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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): JANUARY 31, 2000
FIRST MEDICAL GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 001-00155 13-1920670
State or other (Commission File No.) (I.R.S. Employer
Jurisdiction of Identification No.)
incorporation)
1055 WASHINGTON BOULEVARD, STAMFORD, CT 06901
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 327-0900
NOT APPLICABLE
(Former name or former address, if changed since last report)
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Item 1. Changes in Control of the Company.
Not applicable.
Item 2. Acquisition or Disposition of Assets.
On January 31, 2000, First Medical Group, Inc., a Delaware
corporation (the "Corporation"), entered into an asset purchase agreement (the
"Asset Purchase Agreement") whereby it would sell substantially all of the
assets and certain of the liabilities of the Corporation to AMCMC Acquisition
Corp., a company controlled by Dennis Sokol, the current Chief Executive Officer
of the Corporation. Mr. Sokol intends to resign as a Director and Officer of the
Corporation upon consummation of the transaction. Completion of the transaction
is subject to shareholder approval. The assets and liabilities of the Company
which are involved in the sale are more specifically described in the Asset
Purchase Agreement attached hereto as Exhibit 10.
Item 3. Bankruptcy or Receivership.
Not Applicable.
Item 4. Changes in Company's Certifying Accountant.
Not Applicable.
Item 5. Other Events.
Not Applicable
Item 6. Resignation of Company's Directors.
Not Applicable.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
a. Financial Statements
The financial statements of the Subsidiaries of the Company
involved in the sale shall be filed as an amendment to this
initial report on Form 8-K within 60 days of the filing of
this initial report.
b. Pro Forma Financial Information
The pro forma financial information of the Company going to
effect the asset sale shall be filed as an amendment to this
initial report on Form 8-K within 60 days of the filing of
this report.
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c. Exhibits
10. Asset Purchase Agreement, dated as of January 31,
2000, among First Medical Group, Inc. and AMCMC
Acquisitions Corp.
Item 8. Change in Fiscal Year.
Not Applicable.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 4, 2000 First Medical Group, Inc.
By: /s/ Elias Nemnom
---------------------------
Elias Nemnom
Chief Financial Officer
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Exhibit 10
ASSET PURCHASE AGREEMENT
BETWEEN
FIRST MEDICAL GROUP, INC.
as Seller
AND
AMCMC Acquisition Corp.
as Buyer
as of
January 31, 2000
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TABLE OF CONTENTS
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Page
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1. Definitions.............................................................................................1
2. Basic Transaction.......................................................................................3
(a) Purchase and Sale of Assets....................................................................3
(b) Assumption of Liabilities......................................................................4
(c) Purchase Price.................................................................................4
(d) Purchase Price Adjustment......................................................................4
(e) Surrender of Stock.............................................................................4
(f) The Closing....................................................................................4
(g) Deliveries at the Closing......................................................................4
3. Representations and Warranties of Seller................................................................5
(a) Organization of Seller.........................................................................5
(b) Authorization of Transaction...................................................................5
(c) Noncontravention...............................................................................5
(e) Title to Tangible Assets.......................................................................6
(f) Financial Statements...........................................................................6
(g) Material Adverse Changes.......................................................................6
(h) Legal Compliance...............................................................................6
(i) Intellectual Property..........................................................................7
(j) Contracts......................................................................................7
(k) Litigation.....................................................................................7
(m) Environmental, Health, and Safety Matters......................................................7
(n) Tax Matters....................................................................................8
(o) No Barter Receivables or Obligations...........................................................8
(p) Sufficiency of Acquired Assets.................................................................8
(q) Disclaimer of other Representations and Warranties.............................................8
4. Representations and Warranties of Buyer.................................................................8
(a) Organization of Buyer..........................................................................8
(b) Authorization of Transaction...................................................................9
(c) Noncontravention...............................................................................9
(d) Brokers' Fees..................................................................................9
5. Pre-Closing Covenants...................................................................................9
(a) General........................................................................................9
(b) Notices and Consents...........................................................................9
(d) Conduct of the Business........................................................................9
(e) Notice of Developments........................................................................10
(f) Full Access...................................................................................10
6. Conditions to Obligation to Close......................................................................11
(a) Conditions to Obligation of Buyer.............................................................11
(b) Conditions to Obligation of Seller............................................................12
7. Termination...................................................................................13
(a) Termination of Agreement......................................................................13
(b) Effect of Termination.........................................................................13
8. Post-Closing Covenants.................................................................................14
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(a) General.......................................................................................14
(b) Litigation Support............................................................................14
(c) Transition....................................................................................14
(d) Covenant Not to Compete.......................................................................14
9. Remedies for Breaches of this Agreement................................................................14
(a) Survival of Representations and Warranties....................................................14
(b) Indemnification Provisions for Benefit of Buyers..............................................15
(c) Indemnification Provisions for Benefit of NSDA................................................15
(d) Matters Involving Third Parties...............................................................15
(e) Determination of Adverse Consequences.........................................................16
(f) Exclusive Remedy..............................................................................16
10. Miscellaneous..........................................................................................16
(a) Press Releases and Public Announcements.......................................................16
(c) No Third-Party Beneficiaries..................................................................17
(d) Entire Agreement..............................................................................17
(e) Succession and Assignment.....................................................................17
(f) Counterparts..................................................................................17
(g) Headings......................................................................................17
(h) Notices.......................................................................................17
(i) Governing Law.................................................................................18
(j) Amendments and Waivers........................................................................18
(k) Severability..................................................................................18
(l) Expenses......................................................................................18
(m) Construction..................................................................................18
(n) Incorporation of Exhibits, Annexes and Schedules..............................................18
(o) Bulk Transfer Laws............................................................................18
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Disclosure Schedule
Annex 2.1(a) List of Assets of First Medical Group, Inc. to be
Acquired by Buyer
Annex 2.3(a) List of Liabilities of First Medical Group, Inc. to
be Assumed by Buyer
Exhibit A-1 Form of Assignment and Assumption -
Acquired Assets and Assumed Liabilities
Exhibit A-2 Form of Assignment and Assumption -
Lehigh Notes
Exhibit A-3 Form of Assignment and Assumption -
American Multiprofile Clinic Note
Exhibit B Historical Financial Statements
Exhibit C Form of Mutual Release
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ASSET PURCHASE AGREEMENT
Agreement entered into as of January 31, 2000, by and among AMCMC
Acquisition Corp., a British Virgin Islands corporation having an address at
1055 Washington Boulevard, Stamford, Connecticut 06901 ("BUYER"), and First
Medical Group, Inc., a Delaware corporation having an address at 1055 Washington
Boulevard, Stamford, Connecticut 06901 ("SELLER"). Buyer and Seller are referred
to collectively herein as the "PARTIES."
Pursuant to this Agreement, Buyer will purchase the Acquired Assets (as
defined herein) (and assume the Assumed Liabilities (as defined herein)) of
Seller in return for cash, and Seller will sell, transfer and convey to Buyer
the Acquired Assets (as defined herein), all upon the terms, provisions and
conditions set forth below.
Now, therefore, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"ACQUIRED ASSETS" means the assets listed on Annex 2.1(a).
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"ASSET PURCHASE AGREEMENT" has the meaning set forth in the preface
above.
"ASSUMED LIABILITIES" means the liabilities and obligations listed on
Annex 2.3(a).
"BUSINESS" means the ongoing business of owning and operating
outpatient and ancillary healthcare facilities in Eastern Europe.
"BUYER" has the meaning set forth in the preface above.
"CASH" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"CLOSING DATE" has the meaning set forth in Section 2(f) below.
"CLOSING" has the meaning set forth in Section 2(f) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
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"CONFIDENTIAL INFORMATION" means any information concerning the
businesses and affairs of Seller that is not generally available to the public,
including but not limited to all data, reports, interpretations, forecasts,
audit reports and other records to the extent they contain information
concerning Seller. The term "Confidential Information" also shall include all
notes, analyses, compilations, studies, interpretations or other documents
prepared by Buyer or their officers, directors, employees and/or agents
(collectively, "Representatives"), which contain, reflect or are based upon in
whole or in part, the information furnished to Buyer or its Representatives by
Seller.
"DISCLOSURE SCHEDULE" has the meaning set forth in Section 3 below.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all
federal, state, local and foreign statutes, regulations, and ordinances
concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including without limitation all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, as such requirements are enacted and in effect
on or prior to the Closing Date.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 3(f) below.
"FMG" means First Medical Group, Inc.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"INCOME TAX RETURN" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto.
"INCOME TAX" means any federal, state, local, or foreign income tax,
including any interest, penalty, or addition thereto, whether disputed or not.
"INDEMNIFIED PARTY" has the meaning set forth in Section 9(d) below.
"INDEMNIFYING PARTY" has the meaning set forth in Section 9(d) below.
"INTELLECTUAL PROPERTY" means all trade names, common law and other
trademarks, service marks, trade dress, certification marks, collective marks
and applications and licenses therefor, trademark registrations and
applications, service mark registrations and applications, copyrights and
copyright registrations and applications owned by Seller or Seller Subsidiaries
and used in the Business, and all rights, common law and other, registrations
and applications for the marks and trade names, owned by Seller or Seller
Subsidiaries and used in the Business.
"KNOWLEDGE" means actual knowledge without independent investigation.
"LEHIGH NOTES" means all of Seller's right, title and interest in and
to Seller's subordinated debentures acquired by reason of Seller's restructuring
in 1991, and payable on May 15, 1998 (in the principal amount of $100,000,
together with all accrued interest) and October 15, 1995 (in the principal
amount of $290,000, together with all accrued interest), respectively.
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"LOAN" means the loan in the principal amount of approximately $300,000
(together with interest thereon) made by Dennis A. Sokol to Seller through the
Closing Date. -
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in Section
3(f) below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in Section
3(f) below.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business of
the relevant Person consistent with its past custom and practice (including with
respect to quantity and frequency).
"OTHER AGREEMENTS" means Form of Assignment and Assumption attached
hereto as Exhibit A and Form of Trademark Assignment attached hereto as Exhibit
B.
"PARTIES" AND "PARTY" have the meaning set forth in the preface above.
"PARTY" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PURCHASE PRICE ADJUSTMENT" has the meaning set forth in Section 2(d)
below.
"PURCHASE PRICE" has the meaning set forth in Section 2(c) below.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than (a) mechanic's, materialmen's,
and similar liens, (b) liens for taxes not yet due and payable, (c) purchase
money liens and liens securing rental payments under capital lease arrangements,
and (d) other liens arising in the Ordinary Course of Business and not incurred
in connection with the borrowing of money.
"SELLER SUBSIDIARIES" means all of the entities set forth on Annex
2.1(a) hereto.
"THIRD PARTY CLAIM" has the meaning set forth in Section 4(d) below.
2. BASIC TRANSACTION.
(a) PURCHASE AND SALE OF ASSETS. On and subject to the terms and
conditions of this Agreement, Buyer agrees to purchase from Seller, and Seller
agrees to sell, transfer, convey, and deliver to Buyer, or cause its
subsidiaries to sell, transfer, convey and deliver to Buyer, as the case may be,
all of the Acquired Assets at the Closing for the consideration specified below
in this Section 2.
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(b) ASSUMPTION OF LIABILITIES.
(1) On and subject to the terms and conditions of this
Agreement, Buyer agrees to assume and become responsible for all of the Assumed
Liabilities at the Closing. Buyer will not assume or have any responsibility,
however, with respect to any such liabilities prior to Closing or any other
obligation or liability of Seller not included within the definition of Assumed
Liabilities.
(2) Contemporaneously, as a separate transaction, Seller has
agreed to assign and transfer at the Closing all of its right, title and
interest in and to the Lehigh Notes pursuant to an Assignment and Assumption in
the form of Exhibit A-2 hereto, and all liability attaching to said Lehigh Notes
shall be assumed by the assignee thereof.
(3) Contemporaneously, as a separate transaction, Seller will
assign to AMCMC at the Closing all of Seller's right, title and interest in and
to that certain promissory note, dated January 25, 1999, issued by American
Multiprofile Clinic, Inc. to Seller in the principal amount of $1.5 million,
pursuant to an Assignment and Assumption in the form of Exhibit A-3 hereto.
(c) PURCHASE PRICE. Buyers agree to pay to Seller at the Closing an
aggregate of $1 million (the "PURCHASE PRICE"), subject to the Purchase Price
Adjustment, by delivery of cash by wire transfer or delivery of other
immediately available funds.
(d) PURCHASE PRICE ADJUSTMENT. The Purchase Price will be reduced by
the principal and accrued interest outstanding at the time of Closing on the
Loan(s) (the "Purchase Price Adjustment").
(e) SURRENDER OF STOCK. At the Closing, (i) SAJH Partners, Dennis A.
Sokol, Cenvet, Inc. (General de Sante) and Elena Korchagina will surrender for
cancellation an aggregate of 5,754,760 shares of the common stock of FMG, being
all shares of stock of FMG owned by them collectively in Seller, and (ii) Dennis
A. Sokol will surrender for cancellation all of the issued and outstanding
options and warrants for the purchase of shares of common stock of FMG owned by
him.
(f) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Patton Boggs LLP in
Washington D.C., commencing at 10:00 a.m. local time on the third business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Parties may mutually determine (the
"CLOSING DATE").
(g) DELIVERIES AT THE CLOSING. At the Closing, (i) Seller will deliver
to Buyer the various certificates, instruments, and documents referred to in
Section 6(a) below; (ii) Buyer will deliver to Seller the various certificates,
instruments, and documents referred to in Section 6(b) below; (iii) Seller will
execute, acknowledge (if appropriate), and deliver to Buyer (A) assignments
(including real property, trademark and intellectual property transfer
documents) and assumptions in the forms attached hereto as Exhibit A and (B)
such other instruments of sale, transfer, conveyance, and
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assignment as Buyer and their counsel reasonably may request; (iv) Buyer will
execute, acknowledge (if appropriate), and deliver to Seller (A) an assignment
and assumption in the form attached hereto as Exhibit A and (B) such other
instruments of assumption as Seller and their counsel may reasonably request;
and (v) Buyer will deliver to Seller the consideration specified in Section 2(c)
above, subject to the provisions of Section 2(d) above, and the certificates or
other documentation representing the shares of common stock and options and
warrants for the purchase of such common stock specified in Section 2(e) above.
3. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and
warrants to Buyers that the statements contained in this Section 3 with respect
to it are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 3), except as set forth in the disclosure schedule accompanying this
Agreement and initialed by the Parties (the "DISCLOSURE SCHEDULE"). The
Disclosure Schedule will be arranged in paragraphs corresponding to the lettered
and numbered paragraphs contained in this Section 3.
(a) ORGANIZATION OF SELLER. Seller is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware.
Seller Subsidiaries are all entities duly organized, validly existing, and in
good standing under the law of their respective jurisdictions of organization.
Seller and Seller Subsidiaries have the corporate or other power to own and to
sell the Acquired Assets owned by them and to conduct the Business. Seller and
Seller Subsidiaries are all qualified to do business and are in good standing in
each jurisdiction where such qualification is required to conduct the Business
associated with the Acquired Assets, except where the failure to so qualify
would not have a material adverse effect on the Business or the Acquired Assets.
(b) AUTHORIZATION OF TRANSACTION. Seller has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and the Other Agreements and to perform its obligations hereunder.
Without limiting the generality of the foregoing, the board of directors and
shareholders of Seller has duly authorized the execution, delivery, and
performance of this Agreement by Seller. This Agreement and the Other Agreements
constitute the valid and legally binding obligation of Seller, enforceable in
accordance with its terms and conditions.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Seller or Seller Subsidiaries are subject
or any provision of the Articles of Incorporation or bylaws or other constituent
documents of Seller or Seller Subsidiaries or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Seller or Seller Subsidiaries are a party or by which they
are bound or to which their assets are subject (or result in the imposition of
any Security Interest upon any of their assets), except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
material adverse effect on the financial condition of Seller and Seller
Subsidiaries, taken as a whole, or on the ability of the Parties to consummate
the transactions
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contemplated by this Agreement. Neither Seller nor Seller Subsidiaries are
required to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement (including the assignments and assumptions referred to in Section 2
above), except where the failure to give notice, to file, or to obtain any
authorization, consent, or approval would not have a material adverse effect on
the financial condition of Seller and Seller Subsidiaries, taken as a whole, or
on the ability of the Parties to consummate the transactions contemplated by
this Agreement.
(d) BROKERS' FEES. Seller has no liability or obligation to pay any
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which Buyer could become liable
or obligated.
(e) TITLE TO TANGIBLE ASSETS. Seller has good, valid and marketable
title to the tangible Acquired Assets which are owned by it, free and clear of
all liens, claims, encumbrances, Security Interests, options, charges and
restrictions of any kind. Upon delivery to Buyer at the Closing, good, valid and
marketable title to the tangible Acquired Assets which are owned by Seller will
pass to Buyer, free and clear of all liens, claims, encumbrances, Security
Interests, options, charges and restrictions of any kind.
(f) FINANCIAL STATEMENTS. Attached hereto as Exhibit B are the
following financial statements (collectively the "FINANCIAL STATEMENTS"): (i)
audited consolidated balance sheets for Seller, each as of December 31, 1997 and
December 31, 1998; (ii) audited consolidated statements of income, and cash
flow, each for the fiscal years ended December 31, 1996, December 31, 1997, and
December 31, 1998, for Seller; and (iii) unaudited consolidated balance sheets
and statements of income, and cash flow for Seller (the "MOST RECENT FINANCIAL
STATEMENTS" as of and for the nine months ended September 30, 1999 (the "MOST
RECENT FISCAL MONTH END"). The Financial Statements for Seller (including the
notes thereto) have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered thereby and present fairly the
financial condition of Seller as of such dates and the results of operations of
Seller for such periods; PROVIDED, HOWEVER, that the Most Recent Financial
Statements are subject to normal year-end adjustments and lack footnotes and
other presentation items.
(g) MATERIAL ADVERSE CHANGES. Since September 30, 1999, there has not
been any material adverse change in the Business, the Acquired Assets, financial
condition, results of operations or prospects of Seller or Seller Subsidiaries.
Without limiting the generality of the foregoing, since that date neither Seller
nor Seller Subsidiaries have not engaged in any practice, taken any action, or
entered into any transaction relating to the Business that is outside of its
Ordinary Course of Business.
(h) LEGAL COMPLIANCE. Seller and Seller Subsidiaries have complied with
all applicable laws (including rules, regulations, codes, plans, injunctions,
judgments, orders, decrees, rulings, and charges thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), except where the
failure to comply would not have a material adverse effect upon the financial
condition of Seller and Seller Subsidiaries, taken as a whole.
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(i) INTELLECTUAL PROPERTY. Section 3(i) of the Disclosure Schedule
accurately and completely identifies all registrations and pending applications
for the Intellectual Property that are owned by Seller and Seller Subsidiaries
and identifies each license, agreement, or other permission which Seller and
Seller Subsidiaries have granted to any third party with respect to the
Intellectual Property. Seller is not aware of any violation or infringement of
intellectual property rights relating to the Intellectual Property.
(j) CONTRACTS. Section 3(j) of the Disclosure Schedule is a complete
and accurate list of all material written contracts and other written agreements
relating to the Business to which Seller or a Seller Subsidiary is a party.
Except as set forth on Section 3(j) of the Disclosure Schedule, to the knowledge
of Seller, (i) each of the contracts or other agreements is valid, binding,
legal and enforceable in accordance with its terms; (ii) the parties thereto are
in compliance with the provisions thereof; (iii) no party is in default in the
performance, observance or fulfillment of any material, obligation, covenant or
condition contained therein; and (iv) no event not contemplated by this
Agreement has occurred which with or without the giving of notice or lapse of
time, or both, would constitute a default thereunder. Seller has delivered to
Buyer a correct and complete copy of each contract or other agreement listed in
Section 3(j) of the Disclosure Schedule (as amended to date).
(k) LITIGATION. Section 3(l) of the Disclosure Schedule sets forth each
instance in which Seller or any of Seller Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party to any action, suit, proceeding, hearing, or investigation of, in, or
before any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction. Except as indicated on Section 3(l) of
the Disclosure Schedule, no litigation is pending or, to Seller's knowledge,
threatened against Seller that questions the validity of this Agreement, or any
action taken, or to be taken, by Seller in connection with this Agreement or
that relates to the Acquired Assets, except where such litigation would not have
a material adverse effect on the Business or the Acquired Assets. There is no
material judgment, order, injunction, decree or award outstanding (whether
rendered by a court, administrative agency or by arbitration) against Seller or
Seller Subsidiaries or by which Seller or Seller Subsidiaries are bound which
relates to any of the Acquired Assets. Seller and Seller Subsidiaries are not in
violation of any applicable federal, state or local law, rule, regulation or
ordinance, or any judgment, writ, decree, injunction, order or any other
requirement of any court, administrative agency, bureau, board, commission,
office, authority, department or other governmental body or agency relating to
the conduct of the Business or the ownership or use of the Acquired Assets,
which violation would have a material adverse effect on the Business or the
Acquired Assets, and no notice has been received by Seller or Seller
Subsidiaries alleging any such violation.
(l) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS. Other than as set forth
on Section 3(l) of the Disclosure Schedule:
(i) Seller and Seller Subsidiaries are in compliance with
Environmental, Health, and Safety Requirements, except for such
noncompliance as would not have a material adverse effect on the
financial condition of Seller and Seller Subsidiaries, taken as a
whole.
(ii) Neither Seller nor any Seller Subsidiary has received any
written notice, report or other information regarding any actual or
alleged material violation of
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Environmental, Health, and Safety Requirements, or any material
liabilities or potential material liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise), including any
investigatory, remedial or corrective obligations, relating to its
facilities arising under Environmental, Health, and Safety
Requirements, the subject of which would have a material adverse effect
on the financial condition of Seller and Seller Subsidiaries, taken as
a whole.
(iii) This Section 3(l) contains the sole and exclusive
representations and warranties of Seller with respect to any
environmental, health, or safety matters, including without limitation
any arising under any Environmental, Health, and Safety Requirements.
(m) TAX MATTERS. All tax returns and reports of Seller required to be
filed on or before the date hereof have been duly and timely filed on or before
such date or appropriate extensions to file such returns and reports have been
granted, and all taxes, assessments, fees and other governmental charges upon
Seller and upon the Acquired Assets which are due and payable, other than those
presently payable without penalty or interest, have been paid, except in either
case where the failure to do so would not have a material adverse effect on the
Business or the Acquired Assets. As of the date hereof, there are no tax liens
on any of the Acquired Assets, and, to the best of Seller's knowledge, there is
no basis for the assertion of any such tax liens, other than for taxes currently
due and payable.
(n) NO BARTER RECEIVABLES OR OBLIGATIONS. Except for such arrangements
as are set forth in Section 3(j) or Section 3(n) of the Disclosure Schedule,
Seller is not liable for any outstanding barter obligations with respect to the
Business.
(o) SUFFICIENCY OF ACQUIRED ASSETS. With the exception of personnel,
the Acquired Assets comprise all of the assets, properties and rights necessary
for the continued operation of the Business, consistent with past practices.
(p) DISCLAIMER OF OTHER REPRESENTATIONS AND WARRANTIES. Except as
expressly set forth in this Section 3, Seller makes no representation or
warranty, express or implied, at law or in equity, in respect of any of its
assets (including, without limitation, the Acquired Assets), liabilities or
operations, and any such other representations or warranties are hereby
expressly disclaimed. Without limiting the generality of the foregoing, Seller
makes no representation or warranty regarding any assets other than the Acquired
Assets or any liabilities other than the Assumed Liabilities, and none shall be
implied at law or in equity.
4. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and
warrants to Seller that the statements contained in this Section 4 with respect
to it are correct and complete as of the date of this Agreement and will be
correct and complete as of the Closing Date (as though made then and as though
the Closing Date were substituted for the date of this Agreement throughout this
Section 4), except as set forth in the Disclosure Schedule. The Disclosure
Schedule will be arranged in paragraphs corresponding to the lettered and
numbered paragraphs contained in this Section 4.
(a) ORGANIZATION OF BUYER. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the British Virgin
Islands.
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(b) AUTHORIZATION OF TRANSACTION. Buyer has full power and authority
(including full corporate power and authority) to execute and deliver this
Agreement and the Other Agreements and to perform its obligations hereunder.
Without limiting the generality of the foregoing, the board of directors and
shareholders of Buyer has duly authorized the execution, delivery and
performance of this Agreement by Buyer. This Agreement and the Other Agreements
constitute the valid and legally binding obligation of Buyer, enforceable in
accordance with its terms and conditions.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the assignments and assumptions referred to in Section 2 above), will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Buyer is subject or any provision of its
charter or bylaws or (ii) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Buyer is a party or by which it is bound or to which any of its assets is
subject. With the exception of any forms, notices or other materials that Buyer
has filed with the Federal Trade Commission or the Antitrust Division of the
United States Department of Justice pursuant to the Hart-Scott-Rodino Act, Buyer
does not need to give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any government or governmental agency in
order for the Parties to consummate the transactions contemplated by this
Agreement (including the assignments and assumptions referred to in Section 2
above). The waiting period under the Hart-Scott-Rodino Act with respect to the
transactions contemplated by this Agreement has expired.
(d) BROKERS' FEES. Buyer has no liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which Seller could become liable or
obligated.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
(a) GENERAL. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable in order
to consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 6 below).
(b) NOTICES AND CONSENTS. Subject to Section 5(c) below, each of the
Parties will give any notices to, make any filings with, and use its reasonable
best efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the matters referred to
in Section 3(c) and Section 4(c) above.
(c) CONDUCT OF THE BUSINESS. Seller covenants and agrees that:
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(i) The Business will be conducted by Seller in the ordinary
course and in the same manner as heretofore conducted;
(ii) Seller will maintain insurance on the Acquired Assets and
the Business as heretofore in effect;
(iii) Without Buyer's prior written approval, no material
contract or commitment related to the Business or the Acquired Assets
will be entered into by or on behalf of Seller or Seller Subsidiaries
outside of the Ordinary Course of Business;
(iv) Seller will use commercially reasonable efforts to
preserve intact the Acquired Assets and the existing relationships and
goodwill of the Business with its advertisers, vendors, suppliers,
customers, and other third parties involved in the Business;
(v) Seller will not create or permit to become effective any
material encumbrance on any of the Acquired Assets; and
(vi) Seller will promptly advise Buyer of the commencement or
threat against either of Seller or any Seller Subsidiary of any
material litigation relating to or affecting the Acquired Assets or the
transactions contemplated by this Agreement.
(d) NOTICE OF DEVELOPMENTS.
(i) Seller shall notify Buyer of any development causing a
breach of any of their representations and warranties in Section 3
above. If Buyer has the right to terminate this Agreement pursuant to
Section 7(a)(ii) below by reason of the development and does not
exercise that right within the period of 10 business days referred to
in Section 7(a)(ii) below, the written notice pursuant to this Section
5(e)(i) will be deemed to have amended the Disclosure Schedule, to have
qualified the representations and warranties contained in Section 3
above, and to have cured any misrepresentation or breach of warranty
that otherwise might have existed hereunder by reason of the
development.
(ii) Each Party will give prompt written notice to the other
Party of any material adverse development causing a breach of any of
its own representations and warranties in Section 3 and Section 4
above. No disclosure by any Party pursuant to this Section 5(e)(ii),
however, shall be deemed to amend or supplement the Disclosure Schedule
or to prevent or cure any misrepresentation or breach of warranty.
(f) FULL ACCESS. Subject to applicable law, Seller will give Buyer and
their counsel, financial advisors, auditors and other authorized representatives
reasonable access during business hours to the offices, properties, books and
records of Seller related to the Business and will instruct the employees,
counsel and financial advisors of Seller to cooperate with Buyer in their
investigation of Seller; provided, however, that any investigation pursuant to
this Section 5(f) shall
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be conducted on commercially reasonable prior notice and in such manner as not
to interfere unreasonably with the business of Seller.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF BUYER. The obligation of Buyer to
consummate the transactions to be performed by it in connection with the Closing
is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) Seller and Seller Subsidiaries shall have performed and
complied with all of its covenants hereunder in all material respects
through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement;
(iv) Seller shall have delivered to Buyer a certificate to the
effect that each of the conditions specified above in
Section 6(a)(i)-(iii) is satisfied in all material respects;
(v) Seller and Buyer shall have received all authorizations,
consents, and approvals of governments and governmental agencies
referred to in Section 3(c) and Section 4(c) above;
(vi) Buyer shall have received from Seller the Assignment and
Assumption in the form of Exhibit A-1 hereto duly executed by Seller;
(vii) Buyer shall have received evidence of the execution and
delivery of the Assignment and Assumption in the form of Exhibit A-3
hereto;
(viii) Buyer shall have received from Seller the Mutual
Release in the form of Exhibit C hereto;
(ix) all actions to be taken by Seller in connection with
consummation of the transactions contemplated hereby and all
certificates, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in
form and substance to Buyer;
(x) no statute, rule, regulation, order or injunction of any
court or administrative agency shall be in effect which prohibits Buyer
from consummating the transactions contemplated hereby;
(xi) there shall not be any material action, suit or
proceeding pending or threatened that seeks to prohibit the
consummation of the transactions contemplated thereby; and
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(xii) from and after the date hereof to the Closing, there
shall not have occurred any material adverse change with respect to the
business, the assets, condition (financial or otherwise) or results of
operations of the Business. At the Closing, Seller shall deliver to
Buyer a certificate, dated as of the Closing Date, certifying as to the
foregoing matter.
Buyer may waive any condition specified in this Section 6(a) if it executes a
writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF SELLER. The obligation of Seller to
consummate the transactions to be performed by them in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section 4
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling, or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement;
(iv) Buyer shall have delivered to Seller a certificate to the
effect that each of the conditions specified above in Section
6(b)(i)-(iii) is satisfied in all respects;
(v) Seller and Buyer shall have received all other
authorizations, consents, and approvals of governments and governmental
agencies referred to in Section 3(c) and Section 4(c) above;
(vi) Seller shall have received (A) from Buyer the Assignment
and Assumption in the form of Exhibit A-1 hereto duly executed by Buyer
and (B) a fully executed Assignment and Assumption in the form of
Exhibit A-2 hereto;
(vii) Seller shall have received from Dennis A. Sokol a
resignation as director and officer of Seller and the Mutual Release in
the form of Exhibit C hereto;
(viii) Buyer shall have received all material third-party
consents and approvals necessary for the purchase and transfer of the
Acquired Assets from Seller to Buyer;
(ix) no statute, rule or regulation or order or injunction of
any court or administrative agency shall be in effect which prohibits
Seller from consummating the transactions contemplated hereby;
(x) there shall not be any material action, suit or proceeding
pending or threatened that seeks to prohibit the consummation of the
transactions contemplated thereby; and
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<PAGE>
(xi) all actions to be taken by Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, instruments, and other documents required to effect the
transactions contemplated hereby will be satisfactory in form and
substance to Seller.
Seller may waive any condition specified in this Section 6(b) if it executes a
writing so stating at or prior to the Closing.
7. TERMINATION.
(a) TERMINATION OF AGREEMENT. The Parties may terminate this Agreement
as provided below:
(i) Buyer and Seller may terminate this Agreement by mutual
written consent at any time prior to the Closing;
(ii) Buyer may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing in the event (A)
Seller has within the then previous 10 business days given Buyer any
notice pursuant to Section 5(e)(i) above and either (B) the development
that is the subject of the notice has had a material adverse effect
upon the financial condition of Seller and Seller Subsidiaries, taken
as a whole or (C) the notice from Seller relates to a breach or
breaches not caused or brought about by Seller and the notice gives
Buyer an option to terminate even if the development does not have a
material adverse effect upon the financial condition of Seller and
Seller Subsidiaries, taken as a whole.
(iii) Buyer may terminate this Agreement by giving written
notice to Seller at any time prior to the Closing (A) in the event
Seller has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Buyer has notified
Seller of the breach, and the breach has continued without cure for a
period of 30 days after the notice of breach or (B) if the Closing
shall not have occurred on or before [June 30, 2000], by reason of the
failure of any condition precedent under Section 6(a) hereof (unless
the failure results primarily from Buyer itself breaching any
representation, warranty, or covenant contained in this Agreement); and
(iv) Seller may terminate this Agreement by giving written
notice to Buyer at any time prior to the Closing (A) in the event Buyer
have breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, Seller has
notified Buyer of the breach, and the breach has continued without cure
for a period of 30 days after the notice of breach or (B) if the
Closing shall not have occurred on or before [June 30, 2000], by
reason of the failure of any condition precedent under Section 6(b)
hereof (unless the failure results primarily from Seller themselves
breaching any representation, warranty, or covenant contained in this
Agreement).
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to Section 7(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); PROVIDED, HOWEVER,
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that if this Agreement is terminated for any reason whatsoever, Buyer will treat
and hold as such any Confidential Information they have received from Seller,
will not use any of the Confidential Information except in connection with this
Agreement and will return to Seller all tangible embodiments (and all copies) of
the Confidential Information which are in their possession.
8. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) GENERAL. In case at any time after the Closing any further action
is necessary to carry out the purposes of the Asset Purchase Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party reasonably may
request, all at the sole cost and expense of the requesting Party (unless the
requesting Party is entitled to indemnification therefor under Section 9 below).
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Seller, each of the other Parties will cooperate
with the contesting or defending Party and its counsel in the contest or
defense, make available its personnel, and provide such testimony and access to
its books and records as shall be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending Party
(unless the contesting or defending Party is entitled to indemnification
therefor under Section 9 below).
(c) TRANSITION. Seller will not take any action that is designed or
intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of Seller from maintaining the same
business relationships with Buyer and their subsidiaries after the Closing as it
maintained with Seller prior to the Closing.
(d) COVENANT NOT TO COMPETE. For a period of [one (1) year] following
the date of execution of this Agreement, Seller will not engage directly or
indirectly in any activity that Buyer conducts as of the Closing Date in any
geographic area in which Buyer conducts that business as of the Closing Date. If
the final judgment of a court of competent jurisdiction declares that any term
or provision of this Section 8(d) 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 term 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 be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
9. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
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All of the representations and warranties of Seller contained in
Section 3 shall survive the Closing and continue in full force and effect for a
period of eighteen (18) months thereafter. All of the other representations and
warranties of Buyer and Seller contained in this Agreement shall survive the
Closing and continue in full force and effect forever thereafter (subject to any
applicable statutes of limitations).
(b) INDEMNIFICATION PROVISIONS FOR BENEFIT OF BUYER.
(i) In the event that Seller breaches any of its
representations, warranties, and covenants contained in this Agreement,
and, if there is an applicable survival period pursuant to Section 9(a)
above, provided that Buyer makes a written claim for indemnification
against Seller within such survival period, then Seller agrees to
indemnify Buyer from and against any Adverse Consequences Buyer shall
suffer through and after the date of the claim for indemnification (but
excluding any Adverse Consequences Buyer shall suffer after the end of
any applicable survival period) caused by the breach.
(ii) Seller agrees to indemnify Buyer from and against any
Adverse Consequences Buyer shall suffer caused by any liability of
Seller which is not an Assumed Liability (including any liability of
Seller that becomes a liability of Buyer under any bulk transfer law of
any jurisdiction, under any common law doctrine of de facto merger or
successor liability, or otherwise by operation of law).
(c) INDEMNIFICATION PROVISIONS FOR BENEFIT OF SELLER.
(i) In the event Buyer breaches any of its representations,
warranties, and covenants contained in this Agreement, and, if there is
an applicable survival period pursuant to Section 9(a) above, provided
that Seller makes a written claim for indemnification against Buyer
within such survival period, then Buyer agrees to indemnify Seller from
and against the entirety of any Adverse Consequences Seller shall
suffer through and after the date of the claim for indemnification (but
excluding any Adverse Consequences Seller shall suffer after the end of
any applicable survival period) caused by the breach.
(ii) Buyer agrees to indemnify Seller from and against any
Adverse Consequences Seller shall suffer caused by any liability of
Seller arising after the Closing Date which is an Assumed Liability or
which relates in any way to the Acquired Assets.
(d) MATTERS INVOLVING THIRD PARTIES.
(i) If any third party shall notify any Party (the
"INDEMNIFIED PARTY") with respect to any matter (a "THIRD PARTY CLAIM")
which may give rise to a claim for indemnification against any other
Party (the "INDEMNIFYING PARTY") under this Section 9, then the
Indemnified Party shall promptly (and in any event within five business
days after receiving notice of the Third Party Claim) notify each
Indemnifying Party thereof in writing.
(ii) Any Indemnifying Party will have the right at any time to
assume and thereafter conduct the defense of the Third Party Claim with
counsel of its choice reasonably
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satisfactory to the Indemnified Party; PROVIDED, HOWEVER, that the
Indemnifying Party will not consent to the entry of any judgment or
enter into any settlement with respect to the Third Party Claim without
the prior written consent of the Indemnified Party (not to be withheld
unreasonably) unless the judgment or proposed settlement involves only
the payment of money damages and does not impose an injunction or other
equitable relief upon the Indemnified Party.
(iii) Unless and until an Indemnifying Party assumes the
defense of the Third Party Claim as provided in Section 3(d)(ii) above,
however, the Indemnified Party may defend against the Third Party Claim
in any manner it reasonably may deem appropriate.
(iv) In no event will the Indemnified Party consent to the
entry of any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of each of the
Indemnifying Parties (not to be withheld unreasonably).
(e) DETERMINATION OF ADVERSE CONSEQUENCES. The Parties shall make
appropriate adjustments for tax consequences in determining Adverse Consequences
for purposes of this Section 9. All indemnification payments under this Section
9 shall be deemed adjustments to the Purchase Price.
(f) EXCLUSIVE REMEDY. Buyer and Seller acknowledge and agree that the
foregoing indemnification provisions in this Section 9 shall be the exclusive
remedy of Buyer and Seller with respect to Seller and the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, Buyer acknowledges and agrees that they shall not have any remedy
after eighteen (18) months following the Closing for any breach of the
representations and warranties in Section 3(f)-(o) of this Agreement.
10. INDEMNIFICATION. Buyer agrees that it will, after the date hereof,
and to the fullest extent permitted by applicable law and the corporate
documents of Seller, provide to the directors and officers of Seller
indemnification equivalent to that provided by or available under the
Certificate of Incorporation and Bylaws of Seller or permissible to the fullest
extent permitted under Delaware Corporate law with respect to acts or omissions
occurring prior to the Closing, including without limitation the authorization
of this Agreement and the transaction contemplated hereby, for a period of six
years from the Closing Date, or in the case of claims made prior to the end of
such six year period, until such claims are finally resolved. To the extent
permitted by applicable law, Buyer shall advance expenses as incurred for legal
counsel and otherwise in connection with the foregoing indemnification.
11. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other Party
prior to making the disclosure). At such time as Seller and Buyer have executed
this Agreement, the Parties will make a joint public announcement
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concerning the transactions contemplated herein in a form and content to be
agreed upon by Seller and Buyer. Thereafter, no Party will make any announcement
concerning such transactions without the prior written approval of the other
Party, which approval will not be unreasonably withheld or delayed nor required
in the case of any legally compelled disclosure.
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and supersedes
any prior understandings, agreements, or representations by or between the
Parties, written or oral, to the extent they related in any way to the subject
matter hereof.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party.
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Seller: First Medical Group, Inc.
------------ 1055 Washington Boulevard
Stamford, CT 06901
Attention: Lou Nemnom, Vice President
Copy to: Patton Boggs LLP
---------- 2550 M Street, N.W.
Washington, DC 20037
Attention: John H. Vogel, Esq.
If to Buyer: AMCMC Acquisition Corp.
----------- 1055 Washington Boulevard
Stamford, CT 06901
Attention: Dennis A. Sokol
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Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(h) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of Delaware without giving effect to any
choice or conflict of law provision or rule (whether of the State of Delaware or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by Buyer
and Seller. Seller may consent to any such amendment at any time prior to the
Closing with the prior authorization of their respective board of directors. No
waiver by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(j) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) EXPENSES. Subject to Section 5(c), each of Buyer and Seller will
bear its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
(l) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
(m) INCORPORATION OF EXHIBITS, ANNEXES AND SCHEDULES. The Exhibits,
Annexes and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
(n) BULK TRANSFER LAWS. Buyer acknowledges that Seller will not comply
with the provisions of any bulk transfer laws of any jurisdiction in connection
with the transactions contemplated by this Agreement.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
AMCMC ACQUISITION CORP.
/s/ George Rountree
- -----------------------------------------
By: George Rountree
Title: President
FIRST MEDICAL GROUP, INC.
/s/ Elias M. Nemnom
- -----------------------------------------
By: Elias M. Nemnom
Title: Vice President
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DISCLOSURE SCHEDULE
SECTION 3(i)-INTELLECTUAL PROPERTY.
On October 29, 1999, the Company filed with the U.S. Patent Trademark office a
trademark application for the use of the name American Medical Centers.
SECTION 3(j)-CONTRACTS.
1. Note Agreement with American Multiprofile Clinic Inc. dated January 25,
1999.
2. Severance and Release and Consulting Agreement with Vladimir Checklin and
First Medical Group, Inc. and American Medical Centers Management Company,
Ltd. dated January 1, 1999.
3. Employment Agreement between George D. Rountree and American Medical
Centers Management Company, Ltd. and First Medical Group, Inc. dated April
15, 1999.
SECTION 3(k)-LITIGATION.
1. On September 16, 1998, The Lehigh Group, Inc., now known as First
Medical Group, Inc. was sued along with other defendants in the United
States District Court of Northern Ohio Western Division pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act.
The plaintiffs have alleged that the Company is the
successor-in-interest to the Hilfinger Corporation (a defunct
subsidiary of the Company) and claim that the Hilfinger Corporation
arranged for the disposal or treatment of waste chemicals at one or
more sites. The Company disputes that it is such successor-in-interest.
The plaintiffs are seeking damages, jointly and severally, against the
defendants in excess of $25 million. The occurrence was alleged to have
taken place during the period of 1950 through 1972. The Company has put
several insurance carriers on notice of this matter, however no
determination has been made regarding whether there is insurance
coverage. The Company has retained counsel in Ohio to defend this
claim.
On or about January 7, 1999, the United States Environmental Protection
Agency ("USEPA") forwarded a demand to the Company and the other
defendants for payment of USEPA'S response costs at the various
landfills in an aggregate amount of approximately $792,000. A tolling
agreement was entered between USEPA and the Company, and other parties
to toll the statute of limitations until August 1, 1999 to allow the
parties to negotiate a settlement. The demand asserts that the
liability of the Company is joint and several. To date, to the
knowledge of the Company's counsel handling this matter, no court
action has been instituted by USEPA against the Company with respect to
this matter. The Company is currently discussing a proposed settlement
with the plaintiffs. Accordingly, if this matter is adversely
determined, it could have a material adverse effect on the Company's
financial condition.
2. In 1998 a claim was asserted against the Company by former consultants
to the Company alleging the Company's obligation to pay approximately
$50,000 and provide further consulting contracts to the claimants. The
Company and the claimants have reached an agreement in principal
pursuant to which this claim will be withdrawn in exchange for the
issuance to the claimants of 300,000 shares of the Company's common
stock.
3. In 1998, a number of former employees of the Company and its affiliates
presented claims against the Company in State Court, Miami, Florida,
claiming in excess of $300,000 for vacation and sick pay, together with
benefits and attorneys' fees. The Company has settled with the majority
of the plaintiffs for approximately $30,000.
4. In December 1999, the Company was sued for a malpractice claim by a
patient of American Medical Clinic Moscow Inc. The Company views that
this claim is without merit and through its insurance company has
retained counsel to defend this claim.
<PAGE>
5. In January 2000, a claim was made against American Medical Centers
Management Co. Ltd. by a former employee who seeks approximately
$60,000 fees for breach of an employment contract.
6. In January 2000, a claim was made against First Medical Group, Inc. and
American Medical Centers Management Co., Ltd. by a former employee who
seeks $169,000 for breach of a severence and release and consulting
agreement.
SECTION 3(l)-ENVIRONMENTAL, HEALTH AND SAFETY MATTERS.
None. (Refer to Section 3(k) 1. above).
SECTION 3(n)-BARTER RECEIVABLES OR OBLIGATIONS.
None.
<PAGE>
Annex 2.1(a)
LIST OF ACQUIRED ASSETS
1. All of the issued and outstanding shares of common stock of American
Medical Centers Management Company, Ltd., a British Virgin Islands company
("AMCMC"), which shares are, owned by First Medical Group International,
Ltd. a wholly-owned subsidiary of Seller. AMCMC in turn owns all of the
issued and outstanding shares of the following entities:
(a) American Medical Clinics Moscow, Inc. (Cayman).
- American Medical Clinics, Inc., a Russian joint venture
corporation, all of whose outstanding shares are owned by
said Cayman corporation.
(b) American Medical Clinics - St. Petersburg Ltd. (BVI).
- American Medical Clinics - St. Petersburg Ltd., a Russian
joint venture corporation, all of whose outstanding shares
are owned by said BVI corporation.
- American Medical Clinics - Kiev, a Ukranian joint venture
corporation, all of whose outstanding shares are owned by
said BVI corporation.
(c) American Medical Centers - Warsaw z.o.o. (Poland).
(d) American Medical Centers - Prague s.r.o. (Czechoslovakia).
(e) American Hospital of Moscow Management Company, Ltd. (BVI).
(f) American Multi-Profile Clinic, Inc. (Russia).
2. All of Seller's right, title and interest in and to any intellectual
property relating to AMCMC and the Seller Subsidiaries, including, without
limitation, Seller's pending applications for trademark of "American
Medical Center", "AMC" and related logo design.
3. Insurance coverage carried as of the Closing Date by Seller with respect to
all of the Acquired Assets and the Assumed Liabilities, as in effect on the
Closing Date.
4. All of Seller's right, title and interest in and to the furniture and
fixtures listed on Schedule 1 hereto.
<PAGE>
Annex 2.3(a)
ASSUMED LIABILITIES
1. All liabilities of AMCMC reflected on the books of AMCMC as at the
Closing.
2. All liabilities of Seller which are identified both in the first and
third columns of the attached Schedule 1; provided, however, that the
values of said liabilities to be assumed by Buyer will be as of the
Closing Date.
3. All liability resulting or arising from the claims and/or litigation
described in items 3-6 on the "Disclosure Schedule" to this Agreement.
<PAGE>
FMG/AMCMC TRANSACTION
SCHEDULE OF LIABILITIES (EST)
12/31/99
(ASSUMES 1.0 MILLION SHARE WARRANT CONVERSION
IN EXCHANGE FOR ASSUMPTION OF $125,000 OF LIABILITIES)
<TABLE>
<CAPTION>
Liabilities retained Liabilities assumed
by FMG in transaction Total
------ -------------- -----
<S> <C> <C> <C>
FMG ACCRUED LIABILITIES
Audit accrual-1999 $ 103,000 $ -- $ 103,000
Lehigh tax 20,541 20,541
US Income tax (1998) 59,000 59,000
Bruno settlement 55,000 55,000
Environmental suit-reserve estimate 75,000 -- 75,000
----------- ----------- -----------
312,541 -- 312,541
LEHIGH NOTES PAYABLE
Lehigh notes 390,000 390,000
Lehigh notes-accrued interest -- 544,384 544,384
----------- ----------- -----------
-- 934,384 934,384
FMG ACCOUNTS PAYABLE (12/31/99)
Arthur Andersen 48,000 48,000
American Stock 2,038 2,038
Broad & Cassel (Shapo firm) 12,555 12,555
Cummings & Lockwood 16,877 16,877
McGrane & Nosich 8,888 8,888
NYC Dept of Tax (Lehigh) 4,267 4,267
Shapo 22,186 22,186
Sheldon Ribotsky (1998 tax return) 8,000 8,000
Vorys 32,725 32,725
Zurick 33,333 33,333
Patton Boggs 35,789 35,000 70,789
AIG 14,754 14,754
Equity Group 7,151 7,151
Fishman Hermann 12,221 12,221
SNET 25,282 25,282
Other accounts payable -- 61,615 61,615
----------- ----------- -----------
106,114 274,567 380,681
LIABILITIES RELATING TO DISCONTINUED OPS
Continucare 200,000 200,000
Employee liability 200,000 200,000
Pasternack 113,550 113,550
Sain & Carroll (Settlement of FMG stock-non cash) 30,000 30,000
Gibbs 10,000 10,000
Durham note receivable -- (90,000) (90,000)
----------- ----------- -----------
30,000 433,550 463,550
SHAREHOLDERS NOTES PAYABLE --
Notes Payable-AMC, Inc./Sokol 500,000 500,000
Notes Payable-Equity Group 100,000 100,000
Notes Payable-Zizza 30,000 30,000
Notes Payable-Gale 25,000 25,000
Notes Payable-Sokol 300,000 -- 300,000
Notes Payable-accrued interest (Sokol/AMC, Inc.) 2,500 11,500 14,000
----------- ----------- -----------
302,500 666,500 969,000
----------- ----------- -----------
TOTAL $ 751,155 $ 2,309,001 $ 3,060,156
</TABLE>
<PAGE>
Exhibit A-1
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Agreement") is entered into
as of _______________, 2000, by and among First Medical Group, Inc., a Delaware
corporation ("Assignor") and AMCMC Acquisition Corp., a British Virgin Islands
corporation ("Assignee").
RECITALS
A. Assignor and Assignee executed that certain Asset Purchase Agreement (the
"Purchase Agreement"), dated as of January 31, 2000, wherein Assignor agreed to
assign to Assignee, and Assignee agreed to accept an assignment of and assume
all of the Assumed Liabilities as defined in the Purchase Agreement.
NOW, THEREFORE, pursuant to the terms of the Purchase Agreement and for
good and valuable consideration, the parties hereto agree as follows:
1. CAPITALIZED TERMS. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to those terms in the Purchase Agreement.
2. ASSIGNMENT. Assignor hereby grants, bargains, sells, transfers, sets
over, and delivers unto Assignee all of the Assumed Liabilities as defined in
the Purchase Agreement.
3. ASSUMPTION. Assignee hereby assumes and shall subsequently pay,
discharge, and perform when lawfully due all of the Assumed Liabilities.
4. THIRD PARTIES. The assumption by Assignee of the Assumed Liabilities
is not intended by the parties to expand the rights or remedies of any third
party against Assignee as compared to the rights and remedies which such third
party would have had against Assignor had Assignee not consummated the
transactions contemplated by the Purchase Agreement. Nothing herein contained
shall, or shall be construed to, prejudice the right of Assignee to contest any
claim or demand with respect to any obligation or liability assumed hereunder,
and Assignee shall have all rights which Assignor may have or has had to defend
or contest any such claim or demand.
5. GOVERNING LAWS. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the Delaware and applicable federal law.
6. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon Assignor and Assignee and their respective successors and
assigns.
7. AMENDMENT, WAIVER, AND TERMINATION. This Agreement cannot be
amended, waived, or terminated except by a writing signed by the parties hereto.
8. HEADINGS. The headings in this Agreement are for the purpose of
reference only and shall not limit or otherwise affect the meaning thereof.
9. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original for all purposes but all of
which taken together shall constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
FIRST MEDICAL GROUP, INC.
By:
----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
AMCMC ACQUISITION CORP.
By:
----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
2
<PAGE>
ASSIGNMENT
WHEREAS, FIRST MEDICAL GROUP, INC. ("Assignor"), a corporation duly
organized and existing under the laws of the State of Delaware, having a
principal place of business at 1055 Washington Boulevard, Stamford, Connecticut
06901, has adopted and used the trademark AMC American Medical Centers and
Design, has applied for a registration for said trademark in the United States
Patent & Trademark Office on October 29, 1999, Application Serial Number
75/834,000 (the "Mark"), and has acquired goodwill associated with and
symbolized by the Mark; and
WHEREAS, AMCMC Acquisition Corp. ("Assignee"), a corporation duly
organized and existing under the laws of the British Virgin Islands, having a
principal place of business at 1055 Washington Boulevard, Stamford, Connecticut
06901, is desirous of acquiring all right, title and interest in and to the
Mark, the Registration thereof and the goodwill therein;
NOW, THEREFORE, for One Dollar ($1.00) and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor does hereby assign unto Assignee all its right, title and interest in
and to the Mark, together with the goodwill of the business associated with an
symbolized by the Mark, and the Application for registration thereof as set
forth herein.
Dated: __________________ FIRST MEDICAL GROUP, INC.
, 2000
By:
----------------------------
Name: Elias M. Nemnom
Title: Vice President
<PAGE>
Exhibit A-2
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Agreement") is entered into
as of ________________, 2000, by and between First Medical Group, Inc., a
Delaware corporation ("Assignor") and Crasvitsa, Ltd., a British Virgin Islands
corporation ("Assignee").
Recitals
A. Assignor and AMCMC Acquisition Corp. ("AMCMC") executed that certain
Asset Purchase Agreement (the "Purchase Agreement"), dated as of January 31,
2000, wherein Assignor agreed to assign to AMCMC, and AMCMC agreed to accept an
assignment of and assume all of the Assumed Liabilities as defined in the
Purchase Agreement.
B. In connection with the Purchase Agreement, Assignee has agreed to
assume and become responsible for the Lehigh Notes as defined in the Purchase
Agreement.
NOW, THEREFORE, pursuant to the terms of the Purchase Agreement and for
good and valuable consideration, the parties hereto agree as follows:
1. Capitalized Terms. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to those terms in the Purchase Agreement.
2. Assignment. Assignor hereby grants, bargains, sells, transfers and
sets over to Assignee all of its right, title and interest in and to the Lehigh
Notes, as such term is defined in the Purchase Agreement.
3. Assumption. Assignee hereby assumes and shall subsequently pay,
discharge, and perform when lawfully due all of the obligations under the Lehigh
Notes.
4. Third Parties. The assumption by Assignee of the Lehigh Notes is not
intended by the parties to expand the rights or remedies of any third party
against Assignee as compared to the rights and remedies which such third party
would have had against Assignor had Assignee not consummated the transactions
contemplated by the Purchase Agreement. Nothing herein contained shall, or shall
be construed to, prejudice the right of Assignee to contest any claim or demand
with respect to any obligation or liability assumed hereunder, and Assignee
shall have all rights which Assignor may have or has had to defend or contest
any such claim or demand.
5. Governing Laws. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the Delaware and applicable federal law.
6. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon Assignor and Assignee and their respective successors and
assigns.
7. Amendment, Waiver, and Termination. This Agreement cannot be
amended, waived, or terminated except by a writing signed by the parties hereto.
8. Headings. The headings in this Agreement are for the purpose of
reference only and shall not limit or otherwise affect the meaning thereof.
<PAGE>
9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original for all purposes but all of
which taken together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
FIRST MEDICAL GROUP, INC.
By:______________________________________
Name:________________________________
Title:_______________________________
CRASVITSA LTD.
By:______________________________________
Name:________________________________
Title:_______________________________
2
<PAGE>
Exhibit A-3
ASSIGNMENT AND ASSUMPTION AGREEMENT
This Assignment and Assumption Agreement ("Agreement") is entered into
as of ______________, 2000, by and between First Medical Group, Inc., a Delaware
corporation ("Assignor") and American Medical Centers Management Company, Ltd.,
a British Virgin Islands corporation ("Assignee").
Recitals
A. Assignor and AMCMC Acquisition Corp. ("AMCMC") executed that certain
Asset Purchase Agreement (the "Purchase Agreement"), dated as of January 31,
2000, wherein Assignor agreed to assign to AMCMC, and AMCMC agreed to accept an
assignment of and assume all of the Assumed Liabilities as defined in the
Purchase Agreement.
B. In connection with the Purchase Agreement, Assignor has agreed to
transfer to Assignee that certain promissory note, dated January 25, 1999,
issued to Assignor by American Multiprofile Clinic, Inc. in the principal amount
of $1.5 million (the "Assigned Note").
NOW, THEREFORE, pursuant to the terms of the Purchase Agreement and for
good and valuable consideration, the parties hereto agree as follows:
1. Capitalized Terms. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to those terms in the Purchase Agreement.
2. Assignment. Assignor hereby grants, bargains, sells, transfers and
sets over to Assignee all of Assignor's interest in the Assigned Note.
3. Third Parties. The assignment to Assignee of the Assigned Note is
not intended by the parties to expand the rights or remedies of any third party
against Assignee as compared to the rights and remedies which such third party
would have had against Assignor had Assignee not consummated the transactions
contemplated by the Purchase Agreement. Nothing herein contained shall, or shall
be construed to, prejudice the right of Assignee to contest any claim or demand
with respect to any right or interest transferred hereunder, and Assignee shall
have all rights which Assignor may have or has had to prosecute any such claim
or demand.
4. Governing Laws. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the Delaware and applicable federal law.
5. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon Assignor and Assignee and their respective successors and
assigns.
6. Amendment, Waiver, and Termination. This Agreement cannot be
amended, waived, or terminated except by a writing signed by the parties hereto.
7. Headings. The headings in this Agreement are for the purpose of
reference only and shall not limit or otherwise affect the meaning thereof.
<PAGE>
8. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original for all purposes but all of
which taken together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
FIRST MEDICAL GROUP, INC.
By:____________________________________________
Name:______________________________________
Title:_____________________________________
AMERICAN MEDICAL CENTERS
MANAGEMENT COMPANY, LTD.
By:____________________________________________
Name:______________________________________
Title:_____________________________________
2
<PAGE>
Exhibit B
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 909,064 $1,421,250
Accounts receivable, net of allowance for doubtful accounts of
$53,696 and $877 at December 31, 1998 and 1997, respectively 470,458 98,332
Inventories 116,984 -
Due from related parties - 1,139,760
Prepaid expenses and other current assets 163,996 50,406
------------ ------------
Total current assets 1,660,502 2,709,748
Property and equipment, net 603,433 170,281
Deferred tax asset 577,000 -
Intangible assets, net 2,079,369 2,014,170
Other assets 71,487 248,385
------------ ------------
$ 4,991,791 $ 5,142,584
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 852,237 $ 278,497
Accrued expenses 1,085,402 383,172
Deferred revenue 689,404 731,372
Notes payable to banks and others 1,358,444 3,998,733
Net liabilities of discontinued operations 980,750 804,531
------------ ------------
Total current liabilities 4,966,237 6,196,305
Commitments and contingencies
Shareholders' equity (deficit):
Capital stock, par value $.001; authorized shares 100,000,000; shares issued
9,567,292 and 9,397,292 at December 31, 1998
and 1997, respectively 9,567 9,397
Additional paid-in capital 8,253,318 8,083,488
Accumulated deficit (8,237,331) (9,146,606)
------------ ------------
Total shareholders' equity (deficit) 25,554 (1,053,721)
------------ ------------
$ 4,991,791 $ 5,142,584
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-2
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues $ 10,947,463 $ 9,019,156 $ 6,660,210
Cost of Revenues 9,260,360 7,134,408 5,370,624
------------- ------------- -------------
Gross Profit 1,687,103 1,884,748 1,289,586
Operating expenses:
Salaries and related benefits 904,685 700,220 390,403
General and administrative 1,019,597 1,040,582 1,397,970
Impairment loss on intangibles -- 1,024,337 --
Depreciation and amortization 226,992 215,338 133,877
------------- ------------- -------------
Loss from operations (464,171) (1,095,729) (632,664)
Interest expense, net (167,170) (196,887) (55,523)
------------- ------------- -------------
Loss before (benefit) for income taxes (631,341) (1,292,616) (688,187)
Income tax benefit (473,000) (62,736) --
------------- ------------- -------------
Loss from continuing operations before discontinued
operations and cumulative effect to change in
accounting principle (158,341) (1,229,880) (688,187)
Discontinued operations:
Income (loss) from operations of discontinued managed care
and electrical supply division (2,129,943) (8,240,438) 1,011,899
Gain on disposal of managed care and electrical
supply division 4,138,013 -- --
------------- ------------- -------------
Income (loss) from discontinued operations, net of
taxes of $518,000 in 1998 2,008,070 (8,240,438) 1,011,899
Cumulative effect of change in accounting principle,
net of tax benefit of $29,099 (940,454) -- --
------------- ------------- -------------
Net income (loss) $ 909,275 $ (9,470,318) $ 323,712
------------- ------------- -------------
------------- ------------- -------------
Income (loss) per share - basic and diluted
Loss from continuing operations $ (.01) $ (.13) $ (.07)
Cumulative effect of change in accounting principle (.10) -- --
Net income (loss) from discontinued operations .21 (.90) .11
------------- ------------- -------------
Net income (loss) $ .10 $ (1.03) $ .04
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of common shares outstanding - 9,495,566 9,202,117 9,021,400
basic and diluted ------------- ------------- -------------
------------- ------------- -------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31
----------------------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 909,275 $(9,470,318) $ 323,712
Adjustments to reconcile net income (loss) to
net cash provided by (used in) continuing
operating activities:
(Income) loss from discontinued operations (2,008,070) 8,240,438 (1,011,899)
Depreciation and amortization 226,992 215,338 133,877
Deferred taxes (577,000) -- --
Minority interest -- -- (338,077)
Impairment loss from intangibles -- 1,024,337 --
Non-cash compensation expenses 170,000 -- --
Cumulative effect of change in accounting principle 940,454 -- --
(Increase) decrease in assets, net of acquisitions:
Accounts receivable 44,695 (92,522) (5,810)
Due from related parties, net (125,702) (977,431) (162,329)
Inventories 5,677 -- --
Prepaid expenses and other current assets 21,777 98,274 (65,222)
Intangibles and other assets (15,589) (451,308) (1,320,275)
Increase (decrease) in liabilities, net of acquisitions:
Accounts payable and other accrued expenses 661,859 1,255,616 186,974
Deferred revenues (162,417) (75,104) 806,476
------------- ------------- ------------
Net cash provided by (used in) continuing operating
activities 91,951 (232,680) (1,452,573)
------------- ------------- ------------
Cash flows from investing activities:
Capital expenditures (134,872) (170,764) (37,887)
Organizational costs -- (386,975) (414,841)
Cash acquired in acquisitions 174,255 731,667 --
Net proceeds from sale of discontinued operations 6,590,000 -- --
------------- ------------- ------------
Net cash provided by (used in) investing activities of
continuing operations 6,629,383 173,928 (452,728)
------------- ------------- ------------
Cash flow from financing activities:
Proceeds from loans payable to banks -- 13,882,098 800,000
Repayments of loans payable to banks (2,827,812) (10,025,277) (250,000)
Proceeds from payable to stockholders -- 136,597 374,596
Capital contribution from GDS -- 4,511,512
Contribution to capital of AMCD -- -- 152,490
------------- ------------- ------------
Net cash provided by (used in) financing activities of
continuing operations (2,827,812) 8,504,930 1,077,086
------------- ------------- ------------
Cash provided by (used in) discontinued operations (4,405,708) (7,149,242) 952,529
------------- ------------- ------------
(Decrease) Increase in cash and cash equivalents (512,186) 1,296,936 124,314
Cash and cash equivalents, beginning of the year 1,421,250 124,314 --
------------- ------------- -----------
Cash and cash equivalents, end of the year $ 909,064 $ 1,421,250 $ 124,314
------------- ------------- ------------
------------- ------------- ------------
Supplemental disclosure of cash flow information
Cash paid for interest $ 27,263 $ 115,166 $ 48,748
Cash paid for income taxes 325,384 69,914 33,291
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
F-5
<PAGE>
PART I - FINANCIAL INFORMATION
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $ 2,472 $ 2,788 $ 8,169 $ 8,253
Cost of revenue 2,057 2,384 6,463 7,030
---------- ---------- ---------- ----------
Income from clinic operations 415 404 1,706 1,223
Operating expenses:
Salaries and benefits 273 144 674 550
General and administrative 252 242 673 759
Depreciation and amortization 100 128 291 193
---------- ---------- ---------- ----------
Total operating expenses 625 514 1,638 1,502
Income (loss) from operations (210) (110) 68 (279)
Interest income (expense), net 25 (31) 45 (128)
---------- ---------- ---------- ----------
Income (loss) before income tax provision (185) (141) 113 (407)
Income tax provision (credit) (179) 60 (40) 387
---------- ---------- ---------- ----------
Income (loss) from continuing operations
before discontinued operations (6) (201) 153 (794)
Discontinued operations:
Income (loss) from operations of
discontinued managed care
and electrical supply division (180) (1) 270 (1,983)
Gain on disposal of managed care
and electrical supply division -- 977 -- 4,646
---------- ---------- ---------- ----------
Income from discontinued operations (180) 976 270 2,663
Extraordinary income on write-off of
accrued interest, net of taxes
of $170,000 254 -- 254 --
Cumulative effect of change in
accounting principle -- -- -- (970)
---------- ---------- ---------- ----------
Net income $ 68 $ 775 $ 677 $ 899
Income per share - basic and diluted:
Income (loss) from continuing operations $ -- $ (.02) $ .02 $ (.08)
Income from discontinued operations (.02) .10 .02 .28
Extraordinary income on write-off
of accrued interest .03 -- .03
Cumulative effect of change in
accounting principle -- -- -- (.10)
---------- ---------- ---------- ----------
Income per share $ .01 $ .08 $ .07 $ .10
Weighted average number of common
shares outstanding-basic and diluted 9,567,292 9,567,292 9,567,292 9,454,581
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 610 $ 909
Accounts receivable, net of allowance
for doubtful accounts of $91,000
and $54,000 at September 30, 1999
and December 31, 1998, respectively 533 471
Inventories 105 117
Prepaid expenses and other current assets 493 164
------ ------
Total current assets 1,741 1,661
Property and equipment, net 1,293 603
Deferred tax asset 549 577
Intangible assets, net 2,225 2,079
Other assets 77 72
------ ------
TOTAL $5,885 $4,992
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 970 $ 852
Accrued expenses 1,328 1,085
Deferred revenue 843 689
Notes payable and accrued interest payable 1,117 1,359
Net liabilities of discontinued operations 506 981
------ ------
Total current liabilities 4,764 4,966
Notes payable to shareholders and
related parties 418 --
Commitments and contingencies
Shareholders' equity:
Common stock, par value $.001; authorized
shares100,000,000; shares issued 9,567,292
at September 30, 1999 and December 31, 1998 10 10
Additional paid-in-capital 8,253 8,253
Accumulated deficit (7,560) (8,237)
------- -------
Total shareholders' equity 703 26
------- -------
TOTAL $ 5,885 $ 4,992
</TABLE>
See accompanying notes to consolidated financial statements.
2.
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES OF
SHAREHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
Total
Number of Common Additional Accumulated Shareholders'
Shares Stock Paid-in Capital (Deficit) Equity (Deficit)
--------- ------- --------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 9,397,292 $ 9 $ 8,084 $(9,147) $ (1,054)
Issuance of common stock 170,000 1 169 -- 170
Net income -- -- -- 899 899
--------- ----- ------- ------- --------
Balance, September 30, 1998 9,567,292 $ 10 $ 8,253 $(8,248) $ 15
========= ===== ======= ======= =======
Balance, December 31, 1998 9,567,292 $ 10 $ 8,253 $(8,237) $ 26
Net income -- -- -- 677 677
--------- ----- ------- ------- -------
Balance, September 30, 1999 9,567,292 $ 10 $ 8,253 $(7,560) $ 703
========= ===== ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3.
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1999 1998
-------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 677 $ 899
Adjustments to reconcile net income
to net cash used in
continuing operating activities:
Depreciation and amortization 291 193
Extraordinary income from write-off
of accrued interest (254)
Cumulative effect of change in accounting
principle -- 970
Noncash compensation -- 170
Decrease in due from affiliates -- 1,140
Decrease in deferred tax asset 28 --
Increase in intangibles and other assets (263) (993)
(Decrease) increase in net liabilities
of discontinued operations (475) 550
Other changes, net (35) (49)
------ ------
Net cash (used in) provided by continuing operating
activities ( 31) 2,880
Capital expenditures (868) (523)
Financing activities:
Proceeds from loans from shareholders and related
parties 600 --
Repayment of loan payables and others -- (2,689)
------ -------
(Decrease) in cash and cash equivalents (299) (332)
Cash and cash equivalents, beginning of year 909 1,421
----- -----
Cash and cash equivalents, end of the period $610 $1,089
===== ======
</TABLE>
See accompanying notes to consolidated financial statements.
4.
<PAGE>
FIRST MEDICAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial information for the three months and nine months ended September
30, 1999 and 1998 is unaudited. However, the information reflects all
adjustments (consisting solely of normal recurring adjustments) which are, in
the opinion of management, necessary for the fair statement of results for the
interim periods.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These consolidated financial statements should
be read in conjunction with the consolidated financial statements and related
notes included in First Medical Group, Inc.'s ("the Company") December 31, 1998
Report on Form-10K.
The results of operations for the three month and nine month period ended
September 30, 1999 are not necessarily indicative of the results to be expected
for the full year.
2. NOTES PAYABLE TO SHAREHOLDERS AND RELATED PARTIES
Effective October 1, 1999, the Company entered into an agreement with certain
shareholders and related parties to borrow $655,000. The agreement provides that
the Company will repay these borrowings on a monthly basis over a 3 year period
with 9% interest per annum. In exchange for providing these funds to the
Company, the Company issued 1,637,500 of warrants that may be exercised at $.25
per share for one share of common stock of the Company.
5.
<PAGE>
3. EARNINGS PER SHARE
Earnings per share is calculated by dividing net income by weighted average
number of common shares for the period. Dilutive earnings per share reflect, in
periods in which they have a dilutive effect, the effect of common shares
issuable upon exercise of stock options and other stock equivalents. For the
periods presented, there were no common stock equivalents included in the
calculation, since they would be anti-dilutive.
4. SUPPLEMENTARY SCHEDULE
<TABLE>
<CAPTION>
1999 1998
(in thousands)
---------------
<S> <C> <C>
Cash paid during the nine months
ended September 30, for:
Interest $ -- $ 37
Income taxes 134 387
</TABLE>
6.
<PAGE>
Exhibit C
MUTUAL RELEASE
This Mutual Release (the "Mutual Release"), dated as of , 2000, is made
by and between Dennis Sokol ("Sokol") and First Medical Group, Inc., a Delaware
corporation ("FMG").
RECITALS
A. FMG and AMCMC Acquisition Corporation ("AMCMC") have entered into
a certain Asset Purchase Agreement dated as of January 31, 2000 (the "Purchase
Agreement"), pursuant to which AMCMC has agreed to purchase all of FMG's
operating assets.
B. In connection with the purchase of FMG's operating assets by
AMCMC, Sokol will resign as Director and Officer of FMG.
NOW, THEREFORE, for other good and valuable consideration, FMG and
Sokol hereby agree as follows:
1. RELEASE BY SOKOL. Except as expressly provided in paragraph 3
hereof, Sokol, on behalf of himself and his respective affiliates,
representatives, successors and assigns, hereby waives, releases and forever
discharges FMG, and its respective predecessors, affiliates, subsidiaries,
officers, directors, employees, agents, representatives, successors, receivers
and assigns (collectively, the "FMG Releasees") of and from any and all manner
of demands, claims, fees, causes of action, debts, suits, losses and
liabilities, of any nature whatsoever (collectively, "Claims"), of which such
parties are currently aware, and any Claims based upon, arising out of, or in
connection with any acts or omissions of the FMG Releasees of which they are
currently aware or any other facts or circumstances of which the parties are
currently aware or should have been aware of as of the date of this Mutual
Release, to the extent such
<PAGE>
Claims would be reasonably anticipated to arise from such acts, omissions or
facts, but regardless of whether the damage therefrom occurs before or after the
execution of this Mutual Release. Except as expressly provided in paragraph 3
hereof, it is the intention of Sokol hereby fully, finally and forever to
release each and all of the FMG Releasees from the claims released hereby.
2. RELEASE BY FMG. Except as expressly provided in paragraph 3
hereof, FMG, on behalf of itself and its respective affiliates, subsidiaries,
officers, directors, successors, and assigns, hereby waives, releases and
forever discharges Sokol and his respective affiliates, agents, attorneys,
representatives, successors and assigns (collectively the "Sokol Releasees") of
and from any and all manner of Claims of which such parties currently are aware,
and any Claims based upon, arising out of, or in connection with any acts or
omissions of the Sokol Releasees of which they are currently aware or any other
facts or circumstances of which the parties are currently aware or should have
been aware of as of the date of this Mutual Release, to the extent such Claims
would be reasonably anticipated to arise from such acts, omissions or facts, but
regardless of whether the damage therefrom occurs before or after the execution
of this Mutual Release. Except as expressly provided in paragraph 3 hereof, it
is the intention of FMG hereby fully, finally and forever to release each and
all of the Sokol Releasees from the claims released hereby.
3. RELEASE LIMITATIONS. Nothing contained in paragraphs 1 and 2
hereof shall be deemed to constitute a waiver or release by FMG or Sokol,
respectively, of (i) any rights to enforce the terms of, or to seek damages or
other relief in connection with any misrepresentation, breach or default under,
the Purchase Agreement or this Mutual Release, (ii) any Claim which is unknown
as of the date hereof and which arises out of or in connection with any acts,
omissions or any other facts or circumstances that are unknown as of the date
hereof to the party having such Claim (or if known to such party would not as of
the date hereof reasonably be anticipated as giving rise to a Claim), or (iii)
any Claim arising at any time out of or based on adjudicated fraud, gross
negligence or willful misconduct.
4. NO ASSIGNMENT OF CLAIMS. Sokol represents and warrants to FMG, and
FMG represents and warrants to Sokol, that he/it has not to his/its actual
knowledge made any assignment or transfer of any right, claim or cause of action
released or purported to be released by this Mutual Release, and Sokol, on the
one hand, and FMG, on the other hand, hereby agree to indemnify and hold
harmless the other from any liability, loss, cost or expense, including
reasonable attorneys' fees, arising from or by reason of any breach of this
representation and warranty.
5. NO ADMISSION OF LIABILITY. It is mutually understood and agreed
that this Mutual Release does not constitute and shall not be construed as an
admission of liability or wrongdoing by any of the parties hereto.
6. GOVERNING LAW. The substantive laws of the State of Delaware shall
govern the validity, construction, enforcement, and interpretation of this
Agreement.
7. EFFECTIVE DATE; COUNTERPARTS. This Agreement may be executed in
counterparts and is effective as of the date and year first set forth above.
8. ENTIRE AGREEMENT. This Mutual Release embodies the entire
understanding of the parties hereto relating to the subject hereof, and there
are no further agreements or understandings, written or oral, in effect among
the parties relating to the subject matter hereof.
9. SEVERABILITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such an invalid
provision were omitted.
10. CAPTIONS. The captions used herein are for convenience of
reference only and do not constitute a part of this Agreement.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first set forth above.
---------------------------------
Dennis Sokol
FIRST MEDICAL GROUP, INC.
By
-------------------------------
Elias M. Nemnom, Vice President
3
