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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
COMMISSION FILE NUMBER 0-5567
SEAL HOLDINGS CORPORATION
(Name of small business issuer in its charter)
Delaware 65-0769296
(State of Incorporation) (IRS Employer ID No.)
125 WORTH AVENUE, SUITE 314
PALM BEACH, FLORIDA 33480-4466
(address of principal executive offices) (zip code)
(561) 833-5111
(issuer's telephone number)
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act: Class A Common
Stock, par value $.20
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB [X]
State issuer's revenues for its most recent fiscal year:......... $ 25,267
State the aggregate market value of the voting stock held by
non-affiliates of the Registrant as of March 16, 1999:........... $3,469,300
State the number of shares outstanding of the issuer's classes of
common stock as of March 16, 1999:
Class A common stock, $.20 par value 1,238,525 shares
Class B common stock, $.20 per value 25,000 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for its Annual Meeting of
Stockholders, which will be filed within 120 days from the end of the fiscal
year covered by this Annual Report on Form 10-KSB, are incorporated by
reference into Part III hereof.
Transitional Small Business Disclosure Format (check one)
Yes No X
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PART I
Item 1. DESCRIPTION OF BUSINESS
Business Development - The History of Seal Holdings Corporation
Seal Holdings Corporation ("the Company") is a corporation organized in
March 1997 under the laws of the State of Delaware as a wholly owned
subsidiary of the then registrant, Seal Fleet, Inc., and is the successor
thereof as herein described.
As used in this report, the terms "Seal" and "the Company" may refer
to Seal Holdings Corporation and its subsidiaries or its predecessor companies
unless the context indicates otherwise.
Prior to 1979, Seal's primary business was life insurance with the Company
operating under the name "First National Corporation." In 1979, the Company
went through a quasi-reorganization. It sold its insurance business, had a
simultaneous reverse and forward stock split, purchased an offshore service
boat company, and amended its Articles of Incorporation to change its name
from First National Corporation to Seal Fleet, Inc. to describe the nature of
its business.
On August 14, 1996, with stockholder approval, Seal Fleet sold its
operating assets to Hvide Marine Incorporated (Hvide) and left the offshore
supply business. Several factors led the Company to sell its marine assets.
The Company was in default on its debt of over $7 million, had a negative
net worth, and had only minimal continuing marine operations remaining. The
Company was in competition with large marine companies capable of making
significant investment which increased the difficulty for small companies,
such as Seal to compete. Because of the overall financial condition of
the offshore marine industry, the prices for the Company's supply boats
reached levels where the Company concluded that it was appropriate to
sell its marine assets and transform the nature of its business.
At the Annual Meeting of Stockholders held on May 14, 1997, several
proposals were approved to implement the new direction of the Company.
To reduce the administrative costs associated with maintaining shareholders
with fewer than 50 shares, the stockholders approved the purchase of such
shares through a reverse stock split of the Company's Class A and Class
B common stock. On June 30, 1997, the Company effected a one share for fifty
shares reverse stock split of the common stock, immediately followed by a
twenty-five shares for one share forward stock split of the Company's common
stock. The reverse stock split resulted in all shares being purchased
from stockholders holding fewer than 50 shares, and excess shares over even
multiples of fifty shares from stockholders holding more than fifty shares.
Of the outstanding shares in Seal Fleet, Inc. prior to the reverse split,
approximately 65,200 shares were purchased at a price of $.70 per share.
This share repurchase resulted in an insignificant change in the relative
percentage of total shares held by individual stockholders.
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Also approved at the 1997 Annual Meeting of Stockholders was the
Reincorporation Proposal whereby the Company's state of incorporation was
changed from Nevada to Delaware as a result of the merger of the Company into
its wholly-owned subsidiary, Seal Holdings Corporation, a Delaware corporation.
The stockholders also approved a proposal to increase the number of
authorized shares of Class A common stock to 14,975,000 shares and to
create a class of preferred stock (no preferred stock has been issued
by the Company as of the date hereof). Finally, the stockholders approved
the removal of a restriction requiring the Board of Directors to seek
stockholder approval of an initial acquisition in its transformation process,
to the extent that such approval is not required by applicable law.
In this report, reference is made to the "discontinued operations." This term
refers to the business of the Company prior to August 14, 1996.
The Company's business objective has been the acquisition or development of
one or more operating businesses with growth potential. In mid-1997, the
Company identified health care services as a business opportunity of
particular promise, and announced that it intended to utilize cash, equity,
debt or a combination thereof in effecting such acquisitions or development.
During the second half of 1997 the Company contracted with two senior
healthcare executives to hold key management positions in its newly
established subsidiary, Primary Care Medical Centers of America, Inc.
("PCMC"). PCMC then set out to organize and develop a Physician Practice
Management Company (a "PPM") including a nationwide assemblage of multi-
disciplinary medical centers staffed by orthopedists, neurologists,
physiatrists, chiropractors, podiatrists, physical therapists and affiliated
service providers who work together to offer a coordinated inter-disciplinary
approach to the treatment of musculoskeletal injury and the management of
neuromuscular disease.
See "ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" for a discussion of developments during 1998.
Principal Products and Services
The Company can presently be described as an acquisition company, and as such
has no direct products or services. The Company has devoted substantial
resources to pursuing the Camber and OH, Inc. opportunities.
Significant Customers
The Company currently has no customers.
Competitive Conditions
The Company faces intense competition in its efforts to acquire operating
businesses. Many other companies seeking to acquire businesses have
greater resources than does the Company.
Governmental Regulations
It is possible that the Company, through its investment in Camber or its
exchange of securities with OH, Inc. or through one or more additional
acquisitions, might be subjected to significant governmental regulation in
the operation of its business.
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Environmental Disclosure.
It is possible that in pursuing its business operations laws and governmental
regulations regarding environmental quality control may have a significant
effect upon the Company.
Number of Employees.
Currently, the Company employs three people, in addition to using consultants
and accounting and legal professionals. None of the Company's employees is
represented by a labor union.
ITEM 2. DESCRIPTION OF PROPERTY
The Company
The corporate and general offices of the Company are located in leased space of
approximately 1,950 square feet in Palm Beach, Florida. This lease expires on
March 31, 2002.
The Company also rents public warehouse space in West Palm Beach for storage of
Company records. This rental agreement is "month to month."
ITEM 3. LEGAL PROCEEDINGS
The Company is involved only in litigation which it deems to be in the
ordinary course of the discontinued operations which it conducted
prior to August 14, 1996. Some of this litigation has to do with boat
employee injury claims which are insured. Additional cases are maritime
asbestos claims against the Company. On May 1, 1996, the asbestos claims
were administratively dismissed subject to reinstatement on motion of
plaintiff's counsel. It is expected that all of these cases will be
reinstated in the future. The Company is presently unable to determine
what, if any, impact these cases could have upon the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of 1998 through the solicitation of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
There is no public market for the Class B common stock, all of which is owned
by First Magnum Corporation, an entity wholly owned by Mr. Thomas M.
Ferguson, the Company's Chairman, President and Chief Executive Officer.
The Class A common stock (1,323,375 shares issued, including 84,850 shares
held in treasury, as of March 16, 1999) is publicly traded in the over-the-
counter market under the symbol SEAH. Through November 1987, the Company's
shares were listed on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") under the symbol SEALA. At that time, NASDAQ dropped the
listing because the Company no longer maintained the required equity level.
Since November 1987, the stock has been listed on the National Daily Quotation
Service ("Pink Sheets"). The following table provides information regarding
the average high/ask, low/bid prices for Class A common stock during the periods
indicated.
1998 1997 1996
HIGH LOW HIGH LOW HIGH LOW
---- ---- ---- ---- ---- ----
First Quarter $ .95 $ .73 $1.43 $ .96 $ .62 $.38
Second Quarter 1.31 1.06 1.33 1.08 .88 .50
Third Quarter 1.85 1.58 1.33 .83 1.12 .50
Fourth Quarter 2.14 1.87 1.13 .94 1.38 .76
Prices prior to June 30, 1997 have been adjusted to reflect the impact of the
one-for-two reverse/forward stock split. The resulting prices are not
necessarily indicative of what actual prices would have been had the reverse/
forward stock split occurred prior to June 30, 1997.
The high and low price information set forth above was taken from the
CompuServe-provided database of historical stock pricing. These prices are
inter-dealer price quotations, which do not include retail mark-ups, mark-
downs or commissions and may not represent actual transactions.
HOLDERS
The number of stockholders of record as of December 31, 1998, was 1,580 for
Class A common stock and one for Class B common stock. Stockholders of
record for the Class A common stock include 1,034 stockholders of Seal Fleet,
Inc. who have yet to convert their shares into those of Seal Holdings
Corporation following the reverse/forward split and merger of Seal Holdings
Corporation into Seal Fleet, Inc. on June 30, 1997.
DIVIDENDS
The Company has no plans to declare or pay dividends, in cash or otherwise, in
the foreseeable future. Any change in those plans in the future will depend
on earnings, if any, of the Company, its financial requirements and other
factors. The Company has never had any redeemable preferred stock.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
During the year 1998, the Company invested in developing health care expertise
in order to advance its decision to engage in acquisitions or investments in
that business sector.
As reported earlier, in 1997, the Company employed two senior executives,
knowledgeable in health care, and utilized consultants, accountants and
attorneys in developing a business strategy and in negotiating with physicians
for the purpose of establishing a network of centers for the treatment of
musculo-skeletal injuries and disease. The network concept embodies the
establishment of a multi-disciplinary regimen of integrated care using
different medical disciplines in the treatment, diagnoses, ancillary testing
physical and occupational therapy and rehabilitation of patients. The Company
continued to develop the concept and study both public and private financing
options during 1998.
By late 1997 the Company had assembled a sufficient number of practices under
Letters of Intent to proceed toward a public offering of PCMC's common stock.
From a number of investment banks considered, Prudential Securities was
selected to assist the Company through an IPO. The development of a registration
statement proceeded. By early 1998, however, it became apparent that the
public's interest in PPMs had waned in spite of projections of PCMC growth,
which were based on "same store growth" achieved through formation of a
group practice and capture of ancillary medical services within this practice.
In seeking the necessary capitalization to accomplish its goals, Seal entered
into a Joint Development Agreement with Monsanto Company (NYSE: MTC) in the
Spring of 1998. Reflecting its endorsement of PCMC's business plan, Monsanto
Health Solutions, a division of Monsanto agreed, subject to certain performance
and other conditions, to provide PCMC with project funding in exchange for the
opportunity to acquire a portion of PCMC stock. Due to a planned merger of
Monsanto with American Home Products (NYSE: AHP), Monsanto's business focus
was redefined, and the decision was made to attract outside funding for the
combined PCMC/Monsanto project.
In mid-1998, negotiations began with Kohlberg & Company ("Kohlberg"), a private
investment firm based in Mt. Kisco, New York, to combine PCMC's physician
practice management business with Camber Companies, LLC, a Delaware limited
liability company with a majority interest held by Kohlberg. As a result of
a transaction which closed on November 6, 1998, Seal and Monsanto became
interests holders in Camber with Thomas M. Ferguson, Chairman of Seal,
becoming a Director of Camber.
In December of 1998, Seal and OH, Inc., a Florida corporation which develops
and operates comprehensive outpatient medical, diagnostic and surgical
facilities, announced that they had entered into a securities exchange
agreement. Under the agreement, shareholders of OH, Inc. will exchange all
of their OH, Inc. shares for newly issued shares of common and preferred
stock of Seal, reflecting 91% of the outstanding Seal shares on a fully
diluted basis.
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Pursuant to the terms of the Agreement and Plan of Exchange dated December 21,
1998, between the Company and OH, Inc., on or about April 2, 1999, the Company
will exchange 10,318,419 shares of its Class A Common Stock and 2,000,000
shares of its newly created Series A Preferred Stock which are convertible
into an additional 20,000,000 shares of Class A Common Stock for all of the
issued and outstanding shares of common stock of OH, Inc. The Series A
Preferred Stock will be converted into shares of Class A Common Stock
automatically upon the date that an amendment to the Company's Certificate of
Incorporation is filed with and accepted by the Delaware Secretary of State
which provides that the Company is authorized to issue at least 50,000,000
shares of its Class A Common Stock. The Company intends to submit an
amendment to increase the authorized number of shares of Class A Common Stock
to 50,000,000 shares at its 1999 annual meeting of shareholders. If the
amendment is approved by Seal's shareholders, the 2,000,000 shares of Series
A Preferred Stock issued pursuant to the terms of the Exchange Agreement will
be converted into 20,000,000 shares of Class A Common Stock as soon as the
above-referenced amendment is filed with and accepted by the Delaware
Secretary of State.
There can be no assurance that the Company will be successful in its business
strategy and operations as a result of its investment in Camber or its
combination with OH, Inc.
Until the OH, Inc. transaction closes, the Company remains effectively
controlled by First Magnum Corporation ("Magnum") which owns all of the Class
B common stock and is entitled to elect a majority of the directors of the
Company. The sole shareholder of Magnum is Thomas M. Ferguson ("Ferguson"),
the Company's Chairman, President and Chief Executive Officer.
Since the Company presently has no operations, the impact of the Year 2000
issue on the Company's financial and other computer systems is not considered
to be significant.
FINANCIAL CONDITION
The Company has satisfied its working capital needs with funds generated
from interest and dividend income on short-term investments and from funding
received under the Joint Development Agreement with Monsanto. Subsequent to
December 31, 1998, the Company has received additional funding from OH, Inc.
as a consideration in deferring the closing of the transaction. When working
capital needs exceed interest and dividend income and other funding sources,
short term investments have been liquidated as required. Working capital
requirements include salaries, travel and other expenses associated with
evaluating possible business combinations and general office expenses.
Capital expenditures incurred in 1998 consisted of minor purchases of
furniture and office equipment.
The Company has no outstanding bank debt.
The Company's liquid assets have been diminished in furtherance of the
development and sale of its physician practice management business. Based on
the announced exchange of securities with OH, Inc., whereby OH, Inc. will
become a wholly-owned subsidiary of the Company, the Company believes it will
have sufficient cash reserves or access to capital at least through December 31,
1999. OH, Inc. is also a development-stage entity. OH, Inc. anticipates
substantial additional start-up costs and losses, and will require substantial
additional capital to continue operations and implement its business strategy.
The Company's long-term ability to meet its operating expenses will be dependent
on its ability to raise additional capital or to complete a business
combination with an entity having sufficient cash flow to meet the Company's
ongoing obligations. The Company believes it has values that are attractive to
an outside investor, including its Camber investment, the operational and
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business relationships it has developed, and an attractive equity structure
which includes Common B shares which can elect a majority of the Board of
Directors. With these values, coupled with management's commitment to keep
the Company viable, the Company feels confident that even it the OH, Inc.
transaction were not to close, it would have sufficient cash reserves to
continue operations through December 31, 1999.
RESULTS OF OPERATIONS
As a result of the sale of the PCMC business to Camber in consideration for
an equity investment in Camber, offset by substantial expenditures incurred by
the Company in connection with the physician practice management program, the
Company generated a profit of $874,693 in 1998.
RISK FACTORS
The future viability and success of the Company are subject to numerous
risks and uncertainties, several of which are described below:
Closing with OH, Inc. While the Company believes that a closing with
OH, Inc. will occur on or about April 2, 1999. Until that closing occurs,
there can be no assurance the Company will be successful in concluding the
transaction or that any such transaction will prove beneficial to the Company.
No Operating History. The Company has no operating history in any
line of business which it is likely to select for its future operations.
There can be no assurance that the Company's activities will be profitable.
Limited Financial Resources. The Company's only assets are cash, short-
term investments, its investment in Camber Companies, LLC, and some furniture,
and equipment. The Company's liquid assets have been diminished in furtherance
of its investigations towards the acquisition or development of a new line of
business. The Company's long-term ability to meet its operating expenses will
be dependent on its combination with OH, Inc., the success of the Camber
investment or its ability to raise additional capital or to complete a
business combination successfully with an entity with sufficient cash flow
to meet the Company's ongoing obligations. Any additional business activity
that the company undertakes may require substantial capital, which may be
difficult to obtain or may not be available.
Dilution or Change in Control. The Company's business strategy has been
based on a merger with or acquisition of a private concern, which, in the case
of the exchange of securities with OH, Inc., will result in the Company
issuing securities to stockholders of OH, Inc. This includes the issuance of
previously authorized and unissued Common Stock of the Company and the
issuance of preferred stock that is convertible into Common Stock upon the
approval of an amendment to Seal's Certificate of Incorporation as discussed
above. This will result in a substantial dilution to present stockholders of
the Company, including a change in control and management of the Company.
Speculative Nature of the Company. The success of the Company will depend
to a great extent on the operations, financial condition and management of the
company under the control of the shareholders of OH, Inc. following completion
of the exchange of securities and the success of the Camber investment. Both
businesses. There can be no assurance that the business plans of OH, Inc. and
Camber will be successful.
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Dependence on Inexperienced Management. The success of the Company
largely depends upon the active participation of individuals with experience
in the business sectors in which the Company becomes involved. At the present
time, the Company may not have sufficient experience or expertise in these
business sectors. Opportunities which may become available to the Company for
mergers or acquisitions may be lost or delayed as a result of the limited
amount of experienced resources the Company has to devote to such
opportunities. Once the Company acquires a business opportunity, including the
investment in Camber and the projected transaction with OH, Inc., the Company's
management may change which could result in the need to hire additional
management personnel. In order to supplement the business experience of
management, the Company may employ accountants, technical experts, appraisers,
attorneys or other consultants or advisors. The selection of any such advisors
will be made by management without any control from stockholders. Additionally,
it is anticipated that such persons would be engaged by the Company on an
independent basis without a continuing fiduciary or other obligation of the
Company.
Risks of any Acquired Business. It is possible that the Company has or
may enter into one or more lines of business in which the success of the
Company would be subject to various risks which cannot be identified at this
time. The Company may be unable to diversify its business activities and, as
a consequence, may suffer a total loss to the Company and the stockholders
should an acquisition by the Company prove to be unprofitable. The Company's
failure or inability to diversify its activities into a number of areas may
subject the Company to economic fluctuations within a particular business
or industry and, therefore, increase the risks associated with the Company's
operations.
Conflicts of Interest. All of the present directors and officers of the
Company are associated with other firms or occupations involving other
business activities. Because of these affiliations and because these
individuals may not devote full time to the affairs of the Company, there are
potential inherent conflicts of interest in their acting as directors and
officers of the Company and of other entities. The Company's directors and
officers may be directors or controlling stockholders of other entities
engaged in a variety of businesses which may in the future have various
transactions with the Company. Additional conflicts of interest and non-arm's
length transactions may also arise in the future in the event the Company's
officers or directors are involved in the management of any firms with which
the Company transacts business. The Company may pay finder's fees to its
officers, directors or affiliates in connection with any potential business
combination involving the Company.
Control by Single Stockholder. Magnum owns all of the Class B common
stock and is able to select a majority of the Board of Directors of the
Company and thus controls the direction of the Company.
No Dividends Anticipated. At the present time, the Company does not
anticipate that it will pay dividends, cash or otherwise, on its common stock
in the foreseeable future. Future dividends will depend on earnings, if any,
of the Company, its financial requirements and other factors.
Regulation. Although the Company is subject to regulation under the
Securities Act of 1933 and the Securities Exchange Act of 1934, the Company
believes it is not subject to regulation under the Investment Company Act of
1940 insofar as the Company is not engaged in the business of investing or
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trading in securities. In the event the Company engages in business
combinations which result in the Company holding passive investment interests
in a number of entities, the Company could be subject to regulation under the
Investment Company Act of 1940. In such event, the Company would be required
to register as an investment company and could be expected to incur
significant registration and compliance costs. The Company has obtained no
formal determination from the Securities and Exchange Commission as to its
status under the Investment Company Act of 1940, and consequently, any
violation of such Act would subject the Company to material adverse
consequences.
Forward Looking Statements. Certain of the information contained herein
may contain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, as the same may be amended from time
to time (the "Act") and in releases made by the Securities and Exchange
Commission ("SEC") from time to time. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements expressed or implied by such
forward-looking statements to differ. The words "estimate", "believes",
"anticipates", "projects", "intends", "expects", and similar expressions when
used in connection with the Company, are intended to identify forward-looking
statements. Any such forward-looking statements are based on various factors
and derived utilizing numerous important assumptions and other important factors
that could cause actual results to differ materially from those in the forward
looking statements. These cautionary statements are being made pursuant to the
Act, with the intention of obtaining benefits of the "Safe Harbor" provisions of
the Act. The Company cautions investors that any forward-looking statements
made by the Company are not guarantees of future performance or results and that
actual results may differ materially (and adversely) from those in the forward
looking statements as a result of various factors, including but not limited to
those set forth below. Important assumptions and other important factors that
could cause actual results to differ materially from those in the forward
looking statements include, but are not limited to: the ability of the Company
to raise additional capital and the ability of the Company to implement its
operating strategy. Other factors and assumptions not identified above may also
be involved in the derivation of forward-looking statements, and the failure of
such other assumptions to be realized as well as other factors may also cause
actual results to differ materially from those projected. The Company assumes
no obligation to update these forward-looking statements to reflect actual
results, changes in assumptions or changes in other factors affecting such
forward-looking statements.
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ITEM 7. FINANCIAL STATEMENTS
SEAL HOLDINGS CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants 12
Consolidated Balance Sheets--
December 31, 1998 and 1997 13
Consolidated Statements of Operations--
Years ended December 31, 1998 and 1997 15
Consolidated Statements of Shareholders' Equity--
Years ended December 31, 1998 and 1997 16
Consolidated Statements of Cash Flows--
Years ended December 31, 1998 and 1997 17
Notes to Consolidated Financial Statements 19
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Report of Independent Certified Public Accountants
Shareholders and Board of Directors
Seal Holdings Corporation
We have audited the accompanying consolidated balance sheets of Seal Holdings
Corporation and subsidiaries (the Company) as of December 31, 1998 and 1997,
and the related consolidated statements of operations, shareholders' equity,
and cash flows for the years then ended. 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 consolidated financial position of Seal Holdings
Corporation and subsidiaries at December 31, 1998 and 1997, and the consolidated
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully described in Note I to
the financial statements, the Company has incurred recurring operating losses
and has a working capital deficit. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. Management's plans
in regard to these matters are also described in Note I. The financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that might result from the outcome of this
uncertainty.
ERNST & YOUNG LLP
West Palm Beach, Florida
March 19, 1999
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Seal Holdings Corporation and Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands)
December 31,
----------------
1998 1997
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ASSETS
Current assets
Cash, including $ 0 and $960 of cash equivalents
in 1998 and 1997, respectively $ 15 $1,037
Other receivables 142 8
Prepaid expenses 11 7
Net assets of discontinued operations - 64
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Total current assets 168 1,116
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Furniture and equipment
Furniture and equipment 91 118
Less accumulated depreciation (41) (61)
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Furniture and equipment, net 50 57
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Other assets
Investment in Camber Companies, LLC 1,845 -
Other assets - 16
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Total assets $2,063 $1,189
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See notes to consolidated financial statements
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Seal Holdings Corporation and Subsidiaries
Consolidated Balance Sheets
(Dollars in Thousands)
December 31,
------------------
1998 1997
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Trade accounts payable and accrued expenses $ 99 $ 304
Other current liabilities 64 15
------- -------
Total current liabilities 163 319
------- -------
Total liabilities 163 319
------- -------
Commitments and contingencies
Shareholders' equity
Preferred Stock, $.001 par value; 3,000,000 shares
authorized; no shares issued or outstanding.
Class A common stock, $.20 par value; 14,975,000 shares
authorized; 1,303,375 shares issued and 1,218,525
shares outstanding at December 31, 1998 and 1997 261 261
Class B common stock, $.20 par value; 25,000 shares
authorized, issued and outstanding in 1998 and 1997 5 5
Additional paid-in capital 4,686 4,531
Accumulated deficit (2,883) (3,758)
Treasury stock, at cost, 84,850 shares at
December 31, 1998 and 1997, respectively (49) (49)
Note receivable - shareholder (120) (120)
------- -------
Total Shareholders' Equity 1,900 870
------- -------
Total liabilities and shareholders' equity $2,063 $ 1,189
------- -------
See notes to consolidated financial statements
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Seal Holdings Corporation and Subsidiaries
Consolidated Statements of Operations
(Dollars in Thousands, except Per Share Amounts)
December 31,
------------------------
1998 1997
---------- ---------
Revenue
Interest and dividend income $ 25 $ 115
Expenses
Salaries and benefits 650 346
General and administrative 333 729
Professional fees 397 765
--------- --------
Loss from operations (1,355) (1,716)
Other income, gain on sale of PCMC 2,245 -
--------- ---------
Net income (loss) before taxes 890 (1,716)
--------- ---------
Income tax expense 15 -
Net income (loss) after taxes $ 875 $ (1,716)
--------- ---------
Net income (loss) per share
Basic $ .72 $ (1.41)
Diluted .70 (1.41)
See notes to consolidated financial statements
-15-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Consolidated Statements of Shareholders' Equity
(Dollars in Thousands)
(See Note C)
<TABLE>
<CAPTION>
Common Stock
---------------------- Receivable Additional
Par from Paid-In Accumulated Treasury
Shares Value Shareholder Capital Deficit Stock Total
--------- ---------- --------- ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at Jan. 1, 1997 1,241,123 $248 $4,475 $(2,042) $ (49) $ 2,632
Net loss - 1997 - - - (1,716) - 1,716)
Receivable from Shareholder $(120) (120)
Common stock issued 120,000 24 96 - 120
Common stock acquired
and retired (32,748) (6) (40) (46)
--------- ---- ---- ------- ------ ------- -------
Balance at Dec. 31, 1997 1,328,375 266 (120) 4,531 (3,758) (49) 870
Net income - 1998 875 875
Option compensation 155 155
--------- ---- ----- ------ ------- ----- -------
Balance at Dec. 31, 1998 1,328,375 $266 $(120) $4,686 $(2,883) $ (49) $ 1,900
</TABLE>
See notes to consolidated financial statements
-16-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in Thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998 1997
-------- -------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 875 $(1,716)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) by
operating activities
Gain on sale of PCMC (2,245) -
Option compensation - nonemployee 155 -
Depreciation and amortization 14 8
Changes in net assets of operations
(Increase)decrease in other receivables (134) 6
(Increase)decrease in prepaid expenses (4) 1
(Decrease)increase in accounts payable
and accrued expenses (205) 250
Increase in other current liabilities 49 15
Change in net assets of discontinued operations 64 -
------- ------
Net cash used in operating activities (1,431) (1,436)
------- -------
Cash flows from investing activities
Purchases of property and equipment (7) (60)
Proceeds from sale of land - 154
Common stock acquired and retired - (46)
Decrease (increase) in other assets 16 (12)
Advances from Monsanto Health Solutions 400 -
------- ------
Net cash provided by investing activities 409 36
------- ------
Decrease in cash and cash equivalents (1,022) (1,400)
Cash and cash equivalents at beginning of year 1,037 2,437
------- ------
Cash and cash equivalents at end of year $ 15 $ 1,037
------- ------
</TABLE>
See notes to consolidated financial statements
-17-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation
-------------
The accompanying financial statements include the accounts of Seal
Holdings Corporation and its subsidiaries, all of which are wholly-owned
(collectively "Seal Holdings" or the "Company"). All significant
intercompany accounts and transactions are eliminated in consolidation.
Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents. Cash
equivalents consist of certificates of deposit, U.S. treasury bills, and
other government securities.
Investment in Common Stock
--------------------------
The Company owns a 6% interest in Camber Companies, LLC. This
investment is accounted for at cost which approximates market value at
December 31, 1998.
Concentration of credit risk
----------------------------
Financial instruments which subject the Company to concentrations of
credit risk consist principally of cash and cash equivalents. The
Company maintains cash and cash equivalents with various financial
institutions. Company policy is designed to limit exposure to any one
institution. The Company has not incurred losses related to these
deposits.
Reclassification
----------------
Certain amounts in the December 31, 1997 balance sheet have been
reclassified to conform to the current year presentation.
-19-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Furniture and equipment
----------------------
Furniture and equipment are stated at cost. For financial reporting
purposes, the Company records depreciation and amortization expense
on a straight-line method over the estimated useful lives of the
related assets (leasehold improvements over the shorter of the
life of the related lease or life of the improvement; furniture
and equipment, 3-8 years). For tax purposes, depreciation and
amortization expense are computed using straight-line and accelerated
methods.
Net income (loss) per share
---------------------------
The Company computes earnings per share under Statement of Financial
Accounting Standards No. 128, "Earnings per Shares" ("SFAS 128") Under
SFAS 128, basic earnings per share is computed by dividing net income by
the weighted-average number of common shares outstanding.
The following table sets forth the computation of basic and diluted
earnings per share:
1998 1997
Numerator:
Income (loss) from operations $875 $(1,716)
Denominator:
Denominator for basic earnings
per share-weighted average shares 1,218,525 1,217,359
Effect of dilutive securities:
Employee stock options 37,227 ---
--------- ---------
Dilutive potential common shares 37,227 ---
--------- ---------
Denominator for diluted earnings per
share- adjusted weighted-average
shares and assumed conversions 1,255,752 1,217,359
========= =========
Basic earnings per share $.72 $(1.41)
==== ======
Diluted earnings per share $.70 $(1.41)
==== ======
Options to purchase shares of common stock of the Company outstanding
for 1997 were not included in the computation of diluted earnings per
share because the Company had a loss from operations in 1997, therefore,
their effect would be antidilutive. Such options were included in 1998
to the extent the average market price of the Company's common stock
exceeded the exercise price of the options.
-20-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 reported amounts
of assets and liabilities at the date of the financial statements
and the reported amount of revenues and expenses during the
reported period. Actual results could differ from those estimates.
Accounting for stock based compensation:
--------------------------------------
The Company uses the intrinsic value based method prescribed in Accounting
Principles Board Option No. 25, "Accounting for Stock Issued to
Employees" to account for stock-based compensation, and has chosen to
provide the additional disclosure requirements of Statement of
Financial Accounting Standards, No. 123, "Accounting for Stock-Based
Compensation." Accordingly, compensation cost for stock options is
measured as the excess, if any, of the quoted market price of the
corporation's stock at the date of the grant over the exercise price
of the option.
NOTE B - SALE OF BUSINESS AND POTENTIAL MERGER
In late December of 1998 the Company entered into an Exchange Agreement
with OH, Inc. under which the Company will issue 91% of its equity, fully
diluted for options, to the owners of OH, Inc. in exchange for 100%
of the equity of OH, Inc.
The Company had no revenue producing operations during 1998 or 1997. The
Company invested in developing health care expertise in order to engage in
acquisitions or investments in that business sector. Toward that end, in
October of 1998, the Company sold the net assets of its wholly-owned
subsidiary, Primary Care Medical Centers of America, Inc. to Camber
Companies LLC ("Camber") in exchange for a 6% equity investment in Camber
with a fair market value at the date of the transaction of $1,845,000.
In addition, prior to the agreement with Camber, the Company received
$400,000 of advances from Monsanto Health Solutions. At the time of the
transaction, Camber repaid this liability with shares issued directly to
Monsanto.
On August 14, 1996, the Company sold its marine assets to Hvide Marine
Incorporated ("Hvide") As a result of this event, the Company ceased its
business activities which were related to the ownership, management,
brokerage, and operation of offshore supply ships.
The Company is subject to legal proceedings in the ordinary course of
its discontinued marine business which it conducted prior to August 14,
1996. Included in these cases are maritime asbestos claims against the
Company. On May 1, 1996, these cases were administratively dismissed
subject to reinstatement on motion of plaintiffs' counsel. It is expected
that all of these cases will be reinstated. The Company is presently
unable to determine what, if any, impact these cases could have upon the
Company. Accordingly, no accrual for these claims has been made in the
financial statements.
-21-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
The following summarizes assets and liabilities of discontinued operations
as of December 31 (dollars in thousands):
1998 1997
------ ------
Current assets of discontinued operations
Accounts receivable $ - $ 64
----- -----
Total net current assets of discontinued
operations - 64
----- -----
Current liabilities of discontinued operations
Accounts payable and accrued expenses - -
----- -----
Total net assets of discontinued operations $ - $ 64
----- -----
-22-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE C - EQUITY TRANSACTIONS
Stock Split
On June 30, 1997, the Company effected a one-for-fifty-shares reverse
split of the Company's Class A and Class B common stock, immediately
followed by a twenty-five-shares-for-one-share forward split of the
Company's common stock. On that same date, Seal Fleet, Inc. merged
into its wholly owned subsidiary, Seal Holdings Corporation with Seal
Holdings Corporation remaining as the survivor corporation. Following
the forward split, new share certificates have been issued by Seal
Holdings Corporation upon the return to the Company of the Seal Fleet, Inc.
stock certificates.
The reverse stock split resulted in all shares being purchased from
shareholders holding fewer than 50 shares and excess shares over even
multiples of fifty shares from shareholders holding more than fifty
shares. This share repurchase resulted in an insignificant change in
the relative percentage of total shares held by individual shareholders.
The par value of the Class A and Class B common stock was changed to $0.20
per share. Historical share and per share amounts have been restated
to reflect retroactively the stock splits.
Options
On August 14, 1996, the Board of Directors of the Company adopted a
Long-Term Incentive Plan (the "1996 Plan") for certain key employees,
officers, directors and outside consultants. The 1996 Plan authorized an
aggregate of 300,000 shares of the Company's common stock with the
option price being the fair market value of the common stock on the day
the option is granted.
As of December 31, 1996, there were 200,000 stock options granted under
the 1996 Plan at an option price of $1.00 per share. In accordance with
the resolution of the Company's Board of Directors on March 21, 1997, the
options became exercisable on that date. In addition, a loan of $120,000
to the Company's Chief Executive Officer was authorized to finance the
exercise of his option on 120,000 shares of the Company's common stock, and
the 1996 Plan was terminated, except as to those options which already had
been granted.
On March 21, 1997, the Board of Directors of the Company adopted the 1997
Incentive Option Plan (the "1997 Plan") which authorizes grant of incentive
stock options and non-statutory stock options covering an aggregate of up to
1,200,000 shares of the Company's common stock.
During 1997, 785,000 options were granted under the 1997 plan at an
option price of $1.75 per share. Of this amount, options to purchase
150,000 shares vested upon issuance. The remaining options vested upon the
successful financing of the physician practice management program business
plan to Camber Companies, LLC in October 1998. The options have a 10 year life.
During 1998, 415,000 options were granted under the 1997 plan at an option
price of $1.75 per share. These options were vested upon issuance. With the
award of grants in 1998, all options available under the 1997 Plan have been
fully granted.
Further, on July 13, 1998, the Board of Directors of the Company granted
options to purchase 500,000 shares of the Company's stock under the 1998
Incentive Option Plan (the "1998 Plan") at an exercise price of $1.75 per
share. These options were fully vested upon issuance. With the award of
grants in 1998, all options available under the 1998 Plan have been fully
granted.
-23-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE C - EQUITY TRANSACTIONS (Continued)
Pro forma information regarding net income and earnings per share has
been determined as if the Company had accounted for its employee stock
options under the fair value method of FASB Statement No. 123,
"Accounting for Stock-Based Compensation." The fair value for these
options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weight-average assumptions for 1998 and
1997: risk-free interest rate of 7%; dividend yield of 0%; and a weighted-
average expected option life of five years. A volatility factor of .75
and .50 for 1998 and 1997, respectively, was used in the calculation.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single measure
of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The
Company's pro forma information follows (in thousands except for
earnings per share information):
1998 1997
---- ----
Pro forma net (loss) income $30 $(1,794)
Pro forma earnings per share-
Basic $.02 $ (1.47)
Diluted $.02 $ (1.47)
Information regarding these option plans is as follows:
Shares
Under Option
Option Prices
Options outstanding at January 1, 1997 200,000 $1.00
Granted 785,000 1.75
Exercised (120,000) 1.00
Canceled -
Options outstanding at December 31, 1997 865,000 $1.00-$1.75
Granted 915,000 $1.75
Exercised -
Canceled -
Options outstanding at December 31, 1998 1,780,000 $1.00 - $1.75
Exercisable at December 31, 1998 1,780,000
Exercisable at December 31, 1997 230,000
-24-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE C - EQUITY TRANSACTIONS (Continued)
Exercise prices for options outstanding as of December 31, 1998 was
$1.00 for 80,000 options and $1.75 for 1,700,000 options. The
weighted-average exercise price of options outstanding at December
31, 1998 was $1.72 and the remaining weighted average contractual life of
the options was 6.8 years. The exercise price of all options issued in 1998
exceeded the market price of the stock at date of grant.
At December 31, 1998, the Company has 1,780,000 shares of common stock
reserved for future issuance.
Class B Common Stock
All of the Class B common stock is owned by First Magnum Corporation,
an entity wholly owned by the Company's Chairman, President and
Chief Executive Officer. As the sole stockholder of Class B common stock,
First Magnum Corporation has the right to select a majority of the Board of
Directors of the Company.
Loan to Shareholder
On March 25, 1997, the Company's Chairman, Thomas M. Ferguson,
purchased from the Company 120,000 shares of the Class A common stock
of the Company. On that date Mr. Ferguson issued a promissory note
to the Company for $120,000 secured by a pledge agreement granting
the Company a security interest in the shares. The note comes due
upon the earlier of March 21, 1999, the termination of Mr. Ferguson's
employment with the Company, the date of sale or other disposition of
the shares by Mr. Ferguson or any breach of his obligations under the
Pledge Agreement.
In a meeting of the Board of Directors dated December 1, 1998, it was
resolved that, assuming a successful closing of definitive agreements
with OH, Inc., that Mr. Ferguson receive a special bonus equal to the
value of the loan granted to him on March 21, 1997, and accrued interest
receivable to that date.
NOTE D - LAND HELD FOR SALE
The Company owned a 516-acre tract of unimproved land in Brazoria
County, Texas which was recorded at its estimated fair market value
of $154,000 as "wet lands" and had no possibility of commercial
development in the foreseeable future. During 1996 the Company sold
this tract of land to the United States Department of the Interior's
Fish and Wildlife Service for $154,000. Proceeds from this sale were
received in the first quarter of 1997.
-25-
<PAGE>
Seal Holdings Corporation and Subsidiaries
Notes to Consolidated Financial Statements
NOTE E - FEDERAL INCOME TAX
The Company accounts for income taxes under FASB Statement No. 109,
"Accounting for Income Taxes (FASB 109)." Deferred income tax assets
and liabilities are determined based upon 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.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's net deferred income taxes are as follows:
Year Ended December 31
1998 1997
Deferred tax assets:
Allowance for bad debts - $48,498
Depreciation and amortization $ 619 4,714
Charitable Contributions 3,959 1,701
NOL Carryforward 336,837 671,279
Tax credits 199,272 275,701
Accrual for future claims 18,815 -
Stock option based compensation 58,214 -
--------- -------
Deferred tax assets 617,716 1,001,893
--------- --------
Less valuation allowance (617,716) (1,001,893)
--------- --------
Net deferred tax assets 0 0
--------- --------
SFAS 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized.
After consideration of the evidence, both positive and negative, management
has determined that a $617,716 valuation allowance at December 31, 1998 is
necessary to reduce the deferred tax assets to the amount that will more
likely than not be realized. The change in the valuation allowance for the
current year is $(384,143). At December 31, 1998, the Company has available
net operating loss carryforwards of $895,130, which expire in the years
2000 through 2012.
-26-
<PAGE>
NOTE F - COMMITMENTS
At December 31, 1997, the Company had a commitment for leased office space of
approximately 1,950 square feet, which commenced on April 1, 1997 and ends 60
months later, or March 31, 2002. Under the terms of the lease, the first
three months were rent-free followed by the following schedule of payments.
4th through 22nd Month $3,918.00 per month plus taxes
23rd through 41st Month 4,244.50 per month plus taxes
42nd through 60th Month 4,571.00 per month plus taxes
This schedule is subject to adjustment according to an inflation-based formula.
Rent expense was $42,000 and $36,000 for the years ended December, 31, 1998 and
1997 respectively.
At December 31, 1998, the Company had no other significant commitments.
NOTE H - 401(K) EMPLOYEE RETIREMENT PLAN
The Company has a 401(k) Employee Retirement Plan ("401(k) Plan")
effective January 1, 1985. The 401(k) Plan covers all eligible Company
employees and has been approved by the Internal Revenue Service.
Contributions can be made by an employee in amounts not to exceed the
maximum allowed by the Internal Revenue Service. The Company does not
contribute to the 401(k) Plan. It does, however, pay administrative fees
which are deemed to be immaterial. At December 31, 1998 there was one active
employee in the 401(k) Plan.
NOTE I - GOING CONCERN
The current financial position of the Company requires consideration as to
whether it will be able to continue as a going concern. The Company experienced
operating losses of $1,355,000 and $1,716,000 in 1998 and 1997, respectively.
The Company's liquid assets have been diminished in furtherance of the
development and sale of its physician practice management business.
Management represents that should the OH, Inc. transaction not close, the
Company has values that would interest other outside investors, including its
investment in Camber, the business relationships it has developed, and an
attractive equity structure which includes Common B shares, which can elect a
majority of the Board of Directors.
The Company's long-term ability to meet its operating expenses and to
continue as a going concern will be dependent on its ability to raise
additional capital or to complete a business combination with an entity
having sufficient cash flows to meet the Company's ongoing obligations.
-27-
<PAGE>
NOTE J - SUBSEQUENT EVENT
On January 4, 1999, a letter agreement was signed between OH, Inc. and
the Company with regard to the closing date as set forth in the Agreement and
Plan of Exchange (the "Agreement") dated December 21, 1998. The closing date
was initially planned for January 1, 1999. The Agreement states, however, that
the closing date will be on or about April 2, 1999, but in no event later
than April 30, 1999, unless extended by mutual consent of the parties.
In consideration for extending the closing date, the letter agreement
provides that OH, Inc. shall loan to the Company the principal amount of up
to $187,000 prior to the date of closing at six percent (6%) interest per
annum. The proceeds of this loan were intended to defray the day-to-day
obligations of the Company between January 1, 1999 and March 31, 1999.
The principal and interest accrued will be forgiven upon the successful
closing and will be payable to OH, Inc. only in the absence of such closing.
-28-
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OR ACCOUNTING AND
FINANCIAL DISCLOSURE
NONE
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information appearing under the captions "Proposal One," "Executive
Officers and Directors" and "Security Ownership of Certain Beneficial Owners
and Management" in the Company's Proxy Statement covered by this Annual
Report on Form 10-KSB is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
The information appearing under the caption "Executive Compensation" in the
Company's Proxy Statement is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing under the caption "Security Ownership Of Certain
Beneficial Owners And Management" in the Company's Proxy is incorporated
herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing under the caption "Certain Relationships And
Related Transactions" in the Company's Proxy Statement is incorporated
herein by reference.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The Exhibits listed in the accompanying Index to Exhibits are filed
as part of, or incorporated by reference into, this Annual Report on Form
10-KSB. The following is a list of such Exhibits:
-29-
<PAGE>
Exhibit Description
- ------- -----------
3.1 Articles of Incorporation of Seal Holdings Corporation,
attached to the proxy statement for the annual meeting
of shareholders of Seal Fleet, Inc. held May 14, 1997,
is hereby incorporated herein by reference.
3.2 Bylaws of Seal Holdings Corporation, attached to the
proxy statement for the annual meeting of shareholders
of Seal Fleet, Inc. held May 14, 1997, is hereby incorporated
herein by reference.
10.1 Secured Promissory Note dated March 25, 1997, made by
Thomas M. Ferguson in favor of Seal Fleet, Inc., attached as
Exhibit 1 to Amendment No. 1 to Report on Schedule 13D
dated March 21, 1997, filed by First Magnum Corporation is
hereby incorporated herein by reference.
10.2 Stock Pledge Agreement dated March 25, 1997, made by
Thomas M. Ferguson in favor of Seal Fleet, Inc., attached
as Exhibit 2 to Amendment No. 1 to Report on Schedule 13D
dated March 21, 1997, filed by First Magnum Corporation is
hereby incorporated herein by reference.
*10.3 1998 Incentive Option Plan, attached to the proxy statement
for the annual meeting of shareholders of Seal Holdings
Corporation, held June 24,1998, is hereby incorporated herein
by reference.
*10.4 1997 Incentive Option Plan, attached to the proxy statement
for the annual meeting of shareholders of Seal Fleet, Inc.
held May 14, 1997, is hereby incorporated herein by reference.
*10.5 Seal Fleet, Inc. Amended 1996 Long-Term Incentive Plan,
filed as Exhibit 10.3 to the Company's Quarterly Report on
Form 10-QSB of Seal Fleet, Inc. for the quarterly period
ended March 31, 1997, is hereby incorporated herein by
reference.
10.6 Business Combination Agreement dated October 9, 1998, by and
among Kohlberg & Company, L.L.C., Camber Companies, LLC, Monsanto
Company, Seal Holdings Corporation and Primary Care Medical
Centers of America, Inc.
10.7 General Assignment dated as of October 8, 1998, from Primary
Care Medical Centers of America, Inc. to Camber Companies, LLC.
10.8 Assumption Agreement dated as October 9, 1998 from Camber
Companies LLC to Monsanto Company.
10.9 Agreement and Plan of Exchange between Seal Holdings Corporation
and OH, Inc., a Florida corporation, dated December 21, 1998.
-30-
<PAGE>
21 Subsidiaries of the Registrant.
* Management contracts or compensatory plans or arrangements.
The Company will furnish a copy of any Exhibit on request in payment of the
Company's reasonable expenses of furnishing such Exhibit.
(b) Reports on Form 8-K.
Report on Form 8-K filed November 6, 1998 regarding a press release announcing
a transaction with Camber Companies, LLC.
Report on Form 8-K filed December 22, 1998, regarding a press release
announcing the securities exchange agreement with OH, Inc.
-31-
<PAGE>
SIGNATURES
In accordance with Section 13 and 15(d) of the Exchange Act, the Company caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SEAL HOLDINGS CORPORATION
Dated: March 29, 1999 /s/ Thomas M. Ferguson
----------------------------------
By: Thomas M. Ferguson,
Chairman of the Board, President and
Chief Executive Officer
In Accordance with the Securities Exchange Act of 1934, this Report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ------- ------
/s/ Thomas M. Ferguson Chairman of the Board, March 29, 1999
- - - ------------------------ President, Chief Executive
Thomas M. Ferguson Officer and Director
/s/ James S. Goodner Vice President, March 29, 1999
- - - ------------------------ Chief Financial Officer,
James S. Goodner Treasurer and Secretary
/s/ J. Erik Hvide Director March 29, 1999
- - - ------------------------
J. Erik Hvide
/s/ Donald L. Caldera Director March 29, 1999
- - - ------------------------
Donald L. Caldera
-32-
<PAGE>
EXHIBIT INDEX
Exhibit Description
3.1 Articles of Incorporation of Seal Holdings Corporation,
attached to the proxy statement for the annual meeting
of shareholders of Seal Fleet, Inc. held May 14, 1997,
is hereby incorporated herein by reference.
3.2 Bylaws of Seal Holdings Corporation, attached to the
proxy statement for the annual meeting of shareholders
of Seal Fleet, Inc. held May 14, 1997, is hereby incorporated
herein by reference.
10.1 Secured Promissory Note dated March 25, 1997, made by
Thomas M. Ferguson in favor of Seal Fleet, Inc., attached as
Exhibit 1 to Amendment No. 1 to Report on Schedule 13D
dated March 21, 1997, filed by First Magnum Corporation is
hereby incorporated herein by reference.
10.2 Stock Pledge Agreement dated March 25, 1997, made by
Thomas M. Ferguson in favor of Seal Fleet, Inc., attached
as Exhibit 2 to Amendment No. 1 to Report on Schedule 13D
dated March 21, 1997, filed by First Magnum Corporation is
hereby incorporated herein by reference.
*10.3 1998 Incentive Option Plan, attached to the proxy statement
for the annual meeting of shareholders of Seal Holdings
Corporation, held June 24,1998, is hereby incorporated herein
by reference.
*10.4 1997 Incentive Option Plan, attached to the proxy statement
for the annual meeting of shareholders of Seal Fleet, Inc.
held May 14, 1997, is hereby incorporated herein by reference.
*10.5 Seal Fleet, Inc. Amended 1996 Long-Term Incentive Plan,
filed as Exhibit 10.3 to the Company's Quarterly Report on
Form 10-QSB of Seal Fleet, Inc. for the quarterly period
ended March 31, 1997, is hereby incorporated herein by
reference.
10.6 Business Combination Agreement dated October 9, 1998, by and
among Kohlberg & Company, L.L.C., Camber Companies, LLC, Monsanto
Company, Seal Holdings Corporation and Primary Care Medical
Centers of America, Inc..
10.7 General Assignment dated as of October 8, 1998, from Primary
Care Medical Centers of America, Inc. to Camber Companies, LLC.
10.8 Assumption Agreement dated as October 9, 1998 from Camber
Companies LLC to Monsanto Company.
-33-
<PAGE>
10.9 Agreement and Plan of Exchange between Seal Holdings Corporation
and OH, Inc., a Florida corporation, dated December 21, 1998.
21 Subsidiaries of the Registrant.
27 Financial Data Statement
* Management contracts and compensatory plans or arrangements.
-34-
<PAGE>
<PAGE>
Exhibit 10.6
BUSINESS COMBINATION AGREEMENT
BUSINESS COMBINATION AGREEMENT (the "Agreement") dated as of October 9, 1998,
by and among (i) Kohlberg & Company, L.L.C., a Delaware limited liability
company ("Kohlberg"), (ii) Camber Companies, LLC, a Delaware limited liability
company (the "Purchaser"), (iii) Monsanto Company, a Delaware corporation
("Monsanto"), (iv) Seal Holdings Corporation, a Delaware corporation ("Seal"),
and (v) Primary Care Medical Centers of America, Inc., a Delaware corporation
and a wholly-owned subsidiary of Seal ("PCMC" and, together with Monsanto, the
"Sellers").
The parties desire (i) to combine their respective physician practice
management businesses (the "Business") through the transfer by the Sellers to
the Purchaser of certain of their respective assets used in the Business, and
the assumption by the Purchaser of certain associated liabilities, in exchange
for the issuance by the Purchaser to Sellers of units of limited liability
company interest in the Purchaser, and (ii) to provide for the funding of the
combined Business by Kohlberg, all on the terms and conditions set forth
herein.
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties and covenants contained herein, the parties agree
as follows:
Article I
Defined Terms
Section 1.1 Definitions. For purposes of this Agreement, the following terms
shall have the respective meanings set forth below:
"Acquisition Letters of Intent" mean the letters of intent and other agreements
with respect to proposed transactions with physician practice groups and other
similar organizations included in the PCMC Transferred Assets.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person and, in the case of an individual, includes
members of such individual's immediate family. For purposes of this
definition, "control" when used with respect to any specified person means
the power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" means this Agreement and includes all of the schedules and exhibits
annexed hereto.
"Business" has the meaning set forth in the introduction to this Agreement.
"Class A Units" means Class A units of limited liability company interest in
the Purchaser with the rights and obligations set forth in the Operating
Agreement.
"Class B Units" means Class B units of limited liability company interest in
the Purchaser with the rights and obligations set forth in the Operating
Agreement.
"Closing" means the closing of the purchase and sale of the Transferred Assets
contemplated by this Agreement.
"Closing Date" has the meaning set forth in Section 3.1 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Competing Transaction" means any business combination or recapitalization
involving an acquisition or purchase of all or a significant portion of the
assets of, or any material equity interest in, the Business or any other
similar transaction with respect to the Business involving any person or
entity other than Purchaser or its Affiliates.
"Contract" means any contract, lease, license, purchase order, sales order or
other agreement or binding commitment, whether or not in written form.
"Encumbrances" means all liens, charges, security interests and similar rights
of third parties with respect to property.
"Funding Agreement" means the funding commitment of Kohlberg dated the date
hereof and attached hereto as Exhibit A.
"Indemnified Party" means a party entitled to indemnification pursuant to
Article IX hereof.
"Indemnifying Party" means a party liable for indemnification pursuant to
Article IX hereof.
"Knowledge" means, in the case of PCMC or the Purchaser, the actual knowledge
of any executive officer of such party, and, in the case of Monsanto, the
actual knowledge of Jan S. Wolpert or Bruce Campbell, M.D.
"Latest Balance Sheet" means the unaudited balance sheet of PCMC as of
September 30, 1998 attached hereto as Exhibit B.
"Losses" means any and all out-of-pocket damages, costs, liabilities, losses
(including consequential losses that are directly caused by the event or
circumstance in question such as lost profits but excluding indirect
consequential losses such as injury to reputation or lost opportunity),
judgments, penalties, fines, expenses or other costs, including reasonable
attorney's fees, incurred by an Indemnified Party.
"Material Adverse Effect" means a material adverse effect on either (i) the
assets, operations or financial condition of the Business, or (ii) either
Seller's ability to consummate the transactions contemplated hereby.
"Monsanto Transferred Assets" means all assets, properties and rights of
Monsanto primarily used in or forming a part of the Business, including
without limitation (i) all intellectual property (including business plans
and know-how) relating to the Business and all goodwill associated therewith
of Dr. Bruce Campbell and such other employees of Monsanto's physician
practice management business who are hired by the Purchaser, and all such
intellectual property associated with the initiatives of Dr. Campbell and
such hired employees, but excluding any trademarks or applications or
registrations thereof, (ii) the Contracts listed on Schedule 2.3(a), and
(iii)the opportunity to employ Dr. Bruce Campbell, and excluding any real
property or premises leasehold interest.
"Operating Agreement" means the Amended and Restated Operating Agreement of
the Purchaser in the form attached hereto as Exhibit C.
"PCMC Transferred Assets" means all of the assets, properties and rights of
PCMC of whatever nature, tangible or intangible, including without limitation
(i) all office equipment and computer software, (ii) all Proprietary Rights,
(iii) all Contracts listed on Schedule 2.3(b), including the Acquisition
Letters of Intent, and (iv) the opportunity to employ Craig Cuden and Louis
Morgenier III, and excluding any real property or premises leasehold interests.
"Person" means any individual, partnership, corporation, association, joint
stock company, trust, joint venture, unincorporated organization or
governmental entity (or any department, agency or political subdivision
thereof).
"Proprietary Rights" means all patents, trademarks, service marks, copyrights,
trade names, all registrations and applications for any of the foregoing, all
business plans, know-how and other intellectual property relating to the
Business and all goodwill associated therewith.
"Registration Agreement" means the Joinder to Registration Rights Agreement
among the Purchaser and certain of its unitholders in the form attached
hereto as Exhibit D.
"Third Party Claim" means a claim or demand made by any person or corporation
(other than an Indemnified Party) or any governmental authority or other third
party against an Indemnified Party.
"Transferred Assets" means, collectively, the Monsanto Transferred Assets
and the PCMC Transferred Assets.
Article II
Purchase and Sale of Transferred Assets
Section 2.1 Monsanto Transferred Assets. Upon the terms and subject to the
conditions of this Agreement, at the Closing, the Purchaser shall purchase
from Monsanto, and Monsanto shall transfer, deliver and assign to the
Purchaser, all right, title and interest of Monsanto in and to the Monsanto
Transferred Assets, free and clear of all Encumbrances. In consideration of
such transfer, the Purchaser shall issue to Monsanto at the Closing a total
of 505,320 Class A Units and 52,637 Class B Units.
Section 2.2 PCMC Transferred Assets. Upon the terms and subject to the
conditions of this Agreement, at the Closing, the Purchaser shall purchase
from PCMC, and PCMC shall transfer, deliver and assign to the Purchaser, all
right, title and interest of PCMC in and to the PCMC Transferred Assets, free
and clear of all Encumbrances. In consideration of such transfer, the
Purchaser shall issue to Seal at the Closing a total of 694,680 Class A Units
and 72,363 Class B Units.
Section 2.3 Assumed Liabilities. In connection with the purchase and sale of
the Transferred Assets pursuant to Sections 2.1 and 2.2, the Purchaser shall
assume only the following liabilities and obligations of the Sellers
(collectively, the "Assumed Liabilities"): (i) with respect to Monsanto, the
obligations of Monsanto under the Contracts set forth on Schedule 2.3(a)
(excluding any liability for breach or non-performance of any of such
Contracts existing on or prior to the Closing Date), all employment-related
liabilities arising after the Closing Date associated with those
employees of Monsanto's physician practice management business who are hired
by the Purchases (the "Monsanto Hires"0, and any unused vacation time
accrued as of the Closing Date by the Monsanto Hires, (ii) with respect to
PCMC, (x) the liabilities reflected on the Latest Balance Sheet in the
ordinary course of the Business (which in the aggregate shall not be material),
and (z) the obligations of PCMC under the Contracts set forth on Schedule
2.3(b), excluding any liability for breach or non-performance of any of such
Contracts existing on or prior to the Closing Date, and (iii) all liabilities
and obligations of the Business arising after the Closing Date. The Purchaser
does not assume, and shall not be responsible for, any liabilities arising
from the conduct of the Business by the Sellers prior to the Closing Date
(collectively, the "Excluded Liabilities').
Section 2.4 Further Assurances. From time to time after the Closing, the
Sellers will execute and deliver to the Purchaser such instruments of sale,
transfer, conveyance, assignment and delivery, and such consents, assurances,
powers of attorney and other instruments, as may be reasonably requested by
the Purchaser or its counsel in order to vest in the Purchaser all right,
title and interest of the Sellers and their Affiliates in and to the
Transferred Assets and otherwise in order to carry out the purpose and intent
of this Agreement.
Section 2.5 Certain Financial Obligations. All checks and similar instruments
issued by the Sellers with respect to the Business that are outstanding on the
Closing Date shall be honored by the Sellers upon presentment subsequent to
the Closing Date. To the extent that it is not reasonably practicable to
cause bills relating to utility charges or real property or other ad valorem
taxes or business occupancy taxes associated with the Business to be rendered
by the appropriate utilities or governmental authorities as of the Closing Date
such utility charges and taxes shall be apportioned as of the Closing Date.
All transfer or similar taxes payable in connection with the purchase and
sale of the Monsanto Transferred Assets shall be borne by Monsanto. All
transfer or similar taxes payable in connection with the purchase and sale
of the PCMC Transferred Assets shall be borne by PCMC.
Section 2.6 Payroll Tax Compliance. The Purchaser and the Sellers agree to
use the alternative procedure set forth in Section 5 of Revenue Procedure
84-77, 1984 Cum. Bull. 753, to treat employees of the Company who are employed
by the Purchaser immediately after the Closing Date as having one employer for
payroll tax and compliance purposes during the entire calendar year 1998.
Article III
Closing
Section 3.1 Closing. The closing of the purchase and sale of the Transferred
Assets pursuant to Article II (the "Closing") shall be held at the Mt. Kisco,
New York offices of Kohlberg at 10:00 a.m. (local time) on the third business
day following the satisfaction or waiver of the conditions set forth in
Article VII (the "Closing Date"), or at such other place and time as the
Purchaser and the Sellers may mutually agree.
Section 3.2 Deliveries at Closing. At the Closing, the parties shall make
the deliveries described below, provided that the obligation of each to do
so shall depend upon the performance by the other parties of their obligations
hereunder.
(a) Each Seller shall deliver, or cause to be delivered, to the Purchaser the
following documents and certificates (which shall be in form and substance
reasonably satisfactory to the Purchaser):
(i) a Bill of Sale in the form of Exhibit E hereto and such other instruments
of transfer and conveyance as shall be effective to vest in the Purchaser
good and marketable title to the tangible personal property of such Seller
included in the Transferred Assets;
(ii) a General Assignment in the form of Exhibit F hereto; and
(iii) such other documents as may be reasonably necessary to consummate the
transactions contemplated hereby.
(b) The Purchaser shall deliver to each Seller the following:
(i) the Class A Units and Class B Units issuable pursuant to Sections 2.1
and 2.2;
(ii) an Assumption Agreement in the form of Exhibit G hereto; and
(iii) such other documents as may be reasonably necessary to consummate the
transactions contemplated hereby.
Article IV
Representations and Warranties of the Sellers
Each Seller (severally with respect to itself and not jointly with respect to
the other Seller) represents and warrants to the Purchaser as follows (except
that the representation and warranty contained in Section 4.6 is being made
hereby by PCMC only and not by Monsanto):
Section 4.1 Organization and Qualification. Such Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and has the requisite power and authority
to carry on the Business as now being conducted. Such Seller is duly qualified
to do business, and is in good standing, in each jurisdiction where the
character of its properties used in the Business or the nature of the Business
makes such qualification necessary, except for failures to be so qualified or
in good standing which would not, individually or in the aggregate, have a
Materiel Adverse Effect.
Section 4.2 Corporate Authorization. The execution, delivery and performance
by such Seller of this Agreement and the consummation of the transactions
contemplated hereby are within such Seller's corporate powers and have been
duly authorized by all necessary corporate action on the part of such Seller,
its directors and stockholders. This Agreement constitutes a valid and
binding obligation of such Seller enforceable against such Seller in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws of general application affecting
the enforcement of creditors' rights generally.
Section 4.3 Consents and Approvals. Except as set forth on Schedule 4.3, the
execution, delivery and performance by such Seller of this Agreement and the
consummation of the transactions contemplated hereby require no action by or
in respect of, or filing with or notice to, any governmental or regulatory
body, agency or official. Except as set forth on Schedule 4.3, neither the
execution, delivery and performance by such Seller of this Agreement, nor the
consummation of the transactions contemplated hereby, will (i) violate,
conflict with, or result in a breach of any regulation applicable to such
Seller, or (ii) result in a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions,
or provisions of any note, bond, mortgage, indenture, license, franchise,
permit, lease, agreement or other instrument or obligation to which such
Seller is a party or by which such Seller or any of the Transferred Assets
may be bound, excluding in the case of clause (ii) any violations, breaches,
or defaults which would not, individually or in the aggregate, have a
Material Adverse Effect or for which the Purchaser would not have any material
liability following the Closing.
Section 4.4 Litigation. Except as set forth on Schedule 4.4, there are no
claims, actions, suits, approvals, investigations, informal objections,
complaints or proceedings pending (or to such Seller's knowledge threatened)
against such Seller before any court, arbitrator or administrative,
governmental or regulatory authority or body for which the Purchaser could
have any material liability following the Closing, nor is such Seller subject
to any order, judgment, writ, injunction or decree relating to the Business for
which the Purchaser could have any material liability following the Closing.
Section 4.5 Compliance with Law. Except as set forth on Schedule 4.5, such
Seller is in compliance with all material statutes, laws, ordinances,
regulations, rules or orders of any foreign, federal, state or local
government or any other governmental department or agency (including without
limitation all laws and regulations relating to physician practice management,
human health and safety and the protection of the environment) and all
judgments, decrees or orders of any court applicable to the Business, except
where any such violation or failure to comply would not, individually or
in the aggregate, have a Material Adverse Effect. Except as set forth on
Schedule 4.5, such Seller has and is in compliance in all material respect with
all permits, approvals, licenses and franchises from governmental agencies
required to conduct the Business.
Section 4.6 Real Property. Schedule 4.6 sets forth a complete and correct
list of all real properties or premises that are utilized by PCMC in
connection with the Business, all of which are leased from unrelated third
parties. As to each such property, Schedule 4.6 sets forth (i) location,
(ii) lease term, (iii) monthly rental (both base and additional rent), and
(iv) renewal option, if any. PCMC has a valid leasehold interest in each such
leased property, free and clear of all liens, charges and similar encumbrances;
each such lease is legal, valid and binding in all material respects, as
between PCMC and the other party or parties thereto; and PCMC is a tenant or
possessor in good standing thereunder, free of any material default or
breach and quietly enjoys the premises provided for therein.
Section 4.7 Personal Property. Except as set forth on Schedule 4.7, such
Seller has good and marketable title to the Transferred Assets to be
transferred by such Seller to the Purchaser hereunder, free and clear of all
material Encumbrances.
Section 4.8 Intellectual Property. Such Seller possesses full ownership of
(or, in the case of Monsanto, Monsanto or its employees own or have the valid
rights to use) all Proprietary Rights used in the operation of the Business,
except where the failure to own or have the right to use such Proprietary
Rights would not, individually or in the aggregate, have a Material Adverse
Effect. Such Seller is not infringing upon the intellectual property rights
of others and has not received any notice of conflict with respect to the
intellectual property rights of others except as would not, individually
or in the aggregate, have a Material Adverse Effect.
Section 4.9 Material Contracts. Except as listed on Schedule 4.9, as of the
date hereof, such Seller is not a party to or bound by any Contracts relating
primarily to or, in the case of PCMC, in any way significantly affecting the
operation or ownership of the Business, in each case that are of a type
described below:
(i) any employment contract, consulting contract or any other agreement
relating to the employment of labor;
(ii) any Contract for the purchase or sale of materials, supplies, merchandise,
machinery, equipment, parts or other property or services requiring aggregate
future payments in excess of $10,000;
(iii) any Contract relating to the borrowing of money or the guaranty of
another person's obligations, including, without limitation, all notes,
mortgages, indentures and other obligations, guarantees of performance,
agreements and instruments for or relating to any lending or borrowing,
including assumed indebtedness;
(iv) any Contract granting any person a lien on all or any part of the assets
of the Business;
(v) any Contract granting to any person a first refusal, first offer or
similar preferential right to purchase or acquire any assets of the Business;
(vi) any Contract under which such Seller is (a) a lessee or sublessee of any
machinery, equipment, vehicle or other tangible personal property or real
property, or (b) a lessor of any real property or tangible personal property
owned by such Seller, in either case requiring annual payments in excess of
$5,000;
(vii) any Contract limiting, restricting or prohibiting such Seller or any
affiliate of such Seller from conducting the Business anywhere in the United
States or elsewhere in the world;
(viii) any Contract that requires the consent or approval of the other party
thereto in connection with the transactions contemplated hereby; and
(ix) any other Contract, whether or not made in the ordinary course of
business, which involves payments in excess of $10,000.
Such Seller has provided or made available to the Purchaser a true and
complete copy of each such Contract to which it is a party, including all
amendments or other modifications thereto. Except as set forth on Schedule
4.9, each such Contract is a valid and binding obligation enforceable in
accordance with its terms, and is in full force and effect, subject only to
bankruptcy, reorganization, receivership and other laws affecting creditors'
rights generally. Except as set forth on Schedule 4.9, such Seller has
performed all obligations required to be performed by it under such
Contracts and is not in breach or default thereunder, except for breaches or
defaults which will not, individually or in the aggregate, have a Material
Adverse Effect.
Section 4.10 Brokers. The Purchaser shall have no liability for any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of such Seller, except the fees payable to Benedetto Gartland & Co.
(BG&C) in an amount equal to $420,000, which amount shall be paid by the
Purchaser to BG&C by wire transfer on the Closing Date.
Article V
Representations and Warranties of the Purchaser
The Purchaser represents and warrants to the Sellers as follows:
Section 5.1 Organization and Qualification. The Purchaser is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware with the requisite limited company power to
carry out the transactions contemplated hereby. The Purchaser is duly
qualified to do business, and is in good standing, in each jurisdiction where
the character of its properties used in the Business or the nature of the
Business makes such qualification necessary, except for failures to be so
qualified or in good standing which would not, individually or in the aggregate,
have a Material Adverse Effect.
Section 5.2 Corporate Authorization. The execution, delivery and performance
by the Purchaser of this Agreement and the consummation of the transactions
contemplated hereby are within the limited liability company powers of the
Purchaser and have been duly authorized by all necessary action by its managers
and unitholders. This Agreement constitutes a valid and binding obligation of
the Purchaser enforceable against the Purchaser in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws of general application affecting the
enforcement of creditors' rights generally.
Section 5.3 Consents and Approvals. Except for any required filings and
approvals under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), the execution, delivery and performance by the
Purchaser of this Agreement and the consummation of the transactions
contemplated hereby require no action by or in respect of, or filing with, or
notice to any governmental or regulatory body, agency or official which, if
not obtained or made, will prevent, materially delay or materially burden the
transactions contemplated by this Agreement. Neither the execution, delivery,
and performance by the Purchaser of this Agreement, nor the consummation
by the Purchaser of the transactions contemplated hereby, will (i) violate,
conflict with, or result in a breach of, any provision of the organizational
documents of the Purchaser, or of any material law, statute, rule or regulation
applicable to the Purchaser, or (ii) result in a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, lease, agreement or other instrument or obligation to which
the Purchaser is a party, or by which its properties or assets may be bound,
excluding in the case of clause (ii) any violations, breaches or defaults
which would not prevent consummation of the transactions contemplated hereby.
Section 5.4 Litigation. There are no claims, actions, suits, approvals,
investigations, informal objections, complaints or proceedings pending (or to
the Purchaser's Knowledge threatened) against the Purchaser before any court,
arbitrator, or administrative, governmental or regulatory authority or body,
nor is the Purchaser subject to any order, judgment, writ, injunction or
decree, except in either case for matters which would not prevent consummation
of the transactions contemplated hereby.
Section 5.5 Capitalization. After giving effect to the transactions
contemplated hereby (giving effect to the Kohlberg investment contemplated by
the Funding Agreement and the management investment and options contemplated
by Section 6.7), the capitalization of the Purchaser will be as set forth on
Exhibit H attached hereto. All of the outstanding equity units of the
Purchaser have been validly issued and are fully paid, nonassessable and free
of preemptive rights with no personal liability attaching to the ownership
thereof. Other than the options disclosed on Exhibit H, as of the date
hereof, there are not outstanding subscriptions, options, warrants, rights,
contracts or other arrangements or commitments obligating the Purchaser to
issue any equity units or any securities convertible into or exchangeable
for such units.
Section 5.6 Brokers. The Sellers shall have no liability for any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Purchaser.
Article VI
Covenants
Section 6.1 Conduct of Business. Except as contemplated by this Agreement
and except as otherwise consented to in writing by the Purchaser, during the
period from the date of this Agreement to the Closing Date, PCMC shall
conduct its Business in the ordinary course, and will not intentionally take
any actions that would result in a breach of its representations and
warranties or that could reasonably be expected to have a Material Adverse
Effect. Without limiting the foregoing, PCMC shall exercise their best
efforts to cause the Acquisition Letters of Intent to remain in full force
and effect in accordance with their respective terms.
Section 6.2 Filings and Other Actions. Each of the parties shall use its
reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws to consummate and make effective, as soon as reasonably
practicable, the transactions contemplated hereby. Without limiting the
generality of the foregoing, each of Sellers and the Purchaser shall (i)
make all required filings with or applications to governmental bodies an
approvals, authorizations, waivers and consents of all third parties
necessary for the consummation of the transactions contemplated hereby,
(iii) use its reasonable best efforts to oppose, lift or rescind any injunction
or restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby; and (iv) use its
reasonable best efforts to fulfill all conditions to this Agreement.
Section 6.3 Access to Information; Confidentiality. From the date hereof to
the Closing Date, the Sellers shall, and shall cause their officers, directors,
employees and agents to, afford the directors, officers, employees, agents,
representatives and advisors of the Purchaser reasonable access at all
reasonable times to its officers, employees, agents, properties, books,
records and contracts exclusively relating to the Business, and shall furnish
the Purchaser all financial, operating and other data and information relating
exclusively to the Business as the Purchaser may reasonably request, except
as prohibited by law. In addition, PCMC shall cooperate with Kohlberg in
facilitating Kohlberg's due diligence investigations of the entities that
are subject of the Acquisition Letters of Intent.
Section 6.4 Public Announcements. The Sellers and the Purchaser shall
consult with each other before issuing any press release or otherwise making
any public statements with respect to this Agreement or the transactions
contemplated hereby and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required
by law or contract.
Section 6.5 No Solicitation. Unless and until this Agreement shall have been
terminated pursuant to Section 8.1, none of the Sellers and Seal shall
directly or indirectly (through any employee, agent, affiliate or otherwise)
enter into any agreement, agreement in principle or other commitment (whether
or not legally binding) relating to a Competing Transaction or solicit,
initiate or encourage the submission of any proposal or offer from any person
or entity (including any of its officers, directors, employees and agents)
relating to any Competing Transaction, nor participate in any discussions or
negotiations regarding, or furnish to any other person or entity any
information with respect to, or otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage, any effort or attempt
by any other person or entity to effect a Competing Transaction. The
Sellers and Seal shall immediately cease any and all contacts, discussions and
negotiations with third parties regarding any Competing Transaction. The
Sellers and Seal shall notify the Purchaser if any proposal regarding a
Competing Transaction (or any inquiry or contact with any person or entity
with respect thereto) is made and shall advise the Purchaser of the
contents thereof (and, if an written form, provide the Purchaser with copies
thereof).
Section 6.6 Covenant Not to Compete. Each of the Sellers and Seal agrees that
it will not, at any time during the period ending on the third anniversary of
the Closing Date (the "Non-Competition Period"), engage directly or indirectly
(including through any trust or other entity capitalized, formed or supported
by such person or of which such person is a beneficiary or stockholder) in the
ownership or operation of any business that offers physician practice
management services primarily to physicians who render services primarily in
the musculoskeletal field anywhere in the United States or Canada.
Notwithstanding the preceding sentence, either Seller may acquire all or
substantially all of the assets or equity of any business with respect to which
no more than 25% of such business's revenues for either of its two preceding
fiscal years were derived from operations of a physician practice management
business primarily in the musculoskeletal field, provided that such Seller
shall use its reasonable best efforts to sell such competing business within
12 months of its acquisition. During the Non-Competition Period, the Sellers
and Seal shall not directly or indirectly through another entity (i) induce
or attempt to induce any employee of the Purchaser to leave the employ of
the Purchaser, or (ii) induce or attempt to induce any affiliated physician
or chiropractor to withdraw, curtail or cease doing business with the
Purchaser. If the final judgement of a court of competent jurisdiction
declares that any term or provision of this Section 6.6 is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration or area of the terms or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with
a term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision,
and this Agreement shall thereunder be enforceable as so modified.
Section 6.7 Management Investment and Options. In connection with the
Closing, the Purchaser will offer to Messrs. Campbell and Morgenier the
opportunity to purchase 70,000 and 10,000 Class A Units at a purchase price
of $2.50 per unit, respectively, and will offer to Mr. Cuden the opportunity
to purchase 16,667 Class B Units at a purchase price of $1.50 per unit. In
addition, members of the combined senior management of the Purchaser,
including Messrs. Campbell, Morgenier and Cuden, will be granted options to
purchase that number of Class B Units set forth on Exhibit H hereto at an
exercise price of $2.50 per unit, which options will be evidenced by
Unit Option Agreements in the form of Exhibit I hereto.
Section 6.8 Notice of Certain Events. The Purchaser (which for purposes of
this Section 6.8 shall include any successor entity) shall give BG&C at least
five days' prior written notice, in the manner provided for in Section 10.3,
of the occurrence, subsequent to the Closing, of (i) any direct or indirect
sale or other disposition of all or any material portion of any debt or equity
interests (or options, warrants or other rights relating thereto) in, or the
assets of, the Purchaser, including, without limitation, by means of merger,
consolidation, exchange or recapitalization, (ii) the direct or indirect
redemption or repurchase, by the Purchaser or any of its Affiliates, of all
or any material portion of the debt or equity interests in the Purchaser
(or options, warrants or other rights relating thereto), or (iii) the initial
public offering of debt or equity securities (or options, warrants or other
rights relating thereto) of the Purchaser, or any other event involving the
realization of gain by Monsanto, Kohlberg, Seal or any of their respective
Affiliates (or any assignees of any of the foregoing) on their investments
in the Purchaser or the ability to liquidate such investment. Such notice
shall include a brief description of the material terms of such event and
shall be given to BG&C at its offices at 1330 Avenue of the Americas, New
York, New York, 10019, fax number (212) 26208708, attention: John Rydzewski,
or such other address or fax number as may be specified in writing by BG&C
from time to time. The parties hereto acknowledge that the Purchaser's
agreement to provide notices as provided in this Section 6.8 shall not give
rise to any liability on the part of the Purchaser whatsoever, including
with respect to any additional brokerage, finders or other fee to which
BG&C may be entitled from Monsanto.
Section 6.9. Physician Practice Groups. PCMC shall use its reasonable best
efforts, and Camber and Kohlberg shall use their reasonable best efforts to
assist PCMC, to enter into definitive purchase agreements or binding letters
of intent as contemplated by Section 7.2(f).
Article VII
Conditions to Closing
Section 7.1 Conditions to Each Party's Obligation. The respective obligations
of each party to effect the Closing are subject to the satisfaction or waiver
prior to the Closing Date of the following conditions:
(a) No Legal Prohibition. No statute, rule, regulation or order shall be
enacted, promulgated, entered or enforced by any court or governmental
authority which would prohibit consummation by such party of the transactions
contemplated hereby.
(b) HSR Act. Any applicable waiting period under the HSR Act shall have
expired or been terminated.
(c) No Injunction. Such party shall not be prohibited by any order, ruling,
consent, decree, judgment or injunction of a court or regulatory agency of
competent jurisdiction from consummating the transactions contemplated hereby.
(d) Operating Agreement. The Operating Agreement shall have been executed and
delivered by the parties thereto.
Section 7.2 Conditions to Obligation of the Purchaser. The obligation of the
Purchaser to close the transactions contemplated hereby shall be subject to
the fulfillment and satisfaction, prior to or at the Closing, of the following
conditions:
(a) Representations and Covenants. The representations and warranties of the
Sellers contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date. The Sellers shall have performed
and complied in all material respects with all covenants and agreements
required by this Agreement to be performed or complied with by them on or
prior to the Closing Date.
(b) Approvals. All governmental and material third party approvals, consents,
permits, waivers or releases necessary for consummation of the transactions
contemplated by this Agreement shall have been obtained in form and substance
reasonably satisfactory to the Purchaser.
(c) Absence of Material Adverse Change. There shall have been no material
adverse change in the business, operations or financial condition of the
Sellers' Business (it being understood that no resignation of any employees
other than Messrs. Campbell, Morgenier or Cuden shall be deemed a material
adverse change).
(d) Accounts Receivable Facility. The Purchaser shall have entered into an
accounts receivable financing facility on terms and conditions satisfactory
to the Purchaser and Kohlberg or satisfactory progress has been made towards
the establishment of such a facility.
(e) Management Investment. Messrs. Campbell, Morgenier and Cuden shall have
made the investments contemplated by Section 6.7 and the Purchaser shall have
entered into employment agreements with Messrs. Campbell, Morgenier and Cuden
in substantially the form of Exhibit J hereto.
(f) Physician Practice Groups. PCMC shall have entered into definitive
purchase agreements, or binding letters of intent containing substantial
details regarding the terms to be contained in the definitive purchase
agreements, in each case reasonably satisfactory to Camber, with respect to
the acquisition of Arrowhead Management, Inc. ("Arrowhead") and the
Tannenbaum Chiropractic Centers ("Tannenbaum"), or in lieu of either
Arrowhead or Tannenbaum, one or more alternate physician practice groups of
comparable size and otherwise satisfactory to Camber.
Section 7.3 Conditions to Obligation of the Sellers. The obligation of the
Sellers to close the transactions contemplated hereby shall be subject to the
fulfillment and satisfaction, prior to or at the Closing, of the following
conditions:
(a) Representations and Covenants. The representations and warranties of the
Purchaser contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date. The Purchaser shall have performed and
complied in all material respects with all covenants and agreements required
by this Agreement to be performed or complied with by the Purchaser on or
prior to the Closing Date.
(b) Approvals. All governmental approvals, consents, permits, waivers or
releases necessary for consummation of the transactions contemplated by this
Agreement which, if not obtained, would result in a material liability to the
Sellers shall have been obtained in form and substance reasonably satisfactory
to the Sellers.
(c) Absence of Material Adverse Change. There shall have been no material
adverse change in the business, operations or financial condition of
Purchaser's Business (it being understood that no resignation of any employee
shall be deemed a material adverse change).
(d) Kohlberg Funding. The Funding Agreement shall remain in full force and
effect.
(e) Registration Agreement. The Purchaser shall have executed and delivered
the Registration Agreement.
Article VIII
Termination
Section 8.1 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) By mutual written consent of the Purchaser and the Sellers.
(b) By the Sellers: (i) if the Closing Date shall not have occurred on or
before October 31, 1998 other than as a result of a breach by the Sellers of
their representations, warranties or other obligations hereunder, or (ii) if,
prior to the Closing Date, the Purchaser fails to perform in any material
respect any of its obligations under this Agreement after notice and a
reasonable opportunity to cure such failure.
(c) By the Purchaser: (i) if the Closing Date shall not have occurred on or
before December 31, 1998 other than as a result of a breach by the Purchaser
of its representations, warranties or other obligations hereunder, or (ii) if,
prior to the Closing Date, the Sellers fail to perform in any material
respect any of their obligations under this Agreement after notice and a
reasonable opportunity to cure such failure.
Section 8.2 Effect of Termination. In the event of termination of this
Agreement by the Purchaser or the Sellers as provided in Section 8.1 hereof,
all obligations of the parties under this Agreement shall terminate without
liability of any party to any other party, except (i) that the obligations
set forth in Sections 6.4 and 10.8 of this Agreement shall survive any such
termination and (ii) for liability for fraud or intentional breach of this
Agreement.
Article IX
Indemnification
Section 9.1 Survival of Representations, Warranties, Covenants and Agreements.
The representations, warranties, covenants and agreements of the parties set
forth herein shall survive the execution and delivery of this Agreement and
the Closing.
Section 9.2 Obligation of the Sellers to Indemnify. Subject to the limitations
contained in Section 9.4, each Seller shall indemnify and hold harmless the
Purchaser (and its directors, officers, employees, affiliates, successors and
assigns) from and against all Losses based upon or arising out of (i) any
inaccuracy in or any breach of any representation, warranty, covenant or
agreement of such Seller contained in this Agreement or in any document or
other instrument required to be delivered by it hereunder, and (ii) the
Excluded Liabilities of such Seller. Seal and PCMC shall be jointly and
severally liable with respect to PCMC's obligations pursuant to this
Section 9.2.
Section 9.3 Obligation of the Purchaser to Indemnify. The Purchaser agrees
to indemnify, defend and hold harmless the Sellers from and against all Losses
based upon or arising out of (i) any inaccuracy in or breach of any
representation, warranty, covenant or agreement of the Purchaser contained in
this Agreement or in any document or other instrument delivered hereunder, and
(ii) the Assumed Liabilities.
Section 9.4 Limitations of Indemnity. Notwithstanding the foregoing, (i) no
claim for indemnification shall be asserted with respect to any single Loss
in an amount less than $5,000 (it being understood that all Losses arising
from the same operative facts and circumstances shall be deemed a single
aggregate Loss); (ii) no amounts shall be payable under this Article IX
unless and until the aggregate amount otherwise payable in the absence of this
clause exceeds $50,000, in which event all amounts in excess of such amount
(but only such amounts in excess) shall be due: (iii) in no event shall the
Sellers be liable for indemnification hereunder in an amount in excess of
$1,300,000 in the case of Monsanto and $1,800,000 in the case of PCMC; and
(iv) no claim for indemnification under this Article IX for breaches of
representations and warranties shall first be asserted after the first
anniversary of the Closing Date.
Section 9.5 Procedure for Indemnification Claims.
(a) Any Indemnified Party asserting a right of indemnification provided for
under this Article IX in respect of a Third Party Claim shall notify the
Indemnifying Party in writing of the Third Party Claim within ten business
days after receipt by such Indemnified Party of written notice of the Third
Party Claim. As part of such notice, the Indemnified Party shall furnish the
Indemnifying Party with copies of any pleadings, correspondence or other
documents relating thereto that are in the Indemnified Party's possession. The
Indemnified Party's failure to notify the Indemnifying Part of any such matter
within the time frame specified above shall not release the Indemnifying Party,
in whole or in part, from its obligations under this Article IX except to the
extent that the Indemnifying Party's ability to defend against such claim
is actually prejudiced thereby. The Indemnifying Party agreed (and, at such
time as the Indemnifying Party acknowledges its liability under this Article
IX with respect to such Third Party Claim, the Indemnifying Party shall
have the sole and exclusive right) to defend against, settle or compromise
such Third Party Claim at the expense of such Indemnifying Party. The
Indemnified Party shall have the right (but not the obligation) to participate
in the defense of such claim through counsel selected by it, which
counsel shall be at the Indemnified Party's expense to the extent that the
Indemnifying Party ahs assumed the defense of such claim unless counsel for the
Indemnifying Party could not adequately represent the interests of the
Indemnified Party due to an actual or potential conflict of interest, in
which case such counsel shall be at the Indemnifying Party's expense. In no
event shall the Indemnifying Parties be liable hereunder for the fees and
expenses of more than one law firm or counsel representing the Indemnified
Parties in connection with such Third Party Claim. The Indemnified Party
shall cooperate with the Indemnifying Party and provide such assistance at the
Indemnifying Party's expense as the Indemnifying Party may reasonably request
in connection with the defense of such claim, including buy not limited to
providing the Indemnifying Party access to and use of all relevant corporate
records and making available its officers and employees for depositions, other
pre-trial discovery and as witnesses at trial, if required. If the
Indemnifying Party refuses to acknowledge its liability under this Article IX
with respect to such Third Party Claim, then the Indemnified Party shall have
the right to control the defense of such Third Party Claim and shall have the
right, without the Indemnifying Party's consent, to settle or compromise such
Third Party Claim.
(b) In the event of any claim for indemnification hereunder that is not a
Third Party Claim, the Indemnified Party shall give reasonable notice thereof
to the Indemnifying Party and shall afford the Indemnifying Party access to
all relevant corporate records and other information in its possession
relating thereto.
(c) If an Indemnifying Party becomes obligated to indemnify another party
with respect to any claim for indemnification hereunder and the amount of
liability with respect thereto shall have been finally determined, subject
to the limitations set forth in Section 9.4, the Indemnifying Party shall
pay such amount to the Indemnified Party in immediately available funds
within ten days following receipt by the Indemnifying Party of written demand
from the Indemnified Party. The Purchaser shall have the right (but not the
obligation) to satisfy any such claims for indemnification against a Seller
that have not been paid within such ten days by canceling Class A Units and
Class B Units issued to such Seller hereunder, in each case valued at $2.50
per Class A Unit and $1.50 per Class B Unit.
Section 9.6 Exclusive Remedy. The provisions for indemnification set forth
in this Article IX are the exclusive remedies of the parties arising out of
or in connection with this Agreement, and shall be in lieu of any rights under
contract, tort, equity or otherwise (other than claims based on actual fraud
or intentional breach of this Agreement).
Article X
General Provisions
Section 10.1 Severability. If any provision of this Agreement, or the
application thereof to any person, place or circumstance, shall be held by a
court of competent jurisdiction to be illegal, invalid, unenforceable or void,
then such provision shall be enforced to the extent that it is not illegal,
invalid, unenforceable or void, and the remainder of this Agreement, as well
as such provision as applied to other persons, places or circumstances, shall
remain in full force and effect.
Section 10.2 Waiver. With regard to any power, remedy or right provided in
this Agreement or otherwise available to any party, no waiver or extension
of time shall be effective unless expressly contained in a writing signed by
the waiving party, no alteration, modification or impairment shall be implied
by reason of any previous waiver, extension of time, delay or omission in
exercise or other indulgence, and waiver by any party of the time for
performance of any act or condition hereunder does not constitute a waiver of
the act or condition itself.
Section 10.3 Notices. Any notice or other communication required or permitted
under this Agreement shall be in writing and shall be deemed duly given upon
actual receipt, if delivered personally or by telex, telegram or telecopy; or
five days following deposit in the United States mail, if deposited with
postage pre-paid, return receipt requested and addressed to such address as
may be specified in writing by the relevant party from time to time, and which
shall initially be as follows:
(a) If to the Purchaser:
Camber Companies, LLC
102 Woodmont Boulevard
Suite 320
Nashville, TN 37205
Attn: John F. Jacques
Fax: (615) 463-7671
with a copy to:
Brownstein Hyatt Farber & Strickland, P.C.
410 Seventeenth Street, 22nd Floor
Denver, Colorado 80202-4437
Attention: John R. Garrett, Esq.
Fax: (303) 623-1956
(b) If to Monsanto:
Monsanto Company
800 North Lindbergh Boulevard
St. Louis, MO 63167
Attn: Jan S. Wolpert
Fax: (314) 694-4360
with copies to:
Monsanto Company
800 North Lindbergh Blvd.
St. Louis, MO 63167
Attn: General Counsel
Fax: (314) 694-2594
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: R. Scott Falk, Esq.
Fax: (312) 861-2200
(c) If to PCMC or Seal:
Primary Care Medical Centers of America, Inc.
125 Worth Avenue, Suite 314
Palm Beach, FL 33480
Attn: Thomas M. Ferguson
Fax: (561) 833-6628
with a copy to:
Bronson, Bronson & McKinnon LLP
505 Montgomery Street
San Francisco, CA 94111
Attn: Richard P. Walker, Esq.
Fax: (415) 982-1394
(d) If to Kohlberg to:
Kohlberg & Company, LLC
111 Radio Circle
Mt. Kisco, NY 10549
Attn: Christopher Lacovara
Fax: (914) 241-7476
with a copy to:
Brownstein Hyatt Farber & Strickland, P.C.
410 Seventeenth Street, 22nd Floor
Denver, Colorado 80202-4437
Attention: John R. Garrett, Esq.
Fax: (303) 623-1956
No objection may be made to the manner of delivery of any notice or other
communication in writing actually received by a party.
Section 10.4 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York, regardless of the choice
of laws provisions of New York or any other jurisdiction.
Section 10.5 Entire Agreement. This Agreement (including the attached
exhibits and schedules) and the Confidentiality Agreement constitute the entire
agreement among the parties with respect to the subject matter of this
Agreement and supersedes any prior agreement or understanding, whether written
and oral, among the parties or between any of them with respect to the subject
matter of this Agreement.
Section 10.6 Amendment and Assignment. This Agreement may be amended only by
a written agreement signed by all of the parties. Neither the rights nor the
obligations of any party to this Agreement may be transferred or assigned.
Any purported assignment of this Agreement shall be null, void and of no
effect. This Agreement shall be binding upon and shall inure to the benefit
of the parties and their respective successors. Each party intends that this
Agreement shall not benefit or create any right or cause of action in any
person other than the parties or as specifically expressed in this Agreement,
including without limitation BG&C's rights to receive the payment contemplated
by Section 4.10 and the notices contemplated by Section 6.8.
Section 10.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which independently shall be deemed to be an original
and all of which taken together shall constitute one instrument.
Section 10.8 Expenses. Each party to this Agreement shall bear all of its
own expenses in connection with the execution, delivery and performance of
this Agreement and the transactions contemplated hereby, including without
limitation all fees and expenses of its agents, representatives, counsel and
accountants (except as expressly set forth in Section 4.10).
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the date first written above.
CAMBER COMPANIES, LLC
By: /s/ John F. Jacques
Title: Chairman/CEO
MONSANTO COMPANY
By: /s/ Jan S. Wolpert
Title: VP, Venture Capital
SEAL HOLDINGS CORPORATION
By: /s/ Thomas M. Ferguson
Title: Chairman/CEO
PRIMARY CARE MEDICAL CENTERS OF AMERICA, INC.
By: /s/ Thomas M. Ferguson
Title: Chairman/CEO
KOHLBERG & COMPANY, L.L.C.
By: /s/ Christopher Lacovara
Title: Partner
<PAGE>
Exhibit 10.7
GENERAL ASSIGNMENT
GENERAL ASSIGNMENT dated as of October 30, 1998, from Primary Care Medical
Centers of America, Inc., a Delaware corporation (the "Seller"), to Camber
Companies, LLC, a Delaware limited liability company (the "Purchaser").
The Seller and the Purchaser, along with Kohlberg & Company, L.L.C., a
Delaware limited liability company, Seal Holdings Corporation, a Delaware
corporation, and Monsanto Company, a Delaware corporation, are party to a
Business Combination Agreement dated as of October 9, 1998 (the "Combination
Agreement"). It is a condition precedent to the Purchaser's obligations
under the Combination Agreement that the Seller delivers this General
Assignment. Capitalized terms used herein but not defined herein shall
have the meanings assigned such terms in the Combination Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Seller hereby agrees as
follows:
1. The Seller hereby sells and transfers to the Purchaser, and the Purchaser
accepts from the Seller, all of the Seller's right, title and interest in and
to all Contracts set forth on Schedule F-2-1 hereto (the "Transferred
Agreements").
2. From time to time after the date hereof, the Seller will execute and
deliver to the Purchaser such instruments of sale, transfer, conveyance,
assignment and delivery, and such consents, assurances, powers of attorney
and other instruments as may be reasonably requested by the Purchaser or its
counsel in order to vest in the Purchaser all right, title and interest of the
Seller in and to the Transferred Agreements and otherwise in order to carry
out the purpose and intent of this General Assignment and the purpose and
intent of this General Assignment and the Combination Agreement.
3. Notwithstanding any other provision of this General Assignment to the
contrary, nothing contained in this General Assignment shall in any way
supersede, modify, replace, amend, change, rescind, waive, exceed, expand,
enlarge or in any way affect the provisions, including the warranties,
covenants, agreements, conditions, representations or, in general, any of the
rights and remedies, and any of the obligations and indemnifications set
forth in the Combination Agreement nor shall this General Assignment expand
or enlarge any remedies under the Combination Agreement including without
limitation any limits on indemnification specified therein. This General
Assignment is intended only to effect the transfer of certain property
transferred pursuant to the Combination Agreement and shall be governed
entirely in accordance with the terms and conditions of the Combination
Agreement.
IN WITNESS WHEREOF, the Seller has caused this General Assignment to be
executed and delivered on the date and year first written above.
PRIMARY CARE MEDICAL CENTERS OF AMERICA, INC.
By: /s/ Thomas M. Ferguson
Title: Chairman/CEO
<PAGE>
SCHEDULE F-2-1 C PCMC Transferred Agreements
1. Letter of Intent dated September 3, 1998 for the Acquisition of Practice of
Dr. Robert Tannenbaum.
2. Letter of Intent dated September 3, 1998 for the Acquisition of Practice
of Mr. David Rusnak.
3. Letter of Intent dated September 3, 1998 for the Acquisition of Practice
of Dr. Andrew Hope.
4. Letter of Intent dated September 2, 1998 for the Acquisition of Practice
of Dr. Alexander Keith.
5. Letter of Intent dated August 19, 1998 for the Acquisition of Practice of
N.E. Pain & Rehab, Inc.
6. Letter of Intent dated July 29, 1998 for the Acquisition of Practice of
Mr. Dan Mulhern.
7. Letter of Intent dated July 23, 1998 for the Acquisition of Practice of
Dr. John Merrick.
8. Letter of Intent dated July 22, 1998 for the Acquisition of Practice of
Dr. David McCarthy.
9. Letter of Intent dated July 21, 1998 for the Acquisition of Brown-Arrowhead
Clinics.
10. Letter of Intent dated July 15, 1998 for the Acquisition of Practice of
Dr. Clifford Janssen.
11. Letter of Intent dated July 21, 1998 for the Acquisition of Practice of
Dr. Thomas H. Pratt.
12. Letter of Intent dated July 9, 1998 for the Acquisition of Practice of
Dr. Amaro Exposito.
13. Joint Development Agreement and Letter of Intent, each dated as of
June 1, 1998, between Monsanto Health Solutions and Primary Care Medical
Centers of America, Inc., as amended by the First Amendment dated June 10,
1998, the Second Amendment dated July 31, 1998, the Third Amendment dated
August 3, 1998 and the Fourth Amendment dated August 10, 1998.
<PAGE>
Exhibit 10.8
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT dated as of October 30, 1998 from Camber
Companies, LLC, a Delaware limited liability corporation (the "Purchaser"),
to Primary Care medical Centers of America, Inc., a Delaware corporation
(the "Seller").
The Seller and the Purchaser, along with Kohlberg & Company, L.L.C.,
a Delaware limited liability company, Seal Holdings Corporation, a Delaware
corporation, and Monsanto Company, a Delaware corporation, are party to a
Business Combination Agreement dated as of October 9, 1998 (the "Combination
Agreement"). It is a condition precedent to the Purchaser's obligations
under the Combination Agreement that the Purchaser delivers this Assumption
Agreement. Capitalized terms used herein but not defined herein shall have
the meanings assigned such terms in the Combination Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Purchaser hereby agrees
as follows:
1. The Purchaser hereby assumes the following liabilities and obligations
of the Seller to the extent attributable to the operation of the Business for
the period commencing on and subsequent to the date hereof (collectively, the
"Assumed Liabilities"):
a. liabilities and obligations reflected on the Latest Balance Sheet (but
only to the extent so reflected);
b. all liabilities arising after the date of the Latest Balance sheet in
the ordinary course of the Business (which in the aggregate shall not be
material);
c. all liabilities and obligations of the Seller under the Contracts set
forth on Schedule G-2-1 attached hereto, excluding any liability for breach or
non-performance of any such existing on or prior to the Closing Date; and
d. all liabilities and obligations of the Business arising after the
Closing Date.
2. Notwithstanding anything contained in Section 1 hereof to the contrary,
the Purchaser does not assume, and shall not be responsible for, the Excluded
Liabilities and any liabilities or obligations of the Seller or any affiliate of
the Seller, whether fixed or contingent, known or unknown, threatened, pending
or unasserted, other than the Assumed Liabilities.
3. From time to time after the date hereof, the Purchaser will execute and
deliver, or cause its affiliates to execute and deliver, to the Seller such
instruments as may be reasonably requested by the Seller or its counsel in
order to carry out the purpose and intent of this Assumption Agreement and
the Combination Agreement.
4. Notwithstanding any other provision of this Assumption Agreement to
the contrary, nothing contained in this Assumption Agreement shall in any way
supersede, modify, replace, amend, change, rescind, waive, exceed, expand,
enlarge or in any way affect the provisions, including the warranties,
covenants, agreement, conditions, representations or, in general any of the
rights and remedies, and any of the obligations and indemnifications of the
Purchaser set forth in the Combination Agreement nor shall this Assumption
Agreement expand or enlarge any remedies under the Combination Agreement
including without limitation any limits on indemnification specified therein.
This Assumption Agreement is intended only to effect the transfer of certain
liabilities assumed pursuant to the Combination Agreement and shall be governed
entirely in accordance with the terms and conditions of the Combination
Agreement.
IN WITNESS WHEREOF, the Purchaser has caused this Assumption Agreement
to be executed and delivered on the date and year first written above.
CAMBER COMPANIES, LLC
By: /s/ John F. Jacques
Title: Chairman/CEO
<PAGE>
SCHEDULE G-2-1 C PCMC Assumed Agreements
14. Letter of Intent dated September 3, 1998 for the Acquisition of Practice
of Dr. Robert Tannenbaum.
15. Letter of Intent dated September 3, 1998 for the Acquisition of Practice
of Mr. David Rusnak.
16. Letter of Intent dated September 3, 1998 for the Acquisition of Practice
of Dr. Andrew Hope.
17. Letter of Intent dated September 2, 1998 for the Acquisition of Practice
of Dr. Alexander Keith.
18. Letter of Intent dated August 19, 1998 for the Acquisition of Practice of
N.E. Pain & Rehab, Inc.
19. Letter of Intent dated July 29, 1998 for the Acquisition of Practice of
Mr. Dan Mulhern.
20. Letter of Intent dated July 23, 1998 for the Acquisition of Practice of
Dr. John Merrick.
21. Letter of Intent dated July 22, 1998 for the Acquisition of Practice of
Dr. David McCarthy.
22. Letter of Intent dated July 21, 1998 for the Acquisition of Brown-
Arrowhead Clinics.
23. Letter of Intent dated July 15, 1998 for the Acquisition of Practice of
Dr. Clifford Janssen.
24. Letter of Intent dated July 21, 1998 for the Acquisition of Practice of
Dr. Thomas H. Pratt.
25. Letter of Intent dated July 9, 1998 for the Acquisition of Practice of
Dr. Amaro Exposito.
26. Joint Development Agreement and Letter of Intent, each dated as of
June 1, 1998, between Monsanto Health Solutions and Primary Care Medical
Centers of America, Inc., as amended by the First Amendment dated June 10,
1998, the Second Amendment dated July 31, 1998, the Third Amendment dated
August 3, 1998 and the Fourth Amendment dated August 10, 1998.
</TEXT
<PAGE>
Exhibit 10.9
Agreement and Plan of Exchange
between
Seal Holdings Corporation,
a Delaware corporation
and
OH, Inc.,
a Florida corporation
Dated: December 21, 1998
<PAGE>
Table of Contents
ARTICLE
EXCHANGE
1.1 Exchange Result.
1.2 Capital Amendment.
1.3 Resignation of Officers and Directors
ARTICLE
CLOSING
2.1 Closing.
2.2 Deliveries.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SEAL
3.1 Organization of Seal and Seal Subsidiaries.
3.2 Capital Stock of Seal.
3.3 Authorization.
3.4 No Conflict or Violation.
3.5 Consents and Approvals.
3.6 Litigation.
3.7 Title to Assets
3.8 Contracts, Obligations and Commitments
3.9 Employee Benefit Plans; ERISA
3.10 No Brokers
3.11 Financial Statements; SEC Reports
3.12 Absence of Undisclosed Liabilities
3.13 Recent Events.
3.14 Tax Matters
3.15 No Violation of Law
3.16 Environmental Matters
3.17 No Stockholder Approval
3.18 Books of Account
ARTICLE 4
4.1 Organization of Oakridge and Subsidiaries.
4.2 Oakridge Shares
4.3 Authorization.
4.4 No Conflict or Violation.
4.5 Consents and Approvals.
4.6 Litigation.
4.7 Title to Assets
4.8 Contracts, Obligations and Commitments
4.9 Employee Benefit Plans; ERISA
4.10 No Brokers
4.11 Financial Statements
4.12 Absence of Undisclosed Liabilities
4.13 Recent Events.
4.14 Tax Matters
4.15 No Violation of Law
4.16 Environmental Matters
4.17 Books of Account
ARTICLE 5
ACTIONS BY SEAL AND OAKRIDGE PRIOR TO THE CLOSING
5.1 Maintenance of Business.
5.2 Certain Prohibited Transactions.
5.3 Investigation by Parties.
5.4 Consents and Best Efforts.
5.5 Notification of Certain Matters.
5.6 Exclusivity
5.7 Lock-Up Letters; Right of Refusal
5.8 NASDAQ Matters.
5.9 Series A Preferred Stock.
5.10 Fairness Opinion.
5.11 Services Agreements.
ARTICLE 6
CONDITIONS TO OAKRIDGE'S OBLIGATIONS
6.1 Representations, Warranties and Covenants.
6.2 Consents.
6.3 No Governmental Proceeding or Litigation.
6.4 Performance
6.5 Lock-Up Letters
6.6 Sale of Class B Common Stock.
6.7 Services Agreements
6.8 Seal Resignations.
6.9 Fairness Opinion.
6.10 Capital Amendment; Voting.
ARTICLE 7
CONDITIONS TO SEAL'S OBLIGATIONS
7.1 Representations, Warranties and Covenants.
7.2 No Governmental Proceeding or Litigation.
7.3 Performance
7.4 Fairness Opinion
7.5 Services Agreements
7.6 Oakridge Capitalization
ARTICLE 8
ACTIONS BY SEAL AND OAKRIDGE
AS OF AND AFTER THE CLOSING
8.1 Books and Records.
8.2 Further Assurances.
ARTICLE 9
TERMINATION
9.1 Termination
9.2 Effect of Termination
9.3 Waiver
9.4 Limited Termination Fee.
ARTICLE 10
MISCELLANEOUS
10.1 Survival of Representations
10.2 Assignment.
10.3 Notices
10.4 Expenses
10.5 Choice of Law
10.6 Publicity and Filings
10.7 Confidential Information
10.8 Entire Agreement; Amendments and Waivers
10.9 Invalidity.
10.10 Counterparts
Exhibits
Exhibit "A" Securities and Exchange Agreement
Exhibit "B" Form of Resignation
Exhibit "C" Certificate for Seal
Exhibit "D" Seal Opinion of Counsel
Exhibit "E" Certificate for Oakridge
Exhibit "F" Oakridge Opinion of Counsel
Exhibit "G" Series A Convertible Preferred Stock
Statement of Designation
Exhibit "H-1" Ferguson Employment Agreement
Exhibit "H-2" Goodner Employment Agreement
Exhibit "H-3" Stanford Consulting Agreement
Schedules
Schedule 3.1 Seal Subsidiaries
Schedule 3.2 Subsidiary Capitalization
Schedule 3.5 Seal Consents and Filings
Schedule 3.6 Pending Actions
Schedule 3.7 Title to Assets
Schedule 3.8 Seal Contracts
Schedule 3.9 Seal Employee Benefit Plans; ERISA
Schedule 3.12 Undisclosed Liabilities
Schedule 3.13 Recent Events
Schedule 3.15 Seal-No Violation of Law
Schedule 3.16 Seal Environmental Matters
Schedule 4.1 Oakridge Subsidiaries
Schedule 4.2 Oakridge Subsidiary Capitalization
Schedule 4.4 Oakridge Conflicts
Schedule 4.5 Oakridge Consents
Schedule 4.6 Oakridge Litigation
Schedule 4.7 Oakridge Title to Assets
Schedule 4.8 Oakridge Contracts
Schedule 4.9 Oakridge Employee Benefit Plans; ERISA
Schedule 4.10 Oakridge-No Brokers
Schedule 4.12 Oakridge Undisclosed Liabilities
Schedule 4.15 Oakridge-No Violations of Law
Schedule 4.16 Oakridge Environmental Matters
Schedule 10.8 Amendments and Waivers
AGREEMENT AND PLAN OF EXCHANGE
This Agreement and Plan of Exchange ("Agreement") is dated as of December
21, 1998, by and among Seal Holdings Corporation, a Delaware corporation
("Seal"), and OH, Inc., a Florida corporation ("Oakridge"), with reference to
the following facts:
RECITALS
A. Seal desires to exchange shares of its Class A Common Stock (the
"Class A Shares") and shares of a new series of preferred stock, with such
relative rights, preferences and privileges as described herein (the "Series
A Preferred Shares" and, collectively with the Class A Series, the "Seal
Shares") for all of the issued and outstanding shares of common stock of
Oakridge (the "Oakridge Shares") (the "Exchange").
B. The parties shall carry out the intents and purposes of the Exchange
as set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
EXCHANGE
1.1 Exchange Result. As a result of and immediately following
the Exchange contemplated hereby (a) M. Lee Pearce, M.D., or an entity
designated by him ("Pearce"), shall own and be issued 10,318,419 Class A
Shares and 2,000,000 Series A Preferred Shares convertible into an additional
20,000,000 Class A Shares, and (b) Seal shall own all of the issued and
outstanding Oakridge Shares, with Oakridge becoming a wholly-owned subsidiary
of Seal. The Seal Shares issued to Pearce hereunder shall be equivalent to
91% of the total combined issued and outstanding shares of Class A Common
Stock and Class A common Stock Equivalents (as hereafter defined), on a
fully diluted basis. The Exchange contemplated hereby is intended to qualify
as a tax-free transaction as described in Section 351 of the Internal Revenue
code of 1986, as amended (the "Code"). The Exchange shall be consummated on
an individual basis at the Closing 9as herein defined) with Pearce pursuant
to that certain Securities Exchange Agreement ("Exchange Agreement"), in the
form attached hereto and incorporated herein as Exhibit "A." For purposes
of this Agreement the term "Class A Common Stock Equivalents" means shares of
Class A Common Stock issuable upon (i) the exercise of outstanding options,
warrants or rights to subscribe for the Class A Common Stock or (ii) the
conversion of outstanding shares of preferred stock, debt or other convertible
instruments, in either case, whether or not then currently exercisable or
convertible.
1.2 Capital Amendment. The parties acknowledge that Seal
presently has insufficient shares of Class A Common Stock available for
issuance upon the conversion of the Series A Shares and, prior to Closing,
the Board of Directors of Seal shall recommend the adoption of an amendment
to its certificate of incorporation to increase its authorized shares of Class
A Common Stock to at least 50,000,000 shares (the "Capital Amendment"). The
parties further acknowledge that it is their intent that Seal shall seek
stockholder approval of the Capital Amendment at the next annual meeting of
stockholders of Seal (expected to be held not later than April 30, 1999).
1.3 Resignation of Officers and Directors . All of the officers
and directors of Seal, other than Thomas M. Ferguson ("Ferguson") in his
capacity as a director, shall submit their resignations as such pursuant to
the form of Resignation, attached hereto and incorporated herein as Exhibit
"B." The resignations of Seal's directors shall be presented serially, such
that as each Seal director resigns one of the persons hereinafter designated
by Oakridge shall be elected to fill the vacancy created thereby by the
remaining Seal directors. It is anticipated that the present officers and
directors of Oakridge or its subsidiaries shall be elected to comparable
positions at Seal.
ARTICLE 2
CLOSING
2.1 Closing. The parties to the Agreement shall use their best
efforts to close the transactions contemplated herein on or before March 31,
1999 at the Florida offices of Proskauer Rose, LLP, but in no event later than
April 30, 1999, unless extended by mutual consent of the parties (the
"Closing Date").
2.2 Deliveries. To effect the Exchange, on or before the
Closing Date, as appropriate, the parties hereto shall deliver the following:
(a) Seal shall deliver, or cause to be delivered, the
following to Oakridge or Pearce:
(i) the written resignations of all of the officers and
directors of Seal, other than Ferguson in the manner contemplated by Section
1.3 hereof;
(ii) a counterpart of the Exchange Agreement executed by
Seal;
(iii) a certificate of Seal, in the form of Exhibit "C"
attached hereto and incorporated herein, attesting to the fact that all of
the representations and warranties of Seal are true and correct as of the
Closing Date, and that all conditions to the obligations of such party to be
performed by it have been performed as at the Closing Date;
(iv) a certificate of good standing for Seal from its
state of incorporation;
(v) certified copies of corporate resolutions or other
corporate proceedings taken by Seal to authorize the execution, delivery and
performance of the transactions contemplated under and by this Agreement;
(vi) an opinion of Seal's counsel substantially in the
form attached hereto and incorporated herein as Exhibit "D";
(vii) stock certificates registered in the name of Pearce
representing the Class A Shares and the Series A Preferred Shares; and
(viii) any other such documents or certificates as
reasonably requested by Oakridge.
(b) Oakridge shall deliver, or cause to be delivered, the following
to Seal:
(i) a counterpart of the Exchange Agreement executed by
Pearce;
(ii) a certificate of Oakridge, in the form of Exhibit
"E" attached hereto and incorporated herein, attesting to the fact that all
of the representations and warranties of Oakridge are true and correct as of
the Closing Date, and that all conditions to the obligations of Oakridge to
be performed by Oakridge have been performed as at the Closing Date;
(iii) a certificate of good standing for Oakridge from
its state of formation;
(iv) certified copies of resolutions or other proceedings
taken by Oakridge to authorize the execution, delivery and performance of the
transaction contemplated under and by this Agreement;
(v) an opinion of Oakridge's counsel substantially in
the form attached hereto and incorporated herein as Exhibit "F"; and
(vi) any other such documents or certificates as
reasonably requested by Seal.
(c) Seal and the parties identified in Section 5.11 hereof shall
execute and deliver to Oakridge the Service Agreements contemplated by such
Section.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SEAL
Seal hereby represents and warrants to Oakridge as follows:
3.1 Organization of Seal and Seal Subsidiaries. Set forth in
Schedule 3.1 is a complete listing of each subsidiary or other business entity
owned in whole or in part by Seal, together with their respective states of
incorporation or organization (the "Seal Subsidiaries"). Seal and each of
its Seal Subsidiaries is duly organized, validly existing and in good
standing under the laws of the state of its incorporation, has full corporate
power and authority to conduct its business as it is presently being conducted,
and to own and exploit all of its properties and assets. Seal and each of its
Seal Subsidiaries is duly qualified to do business and is in good standing in
each other jurisdiction (if any) in which such qualification is necessary under
applicable law as a result of the conduct of its business or the ownership of
its properties or assets. The copies of the Certificate of Incorporation
and By-laws of Seal and each of its Seal Subsidiaries delivered to Oakridge
are true, correct and complete in all respects. Since July 1979, and to Seal's
knowledge for the period from inception to July 1979, the minute books of Seal
(including its predecessors) contain true and complete records and consents,
in lieu of meetings of its Board of Directors, and accurately reflect all
transactions referred to therein.
3.2 Capital Stock of Seal. Seal has authorized Fourteen Million
Nine Hundred Seventy-Five Thousand (14,975,000) shares of Class A Common Stock,
$.20 par value, One Million Two Hundred Eighteen Thousand Five Hundred Twenty
Five (1,218,525) shares of which are issued and outstanding, Twenty-Five
Thousand (25,000) shares of Class B Common Stock, $.20 par value, all of which
are issued and outstanding and owned by First Magnum Corporation ("Magnum"),
and Three Million (3,000,000) shares of preferred stock, $.001 par value, none
of which are issued and outstanding. Except as set forth on Schedule 3.2,
there are no outstanding options, warrants or other rights to acquire any
shares of the capital stock of Seal or any of its Seal Subsidiaries nor
agreements or commitments to issue such options, warrants or rights in the
future. All of the outstanding shares of capital stock or other ownership
interests of Seal and each Subsidiary have been duly authorized, are
validly issued, are fully paid and are non-assessable. There are no agreements,
commitments or restrictions relating to ownership or voting of any shares of
Seal or any Seal Subsidiary. Except as set forth on Schedule 3.2, all of the
outstanding shares of capital stock of the Seal Subsidiaries are owned by Seal.
3.3 Authorization. Seal has all necessary corporate power and
authority to enter into this Agreement and has taken all corporate action
necessary to consummate the transactions contemplated hereby and to perform
its obligations hereunder. This Agreement has been duly executed and
delivered by Seal and is a legal, valid and binding obligation of it,
enforceable against it in accordance with its terms. The Board of Directors
approved the transactions contemplated by the Agreement with the understanding
and knowledge that the issuance of the Seal Shares will result in Pearce
becoming an owner of more than fifteen percent (15%) of the voting stock of
Seal and with the intent that, as a result of such authorization, Pearce
would be exempt from the provisions of Section 203 of the Delaware General
Corporation Law.
3.4 No Conflict or Violation. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will result in (a) a violation of or a conflict with any provision of the
Certificate of Incorporation or By-laws of Seal or any Seal Subsidiary, (b)
a breach of, or a default under, any term or provision of any contract,
agreement, indebtedness, lease, encumbrance, commitment, license, franchise,
permit, authorization or concession to which Seal or any Seal Subsidiary is a
party or by which its properties or assets are bound, which breach or default
would have a material adverse effect on the business or financial condition
of Seal, or its ability to consummate the transactions contemplated hereby
(a "Seal Material Adverse Effect"), (c) a violation by Seal or any Seal
Subsidiary of any statute, rule, regulation, ordinance, code, order,
judgement, writ, injunction, decree or award, which violation would have
a Seal Material Adverse Effect, or (d) imposition of any lien, encumbrance,
restriction or charge on the business of Seal or any Seal Subsidiary, or on
any of their respective assets.
3.5 Consents and Approvals. Except as set forth on Schedule 3.5,
no consent, approval or authorization of, or declaration, filing or
registration with, any governmental, regulatory, licensing or other authority,
or any other person or entity, is required to be made or obtained by Seal or
any Seal Subsidiary in connection with the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby.
3.6 Litigation. Except as set forth on Schedule 3.6 (the "Seal
Pending Actions"), there is no action, order, writ, injunction, judgment or
decree outstanding, or claim, suit, litigation, proceeding, labor dispute,
arbitral action or investigation (collectively, the "Seal Actions") pending
or, to the knowledge of Seal or its officers, threatened relating to or
affecting (i) Seal or any Seal Subsidiary, (ii) any benefit plan of Seal or
any Seal Subsidiary, (iii) any asset of Seal or any Seal Subsidiary, or (iv)
the transactions contemplated by this Agreement. Neither Seal nor any Seal
Subsidiary is in default with respect to any judgement, order, writ, injunction
or decree of any court or governmental, regulatory, licensing or other
authority, and there are no unsatisfied judgments against any of them or the
business or activities of any of them which would, individually or in the
aggregate, have a Seal Material Adverse Effect. To the knowledge of Seal,
each of the Seal Pending Actions is fully covered by insurance except as
otherwise specified on Schedule 3.6. There is not a reasonable likelihood of
an adverse determination of Seal Pending Actions which would, individually
or in the aggregate, have a Seal Material Adverse Effect.
3.7 Title to Assets . Seal and each of its Seal Subsidiaries has
good title to all of its leasehold interests and other properties, as
reflected in the most recent balance sheet included in Seal's Financial
Statements, except for properties and assets that have been disposed of in
the ordinary course of business since the date of such balance sheet, free
and clear of all mortgages, liens, pledges, charges or encumbrances of any
nature whatsoever, except (i) the lien for current Taxes (as hereinafter
defined), payments of which are not yet delinquent and other statutory liens,
(ii) such imperfections in title and easements and encumbrances, if any, as
are not material in character, amount or extent and do not materially and
adversely affect the value or interfere with the present use of the property
subject thereto or affected thereby, or otherwise materially impair Seal's
business operations or prospects, (iii) as disclosed in Schedule 3.7, or (iv)
for such matter which, singly or in the aggregate, could not reasonably be
expected to have a Seal Material Adverse Effect. All leases under which Seal
leases real or personal property have been delivered to Oakridge and are in
good standing, valid and effective in accordance with their respective terms,
and there is not, under any of such leases, any existing default or, to
the knowledge of Seal, event which with notice or lapse of time or both
would become a default other than defaults under such leases which in the
aggregate will not have a Seal Material Adverse Effect.
3.8 Contracts, Obligations and Commitments. Schedule 3.8 sets
forth an accurate and complete list of all material contracts, agreements,
options, leases, commitments and instruments of Seal or its Seal Subsidiaries
either: (a) entered into, amended or otherwise modified since August 14, 1996
(or January 1, 1996 with respect to any material contract, agreement, option,
lease, commitment or instrument with Hvide Marine Incorporated or an
affiliate thereof); or (b) pursuant to which Seal or any of the Seal
Subsidiaries has any continuing obligation (contingent or otherwise, including
without limitation any indemnification obligation), or which is otherwise not
yet fully performed by any of the parties thereto ("Seal Contract"). Seal and
its Seal Subsidiaries have provided Oakridge with complete and correct copies of
all such items listed in Schedule 3.8. Except for such items listed in Schedule
3.8, there are no other material contracts or other arrangement under which
goods, equipment or services are provided, leased or rendered by, or are to be
provided, leased or rendered to, Seal or any of its Seal Subsidiaries. Except
as specifically disclosed in Schedule 3.8: (a) the Seal Contracts have not been
modified, pledged, assigned or amended in any material respect, are legally
valid, binding and enforceable in accordance with their respective terms and are
in full force and effect: (b) to the knowledge of Seal there are no material
defaults by Seal or any of its Seal Subsidiaries or any other party to the Seal
Contracts: (c) neither Seal nor any of its Seal Subsidiaries have received
notice of any material default, offset, counterclaim or defense under any Seal
Contract; (d) to the knowledge of Seal no condition or event has occurred which
with the passage of time or the giving of notice or both would constitute a
default or breach by Seal or any of its Seal Subsidiaries of the terms of any
Seal Contract, except for any consents required to consummate the transactions
contemplated by this Agreement; and (e) there does not now, and at Closing will
not, exist any material security interest, mortgage, pledge, restriction,
charge, lien, encumbrance or claim of others on any interest created under any
Seal Contract. None of the Seal Contracts is subject to termination from and
after the Closing Date and prior to the expiration of its stated term by any
party to such Seal Contract, except as stated in each such Seal Contract. For
purposes of this Section 3.8, the "knowledge of Seal" shall include after
inquiry of J. Erik Hvide with respect to any Seal Contract to which Hvide Marine
Incorporated or any affiliate thereof is a party.
3.9 Employee Benefit Plans; ERISA.
(a) Schedule 3.9 contains an accurate and complete list of all
"employee benefit plans," within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") ("ERISA Plans"),
and any other bonus, profit sharing, pension, severance, savings, deferred
compensation, fringe benefit, insurance, welfare, health, post-retirement
benefit, life, stock option, disability, accident, sick pay, vacation,
individual employment, consulting, incentive, change in control, or other plan,
agreement, policy, trust fund, or arrangement (whether written or unwritten,
insured or self-insured) ("Other Plan"):
(i) established, maintained, sponsored, or contributed to
(or with respect to which any obligation to contribute has been undertaken)
within the last six (6) years for any ERISA Plan that is or was subject to Title
IV of ERISA or is or was intended to be qualified under Section 401(a) of the
Code (a "Qualified Plan") and since August 1996 for any Other Plan and any ERISA
Plan which is not a Qualified Plan by Seal, the Seal Subsidiaries or any entity
that would be deemed a "single employer" with Seal under Section 414(b), (c),
(m), or (o) of the Code or Section 4001 of ERISA (an "ERISA Affiliate") on
behalf of any employee, director, or consultant of Seal or a Seal Subsidiary
(whether current, former, or retired) or their beneficiaries; or
(ii) with respect to which Seal, the Seal Subsidiaries or
any ERISA Affiliate has or has within the last six (6) years for any Qualified
Plan and since August 1996 for any Other Plan and any ERISA Plan which is not a
Qualified Plan had any obligation on behalf of any such employee, director,
consultant or beneficiary of Seal or a Seal Subsidiary (each a "Scheduled Seal
Plan" and, collectively, the "Scheduled Seal Plans"). True and complete copies
of each of the Scheduled Seal Plans which is intended to qualify under Section
401(a) of the Code and each other Scheduled Seal Plan which Seal, the Seal
Subsidiaries or any ERISA Affiliate has or could reasonably be expected to have
a current or future actual or potential liability, and the material documents
relating thereto (including, without limitation, any summary plan description,
annual reports, and communications from the Internal Revenue Service ("IRS") or
any other government entity) have been provided to Oakridge.
None of the Scheduled Seal Plans (nor, to Seal's knowledge, any Other Plan or
ERISA Plan which is not a Qualified Plan with respect to the period commencing
six (6) years ago and ending August, 1996) is: (A) a "multi-employer plan," as
defined in Section 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code;
(B) otherwise subject to Title IV of ERISA; or (C) subject to Section 412 of the
Code. With respect to each employee pension benefit plan subject to Title IV of
ERISA or Section 412 of the Code (other than the Seal Plans) maintained or
contributed to by an ERISA Affiliate, (A) there is no actual or contingent
material liability of Seal or any Seal Subsidiary under Title IV of ERISA or
Section 412 of the Code to such Plan, the Pension Benefit Guaranty Corporation
or other governmental authority, and (B) the assets of Seal or any Seal
Subsidiary have not been subject to a lien under ERISA or the Code.
(b) Except where failures to comply with each of the following
representations has not or could not reasonably be expected to result,
individually and in the aggregate, in a Seal Material Adverse Effect, with
respect to each of the Scheduled Seal Plans (and, to Seal's knowledge, with
respect to the period commencing six (6) years ago and ending August, 1996, each
Other Plan and each ERISA Plan which is not a Qualified Plan):
(i) each such Plan intended to qualify under Section 401(a)
of the Code is qualified and has received a determination letter under Revenue
Procedure 93B39 or subsequent IRS guidance to the effect that such Plan is
qualified under Section 401 of the Code and any trust maintained pursuant
thereto is exempt from federal income taxation under Section 501 of the Code and
nothing has occurred or is expected to occur through the date of the Closing
that caused or could reasonably be expected to cause the loss of such
qualification or exemption or the imposition of any penalty or tax liability;
(ii) all payments required by any such Plan, any collective
bargaining agreement or other agreement, or by law (including, without
limitation, all contributions, insurance premiums, or inter-company charges)
with respect to all periods through the date of the Closing shall have been made
prior to the Closing or accrued on the Seal Financial Statements in accordance
with GAAP (as defined in Section 3.11 hereof);
(iii) no claim, lawsuit, arbitration or other action has
been threatened, asserted, instituted, or anticipated against such Plans, any
trustee or fiduciaries thereof, Seal, any Seal Subsidiary, any ERISA Affiliate,
any director, officer, or employee thereof, or any of the assets of any trust of
such Plans;
(iv) each such Plan has been maintained and administered at
all times in compliance with its terms and all applicable laws, rules and
regulations, including, without limitation, ERISA and the Code;
(v) no "prohibited transaction," within the meaning of
Section 4975 of the Code and Section 406 of ERISA, has occurred or is expected
to occur with respect to such Plan;
(vi) no such Plan is or is expected to be under audit or
investigation by the IRS, Department of Labor, or any other governmental
authority and no such completed audit, if any, has resulted in the imposition of
any tax or penalty; and
(vii) with respect to each such Plan that is funded mostly
or partially through an insurance policy, none of Seal, the Seal Subsidiaries or
any ERISA Affiliate has any liability in the nature of retroactive rate
adjustment, loss sharing arrangement or other actual or contingent liability
arising wholly or partially out of events occurring on or before the Closing.
(c) The consummation of the transactions contemplated by this
Agreement will not give rise to any material liability, including, without
limitation, liability for severance pay, unemployment compensation, termination
pay, or withdrawal liability, or accelerate the time of payment or vesting or
increase the amount of compensation or benefits due to any employee, director,
shareholder, or beneficiary of Seal or any Seal Subsidiary (whether current,
former, or retired) or their beneficiaries solely by reason of such
transactions. No amounts payable under any Scheduled Seal Plan (or, to Seal's
knowledge, under any Other Plan or ERISA Plan which is not a Qualified Plan with
respect to the period commencing six (6) years ago and ending August 1996) will
fail to be deductible for federal income tax purposes by virtue of Section 280G
or 162(m) of the Code. None of Seal, any Seal Subsidiary or any ERISA Affiliate
maintains, contributes to, or in any way provides for any benefits of any kind
whatsoever (other than under Section 498B of the Code, the Federal Social
Security Act, or a plan qualified under Section 401(a) of the Code) to any
current or future retiree or terminee. None of Seal, any Seal Subsidiary or any
ERISA Affiliate has any unfunded liabilities pursuant to any Scheduled Seal Plan
(nor, to Seal's knowledge, under any Other Plan or ERISA Plan which is not a
qualified Plan, with respect to the period commencing six (6) years ago and
ending August 1996) that is not intended to be qualified under Section 401(a)
of the Code.
3.10 No Brokers. Seal has not entered into any agreement,
arrangement or understanding of any kind or nature with any person or entity
which may result in the obligation of Oakridge or Seal to pay any finder's fee,
broker's fee, brokerage commission or similar payment in connection with any of
the transactions contemplated hereby.
3.11 Financial Statements; SEC Reports.
(a) The financial statements of Seal (including, without
limitation, the audited financial statements for the year ended December 31,
1997 and the unaudited financial statements for the nine months ended September
30, 1998) delivered to Oakridge are true, complete and correct in all material
respects and have been prepared in accordance with Seal's books and records.
The audited financial statements of Seal are sometimes referred to herein as the
"Seal Audited Financial Statements" and the unaudited financial statements are
sometimes referred to herein as the "Seal Unaudited Financial Statements." The
Seal Audited Financial Statements and Seal Unaudited Financial Statements are
sometimes collectively referred to herein as the "Seal Financial Statements."
All of the Seal Financial Statements together present fairly the financial
position, results of operations and changes in financial position of Seal as at
the dates and for the periods indicated thereon, and are in accordance with
generally accepted accounting principles ("GAAP") applied on a consistent basis,
subject, in the case of the Seal Unaudited Financial Statements, to (i) the
absence of certain notes, and (ii) normal year-end audit adjustments. Seal and
its officers and agents have not made any illegal or improper payments to, or
provided any illegal or improper benefit or inducement for, any governmental or
other official, supplier, customer, or any other person, or attempted to
influence any person to take or refrain from taking any action against Seal.
(b) Seal heretofore has delivered or made available to Oakridge
true and complete copies of (i) its Annual Reports on Form 10-KSB for the fiscal
years ended December 31, 1995, 1996 and 1997, respectively, (ii) all proxy
statements relating to Seal's meetings of stockholders (whether annual or
special) held since June 13, 1995, (iii) all other Forms 10BKSB and 10BQSB filed
by it with the Securities and Exchange Commission (the ASEC@) since June 13,
1995, and (iv) all amendments and supplements to all such reports and
registration statements filed by Seal with the SEC (the documents referred to in
clauses (i), (ii), (iii) and (iv) being hereinafter referred to as the "Seal
Reports"). As of their respective dates, the Seal Reports complied in all
material respects with all applicable requirements of the Securities Act of
1933, as amended, and the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder (including without limitation,
Regulation SBB with respect to the Seal Financial Statements included therein),
and did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
3.12 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 3.12, neither Seal nor any of its Seal Subsidiaries had at September
30, 1998, or has incurred since that date, any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of any nature, except: (a)
liabilities, obligations or contingencies (i) which are accrued or reserved
against Seal's Financial Statements or reflected in the notes thereto, or (ii)
which were incurred after September 30, 1998 and were incurred in the ordinary
course of business and consistent with past practices and in any event not
involving amounts greater than $10,000; (b) liabilities, obligations or
contingencies which (i) would not, in the aggregate, have a Seal Material
Adverse Effect, or (ii) have been discharged or paid in full prior to the date
hereof; and (c) liabilities and obligations which are of a nature not required
to be reflected in the consolidated financial statements of Seal and the Seal
Subsidiaries prepared in accordance with generally accepted accounting
principles consistently applied and which were incurred in the ordinary course
of business.
3.13 Recent Events. Except as set forth on Schedule 3.13, since
September 30, 1998, Seal has operated its business diligently and only in the
ordinary course of business as theretofore conducted, and there has been no (a)
material adverse change in its business, properties, assets, liabilities,
commitments, earnings, financial condition or prospects, or (b) any action
which, if taken or omitted hereafter, would conflict in any material respect
with any representation and warranty set forth in this Article.
3.14 Tax Matters.
(a) Seal and its Seal Subsidiaries have (i) duly filed with the
appropriate governmental authorities all Tax Returns required to be filed by
them for all periods ending on or prior to the Closing Date, other than those
Tax Returns the failure of which to file would not have a Seal Material Adverse
Effect, and such Tax Returns are true, correct and complete in all material
respects, and (ii) duly paid in full or made adequate provision in the Seal
Financial Statements for the payment of all Taxes due for all periods ending at
or prior to the Closing Date (whether or not shown on any Tax Return), except
where the failure to pay such Taxes would not have a Seal Material Adverse
Effect. The liabilities and reserves for Taxes reflected in the Seal balance
sheet included in the most recent Seal Financial Statements are adequate to
cover all Taxes for all periods ending at or prior to the Closing Date and there
are no material liens for Taxes upon any property or asset of Seal or any Seal
Subsidiary thereof, except for liens for Taxes not yet due. There are no
unresolved issues of law or fact arising out of a notice of deficiency, proposed
deficiency or assessment from the IRS or any other governmental taxing authority
with respect to Taxes of Seal or any of its Seal Subsidiaries which, if decided
adversely, singly or in the aggregate, would have a Seal Material Adverse
Effect. Neither Seal nor any of its Seal Subsidiaries is a party to any
agreement providing for the allocation or sharing of Taxes with any entity that
is not, directly or indirectly, a wholly-owned Subsidiary of Seal other than
agreements the consequences of which are fully and adequately reserved for in
the Seal Financial Statements. Neither Seal nor any of the Seal Subsidiaries
has, with regard to any assets or property held, acquired or to be acquired by
any of them, filed a consent to the application of Section 341(f) of the Code.
(b) For purposes of this Agreement, the term "Taxes" shall mean all
taxes, including, without limitation, income, gross receipts, excise, property,
sales, withholding, social security, occupation, use, service, service use,
license, payroll, franchise, transfer and recording taxes, fees and charges,
windfall profits, severance, customs, import, export, employment or similar
taxes, charges, fees, levies or other assessments imposed by the United States,
or any state, local or foreign government or subdivision or agency thereof,
whether computed on a separate, consolidated, unitary, combined or any other
basis, and such term shall include any interest, fines, penalties or additional
amounts and any interest in respect of any additions, fines or penalties
attributable or imposed or with respect to any such taxes, charges, fees, levies
or other assessments.
(c) For purposes of this Agreement, the term "Tax Return" shall
mean any return, report or other document or information required to be supplied
to a taxing authority in connection with Taxes.
3.15 No Violation of Law. Except as disclosed in Schedule 3.15,
neither Seal nor any of the Seal Subsidiaries is in violation of, or has been
given notice or been charged with any violation of, any law, statute, order,
rule, regulation, ordinance, or judgment (including, without limitation, any
applicable environmental law, ordinance or regulation) of any governmental or
regulatory body or authority, except for violations which, in the aggregate,
could not reasonably be expected to have a Seal Material Adverse Effect. To the
knowledge of Seal, no investigation or review by any governmental or regulatory
body or authority is pending or threatened, nor has any governmental or
regulatory body or authority indicated to Seal an intention to conduct the same,
other than, in each case, those the outcome of which, as far as reasonably can
be foreseen, will not have a Seal Material Adverse Effect. Seal and its Seal
Subsidiaries have all permits, licenses, franchises, variances, exemptions,
orders and other governmental authorizations, consents and approvals necessary
to conduct their businesses as presently conducted (collectively, the "Seal
Permits"), except for permits, licenses, franchises, variances, exemptions,
orders, authorizations, consents and approvals the absence of which, alone or in
the aggregate, would not have a Seal Material Adverse Effect. Neither Seal nor
any of the Seal Subsidiaries is in violation of the terms of any Seal Permit,
except for delays in filing reports or violations which, alone or in the
aggregate, would not have a Seal Material Adverse Effect.
3.16 Environmental Matters.
(a) To Seal's knowledge and except as disclosed in Schedule 3.16:
(i) Seal and each of the Seal Subsidiaries have conducted their respective
businesses in compliance with all applicable Environmental Laws (as defined in
Section 3.16(b)), including, without limitation, having all permits, licenses
and other approvals and authorizations necessary for the operation of their
respective businesses as presently conducted, (ii) none of the properties owned,
leased or operated by Seal or any of the Seal Subsidiaries contains any
Hazardous Substance (as defined in Section 3.16(c)) as a result of any activity
of Seal or any of the Seal Subsidiaries in amounts exceeding the levels
permitted by applicable Environmental Laws, (iii) neither Seal nor any of the
Seal Subsidiaries has received any notices, demand letters or requests for
information from any Federal, state, local or foreign governmental entity or
third party indicating that Seal or any of the Seal Subsidiaries may be in
violation of, or liable under, any Environmental Law in connection with the
ownership or operation of their businesses, (iv) there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened against Seal or any of the Seal Subsidiaries
relating to any violation, or alleged violation, of any Environmental Law, (v)
no reports have been filed, or are required to be filed, by Seal or any of the
Seal Subsidiaries concerning the release of any Hazardous Substance or the
threatened or actual violation of any Environmental Law, (vi) no Hazardous
Substance has been disposed of, released or transported in violation of any
applicable Environmental Law from any properties owned, leased or operated by
Seal or any of the Seal Subsidiaries as a result of any activity of Seal or any
of the Seal Subsidiaries during the time such properties were owned, leased or
operated by Seal or any of the Seal Subsidiaries, (vii) there have been no
environmental investigations, studies, audits, tests, reviews or other analyses
regarding compliance or noncompliance with any applicable Environmental Law or
the condition of any properties owned, leased or operated by Seal or any of the
Seal Subsidiaries conducted by or which are in the possession of Seal or the
Seal Subsidiaries relating to the activities of Seal or the Seal Subsidiaries,
(viii) there are no underground storage tanks on, in or under any properties
owned, leased or operated by Seal or any of the Seal Subsidiaries and no
underground storage tanks have been closed or removed from any of such
properties during the time such properties were owned, leased or operated by
Seal or any of the Seal Subsidiaries, and (ix) neither Seal, the Seal
Subsidiaries nor any of their respective properties are subject to any material
liabilities or expenditures (fixed or contingent) relating to any suit,
settlement, court order, administrative order, regulatory requirement, judgment
or claim asserted or arising under any Environmental Law, except for violations
of the foregoing clauses (i) through (ix) that, singly or in the aggregate,
would not reasonably be expected to have a Seal Material Adverse Effect.
(b) For purposes of this Agreement, "Environmental Law" means any
Federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, legal doctrine, order,
judgment, decree, injunction, requirement or agreement with any governmental
entity relating to (x) the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land, plant and
animal life or any other natural resource) or to human health or safety or (y)
the exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, production, release or disposal
of Hazardous Substances, in each case as amended and as in effect on the Closing
Date. The term Environmental Law includes, without limitation,
(i) the Federal Comprehensive Environmental Response Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act, the
Federal Water Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of
1976 (including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Federal Occupational Safety and
Health Act of 1970, each as amended and as in effect on the Closing Date, or any
state counterpart thereof, and
(ii) any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance, trespass and
strict liability) that may impose liability or obligations for injuries, damages
or penalties due to, or threatened as a result of, the presence of, effects of
or exposure to any Hazardous Substance.
(c) For purposes of this Agreement, "Hazardous Substance" means any
substance presently or hereafter listed, defined, designated or classified as
hazardous, toxic, radioactive, or dangerous, or otherwise regulated, under any
Environmental Law. Hazardous Substance includes any substance to which exposure
is regulated by any government authority or any Environmental Law including,
without limitation, any toxic waste, pollutant, contaminant, hazardous
substance, toxic substance, hazardous waste, special waste, industrial substance
or petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos or asbestos containing material, urea formaldehyde foam
insulation, lead or polychlorinated biphenyls.
3.17 No Stockholder Approval. No Seal stockholder approval of the
Exchange or the related transactions contemplated by this Agreement is required,
other than the Capital Amendment.
3.18 Books of Account. The books of account of Seal and its Seal
Subsidiaries accurately and fairly reflect, in reasonable detail and in all
material respects, Seal's and its Seal Subsidiaries' transactions and the
disposition of their assets. All notes and accounts receivable of Seal and its
Seal Subsidiaries are reflected in accordance with generally accepted accounting
principles on their books and records, are valid receivables subject to no
material setoffs or counterclaims, are current and collectible and will be
collected in accordance with their terms at their recorded amounts subject only
to normal adjustments in the ordinary course of business and the reserves for
contractual allowances and bad debts set forth on the face of the balance sheet
contained in the most recent Seal Financial Statements as adjusted for the
passage of time through the Closing Date in accordance with past custom and
practice of Seal and its Seal Subsidiaries. Seal and its Seal Subsidiaries have
filed all reports and returns required by any material law or regulation to be
filed by them, and have paid all taxes, duties and charges due on the basis of
such reports and returns.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF OAKRIDGE
Oakridge hereby represents and warrants to Seal as follows:
4.1 Organization of Oakridge and Subsidiaries. Set forth in
Schedule 4.1 is a complete listing of each subsidiary or other business entity
owned in whole or in part by Oakridge, together with their respective states of
incorporation or organization (the "Oakridge Subsidiaries"). Oakridge is duly
organized and validly existing under the laws of the State of Delaware, has full
power and authority to conduct its business as it is presently being conducted,
and to own and exploit all of its properties and assets. The copies of the
Articles of Incorporation and Bylaws and other governing documents of Oakridge
and the Oakridge Subsidiaries delivered to Seal are true, correct and complete
in all respects.
4.2 Oakridge Shares. All of Oakridge's outstanding shares of
capital stock have been duly authorized, are validly issued, are fully paid and
are non-assessable and are owned by Pearce. All of the outstanding shares of
capital stock or other ownership interests of each Oakridge Subsidiary have been
duly authorized, are validly issued, are fully paid and are non-assessable.
Except as set forth on Schedule 4.2, there are no agreements, commitments or
restrictions relating to ownership or voting of any interest or shares of
Oakridge or any Oakridge Subsidiary. Except as set forth on Schedule 4.2, all
of the outstanding shares of capital stock or member interests of the Oakridge
Subsidiaries are owned by Oakridge.
4.3 Authorization. Oakridge has all necessary corporate power and
authority to enter into this Agreement and has taken all action necessary to
consummate the transactions contemplated hereby and to perform its obligations
hereunder. This Agreement has been duly executed and delivered by Oakridge and
is a legal, valid and binding obligation of it, enforceable against it in
accordance with its terms.
4.4 No Conflict or Violation. Neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated hereby
will result in (a) a violation of or a conflict with any provision of the
Articles of Incorporation or Bylaws, or other governing instruments of Oakridge
or any Oakridge Subsidiary, (b) a breach of, or a default under, any term or
provision of any contract, agreement, indebtedness, lease, encumbrance,
commitment, license, franchise, permit, authorization or concession to which
Oakridge or any Oakridge Subsidiary is a party or by which its properties or
assets are bound, which breach or default would have a material adverse effect
on the business or financial condition of Oakridge, or its ability to consummate
the transactions contemplated hereby (a "Oakridge Material Adverse Effect"), (c)
a violation by Oakridge or any Oakridge Subsidiary of any statute, rule,
regulation, ordinance, code, order, judgment, writ, injunction, decree or award,
which violation would have a Oakridge Material Adverse Effect, or (d) an
imposition of any lien, encumbrance, restriction or charge on the business of
Oakridge or any Oakridge Subsidiary, or on any of their respective assets.
4.5 Consents and Approvals. Except as set forth on Schedule 4.5
hereto, no consent, approval or authorization of, or declaration, filing or
registration with, any governmental, regulatory, licensing or other authority,
or any other person or entity, is required to be made or obtained by Oakridge or
any Oakridge Subsidiary in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby.
4.6 Litigation. Except as set forth on Schedule 4.6, there is no
action, order, writ, injunction, judgment or decree outstanding, or claim, suit,
litigation, proceeding, labor dispute, arbitral action or investigation
(collectively, the "Oakridge Actions") pending or, to the knowledge of Oakridge
or its officers, threatened relating to or affecting (i) Oakridge or any
Oakridge Subsidiary, (ii) any benefit plan of Oakridge or any Oakridge
Subsidiary, (iii) any asset of Oakridge or any Oakridge Subsidiary, or (iv) the
transactions contemplated by this Agreement. Neither Oakridge nor any Oakridge
Subsidiary is in default with respect to any judgment, order, writ, injunction
or decree of any court or governmental, regulatory, licensing or other
authority, and there are no unsatisfied judgments against any of them or the
business or activities of any of them which would, individually or in the
aggregate, have a Oakridge Material Adverse Effect. There is not a reasonable
likelihood of an adverse determination of any pending Oakridge Actions which
would, individually or in the aggregate, have a Oakridge Material Adverse
Effect.
4.7 Title to Assets. Oakridge and each of its Subsidiaries has
good title to all of its leasehold interests and other properties, as reflected
in the most recent balance sheet included in Oakridge's Financial Statements,
except for properties and assets that have been disposed of in the ordinary
course of business since the date of such balance sheet, free and clear of all
mortgages, liens, pledges, charges or encumbrances of any nature whatsoever,
except (i) the lien for current Taxes, payments of which are not yet delinquent
and other statutory liens, (ii) such imperfections in title and easements and
encumbrances, if any, as are not material in character, amount or extent and do
not materially and adversely affect the value or interfere with the present use
of the property subject thereto or affected thereby, or otherwise materially
impair Oakridge's business operations or prospects, (iii) as disclosed in
Schedule 4.7, or (iv) for such matters which, singly or in the aggregate, could
not reasonably be expected to have a Oakridge Material Adverse Effect. Except
as set forth on Schedule 4.7, all leases under which Oakridge leases real or
personal property have been delivered to Seal and are in good standing, valid
and effective in accordance with their respective terms, and there is not, under
any of such leases, any existing default or, to the knowledge of Oakridge, event
which with notice or lapse of time or both would become a default other than
defaults under such leases which in the aggregate will not have a Oakridge
Material Adverse Effect.
4.8 Contracts, Obligations and Commitments. Schedule 4.8 sets
forth an accurate and complete list of all material contracts, agreements,
options, leases, commitments and instruments entered into by Oakridge or any
Oakridge Subsidiary ("Oakridge Contracts"). Oakridge and the Oakridge
Subsidiaries have provided Seal with complete and correct copies of all such
items listed in Schedule 4.8. Except for such items listed in Schedule 4.8,
there are no other material contracts or other arrangements under which goods,
equipment or services are provided, leased or rendered by, or are to be
provided, leased or rendered to, Oakridge or any of its Subsidiaries. Except as
set forth in Schedule 4.8: (a) the Oakridge Contracts have not been modified,
pledged, assigned or amended in any material respect, are legally valid, binding
and enforceable in accordance with their respective terms and are in full force
and effect; (b) to the knowledge of Oakridge there are no material defaults by
Oakridge or any of its Oakridge Subsidiaries or any other party to the Oakridge
Contracts; (c) neither Oakridge nor any of its Oakridge Subsidiaries have
received notice of any material default, offset, counterclaim or defense under
any Oakridge Contract; (d) to the knowledge of Oakridge no condition or event
has occurred which with the passage of time or the giving of notice or both
would constitute a default or breach by Oakridge or any of its Oakridge
Subsidiaries of the terms of any Oakridge Contract, except for any consents
required to consummate the transactions contemplated by this Agreement; and (e)
there does not now, and at Closing will not, exist any material security
interest, mortgage, pledge, restriction, charge, lien, encumbrance or claim of
others on any interest created under any Oakridge Contract. None of the
Oakridge Contracts is subject to termination from and after the Closing Date and
prior to the expiration of its stated term by any party to such Oakridge
Contract, except as stated in each such Oakridge Contract.
4.9 Employee Benefit Plans; ERISA.
(a) Schedule 4.9 contains an accurate and complete list of all
"employee benefit plan," within the meaning of Section 3(3) of ERISA and any
other bonus, profit sharing, pension, severance, savings, deferred compensation,
fringe benefits, insurance, welfare, health, post-retirement benefit, life,
stock option, disability, accident, sick pay, vacation, individual employment,
consulting, incentive, change in control, or other plan, agreement, policy,
trust fund, or arrangement (whether written or unwritten, insured or
self-insured):
(i) established, maintained, sponsored, or contributed to (or
with respect to which any obligation to contribute has been undertaken) within
the last six years by Oakridge, the Oakridge Subsidiaries or any entity that
would be deemed a "single employer" with Oakridge under Section 414(b), (c),
(m), or (o) of the Code or Section 4001 of ERISA (an "ERISA Affiliate") on
behalf of any employee, director, or consultant of Oakridge or an Oakridge
Subsidiary (whether current, former, or retired) or their beneficiaries or
(ii) with respect to which Oakridge, the Oakridge Subsidiaries
or any ERISA Affiliate has or has within the last six years had any obligation
on behalf of any such employee, director, consultant or beneficiary of Seal or a
Seal Subsidiary (each an "Oakridge Plan" and, collectively, the "Oakridge
Plans"). True and complete copies of each of the Oakridge Plans which is
intended to qualify under Section 401 (a) of the Code and each other Oakridge
Plan which Oakridge, the Oakridge Subsidiaries or any ERISA Affiliate has or
could reasonably be expected to have a current or future actual or potential
liability, and the material documents relating thereto (including, without
limitation, any summary plan description, annual reports, and communications
from the IRS or any other government entity) have been provided to Seal.
None of the Oakridge Plans is (A) a "multi-employer plan," as defined in Section
3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code, (B) otherwise
subject to Title IV of ERISA or (C) subject to Section 412 of the Code. With
respect to each employee pension benefit plan subject to Title IV of ERISA or
Section 412 of the Code (other than the Oakridge Plans) maintained or
contributed to by an ERISA Affiliate, (A) there is no actual or contingent
material liability of Oakridge or any Oakridge Subsidiary under Title IV of
ERISA or Section 412 of the Code to such plan, the Pension Benefit Guaranty
Corporation or other governmental authority and (B) the assets of Oakridge or
any Oakridge Subsidiary have not been subject to a lien under ERISA or the Code.
(b) Except where failures to comply with each of the following
representations has not or could not reasonably be expected to result,
individually and in the aggregate, in an Oakridge Material Adverse Effect, with
respect to each of the Oakridge Plans on Schedule 4.9:
(i) except as set forth on Schedule 4.9, each Oakridge Plan
intended to qualify under Section 401(a) of the Code is qualified and has
received a determination letter under Revenue Procedure 93B39 or subsequent IRS
guidance to the effect that the Oakridge Plan is qualified under Section 401 of
the Code and any trust maintained pursuant thereto is exempt from federal income
taxation under Section 501 of the Code and nothing has occurred or is expected
to occur through the date of the Closing that caused or could reasonably be
expected to cause the loss of such qualification or exemption or the imposition
of any penalty or tax liability;
(ii) all payments required by any Oakridge Plan, any collective
bargaining agreement or other agreement, or by law (including, without
limitation, all contributions, insurance premiums, or inter-company charges)
with respect to all periods through the date of the Closing shall have been made
prior to the Closing or accrued on the Oakridge Financial Statements in
accordance with GAAP;
(iii) no claim, lawsuit, arbitration or other action has been
threatened, asserted, instituted, or anticipated against the Oakridge Plans, any
trustee or fiduciaries thereof, Oakridge, any Oakridge Subsidiary, any ERISA
Affiliate, any director, officer, or employee thereof, or any of the assets of
any trust of the Oakridge Plans;
(iv) the Oakridge Plan has been maintained and administered at
all times in compliance with its terms and all applicable laws, rules and
regulations, including, without limitation, ERISA and the Code;
(v) no "prohibited transaction," within the meaning of Section
4975 of the Code and Section 406 of ERISA, has occurred or is expected to occur
with respect to the Oakridge Plan;
(vi) no Oakridge Plan is or is expected to be under audit or
investigation by the IRS, Department of Labor, or any other governmental
authority and no such completed audit, if any, has resulted in the imposition of
any tax or penalty; and
(vii) with respect to each Oakridge Plan that is funded mostly
or partially through an insurance policy, none of Oakridge, Oakridge
Subsidiaries or any ERISA Affiliate has any liability in the nature of
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring on or
before the Closing.
(c) The consummation of the transactions contemplated by this
Agreement will not give rise to any material liability, including, without
limitation, liability for severance pay, unemployment compensation, termination
pay, or withdrawal liability, or accelerate the time of payment or vesting or
increase the amount of compensation or benefits due to any employee, director,
shareholder, or beneficiary of Oakridge or any Oakridge Subsidiary (whether
current, former, or retired) or their beneficiaries solely by reason of such
transactions. No amounts payable under any Oakridge Plan will fail to be
deductible for federal income tax purposes by virtue of Section 280G or 162(m)
of the Code. None of Oakridge, any Oakridge Subsidiary or any ERISA Affiliate
maintains, contributes to, or in any way provides for any benefits of any kind
whatsoever (other than under Section 4980B of the Code, the Federal Social
Security Act, or a plan qualified under Section 401(a) of the Code) to any
current or future retiree or terminee. None of Oakridge, any Oakridge
Subsidiary or any ERISA Affiliate has any unfunded liabilities pursuant to any
Oakridge Plan that is not intended to be qualified under Section 401(a) of the
Code.
4.10 No Brokers. Except as set forth on Schedule 4.10, Oakridge
has not entered into any agreement, arrangement or understanding of any kind or
nature with any person or entity which may result in the obligation of Oakridge
or Seal to pay any finder's fee, broker's fee, brokerage commission or similar
payment in connection with any of the transactions contemplated hereby.
4.11 Financial Statements. Except as described below, the
consolidated financial statements of Oakridge for the period ended October 31,
1998, and delivered to Seal are true, complete and correct in all material
respects, and have been prepared in accordance with Oakridge's books and
records. The financial statements of Oakridge are sometimes referred to herein
as the "Oakridge Financial Statements." Subject to the next sentence, all of
the Oakridge Financial Statements together present fairly the financial
position, results of operations and changes in financial position of Oakridge as
at the dates and for the periods indicated thereon, and are in accordance with
GAAP, applied on a consistent basis, subject to (i) the absence of certain
notes, and (ii) normal year-end audit adjustments. The Oakridge Financial
Statements reflect the consolidation of a predecessor entity to Oakridge,
Comprehensive Outpatient Centers of Florida, Inc. ("COCF"), as though COCF had
been a subsidiary of Oakridge since its inception. COCF will become a
subsidiary of Oakridge on or before December 31, 1998. Oakridge and its
officers and agents have not made any illegal or improper payments to, or
provided any illegal or improper benefit or inducement for, any governmental or
other official, supplier, customer, or any other person, or attempted to
influence any person to take or refrain from taking any action against Oakridge.
4.12 Absence of Undisclosed Liabilities. Except as disclosed in
Schedule 4.12, neither Oakridge nor any Oakridge Subsidiaries had at October 31,
1998, or has incurred since that date, any liabilities or obligations (whether
absolute, accrued, contingent or otherwise) of any nature, except: (a)
liabilities, obligations or contingencies (i) which are accrued or reserved
against Oakridge's Financial Statements or reflected in the notes thereto, or
(ii) which were incurred after October 31, 1998 and were incurred in the
ordinary course of business and consistent with its business plan; (b)
liabilities, obligations or contingencies which (i) would not, in the aggregate,
have a Oakridge Material Adverse Effect, or (ii) have been discharged or paid in
full prior to the date hereof; and (c) liabilities and obligations which are of
a nature not required to be reflected in the consolidated financial statements
of Oakridge and the Oakridge Subsidiaries prepared in accordance with generally
accepted accounting principles consistently applied and which were incurred in
the ordinary course of business.
4.13 Recent Events. Since October 31, 1998, Oakridge has operated
its business diligently and only in the ordinary course of business and there
has been no (a) material adverse change in its business, properties, assets,
liabilities, commitments, financial condition or prospects (it being understood
that the business plan of Oakridge contemplates significant additional
liabilities, commitments and losses beyond the Closing Date), or (b) any action
which, if taken or omitted hereafter, would conflict in any material respect
with any representation and warranty set forth in this Article.
4.14 Tax Matters. Oakridge and the Oakridge Subsidiaries have (i)
duly filed with the appropriate governmental authorities all Tax Returns
required to be filed by them for all periods ending on or prior to the Closing
Date, other than those Tax Returns the failure of which to file would not have a
Oakridge Material Adverse Effect, and such Tax Returns are true, correct and
complete in all material respects, (ii) duly paid in full or made adequate
provision in the Oakridge Financial Statements for the payment of all Taxes due
for all periods ending at or prior to the Closing Date (whether or not shown on
any Tax Return), except where the failure to pay such Taxes would not have a
Oakridge Material Adverse Effect. The liabilities and reserves for Taxes
reflected in the Oakridge balance sheet included in the most recent Oakridge
Financial Statements are adequate to cover all Taxes for all periods ending at
or prior to the Closing Date and there are no material liens for Taxes upon any
property or asset of Oakridge or any Oakridge Subsidiary, except for liens for
Taxes not yet due. There are no unresolved issues of law or fact arising out of
a notice of deficiency, proposed deficiency or assessment from the IRS or any
other governmental taxing authority with respect to Taxes of Oakridge or any of
the Oakridge Subsidiaries which, if decided adversely, singly or in the
aggregate, would have a Oakridge Material Adverse Effect. Neither Oakridge nor
any of the Oakridge Subsidiaries is a party to any agreement providing for the
allocation or sharing of Taxes with any entity that is not, directly or
indirectly, a wholly-owned Subsidiary of Oakridge other than agreements the
consequences of which are fully and adequately reserved for in the Oakridge
Financial Statements. Neither Oakridge nor any of the Oakridge Subsidiaries
has, with regard to any assets or property held, acquired or to be acquired by
any of them, filed a consent to the application of Section 341(f) of the Code.
4.15 No Violation of Law. Except as disclosed in Schedule 4.15,
neither Oakridge nor any of the Oakridge Subsidiaries is in violation of, or has
been given notice or been charged with any violation of, any law, statute,
order, rule, regulation, ordinance, or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any governmental
or regulatory body or authority, except for violations which, in the aggregate,
could not reasonably be expected to have a Oakridge Material Adverse Effect. To
the knowledge of Oakridge, no investigation or review by any governmental or
regulatory body or authority is pending or threatened, nor has any governmental
or regulatory body or authority indicated to Oakridge an intention to conduct
the same, other than, in each case, those the outcome of which, as far as
reasonably can be foreseen, will not have a Oakridge Material Adverse Effect.
Oakridge and its Subsidiaries have all permits, licenses, franchises, variances,
exemptions, orders and other governmental authorizations, consents and approvals
necessary to conduct their businesses as presently conducted (collectively, the
"Oakridge Permits"), except for permits, licenses, franchises, variances,
exemptions, orders, authorizations, consents and approvals the absence of which,
alone or in the aggregate, would not have a Oakridge Material Adverse Effect.
Neither Oakridge nor any of the Oakridge Subsidiaries is in violation of the
terms of any Oakridge Permit, except for delays in filing reports or violations
which, alone or in the aggregate, would not have a Oakridge Material Adverse
Effect.
4.16 Environmental Matters. To Oakridge's knowledge and except as
disclosed in Schedule 4.16, (i) Oakridge and each of the Oakridge Subsidiaries
have conducted their respective businesses in compliance with all applicable
Environmental Laws (as defined in Section 4.16(b)), including, without
limitation, having all permits, licenses and other approvals and authorizations
necessary for the operation of their respective businesses as presently
conducted, (ii) none of the properties owned, leased or operated by Oakridge or
any of the Oakridge Subsidiaries contains any Hazardous Substance (as defined in
Section 3.16(c)) as a result of any activity of Oakridge or any of the Oakridge
Subsidiaries in amounts exceeding the levels permitted by applicable
Environmental Laws, (iii) neither Oakridge nor any of the Oakridge Subsidiaries
has received any notices, demand letters or requests for information from any
Federal, state, local or foreign governmental entity or third party indicating
that Oakridge or any of the Oakridge Subsidiaries may be in violation of, or
liable under, any Environmental Law in connection with the ownership or
operation of their businesses, (iv) there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending or threatened against Oakridge or any of the Oakridge
Subsidiaries relating to any violation, or alleged violation, of any
Environmental Law, (v) no reports have been filed, or are required to be filed,
by Oakridge or any of the Oakridge Subsidiaries concerning the release of any
Hazardous Substance or the threatened or actual violation of any Environmental
Law, (vi) no Hazardous Substance has been disposed of, released or transported
in violation of any applicable Environmental Law from any properties owned,
leased or operated by Oakridge or any of the Oakridge Subsidiaries as a result
of any activity of Oakridge or any of the Oakridge Subsidiaries during the time
such properties were owned, leased or operated by Oakridge or any of the
Oakridge Subsidiaries, (vii) there have been no environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance or
noncompliance with any applicable Environmental Law or the condition of any
properties owned, leased or operated by Oakridge or any of the Oakridge
Subsidiaries conducted by or which are in the possession of Oakridge or the
Oakridge Subsidiaries relating to the activities of Oakridge or the Oakridge
Subsidiaries, (viii) there are no underground storage tanks on, in or under any
properties owned, leased or operated by Oakridge or any of the Oakridge
Subsidiaries and no underground storage tanks have been closed or removed from
any of such properties during the time such properties were owned, leased or
operated by Oakridge or any of the Oakridge Subsidiaries, and (ix) neither
Oakridge, the Oakridge Subsidiaries nor any of their respective properties are
subject to any material liabilities or expenditures (fixed or contingent)
relating to any suit, settlement, court order, administrative order, regulatory
requirement, judgment or claim asserted or arising under any Environmental Law,
except for violations of the foregoing clauses (i) through (ix) that, singly or
in the aggregate, would not reasonably be expected to have a Oakridge Material
Adverse Effect.
4.17 Books of Account. The books of account of Oakridge and its
Subsidiaries accurately and fairly reflect, in reasonable detail and in all
material respects, Oakridge's and its Subsidiaries' transactions and the
disposition of their assets. All notes and accounts receivable of Oakridge and
its Subsidiaries are reflected in accordance with generally accepted accounting
principles on their books and records, are valid receivables subject to no
material setoffs or counterclaims, are current and collectible and will be
collected in accordance with their terms at their recorded amounts subject only
to normal adjustments in the ordinary course of business and the reserves for
contractual allowances and bad debts set forth on the face of the balance sheet
contained in the most recent Oakridge Financial Statements as adjusted for the
passage of time through the Closing Date in accordance with past custom and
practice of Oakridge and its Subsidiaries. Oakridge and its Subsidiaries have
filed all reports and returns required by any material law or regulation to be
filed by them, and have paid all taxes, duties and charges due on the basis of
such reports and returns.
ARTICLE 5
ACTIONS BY SEAL AND OAKRIDGE PRIOR TO THE CLOSING
Seal and Oakridge covenant and agree, as appropriate, as follows for the period
from the date hereof through the Closing Date:
5.1 Maintenance of Business. Each of Seal and Oakridge shall
diligently carry on its business in the ordinary course consistent with either
past practice or its business plan. The parties acknowledge that on or before
December 31, 1998, Oakridge will acquire the outstanding capital stock of COCF
and intends to merge Oakridge Membership Holdings LLC with and into Oakridge,
with Oakridge being the survivor.
5.2 Certain Prohibited Transactions. Seal shall not, without the
prior written consent of Oakridge:
(a issue or enter into binding commitments to issue any shares of
capital stock or any other securities, or any securities or rights convertible
into shares of capital stock or other securities, other than as contemplated by
the Exchange;
(b pay or incur any obligation to pay any dividend or other
distribution on capital stock or otherwise or make or incur any obligation to
make any distribution or redemption with respect to capital stock;
(c borrow money, incur debts or liabilities or make any
expenditures other than in the ordinary course of business consistent with past
practices;
(d make any investment of a capital nature, either by purchase of
stock or securities, contributions to capital, property transfer or otherwise,
or by the purchase of any property or assets of any other individual,
partnership, firm or corporation;
(e enter into or terminate any material contract or agreement, or
make any material change in any of its leases and contracts;
(f enter into or amend any employment, severance, special pay
arrangement with respect to termination of employment or other similar
arrangements or agreements with any directors, officers or key employees, except
in the ordinary course and consistent with past practice;
(g adopt, enter into or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation, health
care, employment or other employee benefit plan, agreement, trust, fund or
arrangement for the benefit or welfare of any employee or retiree, except as
required to comply with changes in applicable law; and
(h take any other action which would cause any representation or
warranty of Seal in this Agreement to be or become untrue in any material
respect.
5.3 Investigation by Parties. Seal and Oakridge shall allow one
another, during regular business hours, through employees, agents and
representatives, to make such investigation of the business, properties, books
and records of the other, and to conduct such examination of the conditions of
the other, as each deems necessary or advisable to familiarize itself with such
business, properties, books, records, condition and other matters, and to verify
the representations and warranties of the other party hereunder. All such
access shall be subject to the terms of that certain Confidentiality Agreement
dated June 16, 1998 between Seal and Oakridge (the "Confidentiality Agreement").
5.4 Consents and Best Efforts. Each party shall, as soon as
possible, commence to take all action required to obtain any and all consents,
approvals and agreements of, and to give all notices and make all other filings
with, any third parties, including governmental, regulatory, licensing or other
authorities, necessary to authorize, approve or permit the full and complete
exchange, conveyance, assignment or transfer of stock and membership interests
contemplated hereby, and each shall cooperate with the other with respect
thereto. In addition, subject to the terms and conditions herein provided, each
of the parties covenants and agrees to use its reasonable best efforts to take,
or cause to be taken, all action, or do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated hereby and to cause
the fulfillment of the parties' obligations hereunder.
5.5 Notification of Certain Matters. Seal and Oakridge shall give
prompt notice to one another of (i) the occurrence, or failure to occur, of any
event the occurrence or failure of which to occur would be likely to cause any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect any time from the date hereof to the Closing
Date, and (ii) any material failure of any person to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by him or it
hereunder, and each party shall use all reasonable efforts to remedy same.
5.6 Exclusivity. Neither Seal nor any of its officers, directors,
employees or agents shall, directly or indirectly, without the prior written
consent of Oakridge, contact, respond to, negotiate with or initiate or hold
discussions with, solicit or entertain offers from, any corporation,
partnership, person or other entity (other than Oakridge) regarding (i) the
sale, issuance or other disposition of any equity interest in Seal, (ii) the
sale or disposition of all or any substantial portion of the assets of Seal, or
(iii) the merger, consolidation or reorganization of Seal with or into any other
entity. Seal agrees to immediately advise, in reasonable detail, Oakridge
regarding any offer, proposal or related inquiry which it, its officers,
directors, employees or agents may hereafter receive from any other corporation,
partnership, person or other entity.
5.7 Lock-Up Letters; Right of Refusal. Seal shall use its best
efforts to obtain from each of the holders of Class A Common Stock Equivalents
(which were exercisable for an aggregate of 1,780,000 shares of Class A Common
Stock as of the date of this Agreement), a written agreement in favor of Seal
and Oakridge, in form and substance satisfactory to Oakridge ("Lock-Up
Letters"), whereby such holders agree as follows:
(a Restrictions on Transfer, Generally. Until the earlier of
April 30, 1999, or the date upon which the Capital Amendment is filed and
becomes effective with the Delaware Secretary of State (the "Exercise Date")
that
(i such holders shall not exercise, convert, sell, transfer or
otherwise dispose of any Class A Common Stock or Class A Common Stock
Equivalents beneficially owned by them (the "Restricted Securities"), and
(ii Seal need not reserve any shares of Class A Common Stock for
issuance in connection with such Class A Common Stock Equivalents; and (iii0
they will vote their shares of Seal's capital stock in favor of the Capital
Amendment. To the extent requested by Oakridge, such later undertaking will be
evidenced by an irrevocable proxy in favor of such person as may hereinafter be
designated by Oakridge.
Notwithstanding the foregoing provisions of this Section 5.7(a), such holders
may collectively exercise, sell or transfer Class A Common Stock Equivalents for
not more than 100,000 shares in the aggregate prior to the Exercise Date.
(b Restrictions on Transfer, Specifically. From and after the
Exercise Date, the following additional restrictions on the sale, transfer or
other disposition ("transfer") of the Restricted Securities shall also apply as
follows:
(i) with regard to Restricted Securities beneficially owned by
Thomas M. Ferguson (including for purposes of this Section 5.7, shares owned of
record by Magnum):
(A) no Restricted Securities shall be transferred until the
earlier of the date upon which the Class A Common Stock is admitted for trading
on the Nasdaq SmallCap Market and one year after the Exercise Date;
(B) if the Class A Common Stock is admitted for trading on the
Nasdaq Small Cap Market before one year after the Exercise Date, then for each
remaining calendar quarter thereafter within such one-year period (or portion
thereof if such period constitutes at least 45 days), Ferguson may transfer up
to 20,000 shares of Restricted Securities per quarter, and
(C) commencing one year after the Exercise Date, up to 40,000
shares of Restricted Securities may be transferred per quarter until the end of
the eighteenth (18th) month following the Exercise Date, at which time such
volume restriction shall cease;
(ii) with regard to Restricted Securities beneficially owned by
Messrs. James S. Goodner and Donald L. Caldera:
(A) for the one-year period after the Closing Date, each may
transfer up to 20,000 shares of Restricted Securities per remaining calendar
quarter (or portion thereof if such period constitutes at least 45 days), and
(B) commencing one year after the Closing Date, each may
transfer up to 40,000 shares of Restricted Securities per calendar quarter until
the end of the eighteenth (18th) month after the Closing Date, at which time
such volume restriction shall cease;
(iii) with regard to Restricted Securities beneficially owned by
Messrs. Richard P. Walker and J. Erik Hvide (including for purposes of this
Section 5.7 shares owned of record by Hvide Marine Incorporated), for the one
year period after the Closing Date, each may transfer up to one-third of the
Restricted Securities now beneficially owned by each such person per remaining
calendar quarter (or portion thereof if such period constitutes at least 45
days). Upon expiration of the foregoing one-year period, such volume
restrictions shall cease.
(c Restrictions Not Cumulative. To the extent any permitted number
of shares of Restricted Securities are not transferred within a particular
calendar quarter in this Section 5.7 and particularly, Section 5.7(b), such
shares may not be cumulated with the permissible number of shares which may be
transferred in subsequent calendar quarters. The Lock-Up Letters shall
acknowledge and authorize Seal to (i) provide stop transfer instructions to its
transfer agent consistent with the terms of such Lock-Up Letters and (ii) place
appropriate restricted legends upon any stock certificate now owned or
hereinafter issued to any of such holders.
(d Right of First Refusal.
(i With regard to a proposed transfer by any of the persons
described in Section 5.7(b) on or before the earlier of (A) three (3) years from
the Closing Date, or (B) the date upon which the "Market Value Public Float" (as
hereinafter defined) shall exceed $100 million, such person (the "Offeror")
shall provide written notice to Seal (c/o Oakridge) in conformity with Section
10.3 hereof of the Offeror's proposed transfer of shares of Restricted
Securities (the "Offered Shares") together with the price per share at which the
Offeror proposes to sell such Restricted Securities (the "Offer Price"). For
purposes of this Section 5.7(d), "Market Value of the Public Float" is defined
as shares that are not held directly or indirectly by any officer or director of
Seal and by any other person who is the beneficial owner of more than 10 percent
of the total shares outstanding multiplied by the bid price of each share of
Seal Class A Common Stock.
(ii Seal shall have three (3) business days from receipt of
such notice to provide written notice to the Offeror that it elects to purchase
all or part of the Offered Shares.
(iii If Seal does not give written notice of exercise of the
foregoing repurchase right as to all of the Offered Shares, then as to any
Offered Shares not being repurchased, the Offeror may, for a period of thirty
(30) days thereafter, sell such Offered Shares at a price per share not below
ninety-five percent (95%) of the Offer Price. If all of the Offered Shares are
not sold within the foregoing 30-day period, then any transfer thereafter shall
again be subject to the foregoing right of first refusal.
(iv Unless otherwise agreed upon by Seal and the Offeror, the
closing of any repurchase of Offered Shares shall be held at 10:00 a.m. at
Seal's then principal office on the third business day after notice of Seal's
election to purchase any Offered Shares. At the closing described in this
Section 5.7(d)(iv), Seal shall pay the applicable purchase price for such
Offered Shares and the Offeror shall deliver, free and clear of any and all
security interests, mortgages, pledges, restrictions, charges, liens,
encumbrances or claims of others, a certificate evidencing the Offered Shares,
in proper form and executed for transfer.
(e Any transfer or sale of any Restricted Securities in
contravention of this Section 5.7 shall be deemed null and void and be of no
force or effect.
5.8 NASDAQ Matters. Seal shall promptly commence all manner of
action, and use its best efforts, with the cooperation and assistance of
Oakridge, to obtain a favorable determination from The NASDAQ Stock Market, Inc.
("NASDAQ") to list the Class A Common Stock on the NASDAQ SmallCap Market as
soon as practicable.
5.9 Series A Preferred Stock. Seal shall take all manner of action
necessary to adopt, and authorize the issuance of, the Series A Shares with such
rights, preferences and limitations as set forth in the Statement of Designation
for Series A Convertible Preferred Stock attached hereto as Exhibit AG,@
including without limitation, the filing of a Preferred Stock Designation with
the Delaware Secretary of State which shall amend its Certificate of
Incorporation.
5.10 Fairness Opinion. Seal shall engage an investment banker
acceptable to Oakridge for the purpose of providing an opinion to Seal and its
Board of Directors that the transactions contemplated by this Agreement are fair
and equitable to the stockholders of Seal from a financial point of view (the
"Fairness Opinion"). The fees and expenses of the investment banker shall be
paid by Seal.
5.11 Services Agreements. Effective on the Closing, Seal shall
enter into (i) an employment agreement with each of Messrs. Ferguson and
Goodner, and (ii) a consulting agreement with First Stanford Corporation ("First
Stanford"). Each employment agreement shall have a term of one (1) year.
Ferguson's employment agreement shall provide for compensation of $97,500 per
annum, and Goodner's employment agreement, will provide for compensation of
$12,000 per annum. The consulting agreement with First Stanford shall be for a
period of one (1) year and shall provide for a consulting fee of $180,000 per
annum. Each employment agreement and the consulting agreement shall otherwise
be on terms and in form substantially as set forth in Exhibits AHB1,@ AHB2" and
AHB3,@ with such changes thereto as are acceptable to Oakridge, First Stanford
and Messrs. Ferguson or Goodner, as appropriate (the "Services Agreements"). As
of the Closing, the Services Agreements shall be the only employment or other
compensation arrangements to which Seal or any Seal Subsidiary is a party.
ARTICLE 6
CONDITIONS TO OAKRIDGE'S OBLIGATIONS
The obligations of Oakridge hereunder are subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions:
6.1 Representations, Warranties and Covenants. All representations
and warranties of Seal contained in this Agreement shall be true and correct in
all material respects at and as of the Closing Date, as if such representations
and warranties were made at and as of the Closing Date, and Seal shall have
performed in all material respects all agreements and covenants required hereby
to be performed by it prior to or at the Closing Date.
6.2 Consents. All consents, approvals and waivers from
governmental, regulatory, licensing or other authorities and other parties
necessary to permit Oakridge and Seal to consummate the transactions
contemplated hereby shall have been obtained, unless the failure to obtain same
has no material adverse effect.
6.3 No Governmental Proceeding or Litigation. No suit, action,
investigation, inquiry or other proceeding by any governmental, regulatory,
licensing or other authority or other person or entity shall have been
instituted or threatened which questions the validity or legality of the
transactions contemplated hereby and which could reasonably be expected to
materially damage Seal if the transactions contemplated hereunder are
consummated.
6.4 Performance. Seal shall have performed and complied, or shall
perform and comply simultaneously, in all material respects with the agreements,
covenants and conditions required hereunder. Each of the deliveries
contemplated by Section 2.2(a) and (c) shall have been satisfied.
6.5 Lock-Up Letters. The holders of the Restricted Securities
shall have executed and delivered the Lock-Up Letters pursuant to Section 5.7
hereof.
6.6 Sale of Class B Common Stock. The purchase and sale of all of
the issued and outstanding shares of Seal's Class B Common Stock from First
Magnum Corporation to Lauderdale Holdings, Inc. or another person or entity
designated by Pearce as contemplated by that certain Stock Purchase Agreement of
even date between such parties shall have been consummated.
6.7 Services Agreements. The Services Agreements shall have been
executed and delivered.
6.8 Seal Resignations. Each of the resignations of the officers
and directors of Seal shall have been received as contemplated by Section 1.3
hereof.
6.9 Fairness Opinion. A favorable Fairness Opinion shall have been
rendered with respect to the transactions contemplated by this Agreement as
contemplated by Section 5.10 hereof.
6.10 Capital Amendment; Voting. As a result of the consummation of
the transactions contemplated hereby, there shall be no restrictions on the
ability of Pearce to vote the Seal Shares in favor of the Capital Amendment.
The transaction contemplated hereby, including the Capital Amendment, shall be
structured such that Pearce is exempt from the requirements of Section 203 of
the Delaware General Corporation Law.
ARTICLE 7
CONDITIONS TO SEAL'S OBLIGATIONS
The obligations of Seal hereunder are subject to the satisfaction, on or prior
to the Closing Date, of each of the following conditions:
7.1 Representations, Warranties and Covenants. All representations
and warranties of Oakridge contained in this Agreement shall be true and correct
in all material respects at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and
Oakridge shall have performed in all material respects all agreements and
covenants required hereby to be performed by either of them prior to or at the
Closing Date.
7.2 No Governmental Proceeding or Litigation. No suit, action,
investigation, inquiry or other proceeding by any governmental, regulatory,
licensing or other authority or other person or entity shall have been
instituted or threatened which questions the validity or legality of the
transactions contemplated hereby and which could reasonably be expected to
materially damage Oakridge if the transactions contemplated hereunder are
consummated.
7.3 Performance. Oakridge shall have performed and complied, or
shall perform and comply simultaneously, in all material respects with the
agreements, covenants and conditions required hereunder, including Section
2.2(b) hereof.
7.4 Fairness Opinion. A favorable Fairness Opinion shall have been
rendered with respect to the transactions contemplated by this Agreement as
contemplated by Section 5.10 hereof.
7.5 Services Agreements. The Services Agreements shall have been
executed and delivered.
7.6 Oakridge Capitalization. There shall have been contributed to
the capital of Oakridge and the Oakridge Subsidiaries (including for purposes
hereof COCF, the outstanding capital stock of which will be contributed to
Oakridge on or before the Closing Date) a minimum of Twenty Million Dollars
($20,000,000) in the aggregate from the inception date of Oakridge (including
COCF, as its predecessor) through the Closing Date.
ARTICLE 8
ACTIONS BY SEAL AND OAKRIDGE
AS OF AND AFTER THE CLOSING
8.1 Books and Records. At or promptly following the Closing, Seal
shall deliver to Oakridge all books, records and files relating to the business,
properties, assets or operations of Seal. Each party (at its expense) shall
have the right to inspect and to make copies of the other's relevant books and
records at any time during business hours for any proper purpose.
8.2 Further Assurances. On and after the Closing Date, each of the
parties shall take all appropriate action and execute all documents, instruments
or conveyances of any kind or nature which may be reasonably necessary or
advisable in the other's opinion to carry out any of the provisions hereof,
including, without limitation, placing Oakridge in possession and control of
Seal.
ARTICLE 9
TERMINATION
9.1 Termination. This Agreement may be terminated by the mutual
consent of the parties or at any time prior to the Closing Date, as follows:
(a Seal shall have the right to terminate this Agreement:
(i)if the Closing has not occurred by April 30, 1999, other than
on account of delay or a breach of the representations and warranties or a
failure to comply with a covenant or agreement contained in this Agreement on
the part of Seal;
(ii)if transactions contemplated by this Agreement are enjoined
by a final, unappealable court order not entered at the request or with the
support of Seal or its affiliates;
(iii) if Oakridge (A) breaches any representation and warranty
or fails to comply with any covenant or agreement contained in this Agreement,
and (B) does not cure such breach or failure within ten business days after
written notice of such default is given to Oakridge (except that such 10
business day cure period shall not be applicable for a breach which cannot be
cured); or
(iv) if the conditions set forth in Article 7 have not been
satisfied (unless waived by Seal).
(b Oakridge shall have the right to terminate this Agreement:
(i) if the Closing has not occurred by April 30, 1999, other
than on account of delay or a breach of the representations and warranties or a
failure to comply with a covenant or agreement contained in this Agreement on
the part of Oakridge;
(ii) if the transactions contemplated by this Agreement are
enjoined by a final, unappealable court order not entered at the request or with
the support of Oakridge or any of its affiliates;
(iii) if Seal (A) breaches any representation and warranty or
fails to comply with any covenant or agreement contained in this Agreement, and
(B) does not cure such breach or failure within 10 business days after written
notice of such default is given to Seal by Oakridge (except that such 10
business day cure period shall not be applicable for a breach which cannot be
cured); or
(iv) if the conditions set forth in Article 6 have not been
satisfied (unless waived by Oakridge).
(c Any termination of this Agreement pursuant to this Section 9.1
shall be effective immediately upon delivery of written notice of termination by
the terminating party to the other parties hereto.
9.2 Effect of Termination. In the event of termination of this
Agreement by either Seal or Oakridge as provided in Section 9.1, this Agreement
shall forthwith become void and there shall be no further obligation on the part
of Seal, Oakridge or their respective officers, managers or directors (except
for the last sentence of Section 5.3, which shall survive the termination).
Nothing in this Section 9.2 shall relieve any party from liability for any
breach of this Agreement.
9.3 Waiver. At any time prior to the Closing Date, the parties
hereto may by written agreement (a) extend the time for the performance of any
of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant thereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any such waiver shall not be deemed
to be continuing or to apply to any future obligation or requirement of any
party hereto provided herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party.
9.4 Limited Termination Fee. In the event that this Agreement is
terminated by Seal pursuant to any of subclauses (ii), (iii) or (iv) of Section
9.1(a) or by Oakridge pursuant to any of subclauses (i), (ii) or (iv) of Section
9.1(b) (and provided in any of such events Seal is otherwise in compliance with,
and not in breach of, its obligations hereunder), then Oakridge shall pay to
Seal the sum of Twenty Five Thousand Dollars ($25,000.00) to help defray the
costs and expenses of Seal relating to the transactions contemplated by this
Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 Survival of Representations. All statements contained in any
certificate or instrument of conveyance delivered by or on behalf of the parties
pursuant to this Agreement or in connection with the transactions contemplated
hereby shall be deemed to be additional representations and warranties of the
parties making such disclosure. All representations and warranties shall
terminate, and shall not survive, on the Closing Date.
10.2 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by either party without the prior written
consent of the other party hereto; provided, however, Oakridge may assign its
rights and obligations hereunder to an entity controlled by, or under common
control with, Pearce. Subject to the foregoing, this Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns, and no other person shall have any right, benefit or
obligation hereunder.
10.3 Notices. All notices or other communications in connection
with this Agreement shall be in writing and shall be considered given when
personally delivered or when mailed by registered or certified mail, postage
prepaid, return receipt requested, or when sent via commercial courier or
telecopier, directed as follows:
If to Seal:
Seal Holdings Corporation
125 Worth Avenue, Suite 314
Palm Beach, FL 33480
Attn: Thomas M. Ferguson
Telephone No. (561) 833-5111
Telecopier No. (561) 833-6628
With a copy to:
Bronson Bronson & McKinnon, LLP
505 Montgomery Street
San Francisco, CA 94111
Attn: Richard P. Walker, Esq.
Telephone No. (415) 986-4200
Telecopier No. (415) 982-1394
If to Oakridge:
OH, Inc.
5601 North Dixie Highway, Suite 411
Fort Lauderdale, FL 33334
Attn: Rudy Noriega
Telephone No. (954) 771-5402
Telecopier No. (954) 954.776.5720
with a copy to:
Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Attn: Stuart Rosow, Esq.
Telephone No. (212) 969-3000
Facsimile No. (212) 969-2900
and
Proskauer Rose LLP
2255 Glades Road, Suite 340 West
Boca Raton, Florida 33431
Attn: Donald E. "Rocky" Thompson, II, Esq.
Telephone No. (561) 241-7400
Telecopier No. (561) 241-7145
10.4 Expenses. Except as set forth in Section 9.4 and the last
sentence of Section 9.2 hereof, each party shall be liable for its own fees,
costs and expenses incurred in connection with the negotiation, preparation,
execution or performance of this Agreement. Immediately prior to the Closing,
the net liabilities of Seal, including liabilities for fees, costs and expenses
relating to this Agreement (but exclusive of contingent liabilities relating to
Seal Pending Actions identified on Schedule 3.6 to this Agreement), shall not
exceed $50,000.
10.5 Choice of Law. This Agreement and all transactions
contemplated by this Agreement shall be governed by, and construed and enforced
in accordance with, the internal laws of the State of Delaware without regard to
principles of conflicts of laws.
10.6 Publicity and Filings. Promptly after the execution of this
Agreement, Seal shall issue a press release with respect to the Exchange, which
press release shall be subject to the prior written approval of Oakridge. Other
than such press release, neither party shall issue any other press releases or
make any public statement regarding the transactions contemplated hereby,
without the prior approval of the other party. Seal shall also file a Form 8BK
with the SEC with respect to the Exchange.
10.7 Confidential Information. The parties acknowledge that the
transactions described herein are of a confidential nature and shall not be
disclosed except to consultants, advisors and affiliates, or as required by law,
until such time, if any, as the parties make a public announcement regarding the
transaction as provided in Section 10.6. No party shall make any public
disclosure of the specific terms of this Agreement, except as required by law.
10.8 Entire Agreement; Amendments and Waivers. Except as provided
herein with respect to the Confidentiality Agreement, this Agreement, together
with all exhibits and schedules hereto, constitutes the entire agreement among
the parties pertaining to the subject matter hereof and supersedes all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties, including without limitation the Letter of Intent. No
supplement, modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
10.9 Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein shall for any reason be held to be invalid, illegal or unenforceable in
any respect, then such invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any other such instrument.
10.10 Counterparts. This Agreement may be executed in one or more
counterparts, each one of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
counterpart of this Agreement via telephone facsimile transmission shall be as
effective as delivery of a manually executed counterpart of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or have
caused this Agreement to be duly executed on their respective behalf by their
respective officers hereunto duly authorized, as of the day and year first above
written.
"SEAL"
SEAL HOLDINGS CORPORATION
By: /s/ Thomas M. Ferguson
Name: Thomas M. Ferguson
Title: Chairman/CEO
"OAKRIDGE"
OH, INC.
By: /s/ Rudy J. Noriega
Name: Rudy J. Noriega
Title: President
<PAGE>
EXHIBIT 21
LIST OF SUBSIDIARIES OF SEAL HOLDINGS CORPORATION
A DELAWARE CORPORATION
AS OF MARCH 16, 1998
Subsidiary State of Incorporation
- - ----------- ----------------------
Primary Care Medical Centers of America, Inc. Delaware
Sealcraft Operators, Inc. Texas
Caribe Company Delaware
Seal Properties, Inc. Texas
Corpus Company Delaware
South Corporation Delaware
Seal Offshore, Inc. Delaware
First Seal, Inc. Texas
Seal (GP), Inc. Delaware
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON
PAGES 13 THROUGH 18 OF THE COMPANY'S FORM 10-KSB FOR THE YEAR AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 15
<SECURITIES> 0
<RECEIVABLES> 142
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 168
<PP&E> 91
<DEPRECIATION> 41
<TOTAL-ASSETS> 2,063
<CURRENT-LIABILITIES> 163
<BONDS> 0
0
0
<COMMON> 266
<OTHER-SE> 1,634
<TOTAL-LIABILITY-AND-EQUITY> 2,063
<SALES> 0
<TOTAL-REVENUES> 25
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,350
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 875
<EPS-PRIMARY> .72
<EPS-DILUTED> .71
</TABLE>
