SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _____________
Commission file number 0-16206
OAK TREE MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in the charter)
DELAWARE 02-0401674
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2 GANNETT DRIVE, SUITE 215
WHITE PLAINS, NY 10604
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
(914) 694-2500
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES NO X
Indicate number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date:
Common Stock, $.01 par value 2,547,921 shares
Class Outstanding at October 21, 1996
<PAGE>
OAK TREE MEDICAL SYSTEMS, INC.
INDEX
Pages
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of August 31, 1996
and May 31, 1996
Consolidated Statements of Operations for
the three months ended August 31, 1996 and 1995
Consolidated Statement of Stockholders' Equity
for the three months ended August 31, 1996
Consolidated Statements of Cash Flows for the three
months ended August 31, 1996 and 1995
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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<PAGE>
<TABLE>
<CAPTION>
OAK TREE MEDICAL SYSTEMS, INC.
Consolidated Balance Sheet
(UNAUDITED)
1996
ASSETS August 31, May 31,
Current Assets
<S> <C> <C>
Cash $ 106,894 $ 292,315
Patient care receivables, less allowance for possible losses of $1,486,270 3,673,497 3,158,325
Prepaids and other 68,621 68,621
- ------------------------------------------------------------------------------------- --------------- ---------------
Total Current Assets 3,849,012 3,519,261
- ------------------------------------------------------------------------------------- --------------- ---------------
Other Assets
Investment 5,000,000 5,000,000
Property and equipment, net 377,001 394,145
Deposits and other 18,657 18,657
CORF licenses 40,000 40,000
Excess of cost over fair value of net assets acquired,
Less accumulated amortization of $90,071 1,221,988 1,252,143
- ------------------------------------------------------------------------------------- --------------- ---------------
Total Other Assets 6,657,646 6,704,945
- ------------------------------------------------------------------------------------- --------------- ---------------
TOTAL ASSETS $ 10,508,757 $ 10,224,206
===================================================================================== =============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 880,950 $ 920,363
Loan payable - other 432,858 310,623
Current maturities of debt 138,429 147,846
Income taxes payable 0 0
- ------------------------------------------------------------------------------------- --------------- ---------------
Total Current Liabilities 1,452,237 1,378,832
- ------------------------------------------------------------------------------------- --------------- ---------------
Other Liabilities
Deferred income tax 801,575 720,782
Long-term debt, less current maturities 107,211 128,481
Obligation to issue shares of common stock 349,765 349,765
- ------------------------------------------------------------------------------------- --------------- ---------------
Total Other Liabilities 1,258,551 1,199,028
- ------------------------------------------------------------------------------------- --------------- ---------------
Commitments and Contingencies
Stockholders' Equity
Common stock, $.01 par value, 25,000,000 shares
authorized, 2,529,169 shares issued and outstanding 25,292 25,292
Additional paid-in capital 9,508,549 9,508,549
Deficit (1,735,872) (1,887,495)
- ------------------------------------------------------------------------------------- --------------- ---------------
Total Stockholders' Equity 7,797,969 7,646,346
- ------------------------------------------------------------------------------------- --------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 10,508,757 $ 10,224,206
===================================================================================== =============== ===============
See accompanying summary of significant accounting policies and notes to consolidated financial statements.
</TABLE>
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<TABLE>
<CAPTION>
OAK TREE MEDICAL SYSTEMS, INC.
Consolidated Statement of Operations
(UNAUDITED)
For The Three Months Ended August 31,
1996 1995
REVENUE
<S> <C> <C>
Net patient services $ 1,002,463 $ 1,070,935
- --------------------------------------------------------------------------------- ----------------- -----------------
EXPENSES
Salaries, personnel leasing, subcontract labor and related costs 166,427 0
Selling, general and administrative 505,512 690,174
Interest 43,072 2,000
Depreciation and Amortization 44,640 46,250
- --------------------------------------------------------------------------------- ----------------- -----------------
TOTAL EXPENSES 759,651 738,424
- --------------------------------------------------------------------------------- ----------------- -----------------
INCOME FROM CONTINUING OPERATIONS 242,812 332,511
BEFORE PROVISION FOR INCOME TAXES
PROVISION FOR INCOME TAXES 91,189 122,000
- --------------------------------------------------------------------------------- ----------------- -----------------
NET INCOME FROM OPERATIONS 151,623 210,511
- --------------------------------------------------------------------------------- ----------------- -----------------
NET INCOME $ 151,623 $ 210,511
- --------------------------------------------------------------------------------- ----------------- -----------------
INCOME PER COMMON SHARE $ .06 $ .08
- --------------------------------------------------------------------------------- ----------------- -----------------
Weighted average number of common and common equivalent
shares outstanding 2,679,375 2,598,901
================================================================================= ================= =================
See accompanying summary of significant accounting policies and notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
OAK TREE MEDICAL SYSTEMS, INC.
Statement of Stockholders' Equity
(UNAUDITED)
For The Three Months Ended August 31, 1996
Additional Total
Common Stock Paid-in Stockholders'
Shares Amount Capital Deficit Equity
- -------------------------------- --------------- ----------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C> <C>
Balance May 31, 1996 2,529,169 $ 25,292 $ 9,508,549 $ (1,887,495) $ 7,646,346
Net Income - - - 151,623 151,623
- -------------------------------- --------------- ----------------- ---------------- --------------- -----------------
Balance August 31, 1996 2,529,169 $ 25,292 $ 9,508,549 $ (1,735,872) $ 7,797,969
================================ =============== ================= ================ =============== =================
See accompanying summary of significant accounting policies and notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
OAK TREE MEDICAL SYSTEMS, INC.
Consolidated Statement of Cash Flows
(UNAUDITED)
For The Three Months Ended August 31,
1996 1995
- --------------------------------------------------------------------------------- ----------------- -----------------
OPERATING ACTIVITIES
<S> <C> <C>
Net income (loss) $ 151,623 $ 210,511
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 44,640 46,250
Change in assets and liabilities:
(Increase) in patient receivables (515,172) (5,488)
(Increase) in prepaids and other 0 (2,500)
(Increase) in deposits and other 0 (532) -
Increase (Decrease) in accounts payable and accrued expenses (39,413) (527,293)
Increase in income tax payable 0 122,000
Increase in deferred income tax 80,793 0
- --------------------------------------------------------------------------------- ----------------- -----------------
NET CASH USED IN OPERATING ACTIVITIES (277,529) (157,052)
- --------------------------------------------------------------------------------- ----------------- -----------------
INVESTING ACTIVITIES
Increase in leasehold improvements (313) 0
Purchase of property and equipment (9,522) 0
Decrease in excess of cost over fair value of assets acquired 10,395 0
- --------------------------------------------------------------------------------- ----------------- -----------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 560 0
- --------------------------------------------------------------------------------- ----------------- -----------------
FINANCING ACTIVITIES
Principal payments on borrowings (30,687) (26,967)
Increase in borrowings 122,235 108,750
- --------------------------------------------------------------------------------- ----------------- -----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 91,548 81,783
- --------------------------------------------------------------------------------- ----------------- -----------------
NET INCREASE (DECREASE) IN CASH (185,421) (75,269)
CASH - Beginning of Period 292,315 138,196
- --------------------------------------------------------------------------------- ----------------- -----------------
CASH - End of Period $ 106,894 $ 62,927
================================================================================= ================= =================
See accompanying summary of significant accounting policies and notes to consolidated financial statements.
</TABLE>
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<PAGE>
OAK TREE MEDICAL SYSTEMS, INC.
Notes to Consolidated Financial Statements
August 31, 1996
(Unaudited)
Summary of Significant Accounting Policies
1. The Accompanying unaudited consolidated financial statements, which are for
interim periods, do not include all disclosures provided in the annual
consolidated financial statements and the footnotes thereto contained in
the Annual Report on form 10-KSB for the year ended May 31, 1996, of Oak
Tree Medical Systems, Inc. (the "Company"), as filed with the Securities
and Exchange Commission. The May 31, 1996, balance sheet was derived from
audited consolidated financial statements, but does not include all
disclosures required by generally accepted accounting principles.
2. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal
recurring nature) necessary for a fair presentation of the financial
statements. The results of operations for the three months ended August 31,
1996, are not necessarily indicative of the results to be expected for the
full year.
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<PAGE>
OAK TREE MEDICAL SYSTEMS, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
General
The Company is engaged in the business of owning, operating and managing
physical therapy clinics, comprehensive outpatient rehabilitation
facilities (CORF) and related medical practices. As of August 31, 1996, all
of the Company's operations were in the Jacksonville, Florida area. The
Company operates its various facilities and practices through its various
subsidiaries as required or practical for licensing, operating and managing
the various aspects of its business.
In October 1996, the Company completed its acquisition of three New York
City based physical therapy centers, with revenues of approximately $2.5
million in their most recent fiscal year. In addition, this acquisition
also included a physical therapy management contract with a Westchester
County Community Hospital. The clinics' assets and related management
contracts were acquired for $900,000 in cash and stock with an agreed upon
value.
Results of Operations
Three months ended August 31, 1996, compared to three months ended March
31, 1995.
Total revenue for the three months ended August 31, 1996, was $1,002,463 a
decrease of $68,472 compared to total revenue of $1,070,935 during the
prior comparable quarter. This reduction in revenue resulted from
management's decision to decrease Oak Tree's offsite servicing activities
and concentrate on their core physical therapy practices. The quarter ended
August 31, 1996, represents the first full quarter of operation in its new
and expanded facilities in Jacksonville.
Total operating expenses and costs during the three months ended August 31,
1996 were $759,651, an increase of $21,227, compared to total operating
expenses of $738,424 during the prior comparable quarter. The increase was
primarily attributable to increased interest expense, which was $43,072 for
the three months ended August 31, 1996, as compared to $2,000 for the prior
comparable quarter. Salaries and similar expenses for the 1995 quarter were
included in selling, general and administrative expenses for that quarter.
Liquidity and Capital Resources
The Company has been funding its capital requirements with operating cash
flow and by loans against its accounts receivable. The Company pays fees on
each advance and interest on the outstanding balance. A portion of the
Company's accounts receivable funding was managed by an entity in which a
former director and one of the Company's medical personnel have an equity
participation. The funding arrangements with this entity have been
terminated.
In September 1996, the Company through one of its subsidiaries, obtained a
term loan in the amount of $400,000 from a bank to fund the acquisition of
the New York practices. Interest on this loan is at the lender's prime rate
plus one percent, to be fully repaid by March 31, 1998. The Company also
has with the same bank, a revolving line of credit in the amount of
$200,000.
Also, in September 1996, the Company obtained a loan in the amount of
$1,250,000, collateralized by $2,600,000 of its accounts receivable. As a
part of the terms of the loan, the Company is obligated to repay the lender
$1,912,500 and twenty percent of the receivables collected over the
$1,912,500. The lender is responsible for the servicing and collecting of
the accounts receivable designated as collateral.
As of August 31, 1996, the Company had working capital of $2,396,775
compared to working capital of $2,140,429 at May 31, 1996. During the three
months, net accounts receivable increased $515,172 over the balance at May
31, 1996. Net cash used in operating activities was $277,529 and $157,052
for the quarters ended August 31, 1996 and 1995 respectively.
Other than completion of the acquisition of the New York practices the
Company has no outstanding commitments for capital expenditures. The
Company's primary goal at this time is for the integration of the
acquisitions into the Company's corporate structure.
The Company has entered into a warrant agreement with a consultant of the
Company pursuant to which the consultant has been granted warrants to
acquire 250,000 shares of common stock. The warrants are exercisable at
prices of between $5.00 to $7.00 per share, and are subject to certain
anti-dilution provisions and expire in July 1998.
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<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
None.
(b) Exhibits
The following exhibits are filed as part of this report:
4.1 Term Loan Agreement dated as of September 30, 1996, between First
Union National Bank and Oak Tree Medical Management, Inc.
4.2 Security Agreement dated as of September 30, 1996, between Oak Tree
Medical Management, Inc. and First Union National Bank
4.3 Promissory Note and Promissory Note dated as of September 30, 1996,
between Oak Tree Medical Management, Inc. and First Union National
Bank
4.4 Unconditional Guaranty dated as of September 30, 1996, between Oak
Tree Medical Management, Inc., Oak Tree Medical Systems, Inc. and
First Union National Bank
4.5 Health Care Receivables Loan and Security Agreement dated as of
September 16, 1996, between Oak Tree Receivables, Inc. and Sam Fund
I, L.P.
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<PAGE>
10.1 Agreement of Sale between Orthopedic & Sports Therapy Services of
Queens, L.P., Parkside of Queens, Inc. and Oak Tree Medical
Management, Inc.
10.2 Agreement of Sale between Parkside Physical Therapy Services, P.C.
and New Media Practice, P.C.
10.3 Agreement of Sale between Gary Danziger, PTSR, Inc. and Oak Tree
Medical Management, Inc.
- 10 -
<PAGE>
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 thereto duly authorized.
OAK TREE MEDICAL SYSTEMS, INC.
By: /s/ William Kedersha
--------------------
William Kedersha
Chief Executive Officer
By: /s/
--------------------
Chief Accounting Officer
Dated: October 21, 1996
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LOAN AGREEMENT
First Union National Bank
50 Main Street
White Plains, New York 10606
(Hereinafter referred to as the "Bank")
Oak Tree Medical Management, Inc.
2 Gannett Drive, Suite 215
White Plains, New York 10601
(Individually and collectively "Borrower")
This Loan Agreement ("Agreement") is entered into September 30, 1996, by and
between Bank and Borrower, a Corporation organized under the laws of New York.
Borrower has applied to Bank for a loan or loans (individually and collectively,
the "Loan") evidenced by one or more promissory notes (whether one or more, the
"Note") as follows:
Term Loan - in the principal amount of $400,000.00 which is evidenced by the
Promissory Note dated September 30, 1996. The Loan proceeds are to be used by
Borrower solely to enable the Borrower to refinance debt incurred by the
Guarantor in acquiring the physical therapy practice now know as Oak Tree
Medical Management, Inc.
Line of Credit - in the principal amount of $200,000.00 which is evidenced by
the Promissory Note dated September 30, 1996 ("Line of Credit Note"), under
which Borrower may borrow, repay, and reborrow, from time to time, so long as
the total indebtedness outstanding at any one time does not exceed the principal
amount. The Loan proceeds are to be used by Borrower solely to finance accounts
receivable. Bank's obligation to advance or readvance under the Line of Credit
Note shall terminate if Borrower is in Default under the Line of Credit Note.
This Agreement applies to the Loan and all Loan Documents. The terms "Loan
Documents" and "Obligations," as used in this Agreement, are defined in the
Note. The term "Borrower" shall include its Subsidiaries and Affiliates. As used
in this Agreement as to Borrower, "Subsidiary" shall mean any corporation of
which more than 50% of the issued and outstanding voting stock is owned directly
or indirectly by Borrower. As to Borrower, "Affiliate" shall have the meaning as
defined in 11 U.S.C. ss. 101, except that the term "debtor" therein shall be
substituted by the term "Borrower" herein.
Relying upon the covenants, agreements, representations and warranties contained
in this Agreement, Bank is willing to extend credit to Borrower upon the terms
and subject to the conditions set forth herein, and Bank and Borrower agree as
follows:
REPRESENTATIONS. Borrower represents that from the date of this Agreement and
until final payment in full of the Obligations: Accurate Information. All
information now and hereafter furnished to Bank is and will be true, correct and
complete. Any such information relating to Borrower's financial condition will
accurately reflect Borrower's financial condition as of the date(s) thereof,
(including all contingent liabilities of every type), and Borrower further
represents that its financial condition has not changed materially or adversely
since the date(s) of such documents. Authorization; Non-Contravention. The
execution, delivery and performance by Borrower and any guarantor, as
applicable, of this Agreement and other Loan Documents to which it is a party
are within its power, have been duly authorized by all necessary action taken by
the duly authorized officers of Borrower and any guarantors and, if necessary,
by making appropriate filings with any
<PAGE>
governmental agency or unit and are the legal, binding, valid and enforceable
obligations of Borrower and any guarantors; and do not (i) contravene, or
constitute (with or without the giving of notice or lapse of time or both) a
violation of any provision of applicable law, a violation of the organizational
documents of Borrower or any guarantor, or a default under any agreement,
judgment, injunction, order, decree or other instrument binding upon or
affecting Borrower or any guarantor, (ii) result in the creation or imposition
of any lien (other than the lien(s) created by the Loan Documents) on any of
Borrower's or guarantor's assets, or (iii) give cause for the acceleration of
any obligations of Borrower or any guarantor to any other creditor. Asset
Ownership. Borrower has good and marketable title to all of the properties and
assets reflected on the balance sheets and financial statements supplied Bank by
Borrower, and all such properties and assets are free and clear of mortgages,
security deeds, pledges, liens, charges, and all other encumbrances, except as
otherwise disclosed to Bank by Borrower in writing ("Permitted Liens"). To
Borrower's knowledge, no default has occurred under any Permitted Liens and no
claims or interests adverse to Borrower's present rights in its properties and
assets have arisen. Discharge of Liens and Taxes. Borrower has duly filed, paid
and/or discharged all taxes or other claims which may become a lien on any of
its property or assets, except to the extent that such items are being
appropriately contested in good faith and an adequate reserve for the payment
thereof is being maintained. Sufficiency of Capital. Borrower is not, and after
consummation of this Agreement and after giving effect to all indebtedness
incurred and liens created by Borrower in connection with the Loan, will not be,
insolvent within the meaning of 11 U.S.C. ss. 101(32). Compliance with Laws.
Borrower is in compliance in all respects with all federal, state and local
laws, rules and regulations applicable to its properties, operations, business,
and finances, including, without limitation, any federal or state laws relating
to liquor (including 18 U.S.C. ss. 3617, et seq.) or narcotics (including 21
U.S.C. ss. 801, et seq.) and/or any commercial crimes; all applicable federal,
state and local laws and regulations intended to protect the environment; and
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), if
applicable. Organization and Authority. Each corporate or limited liability
company Borrower and any guarantor, as applicable, is duly created, validly
existing and in good standing under the laws of the state of its organization,
and has all powers, governmental licenses, authorizations, consents and
approvals required to operate its business as now conducted. Each corporate or
limited liability company Borrower and any guarantor, if any, is duly qualified,
licensed and in good standing in each jurisdiction where qualification or
licensing is required by the nature of its business or the character and
location of its property, business or customers, and in which the failure to so
qualify or be licensed, as the case may be, in the aggregate, could have a
material adverse effect on the business, financial position, results of
operations, properties or prospects of Borrower or any such guarantor. No
Litigation. There are no pending or threatened suits, claims or demands against
Borrower or any guarantor that have not been disclosed to Bank by Borrower in
writing.
AFFIRMATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will: Business Continuity. Conduct its business in
substantially the same manner and locations as such business is now and has
previously been conducted. Maintain Properties. Maintain, preserve and keep its
property in good repair, working order and condition, making all needed
replacements, additions and improvements thereto, to the extent allowed by this
Agreement. Access to Books & Records. Allow Bank, or its agents, during normal
business hours, access to the books, records and such other documents of
Borrower as Bank shall reasonably require, and allow Bank to make copies thereof
at Bank's expense. Insurance. Maintain adequate insurance coverage with respect
to its properties and business against loss or damage of the kinds and in the
amounts customarily insured against by companies of established reputation
engaged in the same or similar businesses including, without limitation,
commercial general liability insurance, workers compensation insurance, and
business interruption insurance; all acquired in such amounts and from such
companies as Bank may reasonably require. Notice of Default and Other Notices.
(a) Notice of Default. Furnish to Bank immediately upon becoming aware of the
existence of any condition or event which
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constitutes a Default (as defined in the Loan Documents) or any event which,
upon the giving of notice or lapse of time or both, may become a Default,
written notice specifying the nature and period of existence thereof and the
action which Borrower is taking or proposes to take with respect thereto. (b)
Other Notices. Promptly notify Bank in writing of (i) any material adverse
change in its financial condition or its business; (ii) any default under any
material agreement, contract or other instrument to which it is a party or by
which any of its properties are bound, or any acceleration of the maturity of
any indebtedness owing by Borrower; (iii) any material adverse claim against or
affecting Borrower or any part of its properties; (iv) the commencement of, and
any material determination in, any litigation with any third party or any
proceeding before any governmental agency or unit affecting Borrower; and (v) at
least 30 days prior thereto, any change in Borrower's name or address as shown
above, and/or any change in Borrower's structure. Compliance with Other
Agreements. Comply with all terms and conditions contained in this Agreement,
and any other Loan Documents, and swap agreements, if applicable, as defined in
the Note. Payment of Debts. Pay and discharge when due, and before subject to
penalty or further charge, and otherwise satisfy before maturity or delinquency,
all obligations, debts, taxes, and liabilities of whatever nature or amount,
except those which Borrower in good faith disputes. Reports and Proxies. Deliver
to Bank, promptly, a copy of all financial statements, reports, notices, and
proxy statements, sent by Borrower to stockholders, and all regular or periodic
reports required to be filed by Borrower with any governmental agency or
authority. Other Financial Information. Deliver promptly such other information
regarding the operation, business affairs, and financial condition of Borrower
which Bank may reasonably request. Non-Default Certificate From Borrower.
Deliver to Bank, with the Financial Statements required herein, a certificate
signed by Borrower, if Borrower is an individual, or by a principal financial
officer of Borrower warranting that no "Default" as specified in the Loan
Documents nor any event which, upon the giving of notice or lapse of time or
both, would constitute such a Default, has occurred. Estoppel Certificate.
Furnish, within 15 days after request by Bank, a written statement duly
acknowledged of the amount due under the Loan and whether offsets or defenses
exist against the Obligations. Deposit Relationship. Maintain its primary
depository account and cash management account with Bank. Reports and Proxies.
Borrower shall deliver to First Union, promptly, a copy of all financial
statements, reports, notices, and proxy statements, sent by Borrower to
stockholders, and all regular or periodic reports required to be filed by
Borrower with any governmental agency or authority.
NEGATIVE COVENANTS. Borrower agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Borrower will not: Default on Other Contracts or
Obligations. Default on any material contract with or obligation when due to a
third party or default in the performance of any obligation to a third party
incurred for money borrowed. Judgment Entered. Permit the entry of any monetary
judgment or the assessment against, the filing of any tax lien against, or the
issuance of any writ of garnishment or attachment against any property of or
debts due Borrower in an amount in excess of $25,000.00 and that is not
discharged or execution is not stayed within Thirty (30) days of entry.
Government Intervention. Permit the assertion or making of any seizure, vesting
or intervention by or under authority of any government by which the management
of Borrower or any guarantor is displaced of its authority in the conduct of its
respective business or such business is curtailed or materially impaired.
Prepayment of Other Debt. Retire any long-term debt entered into prior to the
date of this Agreement at a date in advance of its legal obligation to do so.
Retire or Repurchase Capital Stock. Retire or otherwise acquire any of its
capital stock. Change in Fiscal Year. Borrower or guarantor shall not change its
fiscal year without the consent of Bank. Guarantees. Guarantee or otherwise
become responsible for obligations of any other person or persons in an
aggregate amount in excess of $10,000.00 per fiscal year, other than the
endorsement of checks and drafts for collection in the ordinary course of
business. Encumbrances. Create, assume, or permit to exist any mortgage,
security deed, deed of trust, pledge, lien, charge or other encumbrance on any
of its assets, whether now owned or hereafter acquired, other than: (i) security
interests required
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<PAGE>
by the Loan Documents; (ii) liens for taxes contested in good faith; (iii) liens
accruing by law for employee benefits; or (iv) Permitted Liens.
FINANCIAL COVENANTS. Borrower, on a consolidated basis, agrees to the following
provisions from the date of this Agreement and until final payment in full of
the Obligations, unless Bank shall otherwise consent in writing: Current Ratio.
Borrower shall, at all times, maintain a Current Ratio of not less than 2.00 to
1.00. "Current Ratio" shall mean the ratio of current assets divided by current
liabilities. Working Capital. Borrower shall, at all times, maintain Working
Capital of at least $2,000,000.00. "Working Capital" shall mean the excess of
the current assets over the current liabilities. Tangible Net Worth. Borrower
shall, at all times, maintain Tangible Net Worth of at least $6,000,000.00.
"Tangible Net Worth" shall mean the total assets minus total liabilities. For
purposes of this computation, the aggregate amount of any intangible assets of
Borrower including, without limitation, goodwill, franchises, licenses, patents,
trademarks, trade names, copyrights, service marks, and brand names, shall be
subtracted from total assets, and total liabilities shall include fully
subordinated debt. Total Liabilities to Tangible Net Worth Ratio. Borrower
shall, at all times, maintain a ratio of Total Liabilities, including fully
subordinated debt, divided by Tangible Net Worth of not more than 3.00 to 1.00.
For purposes of this computation, "Total Liabilities" shall mean all liabilities
of Borrower, including capitalized leases and all reserves for deferred taxes
and other deferred sums appearing on the liabilities side of a balance sheet of
Borrower, in accordance with generally accepted accounting principles applied on
a consistent basis. Debt Service Coverage Ratio. Borrower shall at all times
maintain a Debt Service Coverage Ratio of not less than 2.00 to 1.00. "Debt
Service Coverage Ratio" shall mean the sum of net profit plus interest expense
plus income tax expense plus depreciation and amortization divided by the sum of
interest expense plus the current portion of long term debt and capital leases
plus income tax expense. Limitation on Debt. Borrower and any guarantor shall
not, without the Bank's prior written consent, directly or indirectly, create,
incur, assume or become liable for any debt, contingent or direct, if, giving
effect to such additional debt on a pro forma basis, causes the aggregate amount
of Borrower's debt, including obligations to Bank, to exceed $1,300,000.00.
Loans and Advances. Borrower shall not, during any fiscal year, make loans or
advances, excepting ordinary course of business travel and expense advances, to
any person or entity, which total more than $10,000.00 in the aggregate.
ANNUAL FINANCIAL STATEMENTS. Borrower shall deliver to Bank, within 120 days
after the close of each fiscal year, audited financial statements reflecting its
operations during such fiscal year, including, without limitation, a balance
sheet, profit and loss statement and statement of cash flows, with supporting
schedules; all on a consolidated and consolidating basis and in reasonable
detail, prepared in conformity with generally accepted accounting principles,
applied on a basis consistent with that of the preceding year. All such
statements shall be examined by an independent certified public accountant
acceptable to Bank. The opinion of such independent certified public accountant
shall not be acceptable to Bank if qualified due to any limitations in scope
imposed by Borrower or its Subsidiaries, if any. Any other qualification of the
opinion by the accountant shall render the acceptability of the financial
statements subject to Bank's approval.
PERIODIC FINANCIAL STATEMENTS. Borrower shall deliver to Bank unaudited
management-prepared quarterly financial statements including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flows, with supporting schedules, as soon as available and in any event within
30 days after the close of each such period; all in reasonable detail and
prepared in conformity with generally accepted accounting principles, applied on
a basis consistent with that of the preceding year. Such statements shall be
certified as to their correctness by a principal financial officer of Borrower
and in each case, if audit statements are required, subject to audit and
year-end adjustments.
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FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
TAX RETURNS. Borrower shall deliver to Bank, within 30 days of filing, complete
copies of federal and state tax returns, as applicable, each of which shall be
signed and certified by Borrower to be true and complete copies of such returns.
In the event an extension is filed, Borrower shall deliver a copy of the
extension within 30 days of filing.
BORROWING BASE. As to the Line of Credit Note in the principal amount of
$200,000.00, the following provisions shall apply:
Borrowing Limitation. The maximum principal amount that Borrower may borrow
shall be the lesser of the principal amount stated in the Line of Credit Note or
the maximum principal amount allowed under this addendum (the "Maximum Principal
Amount").
The Maximum Principal Amount shall be an amount equal to 75% of the net amount
of Eligible Accounts, less the amount of any Reserve required by Bank.
"Eligible Account" refers to an account receivable not more than 90 days from
the date of the original invoice that arises in the ordinary course of
Borrower's business and meets the following eligibility requirements: (a) the
sale of goods or services reflected in such account is final and such goods and
services have been delivered or provided and accepted by the account debtor and
payment for such is owing; (b) the invoices comprising an account are not
subject to any claims, returns or disputes of any kind; (c) the account debtor
is not insolvent; (d) the account debtor has its principal place of business in
the United States; (e) the account debtor is not an affiliate of Borrower and is
not a supplier to Borrower and the account is not otherwise exposed to risk of
set-off; (f) not more than twenty five percent of the original invoices owing
Borrower by the account debtor are more than ninety days from the date of the
original invoice and do not meet the other eligible requirements; (g) Bank has a
first priority perfected security interest in such account.
"Reserves" may be required at any time and from time to time by Bank without
prior notice to Borrower in amounts deemed by Bank to be adequate to reserve
against outstanding letter of credit, outstanding bankers acceptances,
Borrower's obligations to Bank or its affiliates or any guaranties or other
contingent debt of Borrower.
Required Reports. Borrower shall certify to Bank by the tenth day of each month,
the amount of Eligible Accounts as of the first day of each month, on forms
required by Bank together with all detail and supporting documents requested by
Bank. Bank may at any time and from time to time, during Bank's normal business
hours, enter upon any business premises of Borrower and audit Borrower's
accounts. Bank's determination of the amount of Eligible Accounts shall at all
times be indisputable and deemed correct. The Borrower, at all times, shall
cooperate with Bank without limitation by providing Bank information and access
to Borrower's premises and business records and shall be courteous to Bank's
agents.
Continuing Representations. Borrower warrants and represents as a continuing
warranty, that so long as principal is outstanding under the Line of Credit
Note, the outstanding principal balance shall not exceed the lesser of the
Maximum Principal Amount or the principal amount stated in the Line of Credit
Note (the "Borrowing Limit"). Borrower agrees to pay any advances in excess of
the Borrowing Limit immediately upon receipt by Borrower of written notice that
the Borrowing Limit has been exceeded.
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CONDITIONS PRECEDENT. The obligations of Bank to make the Loan and any advances
pursuant to this Agreement are subject to the following conditions precedent:
Additional Documents. Receipt by Bank of such additional supporting documents as
Bank or its counsel may reasonably request.
IN WITNESS WHEREOF, Borrower and Bank, on the day and year first written above,
have caused this Agreement to be executed under seal.
Oak Tree Medical Management, Inc.
Taxpayer Identification Number: 13-3906760
CORPORATE By:_________________________________________
SEAL William Kedersha, President
By:_________________________________________
Michael Gerber, Executive Vice President
First Union National Bank
_________________________________________
Page 6
SECURITY AGREEMENT
September 30, 1996
Oak Tree Medical Management, Inc.
2 Gannett Drive, Suite 215
White Plains, New York 10601
(Individually and collectively "Debtor")
First Union National Bank
50 Main Street
White Plains, New York 10606
(Hereinafter referred to as the "Bank")
For value received and to secure payment and performance of the Promissory Note
executed by the Debtor dated September 30, 1996, in the original principal
amount of $400,000.00, payable to Bank, and any extensions, renewals,
modifications or novations thereof and the Promissory Note executed by the
Debtor dated September 30, 1996, in the original principal amount of
$200,000.00, payable to Bank, and any extensions, renewals, modifications or
novations thereof (together, the "Note"), this Security Agreement and the other
Loan Documents, and any other obligations of Debtor to Bank however created,
arising or evidenced, whether direct or indirect, absolute or contingent, now
existing or hereafter arising or acquired, including swap agreements (as defined
in 11 U.S.C. ss. 101), future advances, and all costs and expenses incurred by
Bank to obtain, preserve, perfect and enforce the security interest granted
herein and to maintain, preserve and collect the property subject to the
security interest (collectively, "Obligations"), Debtor hereby grants to Bank a
continuing security interest in and lien upon the following described property,
now owned or hereafter acquired, any additions, accessions, or substitutions
thereof and thereto, and all proceeds and products thereof, including cash or
non-cash dividends (collectively, "Collateral"):
All accounts, contract rights, leases, and any other rights of Debtor to payment
for goods sold or leased or for services rendered; furniture; furnishings;
equipment; machinery; accessories; moveable trade fixtures; goods held for sale
or being processed for sale in Debtor's business, including all raw materials,
supplies, and other materials used or consumed in Debtor's business, goods in
process, finished goods, and all other items customarily classified as
inventory; building improvement and construction materials, supplies and
equipment; chattel paper; instruments; documents; all funds on deposit with Bank
and its affiliates; and all general intangibles; as well as all parts,
replacements, substitutions, profits, products and cash and non-cash proceeds of
the foregoing (including insurance and condemnation proceeds payable by reason
of condemnation of or loss or damage thereto) in any form and wherever located.
Debtor hereby represents and agrees that:
OWNERSHIP. Debtor owns the Collateral or Debtor will purchase and acquire rights
in the Collateral within ten days of the date advances are made under the Note.
If Collateral is being acquired with the proceeds of an advance under the Note,
Debtor authorizes Bank to disburse proceeds directly to the seller of the
Collateral. The Collateral is free and clear of all liens, security interests,
and claims except those previously reported in writing to Bank, and Debtor will
keep the Collateral free and clear from all liens, security interests and
claims, other than those granted to Bank.
NAME AND OFFICES. There has been no change in the name of Debtor, or the name
under which Debtor conducts business, within the 5 years preceding the date of
execution of this Security Agreement and Debtor has not moved its executive
offices or residence within the 5 years preceding the date of execution of this
Security Agreement except as previously reported in writing to Bank. The
taxpayer identification number of Debtor as provided herein is correct.
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TITLE/TAXES. Debtor has good and marketable title to Collateral and will warrant
and defend same against all claims. Debtor will not transfer, sell, or lease
Collateral (except in the ordinary course of business). Debtor agrees to pay
promptly all taxes and assessments upon or for the use of Collateral and on this
Security Agreement. At its option, Bank may discharge taxes, liens, security
interests or other encumbrances at any time levied or placed on Collateral.
Debtor agrees to reimburse Bank, on demand, for any such payment made by Bank.
Any amounts so paid shall be added to the Obligations.
WAIVERS. Debtor waives presentment, demand, protest, notice of dishonor, notice
of default, demand for payment, notice of intention to accelerate, and notice of
acceleration of maturity. Debtor further agrees not to assert against Bank as a
defense (legal or equitable), as a set-off, as a counterclaim, or otherwise, any
claims Debtor may have against any seller or lessor that provided personal
property or services relating to any part of the Collateral. Debtor waives all
exemptions and homestead rights with regard to the Collateral. Debtor waives any
and all rights to notice or to hearing prior to Bank's taking immediate
possession or control of any Collateral, and to any bond or security which might
be required by applicable law prior to the exercise of any of Bank's remedies
against any Collateral.
EXTENSIONS, RELEASES. Debtor agrees that Bank may extend, renew or modify any of
the Obligations and grant any releases, compromises or indulgences with respect
to any security for the Obligations, or with respect to any party liable for the
Obligations, all without notice to or consent of Debtor and without affecting
the liability of Debtor or the enforceability of this Security Agreement.
NOTIFICATIONS OF CHANGE. Debtor will notify Bank in writing at least 30 days
prior to any change in: (i) Debtor's chief place of business and/or residence;
(ii) Debtor's name or identity; or (iii) Debtor's corporate structure. Debtor
will keep Collateral at the location(s) previously provided to Bank until such
time as Bank provides written advance consent to a change of location. Debtor
will bear the cost of preparing and filing any documents necessary to protect
Bank's liens.
COLLATERAL CONDITION AND LAWFUL USE. Debtor represents that Collateral is in
good repair and condition and that Debtor shall use reasonable care to prevent
Collateral from being damaged or depreciating. Debtor shall immediately notify
Bank of any material loss or damage to Collateral. Debtor shall not permit any
item of equipment to become a fixture to real estate or an accession to other
personal property. Debtor represents it is in compliance in all respects with
all federal, state and local laws, rules and regulations applicable to its
properties, Collateral, operations, business, and finances, including, without
limitation, any federal or state laws relating to liquor (including 18 U.S.C.
ss. 3617, et seq.) or narcotics (including 21 U.S.C. ss. 801, et seq.) and all
applicable federal, state and local laws, and regulations intended to protect
the environment.
RISK OF LOSS AND INSURANCE. Debtor shall bear all risk of loss with respect to
the Collateral. The injury to or loss of Collateral, either partial or total,
shall not release Debtor from payment or other performance hereof. Debtor agrees
to obtain and keep in force casualty and hazard insurance on Collateral naming
Bank as loss payee. Such insurance is to be in form and amounts satisfactory to
Bank. All such policies shall provide to Bank a minimum of 30 days written
notice of cancellation. Debtor shall furnish to Bank such policies, or other
evidence of such policies satisfactory to Bank. Bank is authorized, but not
obligated, to purchase any or all insurance or "Single Interest Insurance"
protecting such interest as Bank deems appropriate against such risks and for
such coverage and for such amounts, including either the loan amount or value of
the Collateral at its discretion, all at Debtor's expense. In such event, Debtor
agrees to reimburse Bank for the cost of such insurance and Bank may add such
cost to the Obligations. Debtor shall bear the risk of loss to the extent of any
deficiency in the effective insurance coverage with respect to loss or damage to
any of the Collateral. Debtor hereby assigns to Bank the proceeds of all such
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<PAGE>
insurance and directs any insurer to make payments directly to Bank. Debtor
hereby appoints Bank its attorney-in-fact, which appointment shall be
irrevocable and coupled with an interest for so long as the Obligations are
unpaid, to file proof of loss and/or any other forms required to collect from
any insurer any amount due from any damage or destruction of Collateral, to
agree to and bind Debtor as to the amount of said recovery, to designate
payee(s) of such recovery, to grant releases to insurer, to grant subrogation
rights to any insurer, and to endorse any settlement check or draft. Debtor
agrees not to exercise any of the foregoing powers granted to Bank without the
Bank's prior written consent.
ADDITIONAL COLLATERAL. If at any time Collateral is unsatisfactory to Bank, then
on demand of Bank, Debtor shall immediately furnish such additional Collateral
satisfactory to Bank to be held by Bank as if originally pledged hereunder and
shall execute such additional security agreements and financing statements as
requested by Bank.
FINANCING STATEMENTS. No Financing Statement (other than any filed by Bank or
disclosed above) covering any of Collateral or proceeds thereof is on file in
any public filing office. This Security Agreement, or a copy thereof, or any
Financing Statement executed hereunder may be recorded. On request of Bank,
Debtor will execute one or more Financing Statements in form satisfactory to
Bank and will pay all costs and expenses of filing the same or of filing this
Security Agreement in all public filing offices, where filing is deemed by Bank
to be desirable. Bank is authorized to file Financing Statements relating to
Collateral without Debtor's signature where authorized by law. Debtor appoints
Bank as its attorney-in-fact to execute such documents necessary to accomplish
perfection of Bank's security interest. The appointment is coupled with an
interest and shall be irrevocable as long as any Obligations remain outstanding.
Debtor further agrees to take such other actions as might be requested for the
perfection, continuation and assignment, in whole or in part, of the security
interests granted herein. If certificates are issued or outstanding as to any of
the Collateral, Debtor will cause the security interests of Bank to be properly
protected, including perfection of notation thereon.
LANDLORD/MORTGAGEE WAIVERS. Debtor shall cause each mortgagee of real property
owned by Debtor and each landlord of real property leased by Debtor to execute
and deliver instruments satisfactory in form and substance to Bank by which such
mortgagee or landlord waives its rights, if any, in the Collateral.
STOCK, DIVIDENDS. If, with respect to any security pledged hereunder, a stock
dividend is declared, any stock split made or right to subscribe is issued, all
the certificates for the shares representing such stock dividend, stock split or
right to subscribe will be immediately delivered, duly endorsed, to the Bank as
additional collateral, and any cash or non-cash dividend will be immediately
delivered to Bank.
CONTRACTS, CHATTEL PAPER, ACCOUNTS, GENERAL INTANGIBLES. Debtor warrants that
the Collateral consisting of contract rights, chattel paper, accounts, or
general intangibles is (i) genuine and enforceable in accordance with its terms
except as limited by law; (ii) not subject to any defense, set-off, claim or
counterclaim of a material nature against Debtor except as to which Debtor has
notified Bank in writing; and (iii) not subject to any other circumstances that
would impair the validity, enforceability or amount of such Collateral except as
to which Debtor has notified Bank in writing. Debtor shall not amend, modify or
supplement any lease, contract or agreement contained in the Collateral or waive
any provision therein, without prior written consent of Bank.
ACCOUNT INFORMATION. From time to time, at the Bank's request, Debtor shall
provide Bank with schedules describing all accounts and contracts, including
customers' addresses, credited or acquired by Debtor and at the Bank's request
shall execute and deliver written assignments of
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<PAGE>
contracts and other documents evidencing such accounts and contracts to Bank.
Together with each schedule, Debtor shall, if requested by Bank, furnish Bank
with copies of Debtor's sales journals, invoices, customer purchase orders or
the equivalent, and original shipping or delivery receipts for all goods sold,
and Debtor warrants the genuineness thereof.
ACCOUNT AND CONTRACT DEBTORS. Bank shall have the right to notify the account
and contract debtors obligated on any or all of the Collateral to make payment
thereof directly to Bank and Bank may take control of all proceeds of any such
Collateral, which rights Bank may exercise at any time. The cost of such
collection and enforcement, including attorneys' fees and expenses, shall be
borne solely by Debtor whether the same is incurred by Bank or Debtor. Upon
demand of Bank, Debtor will, upon receipt of all checks, drafts, cash and other
remittances in payment on Collateral, deposit the same in a special bank account
maintained with Bank, over which Bank also has the power of withdrawal.
If a Default occurs, no discount, credit, or allowance shall be granted by
Debtor to any account or contract debtor and no return of merchandise shall be
accepted by Debtor without Bank's consent. Bank may, after Default, settle or
adjust disputes and claims directly with account contract debtors for amounts
and upon terms that Bank considers advisable, and in such cases, Bank will
credit the Obligations with the net amounts received by Bank, after deducting
all of the expenses incurred by Bank. Debtor agrees to indemnify and defend Bank
and hold it harmless with respect to any claim or proceeding arising out of any
matter related to collection of the Collateral.
GOVERNMENT CONTRACTS. If any accounts receivable or proceeds of inventory
covered hereby arises from obligations due to Debtor from any governmental unit
or organization, Debtor shall immediately notify Bank in writing and execute all
documents and take all actions demanded by Bank to ensure recognition by such
governmental unit or organization of the rights of Bank in the Collateral.
FARM PRODUCTS. Debtor agrees to deliver to Bank a written list identifying all
points of delivery of, and identifying all potential buyers, commission
merchants, and selling agents to or through whom Debtor may sell farm products
secured by this Security Agreement.
LIVESTOCK. If the Collateral includes livestock, Debtor grants to Bank a
security interest in all increase, progeny and products thereof, all feed owned
by Debtor, all water privileges, all equipment used in feeding and handling said
livestock, and all rights, title and interest in and to all contracts and leases
covering lands for pasture and grazing purposes.
INVENTORY. So long as no Default has occurred, Debtor shall have the right in
the regular course of business, to process and sell Debtor's inventory, unless
Bank shall hereafter otherwise direct in writing. Upon demand of Bank, Debtor
will, upon receipt of all checks, drafts, cash and other remittances, in payment
of Collateral sold, deposit the same in a special bank account maintained with
Bank, over which Bank also has the power of withdrawal. Debtor shall comply with
all federal, state, and local laws, regulations, rulings, and orders applicable
to Debtor or its assets or business, in all respects. Without limiting the
generality of the previous sentence, Debtor shall comply with all requirements
of the federal Fair Labor Standards Act in the conduct of its business and the
production of inventory. Debtor shall notify Bank immediately of any violation
by Debtor of the Fair Labor Standards Act, and a failure of Debtor to so notify
Bank shall constitute a continuing representation that all inventory then
existing has been produced in compliance with the Fair Labor Standards Act.
INSTRUMENTS, CHATTEL PAPER. Any Collateral that is instruments, chattel paper
and negotiable documents will be properly assigned to, deposited with and held
by Bank, unless Bank shall hereafter otherwise direct or consent in writing.
Bank may, without notice, before or after maturity
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<PAGE>
of the Obligations, exercise any or all rights of collection, conversion, or
exchange and other similar rights, privileges and options pertaining to the
Collateral, but shall have no duty to do so.
COLLATERAL DUTIES. Bank shall have no custodial or ministerial duties to perform
with respect to Collateral pledged except as set forth herein; and by way or
explanation and not by way of limitation, Bank shall incur no liability for any
of the following: (i) loss or depreciation of the Collateral (unless caused by
its willful misconduct), (ii) its failure to present any paper for payment or
protest, to protest or give notice of nonpayment, or any other notice with
respect to any paper or Collateral, or (iii) its failure to present or surrender
for redemption, conversion or exchange any bond, stock, paper or other security
whether in connection with any merger, consolidation, recapitalization, or
reorganization, arising out of the refunding of the original security, or for
any other reason, or its failure to notify any party hereto that the Collateral
should be so presented or surrendered.
TRANSFER OF COLLATERAL. The Bank may assign its rights in the Collateral or any
part thereof, to the assignee, as well as any subsequent holder hereof, who
shall thereupon become vested with all the powers and rights herein given to the
Bank with respect to the property so transferred and delivered, and the Bank
shall thereafter be forever relieved and fully discharged from any liability
with respect to such property so transferred, but with respect to any property
not so transferred the Bank shall retain all rights and powers hereby given.
SUBSTITUTE COLLATERAL. With prior written consent of Bank, other Collateral may
be substituted for the original Collateral herein in which event all rights,
duties, obligations, remedies and security interests provided for, created or
granted shall apply fully to such substitute Collateral.
INSPECTION, BOOKS AND RECORDS. Debtor will at all times keep accurate and
complete records covering each item of Collateral, including the proceeds
therefrom. Bank, or any of its agents, shall have the right, at intervals to be
determined by Bank and without hindrance or delay, to inspect, audit, and
examine the Collateral and to make extracts from the books, records, journals,
orders, receipts, correspondence and other data relating to the Collateral,
Debtor's business or any other transaction between the parties hereto. Debtor
will at its expense furnish Bank copies thereof upon request.
CROSS COLLATERALIZATION LIMITATION. As to any other existing or future consumer
purpose loan by Bank to Debtor, within the meaning of the Federal Consumer
Credit Protection Act, Bank expressly waives any security interest granted
herein in Collateral that Debtor uses as a principal dwelling and household
goods.
ATTORNEYS' FEES AND OTHER COSTS OF COLLECTION. Debtor shall pay all of Bank's
reasonable expenses incurred in enforcing this Agreement and in preserving and
liquidating the Collateral, including but not limited to, reasonable
arbitration, paralegals', attorneys' and experts' fees and expenses, whether
incurred without the commencement of a suit, in any trial, arbitration, or
administrative proceeding, or in any appellate or bankruptcy proceeding.
DEFAULT. If any of the following occurs, a default ("Default") under this
Security Agreement shall exist: (i) The failure of timely payment or performance
of any of the Obligations or a default under any Loan Document; (ii) Any breach
of any representation or agreement contained or referred to in this Security
Agreement or other Loan Document; (iii) Any loss, theft, substantial damage, or
destruction of the Collateral not fully covered by insurance, or as to which
insurance proceeds are not remitted to Bank within 30 days of the loss; any sale
(except the sale of inventory in the ordinary course of business), lease, or
encumbrance of any of the Collateral without prior written consent of Bank; or
the making of any levy, seizure, or attachment on or of the Collateral which is
not removed with 10 days; or (iv) the death of, appointment of guardian for,
dissolution of,
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termination of existence of, loss of good standing status by, appointment of a
receiver for, assignment for the benefit of creditors of, or commencement of any
bankruptcy or insolvency proceeding by or against Debtor, its Subsidiaries or
Affiliates, if any, or any general partner of or the holder(s) of the majority
ownership interests of Debtor or any party to the Loan Documents.
REMEDIES ON DEFAULT (INCLUDING POWER OF SALE). If a Default occurs, all of the
Obligations shall be immediately due and payable, without notice and Bank shall
have all the rights and remedies of a secured party under the Uniform Commercial
Code. Without limitation thereto, Bank shall have the following rights and
remedies: (i) To take immediate possession of the Collateral, without notice or
resort to legal process, and for such purpose, to enter upon any premises on
which the Collateral or any part thereof may be situated and to remove the same
therefrom, or, at its option, to render the Collateral unusable or dispose of
said Collateral on Debtor's premises. (ii) To require Debtor to assemble the
Collateral and make it available to Bank at a place to be designated by Bank.
(iii) To exercise its right of set-off or bank lien as to any monies of Debtor
deposited in demand, checking, time, savings, certificate of deposit or other
accounts of any nature maintained by Debtor with Bank or Affiliates of Bank,
without advance notice, regardless of whether such accounts are general or
special. (iv) To dispose of Collateral, as a unit or in parcels, separately or
with any real property interests also securing the Obligations, in any county or
place to be selected by Bank, at either private or public sale (at which public
sale bank may be the purchaser) with or without having the Collateral physically
present at said sale. (v) Any notice of sale, disposition or other action by
Bank required by law and sent to Debtor at Debtor's address shown above, or at
such other address of Debtor as may from time to time be shown on the records of
Bank, at least 5 days prior to such action, shall constitute reasonable notice
to Debtor. Notice shall be deemed given or sent when mailed postage prepaid to
Debtor's address as provided herein. (vi) Bank shall be entitled to apply the
proceeds of any sale or other disposition of the Collateral, and the payments
received by Bank with respect to any of the Collateral, to the Obligations in
such order and manner as Bank may determine. (vii) Collateral that is subject to
rapid declines in value and is customarily sold in recognized markets may be
disposed of by Bank in a recognized market for such collateral without providing
notice of sale.
REMEDIES ARE CUMULATIVE. No failure on the part of Bank to exercise, and no
delay in exercising, any right, power or remedy hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise by Bank or any right,
power or remedy hereunder preclude any other or further exercise thereof or the
exercise of any right, power or remedy. The remedies herein provided are
cumulative and are not exclusive of any remedies provided by law, in equity, or
in other Loan Documents.
MISCELLANEOUS. (i) Amendments and Waivers. No waivers, amendments or
modifications of any provision of this Security Agreement shall be valid unless
in writing and signed by an officer of Bank. No waiver by Bank of any Default
shall operate as a waiver of any other Default or of the same Default on a
future occasion. Neither the failure of, nor any delay by, Bank in exercising
any right, power or privilege granted pursuant to this Security Agreement shall
operate as a waiver thereof, nor shall a single or partial exercise thereof
preclude any other or further exercise of any other right, power or privilege.
(ii) Assignment. All rights of Bank hereunder are freely assignable, in whole or
in part, and shall inure to the benefit of and be enforceable by Bank, its
successors, assigns and affiliates. Debtor shall not assign its rights and
interest hereunder without the prior written consent of Bank, and any attempt by
Debtor to assign without Bank's prior written consent is null and void. Any
assignment shall not release Debtor from the Obligations. This Security
Agreement shall be binding upon Debtor, and the heirs, personal representatives,
successors, and assigns of Debtor. (iii) Applicable Law; Conflict Between
Documents. This Security Agreement shall be governed by and construed under the
law of the state in which the office of Bank as stated above is located without
regard to that state's conflict of laws principles. If any terms of this
Security Agreement conflict with the terms of any commitment letter or loan
proposal, the terms of
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<PAGE>
this Security Agreement shall control. (iv) Jurisdiction. Debtor irrevocably
agrees to non-exclusive personal jurisdiction in the state in which the office
of Bank as stated above is located. (v) Severability. If any provision of this
Security Agreement shall be prohibited by or invalid under applicable law, such
provision shall be ineffective but only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Security Agreement. (vi) Notices. Any notices to
Debtor shall be sufficiently given, if in writing and mailed or delivered to the
address of Debtor shown above or such other address as provided hereunder; and
to Bank, if in writing and mailed or delivered to Bank's office address shown
above or such other address as Bank may specify in writing from time to time. In
the event that the Debtor changes Debtor's address at any time prior to the date
this Note is paid in full, Debtor agrees to promptly give written notice of said
change of address by registered or certified mail, return receipt requested, all
charges prepaid. (vii) Captions. The captions contained herein are inserted for
convenience only and shall not affect the meaning or interpretation of this
Security Agreement or any provision hereof. The use of the plural shall also
mean the singular, and vice versa. (viii) Loan Documents. The term "Loan
Documents" refers to all documents executed in connection with the Obligations
and may include, without limitation, commitment letters, loan agreements,
guaranty agreements, other security agreements, letters of credit, instruments,
financing statements, mortgages, deeds of trust, deeds to secure debt, and any
amendments or supplements (excluding swap agreements as defined in 11 U.S.C. ss.
101). (ix) Joint and Several Liability. If more than one person has signed this
Security Agreement, such parties are jointly and severally obligated hereunder.
(x) Binding Contract. Debtor by execution and Bank by acceptance of this
Security Agreement, agree that each party is bound by all terms and provisions
of this Security Agreement.
IN WITNESS WHEREOF, Debtor, on the day and year first written above, has caused
this Agreement to be executed under seal.
Oak Tree Medical Management, Inc.
Taxpayer Identification Number: 13-3906760
CORPORATE By:______________________________________________
SEAL William Kedersha, President
By:______________________________________________
Michael Gerber, Executive Vice President
3204
Page 7
PROMISSORY NOTE
$400,000.00 September 30, 1996
Oak Tree Medical Management, Inc.
2 Gannett Drive, Suite 215
White Plains, New York 10601
(Individually and collectively "Borrower")
First Union National Bank
50 Main Street
White Plains, New York 10606
(Hereinafter referred to as the "Bank")
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Four Hundred Thousand and No/100 Dollars ($400,000.00) or
such sum as may be advanced from time to time with interest on the unpaid
principal balance at the rate and on the terms provided in this Promissory Note
(including all renewals, extensions or modifications hereof, this "Note").
SECURITY. Borrower has granted Bank a security interest in the collateral
described in the Loan Documents, including, but not limited to, personal
property collateral described in that certain Security Agreement of even date
herewith.
INTEREST RATE. Interest shall accrue on the unpaid principal balance of this
Note from the date hereof at the rate of Bank's Prime Rate plus 1.0% (100 basis
points) as that rate may change from time to time with changes to occur on the
date Bank's Prime Rate changes ("Interest Rate"). Bank's Prime Rate shall be
that rate announced by Bank from time to time as its Prime Rate and is one of
several interest rate bases used by Bank. Bank lends at rates both above and
below Bank's Prime Rate, and Borrower acknowledges that Bank's Prime Rate is not
represented or intended to be the lowest or most favorable rate of interest
offered by Bank.
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (defined herein) occurs and as long as a Default continues, all
outstanding Obligations shall bear interest at the Interest Rate plus 3%
("Default Rate"). The Default Rate shall also apply from acceleration until the
Obligations or any judgment thereon is paid in full.
INTEREST COMPUTATION. (Actual/360). Interest shall be computed on the basis of a
360-day year for the actual number of days in the interest period ("Actual/360
Computation"). The Actual/360 Computation determines the annual effective
interest yield by taking the stated (nominal) interest rate for a year's period
and then dividing said rate by 360 to determine the daily periodic rate to be
applied for each day in the interest period. Application of the Actual/360
Computation produces an annualized effective interest rate exceeding that of the
nominal rate.
REPAYMENT TERMS. This Note shall be due and payable in consecutive monthly
payments of principal of $22,222.22, together with accrued interest, commencing
on October 30, 1996, and on the same day of each month thereafter until fully
paid. In any event, all principal and accrued interest shall be due and payable
on March 31, 1998.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations shall be applied to accrued interest and then
to principal. If a Default
<PAGE>
occurs, monies may be applied to the Obligations in any manner or order deemed
appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
LOAN DOCUMENTS AND OBLIGATIONS. The term "Loan Documents" used in this Note and
other Loan Documents refers to all documents executed in connection with the
loan evidenced by this Note and may include, without limitation, a commitment
letter that survives closing, a loan agreement, this Note, guaranty agreements,
security agreements, security instruments, financing statements, mortgage
instruments, letters of credit and any renewals or modifications, but however,
does not include swap agreements as defined in 11 U.S.C. ss. 101 whenever
executed.
The term "Obligations" used in this Note refers to any and all indebtedness and
other obligations under this Note, all other obligations as defined in the
respective Loan Documents, and all obligations under any swap agreements as
defined in 11 U.S.C. ss. 101 between Borrower and Bank whenever executed.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 5% of each payment past due for 10 or more days.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
If this Note is secured by owner-occupied residential real property located
outside the state in which the office of Bank first shown above is located, the
late charge laws of the state where the real property is located shall apply to
this Note, or if permitted under the law of that state, 5% of each payment past
due for 10 or more days.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations,
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
USURY. Regardless of any other provision of this Note or other Loan Documents,
if for any reason the effective interest should exceed the maximum lawful
interest, the effective interest shall be deemed reduced to, and shall be, such
maximum lawful interest, and (i) the amount which would be excessive interest
shall be deemed applied to the reduction of the principal balance of this Note
and not to the payment of interest, and (ii) if the loan evidenced by this Note
has been or is thereby paid in full, the excess shall be returned to the party
paying same, such application to the principal balance of this Note or the
refunding of excess to be a complete settlement and acquittance thereof.
BORROWER'S ACCOUNTS. Except as prohibited by law, Borrower grants Bank a
security interest in all of Borrower's accounts with Bank and any of its
affiliates.
DEFAULT. If any of the following occurs, a default ("Default") under this Note
shall exist: Nonpayment; Nonperformance. The failure of timely payment or
performance of the Obligations under this Note or any other Loan Documents.
False Warranty. A warranty or representation made
Page 2
<PAGE>
in the Loan Documents or furnished Bank in connection with the loan evidenced by
this Note proves materially false, or if of a continuing nature, becomes
materially false. Cross Default. At Bank's option, any default in payment or
performance of any obligation under any other loans, contracts or agreements of
Borrower, any Subsidiary or Affiliate of Borrower, any general partner of or the
holder(s) of the majority ownership interests of Borrower with Bank or its
affiliates ("Affiliate" shall have the meaning as defined in 11 U.S.C. ss. 101,
except that the term "debtor" therein shall be substituted by the term
"Borrower" herein; "Subsidiary" shall mean any corporation of which more than
50% of the issued and outstanding voting stock is owned directly or indirectly
by Borrower). Cessation; Bankruptcy. The death of, appointment of guardian for,
dissolution of, termination of existence of, loss of good standing status by,
appointment of a receiver for, assignment for the benefit of creditors of, or
commencement of any bankruptcy or insolvency proceeding by or against the
Borrower, its Subsidiaries or Affiliates, if any, or any general partner of or
the holder(s) of the majority ownership interests of Borrower, or any party to
the Loan Documents. Material Capital Structure or Business Alteration. Without
prior written consent of Bank, (i) a material alteration in the kind or type of
Borrower's business or that of its Subsidiaries or Affiliates, if any; (ii) the
acquisition of substantially all of Borrower's, any Subsidiary's, any
Affiliate's, or guarantor's business or assets, or a material portion (10% or
more) of such business or assets if such a sale is outside Borrower's, any
Subsidiary's, any Affiliate's or any guarantor's, ordinary course of business,
or more than 50% of its outstanding stock or voting power in a single
transaction or a series of transactions; (iii) the acquisition of substantially
all of the business or assets or more than 50% of the outstanding stock or
voting power of any other entity; or (iv) should any Borrower, Subsidiary,
Affiliate, or guarantor enter into any merger or consolidation.
REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan
Documents, Bank may at any time thereafter, take the following actions: Bank
Lien and Set-off. Exercise its right of set-off or to foreclose its security
interest or lien against any account of any nature or maturity of Borrower with
Bank without notice. Acceleration Upon Default. Accelerate the maturity of this
Note and all other Obligations, and all of the Obligations shall be immediately
due and payable. Cumulative. Exercise any rights and remedies as provided under
the Note and other Loan Documents, or as provided by law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
Each Borrower or any person liable under this Note waives presentment, protest,
notice of dishonor, demand for payment, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of sale and all other
notices of any kind. Further, each agrees that Bank may extend, modify or renew
this Note or make a novation of the loan evidenced by this Note for any period
and grant any releases, compromises or indulgences with respect to any
collateral securing this Note, or with respect to any Borrower or any person
liable under this Note or other Loan Documents, all without notice to or consent
of any Borrower or any person who may be liable under this Note or other Loan
Documents and without affecting the liability of Borrower or any person who may
be liable under this Note or other Loan Documents.
Page 3
<PAGE>
MISCELLANEOUS PROVISIONS. Assignment. This Note and other Loan Documents shall
inure to the benefit of and be binding upon the parties and their respective
heirs, legal representatives, successors and assigns. Bank's interests in and
rights under this Note and other Loan Documents are freely assignable, in whole
or in part, by Bank. Borrower shall not assign its rights and interest hereunder
without the prior written consent of Bank, and any attempt by Borrower to assign
without Bank's prior written consent is null and void. Any assignment shall not
release Borrower from the Obligations. Applicable Law; Conflict Between
Documents. This Note and other Loan Documents shall be governed by and construed
under the laws of the state where Bank first shown above is located without
regard to that state's conflict of laws principles. If the terms of this Note
should conflict with the terms of the loan agreement or any commitment letter
that survives closing, the terms of this Note shall control. Jurisdiction.
Borrower irrevocably agrees to non-exclusive personal jurisdiction in the state
in which the office of Bank first shown above is located. Severability. If any
provision of this Note or of the other Loan Documents shall be prohibited or
invalid under applicable law, such provision shall be ineffective but only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Note or other such
document. Notices. Any notices to Borrower shall be sufficiently given, if in
writing and mailed or delivered to the Borrower's address shown above or such
other address as provided hereunder, and to Bank, if in writing and mailed or
delivered to Bank's office address shown above or such other address as Bank may
specify in writing from time to time. In the event that Borrower changes
Borrower's address at any time prior to the date the Obligations are paid in
full, Borrower agrees to promptly give written notice of said change of address
by registered or certified mail, return receipt requested, all charges prepaid.
Plural; Captions. All references in the Loan Documents to Borrower, guarantor,
person, document or other nouns of reference mean both the singular and plural
form, as the case may be, and the term "person" shall mean any individual,
person or entity. The captions contained in the Loan Documents are inserted for
convenience only and shall not affect the meaning or interpretation of the Loan
Documents. Binding Contract. Borrower by execution of and Bank by acceptance of
this Note agree that each party is bound to all terms and provisions of this
Note. Advances. Bank in its sole discretion may make other advances and
readvances under this Note pursuant hereto. Posting of Payments. All payments
received during normal banking hours after 2:00 p.m. local time at the office of
Bank first shown above shall be deemed received at the opening of the next
banking day. Joint and Several Obligations. Each Borrower is jointly and
severally obligated under this Note. Fees and Taxes. Borrower shall promptly pay
all documentary, intangible recordation and/or similar taxes on this transaction
whether assessed at closing or arising from time to time.
WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER BY
EXECUTION HEREOF AND BANK BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON THIS NOTE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS
NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT TO BANK TO ACCEPT THIS NOTE.
BORROWER AND BANK AGREE THAT THEY SHALL NOT HAVE A REMEDY OF PUNITIVE OR
EXEMPLARY DAMAGES AGAINST THE OTHER IN ANY DISPUTE AND HEREBY WAIVE ANY RIGHT OR
CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY HAVE NOW OR WHICH MAY ARISE IN THE
FUTURE IN CONNECTION WITH ANY DISPUTE WHETHER THE DISPUTE IS RESOLVED BY
ARBITRATION OR JUDICIALLY.
Page 4
<PAGE>
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal.
Oak Tree Medical Management, Inc.
Taxpayer Identification Number: 13-3906760
CORPORATE By:______________________________________________
SEAL William Kedersha, President
By:______________________________________________
Michael Gerber, Executive Vice President
Page 5
<PAGE>
PROMISSORY NOTE
$200,000.00 September 30, 1996
Oak Tree Medical Management, Inc.
2 Gannett Drive, Suite 215
White Plains, New York 10601
(Individually and collectively "Borrower")
First Union National Bank
50 Main Street
White Plains, New York 10606
(Hereinafter referred to as the "Bank")
Borrower promises to pay to the order of Bank, in lawful money of the United
States of America, at its office indicated above or wherever else Bank may
specify, the sum of Two Hundred Thousand and No/100 Dollars ($200,000.00) or
such sum as may be advanced from time to time with interest on the unpaid
principal balance at the rate and on the terms provided in this Promissory Note
(including all renewals, extensions or modifications hereof, this "Note").
SECURITY. Borrower has granted Bank a security interest in the collateral
described in the Loan Documents, including, but not limited to, personal
property collateral described in that certain Security Agreement of even date
herewith.
INTEREST RATE. Interest shall accrue on the unpaid principal balance of this
Note from the date hereof at the rate of Bank's Prime Rate plus 1.0% (100 basis
points) as that rate may change from time to time with changes to occur on the
date Bank's Prime Rate changes ("Interest Rate"). Bank's Prime Rate shall be
that rate announced by Bank from time to time as its Prime Rate and is one of
several interest rate bases used by Bank. Bank lends at rates both above and
below Bank's Prime Rate, and Borrower acknowledges that Bank's Prime Rate is not
represented or intended to be the lowest or most favorable rate of interest
offered by Bank.
DEFAULT RATE. In addition to all other rights contained in this Note, if a
Default (defined herein) occurs and as long as a Default continues, all
outstanding Obligations shall bear interest at the Interest Rate plus 3%
("Default Rate"). The Default Rate shall also apply from acceleration until the
Obligations or any judgment thereon is paid in full.
INTEREST COMPUTATION. (Actual/360). Interest shall be computed on the basis of a
360-day year for the actual number of days in the interest period ("Actual/360
Computation"). The Actual/360 Computation determines the annual effective
interest yield by taking the stated (nominal) interest rate for a year's period
and then dividing said rate by 360 to determine the daily periodic rate to be
applied for each day in the interest period. Application of the Actual/360
Computation produces an annualized effective interest rate exceeding that of the
nominal rate.
REPAYMENT TERMS. This Note shall be due and payable in consecutive monthly
payments of accrued interest only commencing on October 30, 1996, and on the
same day of each month thereafter until fully paid. In any event, all principal
and accrued interest shall be due and payable on September 30, 1997.
APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations shall be applied to accrued interest and then
to principal. If a Default
Page 1
<PAGE>
occurs, monies may be applied to the Obligations in any manner or order deemed
appropriate by Bank.
If any payment received by Bank under this Note or other Loan Documents is
rescinded, avoided or for any reason returned by Bank because of any adverse
claim or threatened action, the returned payment shall remain payable as an
obligation of all persons liable under this Note or other Loan Documents as
though such payment had not been made.
LOAN DOCUMENTS AND OBLIGATIONS. The term "Loan Documents" used in this Note and
other Loan Documents refers to all documents executed in connection with the
loan evidenced by this Note and may include, without limitation, a commitment
letter that survives closing, a loan agreement, this Note, guaranty agreements,
security agreements, security instruments, financing statements, mortgage
instruments, letters of credit and any renewals or modifications, but however,
does not include swap agreements as defined in 11 U.S.C. ss. 101 whenever
executed.
The term "Obligations" used in this Note refers to any and all indebtedness and
other obligations under this Note, all other obligations as defined in the
respective Loan Documents, and all obligations under any swap agreements as
defined in 11 U.S.C. ss. 101 between Borrower and Bank whenever executed.
LATE CHARGE. If any payments are not timely made, Borrower shall also pay to
Bank a late charge equal to 5% of each payment past due for 10 or more days.
Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received.
If this Note is secured by owner-occupied residential real property located
outside the state in which the office of Bank first shown above is located, the
late charge laws of the state where the real property is located shall apply to
this Note, or if permitted under the law of that state, 5% of each payment past
due for 10 or more days.
ATTORNEYS' FEES AND OTHER COLLECTION COSTS. Borrower shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Obligations,
including, without limitation, reasonable arbitration, paralegals', attorneys'
and experts' fees and expenses, whether incurred without the commencement of a
suit, in any trial, arbitration, or administrative proceeding, or in any
appellate or bankruptcy proceeding.
USURY. Regardless of any other provision of this Note or other Loan Documents,
if for any reason the effective interest should exceed the maximum lawful
interest, the effective interest shall be deemed reduced to, and shall be, such
maximum lawful interest, and (i) the amount which would be excessive interest
shall be deemed applied to the reduction of the principal balance of this Note
and not to the payment of interest, and (ii) if the loan evidenced by this Note
has been or is thereby paid in full, the excess shall be returned to the party
paying same, such application to the principal balance of this Note or the
refunding of excess to be a complete settlement and acquittance thereof.
BORROWER'S ACCOUNTS. Except as prohibited by law, Borrower grants Bank a
security interest in all of Borrower's accounts with Bank and any of its
affiliates.
DEFAULT. If any of the following occurs, a default ("Default") under this Note
shall exist: Nonpayment; Nonperformance. The failure of timely payment or
performance of the Obligations under this Note or any other Loan Documents.
False Warranty. A warranty or representation made
Page 2
<PAGE>
in the Loan Documents or furnished Bank in connection with the loan evidenced by
this Note proves materially false, or if of a continuing nature, becomes
materially false. Cross Default. At Bank's option, any default in payment or
performance of any obligation under any other loans, contracts or agreements of
Borrower, any Subsidiary or Affiliate of Borrower, any general partner of or the
holder(s) of the majority ownership interests of Borrower with Bank or its
affiliates ("Affiliate" shall have the meaning as defined in 11 U.S.C. ss. 101,
except that the term "debtor" therein shall be substituted by the term
"Borrower" herein; "Subsidiary" shall mean any corporation of which more than
50% of the issued and outstanding voting stock is owned directly or indirectly
by Borrower). Cessation; Bankruptcy. The death of, appointment of guardian for,
dissolution of, termination of existence of, loss of good standing status by,
appointment of a receiver for, assignment for the benefit of creditors of, or
commencement of any bankruptcy or insolvency proceeding by or against the
Borrower, its Subsidiaries or Affiliates, if any, or any general partner of or
the holder(s) of the majority ownership interests of Borrower, or any party to
the Loan Documents. Material Capital Structure or Business Alteration. Without
prior written consent of Bank, (i) a material alteration in the kind or type of
Borrower's business or that of its Subsidiaries or Affiliates, if any; (ii) the
acquisition of substantially all of Borrower's, any Subsidiary's, any
Affiliate's, or guarantor's business or assets, or a material portion (10% or
more) of such business or assets if such a sale is outside Borrower's, any
Subsidiary's, any Affiliate's or any guarantor's, ordinary course of business,
or more than 50% of its outstanding stock or voting power in a single
transaction or a series of transactions; (iii) the acquisition of substantially
all of the business or assets or more than 50% of the outstanding stock or
voting power of any other entity; or (iv) should any Borrower, Subsidiary,
Affiliate, or guarantor enter into any merger or consolidation.
REMEDIES UPON DEFAULT. If a Default occurs under this Note or any Loan
Documents, Bank may at any time thereafter, take the following actions: Bank
Lien and Set-off. Exercise its right of set-off or to foreclose its security
interest or lien against any account of any nature or maturity of Borrower with
Bank without notice. Acceleration Upon Default. Accelerate the maturity of this
Note and all other Obligations, and all of the Obligations shall be immediately
due and payable. Cumulative. Exercise any rights and remedies as provided under
the Note and other Loan Documents, or as provided by law or equity.
FINANCIAL AND OTHER INFORMATION. Borrower shall deliver to Bank such information
as Bank may reasonably request from time to time, including without limitation,
financial statements and information pertaining to Borrower's financial
condition. Such information shall be true, complete, and accurate.
LINE OF CREDIT ADVANCES. Borrower may borrow, repay and reborrow, and Bank may
advance and readvance under this Note respectively from time to time, so long as
the total indebtedness outstanding at any one time does not exceed the principal
amount stated on the face of this Note. Bank's obligation to advance or
readvance under this Note shall terminate if Borrower is in Default under this
Note. 30-Day Payout. During the term of the Note, Borrower agrees to pay down
the outstanding balance to a maximum of $100.00 for 30 consecutive days
annually.
WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan Documents shall be valid unless in writing and signed by an officer
of Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or remedy under this
Note and other Loan Documents shall operate as a waiver thereof, nor shall a
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or remedy.
Page 3
<PAGE>
Each Borrower or any person liable under this Note waives presentment, protest,
notice of dishonor, demand for payment, notice of intention to accelerate
maturity, notice of acceleration of maturity, notice of sale and all other
notices of any kind. Further, each agrees that Bank may extend, modify or renew
this Note or make a novation of the loan evidenced by this Note for any period
and grant any releases, compromises or indulgences with respect to any
collateral securing this Note, or with respect to any Borrower or any person
liable under this Note or other Loan Documents, all without notice to or consent
of any Borrower or any person who may be liable under this Note or other Loan
Documents and without affecting the liability of Borrower or any person who may
be liable under this Note or other Loan Documents.
MISCELLANEOUS PROVISIONS. Assignment. This Note and other Loan Documents shall
inure to the benefit of and be binding upon the parties and their respective
heirs, legal representatives, successors and assigns. Bank's interests in and
rights under this Note and other Loan Documents are freely assignable, in whole
or in part, by Bank. Borrower shall not assign its rights and interest hereunder
without the prior written consent of Bank, and any attempt by Borrower to assign
without Bank's prior written consent is null and void. Any assignment shall not
release Borrower from the Obligations. Applicable Law; Conflict Between
Documents. This Note and other Loan Documents shall be governed by and construed
under the laws of the state where Bank first shown above is located without
regard to that state's conflict of laws principles. If the terms of this Note
should conflict with the terms of the loan agreement or any commitment letter
that survives closing, the terms of this Note shall control. Jurisdiction.
Borrower irrevocably agrees to non-exclusive personal jurisdiction in the state
in which the office of Bank first shown above is located. Severability. If any
provision of this Note or of the other Loan Documents shall be prohibited or
invalid under applicable law, such provision shall be ineffective but only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Note or other such
document. Notices. Any notices to Borrower shall be sufficiently given, if in
writing and mailed or delivered to the Borrower's address shown above or such
other address as provided hereunder, and to Bank, if in writing and mailed or
delivered to Bank's office address shown above or such other address as Bank may
specify in writing from time to time. In the event that Borrower changes
Borrower's address at any time prior to the date the Obligations are paid in
full, Borrower agrees to promptly give written notice of said change of address
by registered or certified mail, return receipt requested, all charges prepaid.
Plural; Captions. All references in the Loan Documents to Borrower, guarantor,
person, document or other nouns of reference mean both the singular and plural
form, as the case may be, and the term "person" shall mean any individual,
person or entity. The captions contained in the Loan Documents are inserted for
convenience only and shall not affect the meaning or interpretation of the Loan
Documents. Binding Contract. Borrower by execution of and Bank by acceptance of
this Note agree that each party is bound to all terms and provisions of this
Note. Advances. Bank in its sole discretion may make other advances and
readvances under this Note pursuant hereto. Posting of Payments. All payments
received during normal banking hours after 2:00 p.m. local time at the office of
Bank first shown above shall be deemed received at the opening of the next
banking day. Joint and Several Obligations. Each Borrower is jointly and
severally obligated under this Note. Fees and Taxes. Borrower shall promptly pay
all documentary, intangible recordation and/or similar taxes on this transaction
whether assessed at closing or arising from time to time.
WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER BY
EXECUTION HEREOF AND BANK BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON THIS NOTE, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS NOTE OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS
NOTE, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR
WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS PROVISION IS A
MATERIAL INDUCEMENT TO BANK TO ACCEPT THIS NOTE.
Page 4
<PAGE>
BORROWER AND BANK AGREE THAT THEY SHALL NOT HAVE A REMEDY OF PUNITIVE OR
EXEMPLARY DAMAGES AGAINST THE OTHER IN ANY DISPUTE AND HEREBY WAIVE ANY RIGHT OR
CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY HAVE NOW OR WHICH MAY ARISE IN THE
FUTURE IN CONNECTION WITH ANY DISPUTE WHETHER THE DISPUTE IS RESOLVED BY
ARBITRATION OR JUDICIALLY.
IN WITNESS WHEREOF, Borrower, on the day and year first above written, has
caused this Note to be executed under seal.
Oak Tree Medical Management, Inc.
Taxpayer Identification Number: 13-3906760
CORPORATE By:______________________________________________
SEAL William Kedersha, President
By:______________________________________________
Michael Gerber, Executive Vice President
Page 5
UNCONDITIONAL GUARANTY
September 30, 1996
Oak Tree Medical Management, Inc.
2 Gannett Drive, Suite 215
White Plains, New York 10601
(Individually and collectively "Borrower")
Oak Tree Medical Systems, Inc.
1111 Park Centre Blvd., Suite 340
Miami, Florida 33169
(Individually and collectively "Guarantor")
First Union National Bank
50 Main Street
White Plains, New York 10606
(Hereinafter referred to as "Bank")
To induce Bank to make, extend or renew loans, advances, credit, or other
financial (accommodations to or for the benefit of Borrower, and in
consideration of loans, advances, credit, or other financial accommodations
made, extended or renewed to or for the benefit of Borrower, Guarantor hereby
absolutely, irrevocably and unconditionally guarantees to Bank and its
successors, assigns and affiliates the timely payment and performance of all
liabilities and obligations of Borrower to Bank and its affiliates, including,
but not limited to, all obligations under any notes, loan agreements, security
agreements, letters of credit, swap agreements (as defined in 11 U.S. Code ss.
101), instruments, accounts receivable, contracts, drafts, leases, chattel
paper, indemnities, acceptances, repurchase agreements, overdrafts, and the Loan
Documents defined below, however and whenever incurred or evidenced, whether
primary, secondary, direct, indirect, absolute, contingent, due or to become
due, now existing or hereafter contracted or acquired, and all modifications,
extensions or renewals thereof, including without limitation all principal,
interest, charges, and costs and expenses incurred thereunder (including
attorneys' fees and other costs of collection incurred, regardless of whether
suit is commenced) (collectively, the "Guaranteed Obligations").
Guarantor further covenants and agrees:
GUARANTOR'S LIABILITY. This Guaranty is a continuing and unconditional guaranty
of payment and performance and not of collection. The parties to this Guaranty
are jointly and severally obligated hereunder. This Guaranty does not impose any
obligation on Bank to extend or continue to extend credit or otherwise deal with
Borrower at any subsequent time. This Guaranty shall continue to be effective or
be reinstated, as the case may be, if at any time any payment of Guaranteed
Obligations is rescinded, avoided or for any other reason must be
<PAGE>
returned by Bank, and the returned payment shall remain payable as part of the
Guaranteed Obligations, all as though such payment had not been made. Except to
the extent the provisions of this Guaranty give Bank additional rights, this
Guaranty shall not be deemed to supersede or replace any other guaranties given
to Bank by Guarantor; and the obligations guaranteed hereby shall be in addition
any other obligations guaranteed by Guarantor pursuant to any other agreement of
guaranty given to Bank and other guaranties of the Guaranteed Obligations.
TERMINATION OF GUARANTY. Guarantor may terminate this Guaranty by written
notice, delivered personally to or received by certified or registered United
States Mail by an authorized officer of the Bank at the address for notices
provided herein. Such termination shall be effective with respect to Guaranteed
Obligations arising more than 15 days after the date such written notice is
received by said Bank officer. Guarantor may not terminate this Guaranty as to
Guaranteed Obligations (including any subsequent extensions, modifications or
compromises of the Guaranteed Obligations) then existing, or to Guaranteed
Obligations arising subsequent to receipt by Bank of said notice if such
Guaranteed Obligations are a result of Bank's obligation to make advances
pursuant to a commitment entered into prior to expiration of the 15 day notice
period, or are a result of advances which are necessary for Bank to protect its
collateral or otherwise preserve its interests. Termination of this Guaranty by
any single Guarantor will not affect the existing and continuing obligations of
any other guarantor hereunder.
AFFIRMATIVE COVENANT. Guarantor agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Guarantor will: Reports and Proxies. Guarantor shall deliver
to First Union, promptly, a copy of all financial statements, reports, notices,
and proxy statements, sent by Guarantor to stockholders, and all regular or
periodic reports required to be filed by Guarantor with any governmental agency
or authority.
NEGATIVE COVENANTS. Guarantor agrees that from the date of this Agreement and
until final payment in full of the Obligations, unless Bank shall otherwise
consent in writing, Guarantor will not: Default on Other Contracts or
Obligations. Default on any material contract with or obligation when due to a
third party or default in the performance of any obligation to a third party
incurred for money borrowed. Judgment Entered. Permit the entry of any monetary
judgment or the assessment against, the filing of any tax lien against, or the
issuance of any writ of garnishment or attachment against any property of or
debts due Guarantor in an amount in excess of $25,000.00 and that is not
discharged or execution is not stayed within Thirty (30) days of entry. Change
in Fiscal Year. Guarantor shall not change its fiscal year without the consent
of Bank. Guarantees. Guarantee or otherwise become responsible for obligations
of any other person or persons in an aggregate amount in excess of $10,000.00
per fiscal year, other than the endorsement of checks and drafts for collection
in the ordinary course of business. Encumbrances. Create, assume, or permit to
exist any mortgage, security deed, deed of trust, pledge, lien, charge or other
encumbrance on any of its assets, whether now owned or hereafter acquired, other
than: (i) security interests required by the Loan
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<PAGE>
Documents; (ii) liens for taxes contested in good faith; (iii) liens accruing by
law for employee benefits; or (iv) Permitted Liens.
FINANCIAL COVENANTS. Guarantor, on a consolidated basis, agrees to the following
provisions from the date of this Agreement and until final payment in full of
the Obligations, unless Bank shall otherwise consent in writing: Current Ratio.
Guarantor and its subsidiaries shall, at all times, maintain a Current Ratio of
not less than 2.00 to 1.00. "Current Ratio" shall mean the ratio of current
assets divided by current liabilities. Working Capital. Guarantor and its
subsidiaries shall, at all times, maintain Working Capital of at least
$2,000,000.00. "Working Capital" shall mean the excess of the current assets
over the current liabilities. Tangible Net Worth. Guarantor and its subsidiaries
shall, at all times, maintain Tangible Net Worth of at least $6,000,000.00.
"Tangible Net Worth" shall mean the total assets minus total liabilities. For
purposes of this computation, the aggregate amount of any intangible assets of
Guarantor including, without limitation, goodwill, franchises, licenses,
patents, trademarks, trade names, copyrights, service marks, and brand names,
shall be subtracted from total assets, and total liabilities shall include fully
subordinated debt. Total Liabilities to Tangible Net Worth Ratio. Guarantor and
its subsidiaries shall, at all times, maintain a ratio of Total Liabilities,
including fully subordinated debt, divided by Tangible Net Worth of not more
than 3.00 to 1.00. For purposes of this computation, "Total Liabilities" shall
mean all liabilities of Guarantor, including capitalized leases and all reserves
for deferred taxes and other deferred sums appearing on the liabilities side of
a balance sheet of Guarantor, in accordance with generally accepted accounting
principles applied on a consistent basis. Debt Service Coverage Ratio. Guarantor
and its subsidiaries shall at all times maintain a Debt Service Coverage Ratio
of not less than 2.00 to 1.00. "Debt Service Coverage Ratio" shall mean the sum
of net profit plus interest expense plus income tax expense plus depreciation
and amortization divided by the sum of interest expense plus the current portion
of long term debt and capital leases plus income tax expense. Limitation on
Debt. Guarantor and its subsidiaries shall not, without the Bank's prior
written, directly or indirectly, create, incur, assume or become liable for any
debt, contingent or direct, if, giving effect to such additional debt on a pro
forma basis, causes the aggregate amount of Guarantor's debt, including
obligations to Bank, to exceed $1,300,000.00. Loans and Advances. Guarantor
shall not, during any fiscal year, make loans or advances, excepting ordinary
course of business travel and expense advances, to any person or entity, which
total more than $10,000.00 in the aggregate.
APPLICATION OF PAYMENTS, BANK LIEN AND SET-OFF. Monies received from any source
by Bank for application toward payment of the Guaranteed Obligations may be
applied to such Guaranteed Obligations in any manner or order deemed appropriate
by Bank. Except as prohibited by law, Guarantor grants Bank a security interest
in all of Guarantor's accounts maintained with Bank and any of its affiliates
(collectively, the "Accounts"). If a Default occurs, Bank is authorized to
exercise its right of set-off or to foreclose its lien against any obligation of
Bank to Guarantor including, without limitation, all Accounts or any other debt
of any maturity, without notice.
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<PAGE>
CONSENT TO MODIFICATIONS. Guarantor consents and agrees that Bank may from time
to time, in its sole discretion, without affecting, impairing, lessening or
releasing the obligations of the Guarantor hereunder: (a) extend or modify the
time, manner, place or terms of payment or performance and/or otherwise change
or modify the credit terms of the Guaranteed Obligations; (b) increase, renew,
or enter into a novation of the Guaranteed Obligations; (c) waive or consent to
the departure from terms of the Guaranteed Obligations; (d) permit any change in
the business or other dealings and relations of Borrower or any other guarantor
with Bank; (e) proceed against, exchange, release, realize upon, or otherwise
deal with in any manner any collateral that is or may be held by Bank in
connection with the Guaranteed Obligations or any liabilities or obligations of
Guarantor; and (f) proceed against, settle, release, or compromise with
Borrower, any insurance carrier, or any other person or entity liable as to any
part of the Guaranteed Obligations, and/or subordinate the payment of any part
of the Guaranteed Obligations to the payment of any other obligations, which may
at any time be due or owing to Bank; all in such manner and upon such terms as
Bank may deem appropriate, and without notice to or further consent from
Guarantor. No invalidity, irregularity, discharge or unenforceability of, or
action or omission by Bank relating to any part of, the Guaranteed Obligations
or any security therefor shall affect or impair this Guaranty.
WAIVERS AND ACKNOWLEDGMENTS. Guarantor waives and releases the following rights,
demands, and defenses Guarantor may have with respect to Bank and collection of
the Guaranteed Obligations: (a) promptness and diligence in collection of any of
the Guaranteed Obligations from Borrower or any other person liable thereon, and
in foreclosure of any security interest and sale of any property serving as
collateral for the Guaranteed Obligations; (b) any law or statute that requires
that Bank make demand upon, assert claims against, or collect from Borrower or
other persons or entities, foreclose any security interest, sell collateral,
exhaust any remedies, or take any other action against Borrower or other persons
or entities prior to making demand upon, collecting from or taking action
against Guarantor with respect to the Guaranteed Obligations, including any such
rights Guarantor might otherwise have had under Va. Code ss. 49- 25 and 49-26,
et seq., N.C.G.S. ss. 26-7, et seq., Tenn. Code Ann. ss. 47-12-101, O.C.G.A. ss.
10-7-24 (and any successor statute) and any other applicable law; (c) any law or
statute that requires that Borrower or any other person be joined in, notified
of or made part of any action against Guarantor; (d) that Bank preserve, insure
or perfect any security interest in collateral or sell or dispose of collateral
in a particular manner or at a particular time; (e) notice of extensions,
modifications, renewals, or novations of the Guaranteed Obligations, of any new
transactions or other relationships between Bank, Borrower and/or any guarantor,
and of changes in the financial condition of, ownership of, or business
structure of Borrower or any other guarantor; (f) presentment, protest, notice
of dishonor, notice of default, demand for payment, notice of intention to
accelerate maturity, notice of acceleration of maturity, notice of sale, and all
other notices of any kind whatsoever; (g) the right to assert against Bank any
defense (legal or equitable), set-off, counterclaim, or claim that Guarantor may
have at any time against Borrower or any other party liable to Bank; (h) all
defenses relating to invalidity, insufficiency, unenforceability, enforcement,
release or impairment of Bank's lien on any collateral, of the Loan Documents,
or of any other guaranties held by Bank; (i) any claim or defense that
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<PAGE>
acceleration of maturity of the Guaranteed Obligations is stayed against
Guarantor because of the stay of assertion or of acceleration of claims against
any other person or entity for any reason including the bankruptcy or insolvency
of that person or entity; and (j) the benefit of any exemption claimed by
Guarantor. Guarantor acknowledges and represents that it has relied upon its own
due diligence in making its own independent appraisal of Borrower, Borrower's
business affairs and financial condition, and any collateral; Guarantor will
continue to be responsible for making its own independent appraisal of such
matters; and Guarantor has not relied upon and will not hereafter rely upon Bank
for information regarding Borrower or any collateral.
FINANCIAL CONDITION. Guarantor warrants, represents and covenants to Bank that
on and after the date hereof: (a) the fair saleable value of Guarantor's assets
exceeds its liabilities, Guarantor is meeting its current liabilities as they
mature, and Guarantor is and shall remain solvent; (b) all financial statements
of Guarantor furnished to Bank are correct and accurately reflect the financial
condition of Guarantor as of the respective dates thereof; (c) since the date of
such financial statements, there has not occurred a material adverse change in
the financial condition of Guarantor; (d) there are not now pending any court or
administrative proceedings or undischarged judgments against Guarantor, no
federal or state tax liens have been filed or threatened against Guarantor, and
Guarantor is not in debut or claimed default under any agreement; and (e) at
such reasonable times as Bank requests, Guarantor will furnish Bank with such
other financial information as Bank may reasonably request.
INTEREST. Regardless of any other provision of this Guaranty or other Loan
Documents, if for any reason the effective interest on any of the Guaranteed
Obligations should exceed the maximum lawful interest, the effective interest
shall be deemed reduced to and shall be such maximum lawful interest, and any
sums of interest which have been collected in excess of such maximum lawful
interest shall be applied as a credit against the unpaid principal balance of
the Guaranteed Obligations.
DEFAULT. If any of the following events occur, a default ("Default") under this
Guaranty shall exist: (a) Failure of timely payment or performance of the
Guaranteed Obligations or a default under any Loan Document; (b) A breach of any
agreement or representation contained or referred to in the Guaranty, or any of
the Loan Documents, or contained in any other contract or agreement of Guarantor
with Bank or its affiliates, whether now existing or hereafter arising; (c) The
death of, appointment of a guardian for, dissolution of, termination of
existence of, loss of good standing status by, appointment of a receiver for,
assignment for the benefit of creditors of, or the commencement of any
insolvency or bankruptcy proceeding by or against, Guarantor or any general
partner of or the holder(s) of the majority ownership interests of Guarantor;
and/or (d) The entry of any monetary judgment or the assessment against, the
filing of any tax lien against, or the issuance of any writ of garnishment or
attachment against any property of or debts due Guarantor.
If a Default occurs, the Guaranteed Obligations shall be due immediately and
payable without notice. Guarantor shall pay interest on the Guaranteed
Obligations from such Default at the
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<PAGE>
highest rate of interest charged on any of the Guaranteed Obligations.
ATTORNEY'S FEES AND OTHER COSTS OF COLLECTION. Guarantor shall pay all of Bank's
reasonable expenses incurred to enforce or collect any of the Guaranteed
Obligations, including, without limitation, reasonable arbitration, paralegals',
attorneys' and experts' fees and expenses, whether incurred without the
commencement of a suit, in any suit, arbitration, or administrative proceeding,
or in any appellate or bankruptcy proceeding.
SUBORDINATION OF OTHER DEBTS. Guarantor agrees: (a) to subordinate the
obligations now or hereafter owed by Borrower to Guarantor ("Subordinated Debt")
to any and all obligations of Borrower to Bank now or hereafter existing while
this Guaranty is in effect, provided however that Guarantor may receive
regularly scheduled principal and interest payments on the Subordinated Debt so
long as (i) all sums due and payable by Borrower to Bank have been paid in full
on or prior to such date, and (ii) no event or condition which constitutes or
which with notice or the lapse or time would constitute an event of default with
respect to the Guaranteed Obligations, shall be continuing on or as of the
payment date; (b) Guarantor will place a legend indicating such subordination on
every note, ledger page or other document evidencing any part of the
Subordinated Debt; and (c) except as punished by this paragraph, Guarantor will
not request or accept payment of or any security for any part of the
Subordinated Debt, and any proceeds of the Subordinated Debt paid to Guarantor,
through error or otherwise, shall immediately be forwarded to Bank by Guarantor,
properly endorsed to the order of Bank, to apply to the Guaranteed Obligations.
MISCELLANEOUS. (a) Assignment. This Guaranty and other Loan Documents shall
inure to the benefit of and be binding upon the parties and their respective
heirs, legal representatives, successors and assigns. Bank's interests in and
rights under this Guaranty and other Loan Documents are freely assignable, in
whole or in part, by Bank. Any assignment shall not release Guarantor from the
Guaranteed Obligations. (b) Applicable Law; Conflict Between Documents. This
Guaranty and other Loan Documents shall be governed by and construed under the
laws of the state in which office of Bank first shown above is located without
regard to that state's conflict of laws principles. If the terms of this
Guaranty should conflict with the terms of any commitment letter that survives
closing, the terms of this Guaranty shall control. (c) Jurisdiction. Guarantor
irrevocably agrees to non-exclusive personal jurisdiction in the state in which
the office of Bank first shown above is located. (d) Severability. If any
provision of this Guaranty or of the other Loan Documents shall be prohibited or
invalid under applicable law, such provision shall be ineffective but only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Guaranty or other
document. (e) Notices. Any notices to Guarantor shall be sufficiently given, if
in writing and mailed or delivered to the Guarantor's address shown above or
such other address as provided hereunder, and to Bank, if in writing and mailed
or delivered to Bank's office address shown above or such other address as Bank
may specify in writing from time to time. In the event that Guarantor changes
Guarantor's address at any time prior to the date the Guaranteed Obligations are
paid in full, Guarantor agrees to promptly give written notice of said
- 6 -
<PAGE>
change of address by registered or certified mail, return receipt requested, all
charges prepaid. (f) Plural; Captions. All references in the Loan Documents to
borrower, guarantor, person, document or other nouns of reference mean both the
singular and plural form, as the case may be, and the term "person" shall mean
any individual, person or entity. The captions contained in the Loan Documents
are inserted for convenience only and shall not affect the meaning or
interpretation of the Loan Documents. (g) Binding Contract. Guarantor by
execution of and Bank by acceptance of this Guaranty agree that each party is
bound to all terms and provisions of this Guaranty. (h) Amendments, Waivers and
Remedies. No waivers, amendments or modifications of this Guaranty and other
Loan Documents shall be valid unless in writing and signed by an officer of
Bank. No waiver by Bank of any Default shall operate as a waiver of any other
Default or the same Default on a future occasion. Neither the failure nor any
delay on the part of Bank in exercising any right, power, or privilege granted
pursuant to this Guaranty and other Loan Documents shall operate as a waiver
thereof, nor shall a single or partial exercise thereof preclude any other or
further exercise or the exercise of any other right, power or privilege. All
remedies available to Bank with respect to this Guaranty and other Loan
Documents and remedies available at law or in equity shall be cumulative and may
be pursued concurrently or successively. (i) Partnerships. If Guarantor is a
partnership, the obligations, liabilities and agreements on the part of
Guarantor shall remain in full force and effect and fully applicable
notwithstanding any changes in the individuals comprising the partnership. The
term "Guarantor" includes any altered or successive partnerships, and
predecessor partnership(s) and the partners shall not be released from any
obligations or liabilities hereunder. (j) Loan Documents. The term "Loan
Documents" refers to all documents executed in connection with the Guaranteed
Obligations and may include, without limitation, commitment letters that survive
closing, loan agreements, other guaranty agreements, security agreements,
instruments, financing statements, mortgages, deeds of trust, deeds to secure
debt, letters of credit and any amendments or supplements (excluding swap
agreements as defined in 11 U.S. Code ss. 101).
ANNUAL FINANCIAL STATEMENTS. Guarantor shall deliver to Bank, within 120 days
after the close of each fiscal year, audited financial statements reflecting its
operations during such fiscal year, including, without limitation, a balance
sheet, profit and loss statement and statement of cash flows, with supporting
schedules; all on a consolidated and consolidating basis and in reasonable
detail, prepared in conformity with generally accepted accounting principles,
applied on a basis consistent with that of the preceding year. All such
statements shall be examined by an independent certified public accountant
acceptable to Bank. The opinion of such independent certified public accountant
shall not be acceptable to Bank if qualified due to any limitations in scope
imposed by Guarantor or its Subsidiaries, if any. Any other qualification of the
opinion by the accountant shall render the acceptability of the financial
statements subject to Bank's approval.
PERIODIC FINANCIAL STATEMENTS. Guarantor shall deliver to Bank unaudited
management-prepared quarterly financial statements, including, without
limitation, a balance sheet, profit and loss statement and statement of cash
flows, with supporting schedules, as soon as available and in any event within
30 days after the close of each such period; all in reasonable
- 7 -
<PAGE>
detail and prepared in conformity with generally accepted accounting principles,
applied on a basis consistent with that of the preceding year. Such statements
shall be certified as to their correctness by a principal financial officer of
Guarantor.
FINANCIAL AND OTHER INFORMATION. Guarantor shall deliver to Bank such
information as Bank may reasonably request from time to time, including without
limitation, financial statements and information pertaining to Guarantor's
financial condition. Such information shall be true, complete, and accurate.
TAX RETURNS. Guarantor shall deliver to Bank, within 30 days of filing, complete
copies of federal and state tax returns, as applicable, each of which shall be
signed and certified by Guarantor to be true and complete copies of such
returns. In the event an extension is filed, Guarantor shall deliver a copy of
the extension within 30 days of filing.
WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, GUARANTOR BY
EXECUTION HEREOF AND BANK BY ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED ON THIS GUARANTY, OR ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS GUARANTY OR ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION
WITH THIS GUARANTY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH RESPECT HERETO. THIS
PROVISION IS A MATERIAL INDUCEMENT TO BANK TO ACCEPT THIS GUARANTY.
GUARANTOR AND BANK AGREE THAT THEY SHALL NOT HAVE A REMEDY OF PUNITIVE OR
EXEMPLARY DAMAGES AGAINST THE OTHER IN ANY DISPUTE AND HEREBY WAIVE ANY RIGHT OR
CLAIM TO PUNITIVE OR EXEMPLARY DAMAGES THEY HAVE NOW OR WHICH MAY ARISE IN THE
FUTURE IN CONNECTION WITH ANY DISPUTE WHETHER THE DISPUTE IS RESOLVED BY
ARBITRATION OR JUDICIALLY.
IN WITNESS WHEREOF, Guarantor, on the day and year first written above, has
caused this Unconditional Guaranty to be executed under seal.
Oak Tree Medical Systems, Inc.
Taxpayer Identification Number: 02-0401674
CORPORATE By:______________________________
SEAL Henry Dubbin, Vice Chairman
By:______________________________
Michael Gerber, President
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MASTER
-------------------------------------------------------------------
HEALTH CARE RECEIVABLES LOAN AND SECURITY AGREEMENT
dated as of September 16, 1996
among
OAK TREE RECEIVABLES, INC.,
as Borrower,
SAM FUND I, L.P.,
as Lender,
and
SAM PM, L.P.,
as Program Manager.
-------------------------------------------------------------------
(Borrower Code OTRI)
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
ARTICLE I DEFINITIONS.......................................................................................... 1
ARTICLE II THE LOAN............................................................................................ 1
2.1 The Loan.......................................................................................... 1
2.3 Edited Face Value; Borrowing Base etc. .......................................................... 1
2.4 Borrower's Representations, Warranties and Covenants; Rejected Receivables........................ 1
2.5 Security Interest................................................................................. 2
2.6 No Assumption of Obligations...................................................................... 2
ARTICLE III PAYMENTS; FEES; INTEREST............................................................................ 2
3.1 Interest, etc..................................................................................... 2
3.2 Fees.............................................................................................. 2
3.3 Application of Collections........................................................................ 3
3.4 Repayment......................................................................................... 3
3.5 Prepayments....................................................................................... 3
3.6 Payments, Set-Off, Computations, etc.............................................................. 4
3.7 Evidence of Debt.................................................................................. 4
3.8 Distributions to Borrower; Netting Arrangement.................................................... 4
ARTICLE IV CONDITIONS.......................................................................................... 5
4.1 Conditions Precedent to the First Loan............................................................ 5
4.2 Additional Conditions Precedent to the Loan....................................................... 5
ARTICLE V SERVICING AND ADMINISTRATION......................................................................... 6
5.1 Servicing of Receivables.......................................................................... 6
5.2 Receipt by Borrower............................................................................... 6
5.3 Collateral Monitoring............................................................................. 7
ARTICLE VI REMEDIES UPON TERMINATION........................................................................... 7
6.1 Rights and Remedies............................................................................... 7
6.2 Rights and Remedies Cumulative.................................................................... 7
ARTICLE VII PROGRAM MANAGER ................................................................................... 7
7.1 Authorization and Action.......................................................................... 7
7.2 Rights of Program Manager......................................................................... 8
7.3 Ethical Obligations of Program Manager............................................................ 8
8.1 Indemnity......................................................................................... 8
8.2 Contribution...................................................................................... 9
8.3 Exculpation....................................................................................... 10
ARTICLE IX MISCELLANEOUS....................................................................................... 10
9.1 Amendments, Waivers, etc.......................................................................... 10
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
<S> <C>
9.2 Notices, etc...................................................................................... 10
9.3 Binding Effect; Survival.......................................................................... 10
9.4 Costs, Expenses and Taxes......................................................................... 11
9.5 No Recourse Against Other Parties................................................................. 11
9.6 No Proceedings.................................................................................... 11
9.7 Execution in Counterparts......................................................................... 12
9.8 Interpretation; Entire Agreement.................................................................. 12
9.9 Governing Law..................................................................................... 12
9.10 Consent To Jurisdiction; Waiver Of Immunities.................................................... 12
9.11 Arbitration...................................................................................... 13
9.12 Interest......................................................................................... 13
9.13 No Oral Agreements............................................................................... 14
9.14 Limited Recourse................................................................................. 14
</TABLE>
Schedule 1 Definitions
Schedule 2 Initial Conditions
Schedule 3 Representations and Warranties as to Borrower
Schedule 4 Representations and Warranties as to Eligible Receivables
Schedule 5 Borrower's Covenants
Schedule 6 Edited Face Value; Borrowing Base, etc.
Exhibit A Form of Note
Exhibit B Form of Obligor Notice
Exhibit C Form of UCC Financing Statement
Exhibit D Form of Letter Amending Borrowing Base Determination
Exhibit E Form of Limited Power of Attorney
Exhibit F Form of Borrowing Base Certificate
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<PAGE>
THIS HEALTH CARE RECEIVABLES LOAN AND SECURITY AGREEMENT dated as of
September 16, 1996 (this "Agreement") is among OAK TREE RECEIVABLES, INC., a
Florida corporation ("Borrower"), SAM FUND I, L.P. (including its successors,
assigns and designees, "Lender") and SAM PM, L.P., as program manager (including
its successors, assigns and designees, "Program Manager"). For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
ARTICLE I DEFINITIONS
In this Agreement, unless otherwise specified: (a) capitalized terms
are used as defined in Schedule 1; and (b) terms defined in Article 9 of the
Texas UCC and not otherwise defined herein are used as defined in such Article.
Additional rules of interpretation are set forth in Section 9.8.
ARTICLE II THE LOAN
SECTION 2.1 The Loan. Lender shall make available to Borrower a
multiple draw-down term loan facility, on the terms and subject to the
conditions set forth in this Agreement (the "Commitment"). Lender agrees, on the
terms and subject to the conditions hereinafter set forth, to make a loan in one
or two draw-downs (collectively, the "Loan") to Borrower during the period from
the date hereof to the date (the "Commitment Termination Date") which is the
earlier of
(a) September 18, 1996; and
(b) the date notice is given by Lender to Borrower pursuant to
Section 6.1.
The amount of the Loan made may not exceed the lesser of (x) $1,250,000, as such
amount may be reduced pursuant to Section 3.3 (such amount, as so reduced, being
the "Commitment Amount") and (y) the Borrowing Base. Subject to the terms
hereof, Borrower may borrow and prepay but may not reborrow amounts pursuant
hereto.
SECTION 2.2 Making the Loan. Lender will make the Loan on at least two
Business Days' prior written notice (unless such period is waived by Lender and
Program Manager) from Borrower to Lender (a "Borrowing Notice") specifying the
proposed amount and date (which must be a Business Day) of the Loan. Not later
than 1:00 P.M. (Dallas time) on the date of the Loan and upon fulfillment of the
conditions set forth in Article IV, the proceeds of the Loan will be made
available to Borrower in immediately available funds for deposit in Borrower's
Account.
SECTION 2.3 Edited Face Value; Borrowing Base etc. In connection with
the Loan under this Agreement, Borrower shall communicate certain information to
Program Manager (or a Person designated by Program Manager), Program Manager
shall cause certain estimates to be made, and certain procedures will be
followed prior to or on the Loan Date, all in accordance with, and as more fully
described in, Schedule 6.
SECTION 2.4 Borrower's Representations, Warranties and Covenants;
Rejected Receivables. On the date of this Agreement and on the Loan Date,
Borrower shall be deemed to have represented and warranted to Lender and Program
Manager as set forth in Schedule 3. On each Loan Date, Borrower shall be deemed
to have represented and warranted to Lender and Program Manager as set forth in
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Schedule 4 as to each Receivable included in the Borrowing Base (each, an
"Eligible Receivable"). During the period from the date of this Agreement
through the Final Payout Date, Borrower (for the benefit of all Persons referred
to in Section 9.3) shall comply with the covenants set forth in Schedule 5.
Borrower shall notify Program Manager promptly upon becoming aware of,
and if earlier, Program Manager shall notify Borrower promptly upon becoming
aware of, any breach of any of such representations, warranties or covenants.
Any such notice shall identify all Receivables affected by such breach. Each
Receivable affected by such breach is called a "Rejected Receivable". On the
first Business Day that a Receivable becomes a Rejected Receivable, Borrower
shall remove the Rejected Receivable from the Borrowing Base and replace it with
an Eligible Receivable whose Edited Face Value is equal to or greater than the
Receivable that became a Rejected Receivable.
SECTION 2.5 Security Interest. To secure the prompt payment and
performance of all Obligations, (a) Borrower hereby grants to Lender, for the
benefit of Lender and the other Indemnified Parties, a security interest in all
of Borrower's right, title and interest in, to and under all of the following,
whether now or hereafter existing: (i) all Receivables, (ii) all Records
relating to such Receivables, (iii) all Contracts relating to such Receivables,
(iv) the Transaction Accounts, (v) the Lock- Boxes, all funds and other items on
deposit in the Transaction Accounts and the Lock-Boxes, and all certificates,
agreements and instruments, if any, from time to time evidencing each
Transaction Account, each Lock-Box and all funds and other items on deposit in
each Transaction Account and each Lock-Box, and (vi) all proceeds and amounts
received or receivable (including all Collections) under any or all of the
foregoing (collectively, the "Collateral"); and (b) this Agreement shall
constitute a security agreement under the UCC.
SECTION 2.6 No Assumption of Obligations. Neither this Agreement nor
the Loan pursuant to this Agreement shall constitute or result in an assumption
by Lender or any other Indemnified Party of any obligations or liabilities of
Borrower with respect to any Receivable, Record or Contract.
ARTICLE III PAYMENTS; FEES; INTEREST
SECTION 3.1 Interest, etc. Interest will accrue prior to default on the
unpaid principal amount of the Loan from the date such Loan is made until such
principal amount is paid in full (after, as well as before, judgment) at a fixed
interest rate per annum equal to 14%; provided, however, that once the Lender
has received an aggregate of $662,500 in interest, Facility Fees and Collection
and Servicing Fees, the fixed interest rate per annum shall thereafter equal 6%.
Payments of accrued interest will be made by Borrower to Lender's Account on
each Weekly Payment Date in immediately available funds to the extent available
as provided in Section 3.3. On any overdue principal amount of any Loan,
Borrower will pay interest (after, as well as before, judgment) payable on
demand, at a fluctuating interest rate per annum (the "Default Rate") equal to
16% per annum; provided, however, that once the interest rate has reduced from
14% to 6% as provided in the first sentence of this Section 3.1, the Default
Rate shall be 6% per annum.
SECTION 3.2 Fees. (a) Borrower agrees to pay to Lender a collection and
servicing fee (the "Collection and Servicing Fee") payable out of Collections in
the amount of $500,000 as provided in Section 3.3 for servicing and collecting
the Receivables.
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(b) The Borrower agrees to pay to the Lender a facility fee (the
"Facility Fee") in the amount of $92,500 as provided in Section 3.3; provided,
however, that the Facility Fee shall be deemed paid in full once the Lender has
received interest, Facility Fee and Collection and Servicing Fee equal to an
aggregate amount of $662,500.
(c) the Borrower agrees to pay to the Lender a fee (the "Success Fee")
in an amount equal to 20% of the amount actually collected in excess of the
repayment of the principal amount of the Loan plus interest thereon, plus the
Collection and Servicing Fee actually collected plus the Facility Fee actually
collected; provided, however, that the Success Fee shall be reduced dollar for
dollar by the amount of any interest actually paid by the Borrower under Section
3.1 after the fixed annual interest rate decreases from 14% to 6% per annum;
provided, further, that if for any reason the Lender has not received an
aggregate amount of interest, Facility Fee and Collection and Servicing Fee
equal to $662,500 at the time that the Success Fee becomes due, then the Success
Fee shall be an amount equal to 100% of the amount actually collected thereafter
until the Lender has received an aggregate amount of interest, Facility Fee,
Collection and Servicing Fee and Success Fee equal to $662,500.
SECTION 3.3 Application of Collections. Collections received from the
Receivables set forth on the Receivables Lists shall be applied by the Program
Manager on each Weekly Payment Date in the following order of priority:
first, to the payment of accrued and unpaid interest on the Loan;
second, to the payment of the Collection and Servicing Fee until the
Collection and Servicing Fee has been paid in full;
third, to the payment of the Facility Fee until the Facility Fee has
been paid in full;
fourth, to the payment of principal on the Loan until the Loan has been
paid in full;
fifth, to the payment of the Success Fee until the Success Fee has been
paid in full;
sixth, to the payment of all other unpaid Obligations; and
seventh, after all the Obligations have been paid in full, to the
Borrower's Account.
SECTION 3.4 Repayment. On the Maturity Date, the then aggregate
outstanding principal amount of the Loan will be due and payable in full.
SECTION 3.5 Prepayments. Borrower may, upon at least 60 Business Days'
notice to Lender, prepay the outstanding principal amount of the Loan, in whole
or in part, on any Business Day, in each case with accrued interest to the date
of such prepayment on the principal amount prepaid; provided, however, that each
partial prepayment shall be in a principal amount not less than $50,000 and in
an integral multiple of $50,000 and provided, further, that the Loan may not be
prepaid until the Facility Fee and the Collection and Servicing Fee have been
paid in full. If at any time the aggregate outstanding principal amount of the
Loan exceeds the lesser of (x) the Commitment Amount and (y) the Borrowing Base,
Borrower will immediately make a prepayment in an amount at least equal to such
excess. All Collections shall be applied in accordance with Section 3.3.
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SECTION 3.6 Payments, Set-Off, Computations, etc. Any term or provision
of this Agreement to the contrary notwithstanding, Borrower and Lender hereby
agree as follows:
(a) Payments due hereunder or under any Transaction Document
delivered must be made by Borrower (in immediately available funds) not
later than 11:00 A.M. (Dallas time) on the day when due in lawful money
of the United States for deposit to Lender's Account. Each such payment
must be made by Borrower free and clear of (and without deduction for)
any and all present and future taxes, levies, imposts, deductions,
charges, withholdings and all liabilities with respect thereto,
excluding income and franchise taxes of the United States and of the
State of Texas and any political subdivision of either thereof.
(b) Borrower hereby authorize Lender, if and to the extent
payment is not made when due hereunder or under any other Transaction
Document, to charge from time to time against Borrower's Account or any
or all of Borrower's accounts with Lender any amount so due.
(c) All computations of interest and of the fees described in
this Agreement will be made by Lender on the basis of a year of 365 or
366 days, as the case may be, for the actual number of days (including
the first day but excluding the last day) occurring in the period for
which such interest is or fees are payable. Each computation by Lender
of interest or fees hereunder will be conclusive and binding for all
purposes, absent manifest error.
(d) Whenever any payment to be made hereunder or under the Note
or any other instrument delivered hereunder shall be stated to be due,
on a day other than a Business Day, such payment shall be made, on the
next succeeding Business Day, and such extension of time will, in such
case, be included in the computation of payment of interest or fees, as
the case may be.
SECTION 3.7 Evidence of Debt. Borrower's indebtedness to Lender
resulting from the Loan made hereunder will be evidenced by a promissory note
(the "Note"), in substantially the form attached hereto as Exhibit A, delivered
to Lender pursuant to Section 4.1. Borrower hereby irrevocably authorizes Lender
to make (or cause to be made) appropriate notations on the grid attached to the
Note (or on a continuation of such grid attached to the Note and made a part
thereof), which notations, if made, will evidence, inter alia, the date of, the
outstanding principal of, and the interest rate applicable to, the Loan
evidenced thereby. Failure to record any notation on such grid (or on any such
continuation), or any error with respect thereto, will not, however, limit or
otherwise affect Borrower's obligations hereunder or under the Note to make
payments of principal of or interest on the Loan when due. Lender will also
maintain (in accordance with Lender's usual practice) an account or accounts
evidencing Borrower's indebtedness to Lender resulting from the Loan made and
the amounts of principal, interest and fees payable and paid from time to time
hereunder. In any arbitration, legal action or proceeding in respect of this
Agreement, the entries made in such account or accounts will be prima facie
evidence of the existence and amounts of Borrower's obligations to Lender
therein recorded.
SECTION 3.8 Distributions to Borrower; Netting Arrangement.
Notwithstanding any other provision of this Agreement, all amounts payable or
distributable to Borrower pursuant to this Agreement shall be paid or
distributed net of any amounts payable by Borrower to any Person pursuant to
this Agreement, and the amounts deducted in determining such net amounts shall
be deemed to have been paid or distributed to Borrower and then paid by Borrower
to the actual recipient of such amounts. In
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addition, at any time when an Event of Default has occurred and is continuing
(or, if a Bankruptcy Event with respect to Borrower has occurred and is
continuing, without giving effect to any grace period contemplated by the
definition of Bankruptcy Event), all amounts otherwise payable or distributable
to Borrower pursuant to this Agreement shall instead be deposited in a cash
collateral account (the "Cash Collateral Account") in the name of Lender
maintained at a bank to be designated by Program Manager and held as collateral
for the payment and performance of Borrower's Obligations to which such funds
shall be applied from time to time at Program Manager's discretion. Any funds
remaining in the Cash Collateral Account at the close of business on the Final
Payout Date shall be distributed to Borrower on the first Business Day following
the Final Payout Date.
ARTICLE IV CONDITIONS
SECTION 4.1 Conditions Precedent to the First Loan. The first Loan
hereunder shall be subject to the condition precedent that Program Manager shall
have received, on or before the date of the first Loan, the items listed in
Schedule 2, each (unless otherwise indicated) dated such date or another recent
date acceptable to Program Manager and each in form and substance satisfactory
to Program Manager, and the other actions listed in Schedule 2 shall have been
completed.
SECTION 4.2 Additional Conditions Precedent to the Loan. The Loan shall
be subject to the further conditions precedent that:
(a) the representations and warranties contained in Schedules 3
and 4 are correct in all material respects on and as of each of the Date of
Service and the Loan Date as though made on and as of each such day; provided,
however, that this condition shall be deemed to be satisfied even if there has
been a breach of a representation and warranty if the related Rejected
Receivable shall have been deleted from the Borrowing Base pursuant to this
Agreement and replaced as required by Section 2.4;
(b) the Maturity Date shall not have occurred, and no Event of
Default, or event that with notice, the passage of time or both would constitute
an Event of Default shall have occurred and be continuing on the Loan Date, or
would result from such Loan;
(c) Program Manager shall have received from Borrower an
Obligor Notice, signed by Borrower, with respect to each Obligor of each
Receivable (and Program Manager shall have mailed such Obligor Notice by
certified mail, return receipt requested, to the Obligor named in such Obligor
Notice), provided, however, that an Obligor Notice need not be mailed to the
applicable Obligor other than at the time of the first purchase of a Receivable
that is owed by such Obligor; provided, further, that with respect to Government
Obligors, Borrower shall cause each Seller to open a new Government Lock-Box and
Government Lock-Box Account at a bank that is acceptable to Program Manager, and
the Obligor Notice sent to Government Obligors of such Seller shall direct
payment to such Government Lock-Box or Government Lock-Box Account.
(d) Program Manager shall have received a duly executed and
completed Borrowing Notice from Borrower;
(e) each of Support Servicer (or a Person designated by it) and
Program Manager (or a Person designated by it) shall have timely received the
related Receivables Information, and all other
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actions or procedures outlined in Schedule 6 have occurred by, or will occur
concurrently with, the Loan Date;
(f) Program Manager (or a Person designated by it) shall have
received true and complete copies of all of Borrower's Medical Records relating
to each Receivable included in the Borrowing Base on such Loan Date;
(g) Program Manager shall have received completed copies of all
of the Borrower's patient consents (including face sheets, assignment of benefit
forms, and authorizations to release Medical Records), signed by the applicable
patient for each Receivable included in the Borrowing Base on such Loan Date;
(h) Program Manager (or a Person designated by it) shall have
received one or more financing statements signed by Borrower and Lender in the
form of Exhibit C, or other, similar instruments or documents, as may be
necessary or, in the opinion of Program Manager, desirable under the UCC or any
comparable law of all appropriate jurisdictions to perfect Lender's interests in
the Receivables; and
(i) Program Manager shall have received such other approvals,
opinions and documents as it may reasonably request.
(j) Program Manager shall have received a certificate from
Support Servicer stating that all computer linkups and interfaces, and any other
electronic interfaces, necessary or desirable in the judgment of Support
Servicer to effectuate the transactions and information transfers contemplated
under the Transaction Documents are fully operational to the satisfaction of the
Support Servicer (collectively, the "Data Interface").
By accepting the Loan, Borrower shall be deemed to have represented and
warranted to Lender and Program Manager as to the matters set out in clauses (a)
and (b) of this Section 4.2. Lender's making of a Loan shall not be construed as
a determination by Lender or Program Manager that Borrower has satisfied any or
all of the conditions or requirements of Section 4.1 or this Section 4.2.
ARTICLE V SERVICING AND ADMINISTRATION
SECTION 5.1 Servicing of Receivables. From and after the Loan Date, the
servicing, administration and collection of Borrower's Receivables purchased
from Coast and/or Riverside shall be conducted exclusively by Program Manager or
any Person designated by Program Manager from time to time, as provided in the
collection and servicing agreement by and between Borrower, the Program Manager
and Claims Management Company of America, L.P. (the "Collection and Servicing
Agreement"); provided, that once all amounts due hereunder to Lender (other than
the Success Fee) are paid in full, such obligations shall revert to Borrower.
SECTION 5.2 Receipt by Borrower. If Borrower shall receive any payments
from or on behalf of an Obligor (whether in the form of cash, check or
otherwise) with respect to a Receivable, or any information as to such
Receivable related to such payments, or any related EOBs, from an Obligor, then
Borrower shall, (i) immediately segregate such payments separate and apart from
Borrower's funds and hold such payments in trust for Lender and (ii) not later
than the first Business Day immediately
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following the day on which Borrower receives such payments or information or
related EOBs, (x) notify Program Manager of its receipt of all such payments or
information or related EOBs, (y) cause to be delivered to Program Manager, by
same day delivery or Federal Express for next day delivery, if same day delivery
is not practicable, such payments if needed to pay the Loan in the form received
by Borrower and (z) cause to be delivered to Program Manager, by same day
delivery or Federal Express for next day delivery, if same day delivery is not
practicable, information as to the Receivables as to which such payments related
and copies of any related EOBs. Borrower agrees that, if it shall fail to
deliver to Program Manager any such payments received by Borrower within the
time provided in this Section 5.2, an Event of Default shall be deemed to have
occurred. Borrower agrees that any Records and EOBs held by Borrower relating to
Receivables shall be made available to Lender for its inspection or copying
subject to applicable patient confidentiality requirements with respect to
Medical Records.
SECTION 5.3 Collateral Monitoring. Program Manager or any Person
designated by Program Manager shall have a daily right to monitor the incoming
mail of the Borrower and its Affiliates and Collateral (including the Borrowing
Base). In this regard, such Person shall have access during normal business
hours to all books and records of Borrower and to ensure that Borrower is in
compliance with its obligations pursuant to Section 5.2.
ARTICLE VI REMEDIES UPON TERMINATION
SECTION 6.1 Rights and Remedies. Upon the occurrence and continuation
of an Event of Default, the Lender shall have the right (a) to terminate its
Commitment to lend, whereupon the same will forthwith terminate, (b) declare the
Loan and all indebtedness evidenced by the Note, all interest thereon and all
other amounts payable under this Agreement or any other Transaction Document to
be immediately due and payable, whereupon the Maturity Date will be deemed to
have occurred and the Loan and all indebtedness evidenced by the Note, all such
interest and all such amounts will become and be forthwith due and payable, all
without presentment, demand, protest or further notice of any kind, all of which
are hereby expressly waived by Borrower. On and after the Maturity Date, Program
Manager and Lender shall have, in addition to all rights and remedies under the
Transaction Documents, all rights and remedies provided under each applicable
UCC and other applicable laws (including as to rights covered by Section 2.5).
SECTION 6.2 Rights and Remedies Cumulative. The rights and remedies of
Lender and Program Manager under this Agreement are cumulative, and such rights
and remedies are in addition to and not by way of limitation of any other rights
or remedies Lender or Program Manager may have under applicable law. Lender or
Program Manager, as the case may be, shall have the right, in its sole
discretion, to determine which of its respective rights and remedies, and in
which order any of the same, are to be exercised. No act, failure or delay by
Lender or Program Manager, as the case may be, shall constitute a waiver of any
of its rights and remedies.
ARTICLE VII PROGRAM MANAGER
SECTION 7.1 Authorization and Action. Pursuant to certain agreements,
Lender has appointed and authorized Program Manager (or its designees) to take
such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to Program Manager by the terms hereof, together with
such powers as are reasonably incidental thereto. Borrower hereby agrees that
Program
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Manager (or its designee) shall have the right to enforce all rights of Lender
and all obligations of Borrower under this Agreement for and on behalf of
Lender.
SECTION 7.2 Rights of Program Manager. (a) If Borrower fails to perform
any of its agreements or obligations under this Agreement, Program Manager or
its designee may (but shall not be required to) itself perform, or cause
performance of, such agreement or obligation, and the expenses of Program
Manager or its designee incurred in connection therewith shall be payable by
Borrower as provided in Article VIII.
(b) After the occurrence and continuation of an Event of Default and
until all Obligations of Borrower are paid in full, Borrower hereby authorizes
Program Manager (or its designee), and grants to Program Manager (or such
designee) a power of attorney, with full power of substitution and coupled with
an interest, to take in Borrower's name, as applicable or necessary, any and all
steps as are necessary or advisable, in the determination of Program Manager, in
order to effectuate and perform any and all of the transactions contemplated by
this Agreement. Without limiting the foregoing, Borrower hereby authorizes
Program Manager subject, in each case, to the provisions of applicable law, to
(i) issue notices to, prepare, file and submit proof of claim forms with, and
otherwise communicate with, Obligors in the name of Borrower, (ii) ask, demand,
collect, sue for, recover, receive and give acquittance and receipts for moneys
due and to become due with respect to Receivables, (iii) receive, endorse,
negotiate, transfer, deposit, collect and otherwise deal with any drafts, checks
or other instruments and documents with respect to Receivables as the secured
party with respect thereto, (iv) prepare, sign, apply for, and file, in
Borrower's name, any document (including UCC financing statements or
continuation statements) to establish Lender as secured party or otherwise as
lien holder with respect to such Receivables and other items covered by Section
2.5, (v) open and establish bank accounts with Program Manager (and any other
Person designated by Program Manager) as the only signers on the accounts and
the sole beneficiaries of these accounts for purposes of collecting Receivables
(other than from Government Obligors), (vi) negotiate, settle, adjust,
compromise, extend or renew, discharge and release any or all Receivables, (vii)
prepare, sign and file any claims in Borrower's name with an Obligor or take any
other action or institute any proceedings which Program Manager may deem
necessary or desirable for the collection of any of the Receivables or otherwise
to enforce the rights of Lender with respect to any of the Receivables and
(viii) do all other things necessary or proper to carry out the administration
and servicing of the Receivables. This limited power of attorney shall be
irrevocable until the Final Payout Date. This limited power of attorney is
transferable and assignable by Program Manager, at its sole discretion.
SECTION 7.3 Ethical Obligations of Program Manager. The Program Manager
shall perform its obligations hereunder in accordance with the ethical standards
of the healthcare receivables servicing industry and in compliance with
applicable law. The parties hereto agree that the immediately preceding sentence
shall not prevent Program Manager from taking any action contemplated by this
Agreement.
ARTICLE VIII INDEMNITY; EXCULPATION
SECTION 8.1 Indemnity. Without limiting any other rights which any such
Person may have hereunder or under applicable law, Borrower indemnifies each of
Program Manager, Support Servicer, Lender, each of their respective Affiliates,
and all successors, transferees, participants and assigns, and all officers,
directors, shareholders, controlling persons, employees and agents of any of the
foregoing (each an "Indemnified Party"), forthwith on demand, from and against
any and all Indemnified Amounts awarded against or incurred by any of them
arising out of or relating to any Contract or any Transaction
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Document, or the making of any Loan. Without limiting the foregoing, Borrower
shall indemnify each Indemnified Party for Indemnified Amounts arising out of or
relating to:
(a) the failure of any of Borrower's representations and
warranties to be true and correct in all respects when made or deemed made;
(b) any failure of Borrower to perform any of its duties or
obligations hereunder, including any failure by Borrower to comply with any
applicable law, rule or regulation with respect to any Receivable or the related
Contract; or the nonconformity of any Receivable or the related Contract with
any such applicable law, rule or regulation;
(c) any claim resulting from the sale of the goods or services
related to any Receivable or the furnishing or failure to furnish such goods or
services; or any products liability claim arising out of or in connection with
goods or services that are the subject of any Receivable;
(d) any Tax (but not including Taxes upon or measured by net
income), all interest and penalties thereon or with respect thereto, and all
out-of-pocket costs and expenses, including the reasonable fees and expenses of
counsel in defending against the same, which may arise by reason of the
acquisition of any Receivable, or any other interest in the Receivables;
(e) any commingling of Collections of Receivables with other
funds; and
(f) any investigation, litigation or proceeding related to this
Agreement or the use of proceeds of the Loan or in respect of any Receivable or
Contract or any other investigation, litigation or proceeding in which an
Indemnified Party becomes involved as a result of any of the transactions
contemplated hereby.
The foregoing indemnities shall extend to each Indemnified Party notwithstanding
the sole or concurrent negligence of every kind of character whatsoever, whether
active or passive, whether an affirmative act or an omission, including all
types of negligent conduct identified in the Restatement (Second) of Torts of
one or more of the Persons so indemnified or by reason of strict liability
imposed without fault on any one or more of such Persons. To the extent that an
arbitrator chosen in accordance with Section 9.11 shall have determined that any
Indemnified Party committed an act of gross negligence, or wilful misconduct,
this contractual obligation of indemnification shall continue but shall only
extend to the portion of the claim that is deemed to have occurred by reason of
events other than the gross negligence or wilful misconduct of such Indemnified
Party.
SECTION 8.2 Contribution. If for any reason the indemnification
provided in Section 8.1 is unavailable to an Indemnified Party or is
insufficient to hold an Indemnified Party harmless, then Borrower shall
contribute to the payment of the Indemnified Amount in such proportion as is
appropriate to reflect not only the relative benefits received by such
Indemnified Party on the one hand and Borrower on the other hand but also the
relative fault of such Indemnified Party as well as any other relevant equitable
considerations.
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SECTION 8.3 Exculpation. Notwithstanding anything contained herein to
the contrary, no Indemnified Party shall be liable to Borrower or any other
Person for Indemnified Amounts awarded against or incurred by Borrower, its
Affiliates, and all successors, transferees, participants and assigns, and all
officers, directors, shareholders, controlling persons, employees and agents of
any of the foregoing (each a "Borrower Party"), arising out of or relating to
the Transaction Documents, the funding of any Loan, except for its or their own
gross negligence or willful misconduct in performing or failing to perform its
or their own obligations hereunder or thereunder. In no event, however, shall
the Indemnified Parties be liable: (a) for Indemnified Amounts awarded against
or incurred by any Borrower Party arising out of or relating to the Transaction
Documents, existing at the time the first of such Indemnified Amounts arose; or
(b) for any indirect, special, punitive, exemplary or consequential damages
arising out of or relating to the Transaction Documents. THE FOREGOING
EXCULPATION SHALL EXTEND TO EACH INDEMNIFIED PARTY NOTWITHSTANDING THE SOLE OR
CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER WHATSOEVER, WHETHER ACTIVE OR
PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN OMISSION, INCLUDING ALL TYPES OF
NEGLIGENT CONDUCT IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE
OF THE PERSONS SO EXCULPATED OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT
FAULT ON ANY ONE OR MORE OF SUCH PERSONS. To the extent that an arbitrator
chosen in accordance with Section 9.11 shall have determined that any
Indemnified Party committed an act of gross negligence or wilful misconduct,
this contractual exculpation shall continue but shall only extend to the portion
of the claim that is deemed to have occurred by reason of events other than the
gross negligence or wilful misconduct of such Indemnified Party.
ARTICLE IX MISCELLANEOUS
SECTION 9.1 Amendments, Waivers, etc. No amendment of this Agreement
shall be effective unless the same shall be in writing and signed by all of the
parties hereto. No waiver of any provision of this Agreement or consent to any
departure by Borrower therefrom shall be effective without the written consent
of Program Manager and Lender. Any such waiver or consent shall be effective
only in the specific instance given. No failure or delay on the part of any
Indemnified Party to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right.
SECTION 9.2 Notices, etc. All notices and other communications provided
for under this Agreement shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
express mail or courier or by certified mail, postage prepaid, or by facsimile,
to the intended party at the address or facsimile number of such party set forth
under its name on the signature pages hereof or at such other address or
facsimile number as shall be designated by such party in a written notice to the
other parties hereto. All such notices and communications shall be effective,
(a) if personally delivered or sent by express mail or courier or if sent by
certified mail, when received, and (b) if transmitted by facsimile, when sent,
receipt confirmed by telephone or electronic means. Notwithstanding any other
provision of this Agreement, notices and communications to Program Manager shall
be effective only when received.
SECTION 9.3 Binding Effect; Survival. This Agreement shall be binding
upon and inure to the benefit of Borrower, Program Manager, Lender and their
respective successors and assigns, and the provisions of Article VIII shall
inure to the benefit of the Indemnified Parties, respectively, and their
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respective successors and assigns; provided that the rights of sale, pledge and
transfer of the parties hereto are as follows:
(a) Borrower shall not sell, pledge or otherwise transfer its
rights, or delegate its duties, hereunder or any interest herein without the
prior written consent of Program Manager.
(b) Each of Lender and Program Manager may sell, pledge or
otherwise transfer all or any part of Lender's or Program Manager's right,
title, interest or obligations in, to and under this Agreement, each of the
other Transaction Documents and the Loan. Borrower shall execute and deliver to
Lender or Program Manager, as the case may be, all documents, instruments and
amendments presented to Borrower by Lender or Program Manager, as the case may
be, in order to effectuate such loan, pledge or transfer so long as such
documents, instruments and amendments are not inconsistent with the Transaction
Documents. The benefits of the representations, warranties, indemnities and
covenants of Borrower made or deemed made under this Agreement and the other
Transaction Documents are for the benefit of and may be enforced against
Borrower by any Person to which Lender or Program Manager, as the case may be,
sells, pledges or otherwise transfers any of its right, title, interest or
obligations in, to or under this Agreement, any other Transaction Document from
time to time, including Persons providing funding to Lender or Program Manager
(regardless of whether any such Person other than Lender or Program Manager is
referred to in any provision of this Agreement). After any such sale, pledge or
other transfer, all rights of Program Manager under this Agreement may be
exercised by such Person as the buyer, pledgee or transferee may designate. Any
such sale, pledge or other transfer shall be upon such terms and conditions as
Lender or Program Manager, as the case may be, and its counterparty may mutually
agree, and may be evidenced by such instruments or documents as may be
satisfactory to Lender, Program Manager and such counterparty.
The rights and remedies with respect to any breach of representation
and warranty made by Borrower and the provisions of Articles VI and VIII and
Sections 2.5, 2.6, 3.6, 5.2, 7.2, 9.3, 9.4, 9.5, 9.6, 9.9, 9.10, 9.11 and 9.12
shall be continuing and shall survive any termination of this Agreement or of
any party's rights or obligations hereunder.
SECTION 9.4 Costs, Expenses and Taxes. In addition to its obligations
under Article VIII, Borrower agrees to pay on demand: all costs and expenses
incurred by Program Manager, Support Servicer and Lender and their respective
Affiliates in connection with any amendment of or consent or waiver under any of
the Transaction Documents which is requested or proposed by Borrower (whether or
not consummated), or the enforcement of, or any actual or claimed breach of, any
Transaction Document, including the reasonable fees and expenses of counsel to
any of such Persons incurred in connection with any of the foregoing or in
advising such Persons as to their respective rights and remedies under any of
the Transaction Documents in connection with any of the foregoing.
SECTION 9.5 No Recourse Against Other Parties. No recourse under any
obligation, covenant or agreement of Lender contained in this Agreement shall be
had against any employee, officer or director of Lender; provided that, subject
to Section 8.3, nothing in this Section 9.5 shall relieve any of the foregoing
Persons from any liability which such Person may otherwise have for such
Person's gross negligence or willful misconduct as determined by an arbitrator
(in accordance with Section 9.11).
SECTION 9.6 No Proceedings. Borrower agrees that it will not institute
against Lender, or join any other Person in instituting against Lender, any
proceeding of the type referred to in the definition of
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Bankruptcy Event. The foregoing shall not limit Borrower's right to file any
claim in or otherwise take any action with respect to any such proceeding that
was instituted by any Person other than Borrower.
SECTION 9.7 Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by the different parties in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
Agreement.
SECTION 9.8 Interpretation; Entire Agreement. In this Agreement
(including the Schedules and Exhibits hereto), unless the context otherwise
requires: (a) references to any Person includes such Person's successors and
assigns but, if applicable, only if such successors and assigns are permitted by
this Agreement; (b) references to any Article, Section, Exhibit or Schedule
refer to such Article or Section of, or Exhibit or Schedule to, this Agreement,
and references in any Article, Section or definition to any subsection or clause
refer to such subsection or clause of such Article, Section or definition; (c)
"herein", "hereof", "hereto", "hereunder" and similar terms refer to this
Agreement as a whole and not to any particular Section, paragraph or provision
of this Agreement; (d) "including" means including without limitation, and other
forms of the verb "to include" have correlative meanings; (e) the word "or" is
not exclusive; (f) for purposes of calculating any amount accrued over a period
of time, the first day of such period shall be included and the last day
excluded; (g) references to any law or regulation refer to such law or
regulation as amended from time to time, including any successor or replacement
law or regulation; (h) captions are solely for convenience of reference and
shall not affect the meaning of this Agreement; (i) the term "goods" shall
include medical equipment; and (j) the singular number includes the plural and
vice versa. Any provision of this Agreement or any other Transaction Document
which is prohibited or unenforceable under applicable law shall, as to such
provision, be ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions of this Agreement or such other
Transaction Document. This Agreement, together with the other Transaction
Documents, constitutes the entire understanding and agreement among the parties
hereto as to the subject matter hereof and supersedes all prior oral or written
understandings or agreements.
SECTION 9.9 Governing Law. THIS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF TEXAS. THE
PARTIES HERETO FURTHER AGREE THAT INSOFAR AS THE PROVISIONS OF ARTICLE 1.04,
SUBTITLE 1, TITLE 79, OF THE REVISED CIVIL STATUTES OF TEXAS, 1925, AS AMENDED,
ARE EVER DEEMED APPLICABLE TO THE DETERMINATION OF THE HIGHEST LAWFUL RATE WITH
RESPECT TO THIS AGREEMENT, THE INDICATED RATE CEILING COMPUTED FROM TIME TO TIME
PURSUANT TO SUCH ARTICLE SHALL APPLY HERETO; PROVIDED, HOWEVER, THAT TO THE
EXTENT PERMITTED BY SUCH ARTICLE, LENDER OR PROGRAM MANAGER MAY FROM TIME TO
TIME BY NOTICE FROM LENDER OR PROGRAM MANAGER TO BORROWER REVISE THE ELECTION OF
SUCH INTEREST RATE CEILING AS SUCH CEILING AFFECTS THE THEN CURRENT OR FUTURE
BALANCES OF THE NOTE OR ANY OTHER INSTRUMENT EXECUTED IN CONNECTION WITH THIS
AGREEMENT. THE PROVISIONS OF CHAPTER 15 OF SUBTITLE 3 OF THE SAID TITLE 79 DO
NOT APPLY TO THIS AGREEMENT OR ANY INSTRUMENT IN CONNECTION WITH THIS AGREEMENT.
SECTION 9.10 Consent To Jurisdiction; Waiver Of Immunities. SUBJECT TO
SECTION 9.11, EACH PARTY TO THIS AGREEMENT IRREVOCABLY (a) SUBMITS TO THE
12
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JURISDICTION, FIRST, OF ANY UNITED STATES FEDERAL COURT, AND SECOND, IF FEDERAL
JURISDICTION IS NOT AVAILABLE, OF ANY TEXAS STATE COURT, IN EITHER CASE SITTING
IN DALLAS, TEXAS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, (b) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING, (c) WAIVES PERSONAL SERVICE OF ANY PROCESS AND CONSENTS TO THE
SERVICE OF ANY AND ALL PROCESS BY THE MAILING OF COPIES OF SUCH PROCESS BY
CERTIFIED MAIL TO ITS ADDRESS CONTEMPLATED BY SECTION 9.2 AND (d) TO THE EXTENT
THAT IT HAS OR HEREAFTER MAY ACQUIRE THE SAME, WAIVES, IN RESPECT OF ITS
OBLIGATIONS UNDER OR IN CONNECTION WITH THIS AGREEMENT ANY IMMUNITY FROM THE
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID TO EXECUTION, EXECUTION
OR OTHERWISE) AS TO ITSELF OR ITS PROPERTY.
SECTION 9.11 Arbitration. ANY CONTROVERSY OR CLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE BREACH HEREOF SHALL BE SETTLED BY ARBITRATION
TO BE HELD AT A PLACE DESIGNATED BY PROGRAM MANAGER IN DALLAS, TEXAS. A SINGLE
ARBITRATOR MUTUALLY AGREED TO BY THE PARTIES HERETO SHALL ACT AS ARBITRATOR
PROVIDED THAT, IF THE PARTIES CANNOT AGREE ON AN ARBITRATOR, SUCH SINGLE
ARBITRATOR SHALL BE SELECTED IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION. THE ARBITRATION SHALL BE CONDUCTED IN ACCORDANCE WITH
THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION EXCEPT (a) WITH RESPECT TO THE
SELECTION OF THE ARBITRATOR WHICH SHALL BE AS PROVIDED IN THIS SECTION 9.11 AND
(b) THAT THE ARBITRATOR SHALL DESIGNATE A "LOSING PARTY", AND THE COSTS AND
EXPENSES OF THE ARBITRATOR SHALL BE BORNE BY SUCH LOSING PARTY. THIS AGREEMENT
SHALL BE SPECIFICALLY ENFORCEABLE UNDER THE PREVAILING ARBITRATION LAWS, AND
JUDGMENT UPON THE AWARD RENDERED BY THE ARBITRATOR MAY BE ENTERED AS A FINAL
JUDGMENT IN ANY COURT IN TEXAS OR ELSEWHERE IN ANY COURT HAVING JURISDICTION
THEREOF. THE PARTIES HERETO AGREE TO CONTINUE PERFORMING THEIR RESPECTIVE
OBLIGATIONS UNDER THIS AGREEMENT UNTIL THE ARBITRATION HAS CONCLUDED.
SECTION 9.12 Interest. Anything in this Agreement to the contrary
notwithstanding, Borrower shall never be required to pay any amounts which may
be characterized as unearned interest and shall never be required to pay any
amounts, if characterized as interest, at a rate in excess of the Highest Lawful
Rate, and if the effective rate of interest which would otherwise be payable
under this Agreement would exceed the Highest Lawful Rate, or if Lender shall
receive any amounts characterized as unearned interest or shall receive monies
that are deemed to constitute interest which would increase the effective rate
of interest payable by Borrower under this Agreement to a rate in excess of the
Highest Lawful Rate, then (i) the amount of interest which would otherwise be
payable by Borrower under this Agreement shall be reduced to the amount allowed
by applicable law, and (ii) any unearned interest paid by Borrower or any
interest paid by Borrower in excess of the Highest Lawful Rate shall be refunded
to Borrower. It is further agreed that, without limitation of the foregoing, if
payments made hereunder are characterized as interest, all calculations of the
rate of interest contracted for, charged or received by Lender under this
Agreement are made for the purpose of determining whether such rate exceeds the
Highest Lawful Rate
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applicable to Borrower (such Highest Lawful Rate being the "Lender's Maximum
Permissible Rate"), and shall be made, to the extent permitted by usury laws
applicable to Borrower (now or hereafter enacted), by amortizing, prorating and
spreading in equal parts during the period of the full stated term of this
Agreement all interest at any time contracted for, charged or received by Lender
in connection therewith. If at any time and from time to time (i) the amount of
interest payable to Lender on any date shall be computed at the Lender's Maximum
Permissible Rate pursuant to this Section 9.12 and (ii) in respect of any
subsequent interest computation period the amount of interest payable to Lender
would be less than the amount of interest payable to Lender computed at the
Lender's Maximum Permissible Rate, then the amount of interest payable to Lender
in respect of such subsequent interest computation period shall continue to be
computed at the Lender's Maximum Permissible Rate until the total amount of
interest payable to Lender shall equal the total amount of interest which would
have been payable to Lender if the total amount of interest had been computed
without giving effect to this Section 9.12.
SECTION 9.13 No Oral Agreements. THIS WRITTEN AGREEMENT REPRESENTS THE
FINAL AGREEMENT BETWEEN AND AMONG THE PARTIES HERETO AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES HERETO.
SECTION 9.14 Limited Recourse. Anything herein to the contrary
notwithstanding, the obligation of Borrower to Lender to repay the principal
amount of the Loan and/or interest and fees with respect thereto shall be
limited to the Collateral for the Loan; provided, however, the Borrower (i)
shall be required to perform all of its other covenants, indemnification,
exculpation and other obligations hereunder and (ii) shall remain liable for any
breaches of its representations, warranties and covenants hereunder and for its
indemnification, exculpation and other obligations hereunder.
THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN AND AMONG THE PARTIES HERETO.
14
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in Chicago, Illinois as of the date first above written.
OAK TREE RECEIVABLES, INC.
as Borrower
By: ____________________________________
Name Printed: Michael J. Gerber
Title: Vice President
1111 Park Centre Boulevard
Suite 340
Miami, Florida 33169
Telephone No. (305) 624-0007
Facsimile No. (305) 624-0911
Attention: Michael J. Gerber
SAM FUND I, L.P.,
as Lender
By SAM Fund General Partner, L.L.C.,
its general partner
By:____________________________________
Name Printed: Loy Deloney
Title: Manager
5821 Lakehurst
Dallas, Texas 75230
Telephone No. (214) 363-8171
Facsimile No. (214) 363-3366
Attention: J. Christopher Mallick
15
<PAGE>
SAM PM, L.P.,
as Program Manager
By SAM Holdings General Partner, L.L.C.,
its general partner
By: ____________________________________
Name Printed: Loy Deloney
Title: Manager
8201 Preston Road
Suite 450
Dallas, Texas 75225
Telephone No. (214) 739-4688
Facsimile No. (214) 739-4606
Attention: J. Christopher Mallick
16
<PAGE>
SCHEDULE 1. DEFINITIONS
"Adverse Claim" means any lien, security interest, charge, encumbrance
or other right or claim of any Person other than Lender or Lender's assigns.
"Affiliate" means, as to any Person, any other Person controlling,
controlled by, or under common control with, that Person.
"Agreement" is defined in the preamble.
"Application" means a loan information and application form relating to
Borrower.
"Bankruptcy Event" means, as to any Person, any of the following
events:
(a)(i) a case or other proceeding shall be commenced, without
the application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding up or
composition or readjustment of debts of such Person, the appointment of a
trustee, receiver, custodian, liquidator, assignee, sequestrator or other
similar official for such Person or for any substantial part of its property, or
any similar action as to such Person under any law relating to bankruptcy,
insolvency, reorganization, winding up or composition or adjustment of debts,
and such case or proceeding shall continue unstayed or undismissed for a period
of 30 days; or (ii) an order for relief in respect of such Person shall be
entered in an involuntary case under the Federal bankruptcy laws or other
similar laws now or hereafter in effect; or
(b) such Person (i) shall commence a voluntary case or other
proceeding under any applicable bankruptcy, insolvency, reorganization, debt
arrangement, dissolution or other similar law now or hereafter in effect, or
(ii) shall consent to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, sequestrator or other similar official for,
such Person or for any substantial part of its property, or (iii) shall make any
general assignment for the benefit of creditors, or shall fail to, or admit in
writing its inability to, pay its debts generally as they become due, or, if a
corporation or similar entity, its board of directors shall vote to implement
any of the foregoing described in this clause (b);
"Borrower" is defined in the preamble.
"Borrower Party" is defined in Section 8.3.
"Borrower's Account" means such bank account as Borrower may designate
by notice to Program Manager from time to time.
"Borrowing Base" is defined in Schedule 6.
"Borrowing Base Certificate" is defined in Schedule 5.
"Borrowing Notice" is defined in Section 2.2.
Schedule 1, Page 1
<PAGE>
"Business Day" means a day on which commercial banks in Dallas, Texas
are not authorized or required to be closed for business.
"Cash Collateral Account" is defined in Section 3.8.
"Coast" means 1st Coast Rehabilitation, Inc., a Florida corporation
and/or 1st Coast Physical Medicine Associates, Inc., a Florida corporation.
"Collateral" is defined in Section 2.5.
"Collection and Servicing Agreement is defined in Section 5.1.
"Collection and Servicing Fee" is defined in Section 3.2.
"Collections" means all funds received by or on behalf of Lender,
Borrower, Program Manager or any other Person from or on behalf of Obligors in
payment of any amount owed with respect to any Receivable.
"Commitment" is defined in Section 2.1.
"Commitment Termination Date" is defined in Section 2.1
"Commitment Amount" is defined in Section 2.1.
"Constituent Documents" means, with respect to a Person which is a
corporation, its certificate (or articles) of incorporation and by-laws, with
respect to a Person which is a limited partnership, its certificate of limited
partnership and agreement of limited partnership, and with respect to any other
Person, documents which are similar in purpose to the foregoing.
"Contract" means an agreement that requires an Obligor to pay for
services rendered or medical equipment or goods sold, leased or rented to
individuals by Borrower or an Affiliate of Borrower from time to time, including
an agreement with any Managed Care Obligor or with an Insurance Obligor or a
Governmental Obligor.
"Data Interface" is defined in Section 4.2.
"Date of Service" means with respect to medical services rendered or
goods provided by Borrower to an individual, the date the services or goods
giving rise to the related Receivable were rendered or provided.
"Default Rate" is defined in Section 3.1.
"Dollar" and "$" mean lawful money of the United States of America.
"DRG Code" means a Diagnosis Related Group code.
"Edited Face Value" is defined in Schedule 6.
Schedule 1, Page 2
<PAGE>
"Eligible Receivables" is defined in Section 2.4.
"EOB" means the explanation of benefits, remittance advice or other
record that is provided by an Obligor explaining how it determined the amount it
will or will not pay with respect to a Receivable of which it is the Obligor.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Event of Default" means any of the following:
(a) failure on the part of Borrower to remit any sums payable
by it under this Agreement, the Note or any other Transaction Document when due;
(b) failure on the part of Borrower to deliver any information
required pursuant to a Transaction Document within five calendar days after the
date on which such information is required to be delivered;
(c) failure on the part of Borrower to observe or perform in
any material respect any other term, covenant, condition or agreement contained
in this Agreement or any other Transaction Document, if such failure has not
been cured within 30 days after the earlier of (i) Borrower having actual
knowledge of such failure or (ii) receipt of written notice thereof by Borrower
from Program Manager or Lender;
(d) any representation or warranty of Borrower contained in
this Agreement or any other Transaction Document proves to have been false or
misleading in any material respect when made or deemed made;
(e) a Bankruptcy Event shall have occurred with respect to
Borrower; or
(f) the Internal Revenue Service shall file notice of a lien
pursuant to Section 6323 of the Internal Revenue Code of 1986, as amended, with
regard to any of the assets of Borrower and such lien shall not have been
released within 5 days, or the Pension Benefit Guaranty Corporation shall, or
shall indicate its intention to, file notice of a lien pursuant to Section 4068
of ERISA with regard to any of the assets of Borrower or any of its Affiliates.
"Facility Fee" is defined in Section 3.2.
"Final Payout Date" means the date following the Maturity Date on which
the Loan and all other Obligations payable by Borrower under the Transaction
Documents have been paid in full.
"Government Consents" means approvals of governmental authorities
necessary for Borrower's business as currently conducted and proposed to be
conducted, the ownership, use, operation and maintenance of its properties,
facilities and assets and the performance by Borrower of the transactions
contemplated by the Transaction Documents.
"Government Entity" means the United States, any state thereof or the
District of Columbia, any political subdivision of any of the foregoing and any
agency or instrumentality of any of the foregoing or any fiscal intermediary
thereof.
Schedule 1, Page 3
<PAGE>
"Government Lock-Box" means the lock-box created by each Seller
pursuant to Section 4.2(c).
"Government Lock-Box Account" means the lock-box account created by
each Seller pursuant to Section 4.2(c).
"Government Obligor" means a Government Entity that is obligated to
make any payments with respect to Receivables representing amounts owing under
Medicare, Medicaid or any other program established by Federal or state law
which provides for payments for health care goods or services to be made to
providers thereof; provided that "Government Obligor" shall not include any
workmen's compensation program.
"Government Receivable" means a Receivable that is payable by a
Government Obligor.
"Highest Lawful Rate" means, on any date, the maximum nonusurious
interest rate that may under applicable federal and applicable state law be
contracted for, charged or received under such laws.
"HMO" means any health maintenance organization.
"Indemnified Amounts" means any and all damages, losses, claims,
liabilities and related costs and expenses, including reasonable attorneys' fees
and disbursements.
"Indemnified Party" is defined in Section 8.1.
"Insurance Obligor" means an Obligor that is an Insurer.
"Insurer" means any non-individual Person (other than a Government
Obligor) located in the United States that, in the ordinary course of its
business, agrees to pay for health care goods and services received by
individuals, including a commercial insurance company, a nonprofit insurance
company, an employer or union that self-insures for employee or member health
insurance, or a Managed Care Obligor. "Insurer" includes insurance companies
issuing health, personal injury or other types of insurance.
"Lender" is defined in the preamble. All references to Lender in this
Agreement shall include its successors, designees and assigns (whether or not
such successors, designees or assignees are specifically mentioned in any
particular provision of this Agreement).
"Lender's Account" means such bank account as Program Manager may
designate from time to time in a writing to Borrower.
"Lender's Maximum Permissible Rate" is defined in Section 9.12.
"Lien" means a mortgage, pledge, lien, security interest, charge,
encumbrance or preference, priority or other security agreement or preferential
agreement or arrangement of any kind or nature whatsoever (including any
retained security title of a conditional vendor or lessor, any capitalized
leases and the filing of any financing statement under the UCC or comparable law
of any jurisdiction).
"Loan" is defined in Section 2.1.
Schedule 1, Page 4
<PAGE>
"Loan Date" means with respect to the Loan, the date upon which the
Loan is made; provided that the Loan Date shall not occur on or after the
Commitment Termination Date.
"Lock-Box" means each Lock-Box established pursuant to a Transaction
Document.
"Lock-Box Account" means the Non-Government Lock-Box Account.
"Lock-Box Agreement" means the Non-Government Lock-Box Agreement.
"Lock-Box Bank" means any bank identified as a "Lock-Box Bank" in a
Lock-Box Agreement.
"Managed Care Obligor" means an Obligor that is an MSO, a PPO, an HMO,
an MCO, or any entity or any comparable Person where the primary contractual
relationship for payment of medical services is between such Person and the
patient or beneficiary and not such Person and the medical service providers.
"Material Adverse Effect" means a material adverse effect on (a) the
financial condition, operations, assets, business, properties or prospects of
Borrower, (b) the ability of Borrower to perform its obligations under any
Transaction Document or to exercise its rights under any Contract or (c) the
performance of the Eligible Receivables.
"Maturity Date" means the date this Agreement is terminated, which
shall be the earliest of (i) September 16, 1997, (ii) the date specified by
Borrower in a notice to Program Manager (which notice may be given with or
without cause), which date shall fall at least 240 days after the date such
notice is sent, (iii) the date on which a Bankruptcy Event with respect to
Borrower shall have occurred and (iv) the date after the occurrence and
continuation of any Event of Default (other than in clause (iii)) upon the
giving of notice by Program Manager to Borrower.
"MCO" means a managed care organization.
"Medicaid" means the medical assistance program established by a state
pursuant to Title XIX of the Social Security Act of 1935, 42 U.S.C. ss.ss. 1396
et seq.
"Medical Records" means all Records that evidence, or otherwise relate
to, health care services rendered, or health care goods provided, by Borrower to
an individual.
"Medicare" means the health insurance program established by Title
XVIII of the Social Security Act of 1935, 42 U.S.C. ss.ss. 1395 et seq.
"MSO" means a managed service organization.
"Non-Government Lock-Box Agreement" means the agreement delivered
pursuant to clause (i) of Schedule 2.
"Note" is defined in Section 3.7.
Schedule 1, Page 5
<PAGE>
"Obligations" means the Loan, all amounts due by Borrower under the
Note, this Agreement and the other Transaction Documents.
"Obligor" means, with respect to any Receivable, the Person primarily
or secondarily obligated to make payments on that Receivable.
"Obligor Notice" means, as the case may be, a notice to an Insurance
Obligor in the form of Exhibit B-1 or a notice to Government Obligor in the form
of Exhibit B-2.
"Parent" means Oak Tree Medical Systems, Inc., a Delaware corporation.
"Person" means an individual, partnership, corporation, trust
(including a business trust), joint stock company, limited liability company,
unincorporated association, joint venture, government or any agency or political
subdivision thereof or any other entity, whether acting in an individual,
fiduciary or other capacity.
"PPO" means a preferred provider organization.
"Program Manager" is defined in the preamble. All references in this
Agreement to the Program Manager shall include its successors, designees and
assigns (whether or not such successors, designees or assigns are specifically
mentioned in any particular provision of this Agreement).
"Receivable" means any right of Borrower to payment from an Obligor,
whether or not constituting an account, chattel paper, an instrument, a general
intangible or an interest in or claim under any policy of insurance, arising (a)
from the sale, rental or lease of health care goods (including medical
equipment) to an individual or the provision of health care services to an
individual (and any services or sales ancillary thereto) or (b) under health
care capitation and similar agreements, in each case including all rights and
remedies of Borrower relating thereto (including all guarantees, security
interests and other arrangements supporting or securing such a right to
payment), together with any and all proceeds in any way derived, directly or
indirectly, from any of the foregoing.
"Receivables Information" means, with respect to any Receivable, (a)
the name and social security number of the applicable patient, (b) the Date of
Service relating to that Receivable, (c) the diagnosis, procedures and services
relating to that Receivable, (d) the charges therefor, (e) any other information
required to complete a HCFA 1500 form with respect to that Receivable, (f) any
other information that an applicable Obligor will require in order to accept,
process and make timely payment on that Receivable and (g) any other information
specified from time to time by Program Manager.
"Receivables List" means the Receivable-by-Receivable list attached to
a Borrowing Base Certificate.
"Records" means books, documents, papers, patient files, patient health
records and other records and information (including information contained in or
on computer programs, disks and tapes) that evidence Receivables or are
otherwise necessary or desirable to collect Receivables (including all Medical
Records).
"Rejected Receivable" is defined in Section 2.4.
Schedule 1, Page 6
<PAGE>
"Reviewing Person" means each of Lender, Program Manager and their
respective agents and designees, including any Person that is permitted by
Paragraph 2 of Schedule 5 to be physically present in the administrative offices
of Borrower during normal business hours.
"Riverside" means Riverside CORF, Inc., a Florida corporation.
"Seller" means one of Riverside or Coast.
"Support Servicer" means any Person designated from time to time as
such in a notice from Program Manager to Borrower.
"Taxes" means any present or future income, unemployment or other
taxes, fees, duties, withholding or other charges of any nature whatsoever
imposed by any taxing authority (whether pursuant to Federal, state or local
law).
"Transaction Accounts" means each account established pursuant to the
Transaction Documents including the Cash Collateral Account and the
Non-Government Lock-Box Account established pursuant to the Non-Government
Lock-Box Agreement.
"Transaction Documents" means this Agreement, the Note and any other
documents or agreements to be executed and delivered in connection herewith.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction or jurisdictions.
"Weekly Payment Date" means the first Business Day of each week.
Schedule 1, Page 7
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SCHEDULE 2. INITIAL CONDITIONS
(Section 4.1)
Documents to be delivered:
(a) The Application, duly completed by Borrower, together with all of
the information called for by the Application.
(b) A certificate of the Secretary or Assistant Secretary of Borrower
certifying:
(i) the Constituent Documents of Borrower, with the applicable
Constituent Documents having been duly certified by the Secretary of State of
Borrower's state of formation, as of a recent date acceptable to Program
Manager;
(ii) a copy of the resolutions of the Board of Directors of
Borrower approving the Transaction Documents and the transactions contemplated
thereby; and
(iii) the names and true signatures of the officers authorized
on Borrower's behalf to sign the Transaction Documents (on which certificate
Program Manager and Lender may conclusively rely until such time as Program
Manager shall receive from Borrower a revised certificate meeting the
requirements of this clause (b)(iii)).
(c) A good standing certificate for Borrower issued by the Secretary of
State of Borrower's state of formation.
(d) A search report provided in writing to Program Manager by a Person
acceptable to Program Manager, listing all effective financing statements that
name Borrower, Parent, Riverside or Coast as debtor and that are filed in the
jurisdictions in which filings were made pursuant to Section 4.2(h) and in such
other jurisdictions as Program Manager may reasonably request, together with
copies of such financing statements and searches of applicable Federal and state
court and agency dockets and lien records showing any judgment, Tax and ERISA
liens affecting the Receivables.
(e) A power of attorney from Borrower in substantially the form of
Exhibit E.
(f) One or more financing statements signed by Borrower, Parent,
Riverside or Coast and each secured party that has an Adverse Claim on
Receivables of Borrower, Parent, Riverside or Coast and other items covered by
Section 2.5, which are necessary or, in the opinion of Program Manager,
desirable under the UCC or any comparable law of all appropriate jurisdictions
to terminate such Adverse Claim, together with, if applicable, signed payoff
letters from such secured party.
(g) The Note, duly executed by Borrower.
(h) A duly executed Collection and Servicing Agreement.
(i) A duly executed Non-Government Lock-Box Agreement.
(j) A Borrowing Base Certificate in substantially the form of Exhibit
F.
Schedule 2, Page 1
<PAGE>
(k) Such other agreements, instruments, certificates, opinions and
other documents as Program Manager may reasonably request.
Other conditions:
(l) Program Manager shall have designated each of the initial Lender's
Account and Support Servicer in writing to Borrower.
(m) Program Manager shall have received any applicable written
disclosure contemplated by Paragraph 5 of Schedule 3 or Paragraph 3 of Schedule
4.
(n) Payment of $2,000 to Lender's counsel.
Schedule 2, Page 2
<PAGE>
SCHEDULE 3. REPRESENTATIONS AND WARRANTIES
AS TO BORROWER
1. Existence, etc. Borrower was duly formed and is validly existing and
in good standing under the laws of its state of organization and is duly
qualified to do business, is in good standing and possesses all necessary
licenses and approvals in each jurisdiction in which the nature of its business
requires such qualification, licenses or approvals. Borrower is a wholly-owned
Subsidiary of Parent.
2. Authorization, etc. The execution, delivery and performance by
Borrower of the Transaction Documents to which it is a party, including the
granting of a Lien on the Collateral by Borrower to Lender, (a) are within
Borrower's powers or legal capacity, (b) have been duly authorized by all
necessary action, (c) do not contravene or conflict with (i) Borrower's
Constituent Documents, (ii) any Contract or any other contractual restriction
binding on or affecting Borrower or its property or (iii) any law, rule,
regulation, order, writ, judgment, award, injunction or decree binding on or
affecting Borrower or any of its property, (d) do not result in the imposition
of any Adverse Claim on any of Borrower's properties, other than pursuant to the
Transaction Documents, (e) do not require any authorization, consent, approval
or other action by, or notice to or filing with, any governmental authority or
regulatory body or other Person, except for the filing of the financing
statements referred to in Section 4.2(h), and (f) do not require compliance with
any bulk sales act or similar law.
3. Enforceability. This Agreement and each of the other Transaction
Documents has been duly executed and delivered by Borrower and constitutes a
legal, valid and binding obligation of Borrower enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
4. Financial Statements. The balance sheets of Borrower and Parent,
respectively, and the related statements of income of Borrower and Parent,
respectively, for the fiscal year then ended, copies of which have been
furnished to Program Manager, fairly present the financial condition of Borrower
and Parent, respectively, as at such date and the results of the operations of
Borrower and Parent, respectively, for the period ended on such date. Since the
date of such financial statements, there has been no material adverse change in
the financial condition, operations, assets, business, properties or prospects
of Borrower and Parent, respectively.
5. Proceedings. Each litigation, arbitration, governmental
investigation or proceeding, labor controversy or other proceeding which is
pending (or which has been threatened in writing) affecting Borrower, or any of
its properties, businesses, assets or revenues has been disclosed in writing to
Program Manager.
6. Regulatory Matters; Contracts. (a) Borrower has all necessary
permits, licenses, agreements, accreditations, certifications, identification
numbers and Government Consents to operate and conduct its business as it is
presently being conducted, subject to minor exceptions and deficiencies which
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
(b) Each Contract relating to an Eligible Receivable is the legal,
valid, binding and enforceable obligation of the related Obligor, is in full
force and effect and has not been amended or otherwise
Schedule 3, Page 1
<PAGE>
modified, rescinded or revoked or assigned. Borrower and the related Obligor
each is in compliance with the requirements of each Contract relating to an
Eligible Receivable.
7. UCC Matters. The chief executive office of Borrower is located at
Borrower's address referred to in Section 9.2 (or at other locations that have
been notified to Program Manager in accordance with Paragraph 6 of Schedule 5
and are located in jurisdictions where all actions required by that Paragraph
have been completed). Borrower's legal name is as set forth in the preamble to
this Agreement, and except as set forth in the Application, Borrower has not
changed its name in the last six years and, during such period, Borrower did not
use, and Borrower does not now use, except as otherwise permitted by Paragraph 6
of Schedule 5, any trade names, fictitious names, assumed names or "doing
business as" names. Borrower has not changed the location of its chief executive
office or its name, identity or corporate structure within the four months prior
to the date of this Agreement. Borrower does not have an office or assets in the
States of Colorado, Kansas, New Mexico, Oklahoma, Utah or Wyoming.
8. Solvency. Borrower is solvent and will not become insolvent after
giving effect to the transactions contemplated by this Agreement; Borrower has
not incurred debts or liabilities beyond its ability to pay and is paying its
debts as they come due; Borrower will, after giving effect to the transactions
contemplated by this Agreement, have an adequate amount of capital to conduct
its business in the foreseeable future; and the Loan hereunder are made in good
faith and Borrower has no actual intent to hinder, delay or defraud either
present or future creditors of Borrower.
9. Taxes. Borrower or Parent has filed on a timely basis all Federal,
state and local Tax returns required to be filed and has paid, or made adequate
provision for payment of, all Taxes, assessments and other governmental charges
due from Borrower or Parent.
10. ERISA. Each pension plan or profit sharing plan to which Borrower
or Parent is a party has been fully funded in accordance with the obligations of
Borrower or Parent set forth in such plan.
11. Information. All documents, Medical Records, Receivables
Information and other information furnished by or on behalf of Borrower to
Lender, Support Servicer, Program Manager and any transferees, agents and
employees of any thereof prior to the date of this Agreement and during the term
of this Agreement, or in connection with any transaction contemplated by this
Agreement, do not and will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
Schedule 3, Page 2
<PAGE>
SCHEDULE 4. REPRESENTATIONS AND WARRANTIES
AS TO ELIGIBLE RECEIVABLES
1. With respect to each such Receivable: (a) its Obligor (i) is an
Insurance Obligor, a Government Obligor or other Obligor agreed to in writing by
Lender,, (ii) is a resident of the United States, (iii) is not an Affiliate of
Borrower, (iv) is the primary Obligor with respect to such Receivable; and (v)
is not the subject of a Bankruptcy Event.
(b) the Date of Service for such Receivable is at least 60 days
prior to the statutory and contractual filing deadline for collection applicable
to such Receivable;
(c) it is denominated and payable only in dollars in the United
States and has an Edited Face Value not in excess of fifty thousand dollars
($50,000); and
(d) it is not a Receivable (or in a category of Receivables) as
to which Program Manager has notified Borrower that Program Manager has
determined prior to the date of such determination, in its sole discretion, that
such Receivable (or category of Receivables) is unacceptable for inclusion in
the Borrowing Base.
2. The Obligors identified on each Receivables List are obligated to
pay at least the Edited Face Value of the related Receivables described thereon.
3. None of such Receivables (a) has been compromised, adjusted,
extended, satisfied, subordinated, rescinded, set off or modified (and no
obligations of the related Obligor with respect thereto have been waived) or (b)
is subject to compromise, adjustment, extension, satisfaction, subordination,
rescission, set off, counterclaim, defense or any other modification whether
arising out of transactions concerning the Contract or otherwise unless the same
has been disclosed in writing to Program Manager and is acceptable to Program
Manager.
4. True and correct copies of all Medical Records relating to each such
Receivable have been delivered by Borrower to Program Manager, on behalf of
Lender.
5. Each such Receivable is owned by Borrower free and clear of any
Adverse Claim, other than (a) the rights of Lender under this Agreement; (b) any
rights of any Person claiming under Lender; and (c) any rights of an Obligor
potentially to assert that the amount billed with respect to such Receivable
exceeds the amount that the Obligor must pay pursuant to applicable law or
contract. No Obligor of any such Receivable has received any notice of any
Adverse Claim against, interest in, or Lien on all or any part of such
Receivable and the other items assigned pursuant to Section 2.5 other than
interests being granted to Lender and its assignees and other than any such
adverse claim, interest, or lien that will no longer exist immediately after
such date.
6. Section 2.5 vests in Lender a valid security interest in such
Receivables and other items purported to be created thereby. No action, other
than the execution and delivery of this Agreement, the filing of UCC financing
statements in the state in which Borrower's office referenced in Section 9.2 is
located, the execution and delivery of the Obligor Notices, and the giving of
value by Lender is required to perfect the interest of Lender in the Collateral
acquired by Lender, and all such actions have been accomplished by the date each
such Receivable is included in the Borrowing Base (it being understood
Schedule 4, Page 1
<PAGE>
that Section 4.2 contemplates that Program Manager will send Obligor Notices to
the applicable Obligors). No effective financing statement or other similar
instrument covering any such Receivable or any interest therein is on file in
any recording office except such as may be filed in favor of (or against) Lender
or Lender's assigns.
7. Each such Receivable and each of the related Contracts:
(a) was created in accordance with and complies in all respects
with all laws, rules, regulations, orders, decrees and directives applicable
thereto (including laws, rules, regulations, orders, decrees and directives
relating to usury, consumer protection, truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection practices
and privacy), and no party to such related Contracts is in violation of any such
law, rule, regulation, order, decree or directive in any material respect; and
(b) is in full force and effect and represents and constitutes
a legal, valid and binding obligation of the related Obligor, enforceable
against such Obligor in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is considered in
a proceeding in equity or at law.
8. Each such Receivable (a) is payable, in an amount equal to not less
than its Edited Face Value, by the Obligor identified by Borrower as being
obligated to do so, (b) is based on an actual and bona fide rendition of health
care services to, or the furnishing of goods to, an individual by Parent in the
ordinary course of its business, and (c) is not evidenced by instruments or
chattel paper within the meaning of the UCC.
9. The goods and services provided and reflected in each such
Receivable were medically necessary, and the patient has received such goods or
services.
10. The Edited Face Value for each such Receivable (a) does not exceed
the usual, customary and reasonable fees charged by other medical service
providers in each of Parent's and the applicable patient's community for
services or goods which are the same as or similar to the services or goods
constituting the basis for such Receivable and (b) does not exceed any
limitations imposed by any applicable workmen's compensation statute or
regulations or contracts for reimbursement from the related Obligor.
11. Parent has treated the assignment of such Receivables to Borrower
as a sale or contribution for all purposes, including Tax and accounting
purposes, and has reflected such sale or contribution treatment in all of
Parent's and Borrower's relevant books, records, computer files, tax returns,
financial statements other applicable documents and regulatory filings. The
patient to which such Receivable relates has signed an assignment of benefits
evidencing such patient's intent to assign its rights to payment with respect to
such Receivable for collateral purposes to Borrower and its assignees.
12. There are no actions, suits, proceedings or investigations pending
or threatened before any court, administrative agency, arbitrator, governmental
body or other tribunal (i) asserting the invalidity of a Receivable or any
Contract related thereto, (ii) with respect to any Receivable, relating to the
bankruptcy or insolvency of the related Obligor, (iii) seeking the payment of
such Receivable or payment
Schedule 4, Page 2
<PAGE>
or performance of such Contract or (iv) seeking any determination or ruling that
might adversely affect the validity, collectibility, timely payment or
enforceability of such Receivable or any Contract related thereto.
13. Intentionally Left Blank.
14. No default has occurred under any Contract relating to any
Receivable which is reasonably likely to have a material adverse effect on such
Contract or the related Receivable.
15. As to each Receivable which is an interest in or claim under any
policy of insurance, such policy of insurance contains no provisions restricting
or in any way conditioning the assignability of any interest in or claim under
such policy of insurance.
16. All such Receivables were generated by Riverside or Coast, each of
which is a wholly- owned subsidiary of Parent.
Schedule 4, Page 3
<PAGE>
SCHEDULE 5. BORROWER'S COVENANTS
1. Legal Matters. (a) Borrower shall comply in all respects with all
applicable laws, rules, regulations and orders and preserve and maintain its
existence, rights, franchises, qualifications and privileges. Borrower shall pay
all of its Taxes when due, unless and only to the extent that Borrower is
contesting such Taxes in good faith and by appropriate proceedings (and has set
aside on its books adequate reserves relating thereto in accordance with
generally accepted accounting principles).
(b) Borrower shall comply, in all respects, with all laws, acts, rules,
regulations, orders, decrees and directives of any Federal, state or local
governmental authority (including laws, rules and regulations relating to usury,
consumer protection, truth-in-lending, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collections and privacy)
applicable to the Receivables or any part thereof or any related Contracts and
with respect to Borrower and its business and properties.
(c) Borrower shall comply, in all material respects, with its
obligations under the Contracts relating to Receivables. The exercise by Lender,
Program Manager or any of their respective agents or designees (including
Support Servicer) or assignees of rights hereunder shall not relieve Borrower
from such obligations.
2. Books and Records; Access. (a) Borrower shall (i) keep its books and
accounts in accordance with sound accounting principles and, (ii) make a clear
and unambiguous notation on its computer files and other books and records to
indicate that its Receivables have been assigned to Lender as security. Borrower
also shall maintain and implement administrative and operating procedures
pursuant to Program Manager's instructions (including an ability to recreate
records evidencing Receivables and related Contracts in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable to assist
Program Manager in collecting all Receivables after the occurrence and
continuation of an Event of Default.
(b) Borrower shall permit each Reviewing Person at all times to have
full and free access during normal business hours to all the books,
correspondence and records of Borrower insofar as they relate to the
Receivables, to examine the same, to take extracts therefrom and to make
photocopies thereof, and Borrower agrees to render to each Reviewing Person, at
Borrower's cost and expense, such clerical and other assistance as may be
reasonably requested in connection with the exercise of the foregoing rights.
Borrower shall, from time to time during regular business hours as requested by
a Reviewing Person, discuss matters relating to the Receivables or Borrower's
performance under the Transaction Documents or the Contracts relating to the
Receivables with any of the officers or employees of Borrower having knowledge
of such matters.
(c) Borrower shall treat the transactions contemplated by this
Agreement, including the assignment for security of each Receivable to Lender,
as a Loan from Lender to Borrower for all purposes, including Tax and accounting
purposes, and shall reflect loan treatment in all of Borrower's relevant books,
records, computer files, Tax returns, financial statements and other applicable
documents and regulatory filings.
(d) Borrower agrees that Program Manager shall be permitted to have at
least one of its employees or designated representatives physically present in
the administrative offices of Borrower during normal business hours for such
purposes as Program Manager may deem appropriate in connection
Schedule 5, Page 1
<PAGE>
with this Agreement. Borrower agrees that such employees or designated
representatives shall have the same privilege of access to its files and records
and communication with its employees pertaining to the collection of Receivables
as Borrower's own employees.
(e) Borrower hereby grants each Reviewing Person the right of access to
an inspection of, during Borrower's regular business hours, all Records and all
facilities of Borrower, or facilities used by Borrower or by third parties on
behalf of Borrower, including facilities at which billing, processing,
collection, administration or servicing activities occur or have occurred with
respect to Receivables, and including facilities for cash and payment receipts
and processing. This right of access may be exercised at any time and from time
to time and shall include the right: (i) to examine and make copies of and
abstracts from all records of Borrower and its agents or contractors relating to
its Receivables and the processing and administration thereof and to Borrower's
performance and nonperformance of its duties and obligations hereunder; (ii) to
visit the offices and properties of Borrower and its agents and contractors for
the purposes of examining the records referred to in clause (i) of this
sentence; and (iii) to discuss matters relating to such matters with any
officer, employee, agent or representative of Borrower or its contractors
believed by a Reviewing Person to have knowledge of such matters. Borrower shall
cooperate and be responsible for the compliance with this Paragraph 2(e) by any
Affiliate or other Person engaged by Borrower to assist in the processing or
administration of Receivables.
3. Reporting. Borrower shall furnish to Program Manager:
(a) as soon as Borrower learns of the occurrence of any Event
of Default, or event that with notice, passage of time or both would become an
Event of Default, notice of such event, followed (as soon as practicable and in
any event within five Business Days of such notice) by a written statement of an
officer identified in the most recent certificate delivered pursuant to Schedule
2 setting forth details of such event and the action that Borrower proposes to
take with respect thereto;
(b) as soon as possible and in any event within three Business
Days of Borrower learning thereof, notice of (i) any previously undisclosed
litigation, investigation or proceeding which could reasonably be expected to
have a Material Adverse Effect, (ii) any material adverse development in
previously disclosed litigation and (iii) the occurrence of any Reportable Event
(as defined in Article IV of ERISA) as to any employee benefit plan for which
Borrower has any liability;
(c) as soon as possible and in any event within one Business
Day of Borrower learning thereof, notice of (i) any disputes, offsets,
deductions, defenses or counterclaims which are or may be asserted by an Obligor
against its obligation to pay any amounts owed on a Receivable or (ii) the
occurrence of any other event or condition that would have caused, or may cause,
the representation and warranty contained in Paragraph 3 of Schedule 4 to no
longer be true and correct if such representation and warranty were made by
Borrower on the date of the occurrence of such event or condition;
(d) promptly, from time to time, updated, completed, signed
copies of the patient consents referred to in Section 4.2(g) of this Agreement
as such information contained in such patient consents previously delivered to
Program Manager changes over time; and
(e) on the first Business Day of each week a Borrowing Base
Certificate substantially in the form of Exhibit F (the "Borrowing Base
Certificate").
Schedule 5, Page 2
<PAGE>
(f) promptly, from time to time, such other information,
documents, records or reports as Program Manager may from time to time
reasonably request.
4. Certain Matters Relating to Receivables and Collections. Borrower
shall not:
(a) except as otherwise expressly provided herein, sell, assign
(by operation of law or otherwise) or otherwise dispose of, or create or suffer
to exist any Adverse Claim upon or with respect to, any Receivable or related
Contract or assign any right to receive income in respect thereof;
(b) compromise, adjust, extend, satisfy, subordinate, rescind,
set off, amend or otherwise modify, or otherwise permit or agree to any
deviation from, the terms and conditions of any Receivable, or except as
disclosed in writing to Program Manager and Lender prior to the effective date
thereof, otherwise amend, modify or waive any term or condition of any Contract
related thereto;
(c) make any change in the character of its business (except
for changes required by state or Federal statutes or regulations or for
continued participation in third-party payment programs), which change would, in
either case, impair the timing of collection or ultimate collectibility of any
Receivable;
(d) change, modify or rescind any direction contained in any
previously delivered Obligor Notice (other than to a Government Obligor); or
(e) otherwise do anything to impair Lender's right in any
Receivable, or impede or interfere with the collection of any Receivable.
5. Payments to Obligors. Borrower shall make all payments to an Obligor
necessary to prevent such Obligor from offsetting an earlier overpayment to
Borrower against any amount which such Obligor owes with respect to a
Receivable, and Borrower shall immediately notify Program Manager in the event
of any action, proceeding, dispute, offset, deduction, defense or counterclaim
that is or may be asserted by an Obligor relating to a Receivable.
6. UCC Matters; Further Assurances. (a) Borrower shall not, without
providing 60 days' prior written notice to Lender and Program Manager and any
designee and filing such UCC financing statements and amendments to any
previously filed financing statements as Program Manager may require, (i) change
the location of its chief executive office or the location of the offices where
the Records are kept or (ii) change its name, identity or structure or use any
trade names, fictitious names, assumed names or "doing business as" names not
listed in the Application.
(b) Borrower shall not permit any Receivable to be evidenced by an
"instrument" or "chattel paper" (as defined in the UCC) unless the same is
delivered to Lender or Program Manager; provided, that such Receivable shall not
thereafter be an Eligible Receivable.
(c) Borrower shall, at its expense, maintain the Data Interface in good
working condition and fully operational and, at its expense, take all further
action that either Program Manager or Support Servicer may reasonably request,
from time to time, in order to fully effectuate the transactions and information
transfers contemplated under the Transaction Documents to the reasonable
satisfaction of each of Program Manager and Support Servicer.
Schedule 5, Page 3
<PAGE>
(d) Borrower shall, at its expense, promptly execute and deliver all
further instruments, Records and documents, and take all further action that
Program Manager may reasonably request, from time to time, in order to perfect,
protect or more fully evidence the Lien of Lender on the Collateral, or to
enable Lender, Support Servicer or Program Manager to exercise or enforce the
rights of Lender hereunder or under the Collateral. Without limiting the
generality of the foregoing, Borrower shall, upon the request of Program
Manager, execute and file such UCC financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be, in the opinion of Program Manager, necessary or appropriate
with respect to all or any of the items covered by Section 2.5. Borrower hereby
authorizes Program Manager to file one or more financing or continuation
statements, and amendments thereto and assignments thereof, relative to all or
any of the items covered by Section 2.5 without the signature of Borrower where
permitted by law. If Borrower fails to perform any of its agreements or
obligations contained in this Agreement, Program Manager may (but shall not be
required to) itself perform, or cause performance of, such agreement or
obligation, and the expenses of Program Manager incurred in connection therewith
shall be payable by Borrower.
7. Hardware and Software. Borrower acknowledges and agrees that all
computer hardware and software provided to Borrower by Program Manager or
Support Servicer in connection with the transactions contemplated by this
Agreement are and shall remain the property of Program Manager or Support
Servicer, as the case may be, and Borrower shall return the same promptly to
Program Manager or the Support Servicer, as the case may be, upon request.
8. Separateness. Borrower will not permit its assets to be commingled
with those of Parent or any Affiliate of Parent. Borrower shall maintain
separate records and books of account from those of Parent and any Affiliate of
Parent, and Borrower shall conduct its business from an office separate from
that of Parent or any Affiliate of Parent, with a telephone number and
stationery which are separate from the telephone number and stationery of Parent
or any Affiliate of Parent (it being understood that, subject to the foregoing,
the office of Borrower may be at the same location as the office of Parent or
any Affiliate of Parent). Borrower will conduct its business solely in its own
name and will cause Parent and each Affiliate of Parent to conduct its
respective business solely in its respective own name so as not to mislead
others as to the identity of the entity with which those others are concerned.
Borrower will not incur any direct, indirect or overhead expenses that are
material for any items shared between Borrower and Parent or any Affiliate of
Parent, other than shared expenses that will be allocated on a basis reasonably
related to the value of services rendered or property used, it being understood
that the organizational expenses of Borrower may be paid by Parent or an
Affiliate of Parent. Borrower will not hold itself out, or permit itself to be
held out, as having agreed to pay, or as being liable for, the debts of Parent
or any Affiliate of Parent, and Borrower shall cause Parent or any Affiliate of
Parent not to hold itself out, or permit itself to be held out, as having agreed
to pay, or as being liable for, the debts of Borrower. Borrower shall not engage
in any transactions with Parent or any Affiliate of Parent except in connection
with the formation and capitalization of Borrower or except in connection with
this Agreement and the other Transaction Documents including the purchase or
Receivables from Parent or Affiliates of Parent. The financial statements of
Borrower shall reflect that it is a corporation which is separate from Parent
and each Affiliate of Parent. Borrower shall observe all formalities of an
independent corporation, and at all times it shall maintain an "Independent
Director" (as such term is used in the Constituent Documents of Borrower).
9. Constituent Documents. Borrower shall not amend its Constituent
Documents without the prior written consent of Lender.
Schedule 5, Page 4
<PAGE>
SCHEDULE 6.
EDITED FACE VALUE; DETERMINATION OF BORROWING BASE ETC.
(Section 2.2)
Following is a summary of certain steps which will be taken in
connection with the determination of the Borrowing Base:
1. From time to time upon the request of Program Manager, but in any
event not less often than on each Weekly Payment Date, Program Manager on behalf
of Lender shall transmit to the Borrower Receivables Information with respect to
all of its existing Receivables in the Borrowing Base. If any such Receivables
Information cannot be communicated through the Data Interface (and prior to the
establishment of the Data Interface pursuant to Section 4.2), Borrower shall
deliver such Receivables Information to Program Manager (or a Person designated
by it), by messenger for same day delivery, if practicable, or, if not
practicable, by Federal Express for next day delivery.
2. Program Manager shall, or shall cause Support Servicer to, review
and evaluate all information set forth in the Receivables Information by, among
other things, generating claim forms to be submitted to Obligors and
communicating with such Obligors.
3. In connection with such review and evaluation Program Manager and
Borrower shall determine which are the Eligible Receivables to be included
within the Borrowing Base. Based upon such review and evaluation, among other
things, Program Manager shall cause an estimate to be made of the amount of
Collections that will be received with respect to such Receivable (such estimate
being referred to as the "Edited Face Value" of such Receivable). The Edited
Face Value of a Receivable may be changed thereafter by Lender.
4. Program Manager shall cause the related Receivables List and one or
more UCC financing statements covering the Receivables described on the
Receivables List to be prepared and delivered to Borrower.
5. Borrower shall execute the related UCC financing statement(s) and
each page of the related Receivables List.
6. Borrower shall then return the related Receivables List as well as
the UCC financing statement(s) to Program Manager.
7. Program Manager shall then review the related Receivables List as
well as the UCC financing statement(s) received by it from Borrower and,
assuming that such items have been properly completed by Borrower, and subject
to the other terms and conditions specified in the Agreement, Lender shall
determine the "Borrowing Base" which shall equal not more than 94.7% of the
aggregate Edited Face Value of all Eligible Receivables minus all Collections
theretofore received by Lender on such Eligible Receivables.
Schedule 6, Page 1
<PAGE>
EXHIBIT A
PROMISSORY NOTE
$1,250,000 September 16, 1996
FOR VALUE RECEIVED, the undersigned, OAK TREE RECEIVABLES, INC., a
Florida corporation ("Borrower"), HEREBY PROMISES TO PAY to the order of SAM
FUND I, L.P. ( "Lender") on the Maturity Date, the principal sum of ONE MILLION
TWO HUNDRED FIFTY THOUSAND DOLLARS ($1,250,000) or, if less, the then aggregate
outstanding principal amount of the Loan.
Borrower also promises to pay interest on the unpaid principal amount
of the Loan from the date of the Loan until such principal amount is paid in
full, at such interest rates, and payable at such times, as are specified in the
Agreement (as defined below).
Both principal and interest are payable in lawful money of the United
States of America in immediately available funds at the office of Lender at 5821
Lakehurst, Dallas, Texas 75230, or at such other address as Lender shall notify
Borrower, for the account of the Lender, free and clear of, and without
deduction for or on account of, any and all present and future taxes, levies,
imposts, deductions, charges, withholdings and all liabilities with respect
thereto, all as set forth in the Agreement. The Loan, and all payments made on
account of principal hereof, will be recorded by Lender and, prior to any
transfer hereof, endorsed on the grid attached hereto which is a part of this
promissory note.
This promissory note is the Note referred to in, and is entitled to the
benefits of, the Health Care Receivables Loan and Security Agreement dated as of
September 16, 1996 (as the same may be amended, restated or otherwise modified
or supplemented from time to time, the "Agreement"), between Borrower, Lender
and SAM PM, L.P., which Agreement, among other things, contains provisions for
acceleration of the Maturity Date upon the occurrence of certain stated Events
of Default and also for prepayments on account of principal hereof prior to the
Maturity Date upon the terms and conditions specified in the Agreement.
Capitalized terms used but not defined in this promissory note shall
have the meaning assigned to each such term in the Agreement.
THIS NOTE SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY
THE INTERNAL LAWS OF THE STATE OF TEXAS.
OAK TREE RECEIVABLES, INC.
By______________________
Title:
<PAGE>
<TABLE>
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LOAN AND PRINCIPAL AMOUNTS
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Amount of Loan Made Amount of Principal Repaid Unpaid Principal Balance
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Date Notation Made By
<S> <C> <C> <C> <C>
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</TABLE>
<PAGE>
EXHIBIT B-1
FORM OF NOTICE TO NON-GOVERNMENT OBLIGORS
[Letterhead of the Borrower]
CERTIFIED MAIL; [Date]
RETURN RECEIPT REQUESTED
[Name and Address
of Obligor]
To Whom it May Concern:
[The purpose of this letter is to notify you that we have granted a
Lien to SAM Fund I, L.P. (the "Lender") on receivables with respect to which you
are obligated to pay us.] You are hereby irrevocably directed to make or send
all Explanations of Benefits, remittance advices and other forms of payment,
including checks, to the following address:
Post Office Box [ ]
[ ]
Reference:
This direction may not be changed, modified or rescinded other than by
written instrument executed by the Lender.
OAK TREE RECEIVABLES, INC.
By:________________________________
Name Printed:______________________
Title:_____________________________
[Not required to be sent if sent under applicable Receivables Purchase
Agreement.]
<PAGE>
EXHIBIT B-2
FORM OF NOTICE TO GOVERNMENT OBLIGORS
[Letterhead of Borrower]
CERTIFIED MAIL; [Date]
RETURN RECEIPT REQUESTED
[Name and Address
of Government Obligor]
To Whom it May Concern:
You are hereby directed to make or send all Explanations of Benefits,
remittance advices and other forms of payment, including checks, to the
following address:
Post Office Box [ ]
[ ]
Reference:
OAK TREE RECEIVABLES, INC.
By:________________________________
Name Printed:______________________
Title:_____________________________
[Not required to be sent if sent under applicable Receivables Purchase
Agreement.]
<PAGE>
EXHIBIT C
FORM OF UCC FINANCING STATEMENT(S)/1/
Debtor Secured Party
Oak Tree Receivables, Inc. SAM Fund I, L.P.
_________________________ 5821 Lakehurst Avenue
_________________________ Dallas, Texas 75230
_________________________
_________________________
Tax I.D. No._________________
Description of Collateral
Accounts, chattel paper, instruments, general intangibles, interests in or
claims under any policy of insurance, records, contracts, Transaction Accounts,
Lock-Boxes all funds and other items on deposit in the Transaction Accounts and
the Lock-Boxes, and all certificates, agreements and instruments, if any, from
time to time evidencing each Transaction Account, each Lock-Box and all funds
and other items on deposit in each Transaction Account and each Lock-Box, and
all proceeds of and amounts received or receivable under any of the foregoing;
all as more fully described and specified in Schedule I attached hereto and made
a part hereof.
/X/ Proceeds [/X/ products] of collateral are also covered.
Number of additional sheets presented: 2
Signature of Debtor Signature of Secured
Party
OAK TREE RECEIVABLES, INC. SAM Fund I, L.P., by
SAM Fund General Partner, L.L.C., its
general partner
By____________________ By____________________
[Title] [Title]
- ------------------
/1/ This page illustrates information to be used in completing UCC-1
financing statements to be filed pursuant to this Agreement.
<PAGE>
SCHEDULE I
to
Uniform Commercial Code Financing Statement
on Form UCC-1
Naming:
DEBTOR
OAK TREE RECEIVABLES, INC.
1111 Park Centre Blvd., Suite 340
Miami, Florida 33169
SECURED PARTY
SAM Fund I, L.P.
5821 Lakehurst Avenue
Dallas, Texas 75230
The financing statement (the "Financing Statement") to which this
Schedule I is attached and of which it is made a part covers all of the Debtor's
right, title and interest in, to and under the following, whether now or
hereafter owned, existing or arising (herein called the "Collateral"): (a) all
Receivables, (b) all Records relating to such Receivables, (c) all Contracts
relating to such Receivables, and (d) all proceeds of and amounts received or
receivable (including without limitation all Collections) under any or all of
the foregoing.
The Financing Statement is being filed to perfect (i) all interests
in the Collateral granted to the Secured Party by the Debtor pursuant to the
Loan and Security Agreement, and (ii) the security interest granted by the
Debtor to the Secured Party in the Collateral.
As used herein, the following terms shall have the meanings set forth
below:
"Collections" means all funds which are received by or on behalf of
Debtor, Secured Party, Program Manager or any other Person from or on behalf of
Obligors in payment of any amount owed with respect to any Receivable.
"Contract" means an agreement that requires an Obligor or an
Affiliate of Debtor to pay for services rendered or medical equipment or goods
sold, leased or rented to individuals by Debtor from time to time.
"Loan and Security Agreement" means that certain Health Care
Receivables Loan and Security Agreement among Debtor, Secured Party, and Program
Manager, as the same may be amended, amended and restated or otherwise modified
from time to time in accordance with its terms.
<PAGE>
"Lock-Box" means each Lock-Box established pursuant to a Transaction
Document.
"Medical Records" means all Records that evidence, or otherwise
relate to, health care services rendered, or health care goods provided, by
Debtor to an individual.
"Obligor" means, with respect to any Receivable, the Person primarily
or secondarily obligated to make payments on that Receivable.
"Person" means an individual, partnership, corporation, trust
(including without limitation a business trust), joint stock company, limited
liability company, unincorporated association, joint venture, government or any
agency or political subdivision thereof or any other entity, whether acting in
an individual, fiduciary or other capacity.
"Program Manager" means SAM PM, L.P. or any successor.
"Receivable" means any right of Debtor to payment from an Obligor,
whether or not constituting an account, chattel paper, an instrument, a general
intangible or an interest in or claim under any policy of insurance, arising (a)
from the sale, rental or lease of health care goods (including without
limitation medical equipment) to an individual or the provision of health care
services to an individual (and any services or sales ancillary thereto) or (b)
under health care capitation and similar agreements, in each case including
without limitation all of the rights and remedies of Debtor relating thereto
(including without limitation all guarantees, security interests and other
arrangements supporting or securing such a right to payment), together with any
and all proceeds in any way derived, directly or indirectly, from any of the
foregoing. The Receivables shall be limited to those listed on Annex A hereto as
supplemented from time to time to replace rejected receivables.
"Records" means books, documents, papers, patient files, patient
health records, and other records and information (including without limitation
information contained in or on computer programs, disks and tapes) that evidence
Receivables or are otherwise necessary or desirable to collect Receivables
(including without limitation all Medical Records).
"Transaction Accounts" means each account established pursuant to the
Transaction Documents including the Cash Collateral Account, and the
Non-Government Lock-Box Account established pursuant to the Non-Government
Lock-Box Agreement.
"Transaction Documents" means this Agreement, the Note and any other
documents or agreements to be executed and delivered in connection herewith.
"UCC" means the Uniform Commercial Code as from time to time in
effect in the applicable jurisdiction or jurisdictions.
<PAGE>
ANNEX A
RECEIVABLES LIST
[TO BE ATTACHED]
<PAGE>
EXHIBIT D
FORM OF LETTER AMENDING BORROWING BASE DETERMINATION
[Letterhead of Program Manager]
________________, 199_
CERTIFIED MAIL;
RETURN RECEIPT REQUESTED
[Name and Address
of Borrower]
Re: Borrowing Base Determination
Dear [Borrower]:
Please refer to that certain Health Care Receivables Loan and
Security Agreement dated as of September 16, 1996 (as heretofore amended,
amended and restated or otherwise modified called the "Loan and Security
Agreement") among you, as Borrower, SAM Fund I, L.P., as Lender and us, as
Program Manager. Capitalized terms used but not otherwise defined herein have
the meanings assigned to such terms in Schedule 1 of the Loan and Security
Agreement. Articles I and IX of the Agreement are hereby incorporated by
reference herein with all appropriate changes.
From and after the date hereof, the Borrowing Base shall equal __% of
the aggregate Edited Face Values of the Eligible Receivables minus the
Collections thereon.
Please acknowledge your agreement to the foregoing by signing below and
returning a signed copy of this letter to our attention in the manner
contemplated by Section 9.2 of the Loan and Security Agreement.
Sincerely,
SAM PM, L.P.
By SAM Holdings General Partner, L.L.C.,
its general partner
By:________________________________
Name Printed:_________________
Title:____________________
Agreed and Acknowledged
as of the date first
written above:
[NAME OF BORROWER]
By:________________________________
Name Printed:______________________
Title:_____________________________
<PAGE>
EXHIBIT E
FORM OF LIMITED POWER OF ATTORNEY
This Limited Power of Attorney is executed pursuant to the Health Care
Receivables Loan and Security Agreement, dated as of September 16, 1996 (as
amended, amended and restated or otherwise modified from time to time, the "Loan
and Security Agreement") among OAK TREE RECEIVABLES, INC., as Borrower, SAM Fund
I, L.P., as Lender and SAM PM, L.P., as Program Manager.
KNOW ALL PERSONS BY THESE PRESENTS, that OAK TREE RECEIVABLES, INC., a
Florida corporation ("Borrower") at 1111 Park Centre Blvd., Suite 340, Miami,
Florida 33169, effective after the occurrence and continuation of an Event of
Default, does hereby nominate, constitute and appoint SAM PM, L.P. ("Program
Manager"), each officer and manager of Program Manager and of the general
partner of the Program Manager from time to time (and each employee and agent of
Program Manager and of the general partner of the Program Manager authorized by
Program Manager or the general partner of the Program Manager from time to time
to act hereunder), jointly and each of them severally, together or acting alone,
its true and lawful attorney-in-fact, for Borrower in its name, place and stead,
in the sole discretion of such attorney-in-fact, to take in Borrower's name, as
applicable or necessary, subject to applicable law, any and all steps as are
necessary or advisable, in the determination of such attorney-in-fact, in order
to effectuate and perform any and all of the transactions contemplated by the
Loan and Security Agreement. Without limiting the foregoing, Borrower hereby
authorizes such attorney-in-fact, subject to applicable law, to (i) issue
notices to, prepare, file and submit proof of claim forms with, and otherwise
communicate with, Obligors in the name of Borrower, (ii) ask, demand, collect,
sue for, recover, receive and give acquittance and receipts for moneys due and
to become due with respect to Receivables, (iii) receive, endorse, negotiate,
transfer, deposit, collect and otherwise deal with any drafts, checks or other
instruments and documents with respect to Receivables, (iv) prepare, sign, apply
for, and file, in Borrower's name, any document (including UCC financing
statements or continuation statements) to establish Lender as secured party of
the Receivables and any related property and lien holder with respect to such
Receivables and any related property, (v) open and establish bank accounts with
Program Manager (and any other person or entity designated by Program Manager)
as the only signers on the accounts and the sole beneficiaries of these accounts
for purposes of collecting Receivables, (vi) negotiate, settle, adjust,
compromise, extend or renew, discharge and release any or all Receivables, (vii)
prepare, sign and file any claims in Borrower's name with an Obligor or take any
other action or institute any proceedings which Program Manager may deem
necessary or desirable for the collection of any of the Receivables or otherwise
to enforce the rights of Lender with respect to any of the Receivables and
(viii) do all other things necessary or proper to carry out the administration
and servicing of the Receivables.
Borrower hereby ratifies and confirms the execution, delivery and
performance (whether before or after the date hereof) of the above-mentioned
instruments, documents and actions, by Borrower's attorney-in-fact and all that
Borrower's attorney-in-fact shall lawfully do or cause to be done by virtue
hereof.
This Limited Power of Attorney is coupled with an interest and shall not
be revocable until such date that Borrower and Program Manager shall mutually
designate in writing as the "Final Payout Date". This Limited Power of Attorney
is transferable and assignable by Program Manager, at its sole discretion.
<PAGE>
Borrower hereby agrees that no person or entity dealing with Borrower's
attorney-in-fact shall be bound to inquire into such attorney-in-fact's power
and authority hereunder and any such person or entity shall be fully protected
in relying on such power of authority.
Capitalized terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Loan and Security Agreement.
This Limited Power of Attorney shall be governed and construed in
accordance with the laws of the State of Texas without reference to principles
of conflicts of law.
IN WITNESS WHEREOF, Borrower has executed this Limited Power of Attorney
this ___ day of September, 1996.
OAK TREE RECEIVABLES, INC.
By:________________________________
Name Printed:______________________
Title:_____________________________
Attest:
By:__________________________________
Name Printed:________________________
Title:_______________________________
-2-
<PAGE>
STATE OF FLORIDA )
SS
COUNTY OF DADE )
On September __, 1996 before me, ______________________ personally
appeared _____________________
o personally known to me, or
o proved to me on the basis of satisfactory evidence to be the person whose
name is subscribed to the within instrument and acknowledged to me that such
person executed the same in such person's authorized capacity, and that by such
person's signature on the instrument such person (or entity upon behalf of which
person acted) executed the instrument.
Signature_______________________
[Affix Notary Seal]
My Commission Expires On:
______________________, 199_
-3-
<PAGE>
EXHIBIT F
FORM OF BORROWING BASE CERTIFICATE
To: The Lender party to the Loan and Security Agreement
Described Below
This Borrowing Base Certificate is furnished to that certain Loan and
Security Agreement dated as of September 16, 1996 (which, as it may be amended
or modified and in effect from time to time, is herein called the "Agreement")
among Oak Tree Receivables, Inc., as Borrower (the "Borrower"), SAM Fund I,
L.P., as Lender and SAM PM, L.P., as Program Manager. Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
such terms in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _________________ of the Borrower.
2. Schedule I attached hereto sets forth financial data and
computations evidencing the computation of the Borrowing Base, all of which data
and computations are true, complete and correct.
The foregoing certifications are made and delivered this ____ day of
_____________, 199_.
______________________________
[Name]
<PAGE>
SCHEDULE I TO BORROWING BASE CERTIFICATE
Calculations as of ____________, 199_
(a) Edited Face Value of Eligible Receivables $__________
(b) Collections Received on such Eligible Receivables $__________
(c) Line (a) minus Line (b) $__________
(d) Line (c) multiplied by ____% (Borrowing Base) $__________
(e) Outstanding Principal Balance of Loan $__________
===========================================
AGREEMENT OF SALE
dated August __, 1996
between
Orthopedic & Sports Therapy Services of Queens, L.P. and
Parkside of Queens, Inc.,
Sellers
and
Oak Tree Medical Management, Inc.,
Purchaser
===========================================
1
<PAGE>
AGREEMENT OF SALE
AGREEMENT OF SALE, made August __, 1996, among Orthopedic & Sports Therapy
Services of Queens Limited Partnership, a Virginia Limited Partnership (the
"L.P."), having an address at 250 West 100th Street, New York, NY, Parkside of
Queens, Inc., having an address at 250 West 100th Street, New York, NY ("General
Partner") Gary Danziger, having an address at 1 Crooked Mile Road, Westport, CT
06880 ("Shareholder/Limited Partner"), and Oak Tree Medical Management, Inc., a
New York corporation, having an address at 2 Gannett Drive Suite 215, White
Plains, NY 10604 ("Purchaser"). The L.P., the General Partner and the Limited
Partner/Shareholder shall collectively be referred to as "Sellers."
W I T N E S S E T H:
WHEREAS, Purchaser desires to acquire, and Sellers desire to sell the stock of
the General Partner, the interests of the General Partner and the Limited
Partner in the L.P., and the assets of the business known as Orthopedic & Sports
Therapy Services of Queens, Limited Partnership, such business managing a
physical therapy practice at 163-03 Horace Harding Expressway, Flushing, New
York, hereinafter specified, upon the terms and conditions hereinafter set
forth, and
WHEREAS, Shareholder is the Limited Partner of L.P. and the stockholder of the
General Partner.
NOW, THEREFORE, in consideration of the covenants and agreements hereafter set
forth, and other valuable consideration, the receipt and sufficiency of which
hereby is acknowledged, the parties hereto agree as follows:
1. Agreement To Sell. Sellers agree to sell, transfer and deliver to Purchaser,
and Purchaser agrees to purchase, upon the terms and conditions hereinafter set
forth, all of the stock of the General Partner, the interests of the General
Partner and the Limited Partner in the L.P., and assets of the business known as
Orthopedic & Sports Therapy Services of Queens, L.P. (the "Stock, Interests and
Assets"), including without limitation the following:
(a) the equipment, patient files, name described in Exhibit A-1 hereto
and all similar equipment and general assets acquired or owned by the
business on or before the closing date (the "General Assetst");
(b) the furniture, fixtures and improvements described in Exhibit A-2
hereto and all similar items acquired or owned by the business on or
before the closing date (the "Improvements");
(c) the lease described in Exhibit A-3 hereto (the "Lease");
2
<PAGE>
(d) the equipment leases, contracts and agreements described in Exhibit
A-4 hereto (the "Contracts");
(e) the Provider Agreements described and attached in Exhibit A-5
hereto (the "Provider Agreements");
(f) the bank accounts, lines of credit and safe deposit boxes,
including a list of the persons authorized to access the bank accounts
and safe deposit boxes, described in Exhibit A-6 hereto (the "bank
accounts and boxes").
(g) the Accounts Receivable listed in Exhibit A-7 (the "A/R").
Notwithstanding anything to the contrary contained herein, there shall
be excluded from the Assets, all cash on hand and in Sellers' bank
accounts.
2. Purchase Price. The purchase price to be paid by Purchaser is Three Hundred
Twenty Five Thousand Dollars ($325,000.00), payable as follows:
(a) One Hundred Twenty Five Thousand Dollars ($125,000.00) at the
closing. (B) One Hundred Thousand Dollars ($100,000.00) at the closing
by taking title subject to and assuming payment of the Existing
Indebtedness owed to Calusa Financial - Medical, Inc. identified in
Exhibit B hereto in said principal amount, and paying the same
according to the terms thereof. If on the closing date the outstanding
principal balance of the Existing Indebtedness is less than
$100,000.00, the $125,000.00 to be paid at the closing by check
pursuant to clause (a) above, shall be increased by the amount that
such outstanding principal balance shall be less than $100,000.00. IN
NO CASE SHALL PURCHASER BE RESPONSIBLE FOR MORE THAN $100,000.00 OF
THIS DEBT. (c) Twenty four months following closing, ten thousand
(10,000) shares of common stock of Oak Tree Medical Systems, Inc. of
Miami, FL, will be given to Seller. Purchaser guarantees the value to
be worth at least ten dollars ($10) per share, equaling One Hundred
Thousand Dollars ($100,000.00). If in 24 months from closing the stock
is worth less than $10 per share, Purchaser will make up the shortfall,
in cash or stock, at its option, i.e. the value of the 10,000 shares
will equal at least $100,000. If the stock value is higher than $10 per
share, Seller will realize the gain.
3. The Closing. The "closing" means the settlement of the obligations of Seller
and Purchaser to each other under this agreement, including the payment of the
purchase price to Seller as provided in Article 2 hereof and the delivery of the
closing documents provided for in Article 4 hereof. The closing shall be held at
the offices of Robert P. Borsody, P.C., 250 Park Avenue, New York, NY 10177, and
shall take place within thirty (30) days of completion of Purchaser's audit,
(the "closing date"), but in no event later than September 30,1996.
4. Closing Documents. At the closing Seller shall execute and deliver to
Purchaser:
3
<PAGE>
(a) a Bill of Sale substantially in the form of Exhibit C hereto
(b) an Assignment of the rights of the lessee under the Lease,
substantially in the form of
Exhibit Chereto
(c) certified copies of resolutions duly adopted by the Limited
Partners and General Partner of Sellers authorizing the sale of the
Assets and Stock and the performance by Sellers of their obligations
hereunder
(d) an opinion of Seller's counsel, Jerry Shames, Esq. dated as of the
closing date, in form and substance satisfactory to Purchaser's
counsel, stating such counsel's opinion that: (i) Sellers are a Limited
Partnership and General Partner duly organized, validly existing and in
good standing under the laws of New York; (ii) Sellers have full power
and authority to enter into this agreement and perform its obligations
hereunder; (iii) the execution and delivery of this agreement and the
performance by Sellers of their obligations hereunder have been duly
authorized by the Limited Partners and General Partner of Sellers and
no further action or approval is required in order to constitute this
agreement as the binding obligation of Seller, enforceable in
accordance with its terms, except as enforceability may be limited by
bankruptcy, moratorium, insolvency or other laws affecting creditor's
rights generally; (iv) the execution and delivery of this agreement and
the performance by Sellers of their obligations hereunder do not and
will not violate any provision of the Limited Partnership Agreement or
other governing instrument of Sellers; and (v) except as may be set
forth in this agreement, such counsel is not representing Sellers or
Shareholder in any suit, action or proceeding against Sellers which, if
adversely determined, would prohibit the consummation of the
transactions contemplated by this agreement
(e) Restrictive Covenant as enumerated in Article Ten (10),
(f) Statement executed by Calusa Financial-Medical, Inc. and
Shareholder that Existing Debt identified in Exhibit B herein is
currently paid, to date of closing. Statement shall also note that any
payments in arrears have been brought current, to date of closing,
(g) Statements executed by Shareholder/Limited Partner releasing and
indemnifying Purchaser from any and all obligations and liabilities in
excess of the principal of the Existing Debt identified in Exhibit B
herein. A pay-off letter from Calusa Financial-Medical, Inc. shall
state the principal balance due.
(h) such other instruments and information in form and substance
satisfactory to Purchaser's attorneys as may be necessary or
proper to transfer to Purchaser good and marketable title to all
other ownership interests in the Stock and Assets to be
transferred under this agreement.
4
<PAGE>
At the closing Sellers shall deliver to Purchaser all keys for the business. If
any keys for the business or assets are held by employees or others, Sellers
shall identify such individuals, their addresses and their relationship to the
Sellers. Sellers shall do all further acts and things as may be necessary, or
reasonably requested by Purchaser, to consummate the transactions contemplated
by this agreement, including the acquisition of possession of the Assets.
Sellers shall advise Purchaser of, and cause to be delivered to Purchaser, all
trade secrets and proprietary information pertaining to the assets of the
business. After the closing, Sellers shall make available to Purchaser, at
reasonable times upon reasonable notice, access to all books and records of
Sellers relating to the Stock and Assets; however, such books and records shall
remain the property of Sellers.
At the closing Purchaser shall execute and deliver to Sellers:
(a) an Assumption of the obligations of the lessee under the Lease,
substantially in the form of Exhibit C hereto
(b) an Assumption of the Existing Indebtedness
Except as expressly provided herein, Purchaser shall not be obligated to pay or
perform any obligations or liabilities of Sellers including without limitation
obligations or liabilities of Sellers to its creditors or any legal, accounting,
brokerage or finder's fees or any taxes or other expenses in connection with
this agreement or the consummation of the transactions contemplated hereby.
5. Closing Adjustments. The following items shall be apportioned as of midnight
of the day preceding the closing date:
(a) rent, including any additional rent, under the Lease
(b) taxes and applicable common charges under the lease
(c) water and sewer charges
(d) utilities, as applicable
(e) employee salaries and benefits
(f) interest on Existing Indebtedness
Any errors or omissions in computing apportionments shall be corrected after the
closing, with both parties fully cooperating.
6. Waiver Of Bulk Transfer Requirements. Purchaser, at the request of Seller,
hereby waives compliance with the bulk transfer provisions of the Uniform
Commercial Code which may be applicable to this transaction. Seller agrees to
pay and to indemnify Purchaser against all claims made by the creditors of
Seller, other than the Existing Indebtedness, to which this sale is subject.
5
<PAGE>
At the closing, Seller shall deposit with the Escrow Agent hereinafter
identified the sum of $15,000.00 to be held in escrow as security for the
payment of any and all liabilities due the State of New York or any other
governmental authority for sales taxes. Said sum shall be released from escrow
and delivered to Seller at such time as a receipt or receipts evidencing payment
of said liabilities of Seller, or appropriate releases, are delivered to
Purchaser.
7. Representations And Warranties Of Sellers. Sellers represent and warrant to
Purchaser as follows:
(a) Sellers are a Limited Partnership and General Partner is a
Corporation duly organized, validly existing under the laws of Virginia
and New York, respectively, and is duly qualified to do business in New
York. Sellers have full power and authority to own its properties and
to conduct its business as now carried on, and to carry out and perform
its undertakings and obligations as provided herein. The execution and
delivery by Sellers of this agreement and the consummation of the
transactions contemplated herein have been duly authorized by the
Limited Partners and General Partner of Sellers and will not conflict
with or breach any provision of the Limited Partnership Agreement or
other governing instrument of Sellers, and do not and will not conflict
with or result in any breach of any condition or provision of, or
constitute a default under, or result in the creation or imposition of
any lien, charge or encumbrance upon the Stock or Assets by reason of
the provisions of any contract, lien, lease, agreement, instrument or
judgment to which Sellers are a party, or which is or purports to be
binding upon Sellers or which affects or purports to affect the Assets.
No further action or approval is required in order to constitute this
agreement the binding and enforceable obligation of Sellers.
(b) No action, approval, consent or authorization, including without
limitation any action, approval, consent or authorization of any
governmental or quasi-governmental agency, commission, board, bureau or
instrumentality, is necessary for Sellers to constitute this agreement
the binding and enforceable obligation of Sellers or to consummate the
transactions contemplated hereby.
(c) Sellers are the owners of and haves good and marketable title to
the Stock and Assets, free of all liens, claims and encumbrances,
except as set forth herein.
(d) There are no violations, potential claims of violations or
questions of irregularity regarding any law or governmental rule or
regulation pending or, to the best of Sellers' knowledge, threatened
against Sellers or the Assets. Sellers have complied with all laws and
governmental rules and regulations applicable to the business or the
Assets. Sellers and Shareholder have duly notified all insurance
carriers or third party payors of any suspected or known claims or
potential claims which may be asserted against Sellers or the Assets.
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(e) There are no judgments, liens, suits, actions or proceedings
pending or, to the best of Sellers' knowledge, threatened against
Seller or the Assets. Neither Seller nor the Assets are a party to,
subject to or bound by any agreement or any judgment or decree of any
court, governmental body or arbitrator which would conflict with or be
breached by the execution, delivery or performance of this agreement,
or which could prevent the carrying out of the transactions provided
for in this agreement, or which could prevent the use by Purchaser of
the Assets or adversely affect the conduct of the business by
Purchaser.
(f) Sellers have not entered into, and the Assets are not subject to,
any: (i) written contract or agreement for the employment of any
employee of the business; (ii) contract with any labor union or guild;
(iii) pension, profit-sharing, retirement, bonus, insurance, or similar
plan with respect to any employee of the business; or (iv) similar
contract or agreement affecting or relating to the Assets.
(g) At the time of the closing, there will be no (secured or unsecured)
creditors of Sellers, other than the holders of the Existing
Indebtedness, Exhibit B. Such payments on the Existing Indebtedness are
current and no payments are in arrears. The general business creditors
and equipment lessors are listed in Exhibit A-4 attached hereto. Except
as set forth herein, Shareholder shall be liable for all obligations of
Sellers which are incurred prior to the closing date.
(h) The Lease is in full force and effect and without any default by
Sellers thereunder. All copies of the Lease provided by Sellers to
Purchaser are true and complete copies of the original Lease. The lease
may be assigned to Purchaser.
(i) Identified Contracts and Equipment Leases are in full force and
effect and without any default by Sellers thereunder. All copies of the
Contracts and Leases provided by Sellers to Purchaser are true and
complete copies of the original Contracts. Seller is not indebted under
any executory Contracts or Leases, except as may be set forth in
Exhibit A-4 hereto.
(j) Any and all Provider Agreements are in full force and effect. True
and complete copies of such Agreements are attached hereto as Exhibit
A-5.
(k) Sellers and all its Partners and Stockholder have filed each tax
return, including without limitation all income, excise, property,
gain, sales, franchise and license tax returns, required to be filed by
Sellers and all Partners and Stockholder prior to the date hereof. Each
such return is true, complete and correct, and Sellersand all its
Partners and Stockholder have paid all taxes, assessments and charges
of any governmental authority required to be paid by it and have
created reserves or made provision for all taxes accrued but not yet
payable. No government is now asserting, or to Sellers' knowledge
threatening to assert, any deficiency or assessment for additional
taxes or any interest, penalties or fines with respect to Sellers or
7
<PAGE>
Stockholder. Sellers' federal tax identification number are
_________________. Shareholder shall hold Purchaser harmless and
indemnify purchaser against all claims for taxes due from and owed by
sellers or Shareholder.
(l) The attached financial statements in Exhibit D are true and
accurate. The financial statements fairly and correctly present the
financial position of the Sellers and will so represent such as of the
date of closing.
TAt the closing Sellers shall execute and deliver an affidavit setting
forth the above representations as of the date of the closing.
8. Representations And Warranties Of Purchaser. Purchaser represents and
warrants to Seller as follows:
(a) Purchaser is a corporation organized under the laws of New York,
and is duly qualified to do business in New York. Purchaser has full
power and authority to carry out and perform its undertakings and
obligations as provided herein. The execution and delivery by Purchaser
of this agreement and the consummation of the transactions contemplated
herein have been duly authorized by the Board of Directors of Purchaser
and will not conflict with or breach any provision of the Certificate
of Incorporation or Bylaws of Purchaser. No further action or approval,
corporate or otherwise, is required in order to constitute this
agreement the binding and enforceable obligation of Purchaser.
(b) No action, approval, consent or authorization, including without
limitation any action, approval, consent or authorization of any
governmental or quasi-governmental agency, commission, board, bureau or
instrumentality, is necessary for Purchaser to constitute this
agreement the binding and enforceable obligation of Purchaser or to
consummate the transactions contemplated hereby.
8
<PAGE>
9. Conditions To Closing. The obligations of Purchaser to close hereunder are
subject to the following conditions:
(a) All of the terms, covenants and conditions to be complied with or
performed by Sellers under this agreement on or before the closing
shall have been complied with or performed in all material respects.
(b) All representations or warranties of Sellers herein are true in all
material respects as of the closing date. Such representations and
warranties shall also survive closing.
(c) Satisfactory results of financial audit.
(d) All assets are in good working order, as applicable.
(e) On the closing date, there shall be no liens or encumbrances
against the Assets, except as provided for herein.
(f) The business of the Sellers will have been conducted only in the
ordinary course of business. No contracts or purchase agreements/orders
will have been entered into, other than in the ordinary course of
business. No expenditures or credit purchases will be made by Sellers,
other than in the ordinary course of business.
(g) Sellers, Shareholder and their representatives and advisors will
supply, upon request by Purchaser and its representatives, such
pertinent information as may be required by Purchaser in order to
conduct its due diligence survey of Sellers. It is agreed that any
documents or information provided hereunder shall be kept in full and
complete confidence.
(h) All payments in the Existing Indebtedness are current and not in
arrears, to date of closing.
Sellers promptly shall notify the lessor under the Lease (the "Lessor") of the
proposed assignment of the Lease to Purchaser, and shall request the consent of
the Lessor thereto. Sellers and Purchaser shall furnish to the Lessor such
information as may reasonably be required in connection with the procuring of
such consent, and shall otherwise cooperate in an effort to expeditiously
procure such consent. If the Lessor shall fail or refuse to grant such consent
in writing within thirty days after the date of this agreement (the "Outside
Date"), or shall require as a condition of the granting of such consent that
additional consideration be paid to the Lessor, which neither Sellers nor
Purchaser are willing to pay, then Purchaser may terminate this agreement, by
written notice to the other delivered within ten days after the Outside Date.
If this agreement is terminated as provided above in this Article 9, Sellers
shall return any payments made by Purchaser on account of the purchase price,
whereupon all rights of Purchaser hereunder and to the assets shall terminate,
and neither Sellers nor Purchaser shall have any further claim against the other
hereunder.
9
<PAGE>
10. Restrictive Covenant Not to Compete. Seller and Partner will not, for a
period of four (4) years from the date of closing, either directly or indirectly
engage in the practice of physical therapy or related services, within lower
Westchester County, NY (up to and including latitude of White Plains, NY),
Fairfield County, CT and within a ten (10) mile radius of Seller's current
address at 163-03 Horrace Harding Expressway, Flushing, NY 11363. Seller and
Shareholder shall execute at closing, such documents as will evidence this
surviving provision.
11. Indemnification. Each party hereto, including Shareholder, shall indemnify
and hold the other parties harmless from and against all liability, claim, loss,
damage or expense, including reasonable attorneys' fees, incurred or required to
be paid by such other parties by reason of any breach or failure of observance
or performance of any representation, warranty, covenant or other provision
(including lists and Exhibits) of this agreement by such party. Shareholder
shall indemnify and hold Purchaser harmless against all actions, suits,
proceedings, judgments, costs and expenses incurred by or levied against
Purchaser, due to Seller's or Shareholder's prior acts, omissions, negligence or
other wrongful conduct.
12. Risk Of Loss. The risk of loss to the assets of the business sold hereunder,
until the closing, is assumed and shall be borne by Shareholder and Sellers.
Sellers agree to keep all of its assets fully insured against any loss, either
by fire, theft or casualty, to the date of closing. In the event that prior to
closing, such Assets are totally or substantially damaged by reason of fire,
theft or casualty, Purchaser may, in its sole discretion, terminate the within
transaction. In such case, all money heretofore deposited with Sellers or
Sellers' representative shall be refunded to Purchaser and the parties shall be
released from any further liability hereunder. If the Purchaser elects to
consummate this transaction despite such loss or damage, it may do so by paying
the purchase price set forth herein, reduced by any insurance proceeds received
by Sellers.
13. Escrow Conditions. At the closing, Sellers are to deliver to Jerry Shames,
Attorney at Law, having an address at 16 Taylor Place, Westport, CT 06880
("Escrow Agent"), the sum of $15,000.00 to be held in escrow as security for the
payment of certain liabilities of Seller, as provided in Article Six (6) above.
Escrow Agent shall hold the foregoing $15,000.00 in accordance with this
agreement, or a joint instruction signed by Sellers and Purchaser, or separate
instructions of like tenor signed by Sellers and Purchaser, or a final judgment
of a court of competent jurisdiction.
14. Brokerage. The parties hereto represent and warrant to each other that they
have not dealt with any broker or finder in connection with this agreement other
than the broker, American Health Resources, LLC with offices at 21394 Marina
Cove Circle, Suite H11, North Miami Beach, FL 33180 (the "Broker"). The
Purchaser shall be solely responsible for and shall pay at closing all
commission, fees, expenses and charges due or owing to the Broker in connection
with this transaction, pursuant to a separate agreement between the Purchaser
and Broker. Purchaser and Seller shall indemnify, defend and hold each other
harmless from and against any loss, cost, expense, claim or liability
(including, without limitation, reasonable attorney's fees) arising under or in
respect of any claim by any person or entity for any commission, fee or expense
in respect of
10
<PAGE>
the transaction contemplated by this Agreement, where such claim is based in
whole or in part upon any act of the indemnifying party or its representatives.
The provisions of this Article shall survive the expiration, termination or
cancellation of this Agreement, but shall not be construed as a covenant for the
benefit of any third party.
15. The Shareholder. Shareholder hereby confirms all of the representations and
warranties of Sellers, and agrees to indemnify and hold Purchaser harmless from
and against misrepresentation or breach of any warranty by Sellers, or any
breach or failure by Sellers to comply with any term, covenant or condition of
this agreement.. Shareholder represents and warrants that he is theLimited
Partner of L.P. and the sole Shareholder of General Partner, and that he has
full power and authority to carry out and perform his undertakings and
obligations as provided herein. Shareholderagrees as aforesaid to induce
Purchaser to enter into this agreement. No action or inaction of Shareholder or
Purchaser, including the giving of notices, shall affect, change or discharge
the obligations of the Purchaser's Guarantor hereunder.
16. Notices. All notices, demands and other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
properly given if delivered by hand or by registered or certified mail, return
receipt requested, with postage prepaid, to Seller's attorney, Jerry Shames,
Esq. at 16 Taylor Place, Westport, CT 06880, and to Purchaser's attorney,
Frederick C. Veit, Esq., at 2 Gannett Drive Suite 215, White Plains, NY 10604.
The respective attorneys for the parties hereby are authorized to give any
notice required or permitted hereunder and to agree to adjournments of the
closing.
17. Survival. The representations, warranties and covenant contained herein or
in any document, instrument, certificate or schedule furnished in connection
herewith shall survive the delivery of the Bill of Sale and shall continue in
full force and effect after the closing, except to the extent waived in writing.
18. Further Assurances. In connection with the transactions contemplated by this
agreement, the parties agree to execute and deliver such further instruments,
and to take such further actions, as may be reasonably necessary or proper to
effectuate and carry out the transactions contemplated in this agreement.
19. Changes Must Be In Writing. No delay or omission by either Seller or
Purchaser in exercising any right shall operate as a waiver of such right or any
other right. This agreement may not be altered, amended, changed, modified,
waived or terminated in any respect or particular unless the same shall be in
writing signed by the party to be bound. No waiver by any party of any breach
hereunder shall be deemed a waiver of any other or subsequent breach.
20. Captions And Exhibits. The captions in this agreement are for convenience
only and are not to be considered in construing this agreement. The Exhibits
annexed to this agreement are an integral part of this agreement, and where
there is any reference to this agreement it shall be deemed to include said
Exhibits.
11
<PAGE>
21. Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of New York.
22. Binding Effect. This agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
23. Cancellation. Purchaser reserves the right to cancel this Agreement, without
penalty, if any negative disclosure is discovered regarding Seller or its
Assets, which would materially affect the value of Seller's Assets.
24. Confidentiality. Each party acknowledges and agrees that any information or
data it has acquired from the ---------------- other party, not otherwise
properly in the public domain, was received in confidence. Each party hereto
agrees not to divulge, communicate or disclose, except as may be required by law
or for the performance of this Agreement (including conducting due diligence or
notifying a party's lender), or use to the detriment of the disclosing party or
for the benefit of any other person or persons, or misuse in any way, any
confidential information of the disclosing party concerning the subject matter
hereof, including any trade or business secrets of the disclosing party and any
technical or business materials that are treated by the disclosing party as
confidential or proprietary, including without limitation information (whether
in written, oral or machine readable form) concerning: general business
operations: methods of doing business, servicing clients, client relations, and
of pricing and making charge for services and products; financial information,
including costs, profits and sales; marketing strategies; business forms
developed by or for the disclosing party; names of suppliers, personnel, clients
and potential clients; negotiations or other business contacts with suppliers,
personnel, clients and potential clients; form and content of bids, proposals
and contracts; the disclosing party's internal reporting methods; technical and
business data and documentation; software programs, however embodied; diagnostic
techniques; and information obtained by or given to the disclosing party about
or belonging to third parties.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this agreement the date first
above written.
By_________________________
Gary Danziger
ORTHOPEDIC & SPORTS THERAPY SERVICES OF QUEENS, L.P.
ATTEST:
By ________________________
General Partner
By ________________________
Managing Limited Partner
PARKSIDE OF QUEENS, INC.
ATTEST:
By ________________________
President
OAK TREE MEDICAL MANAGEMENT, INC.
ATTEST:
By ________________________
President
By ____________________
Secretary
Jerry Shames, Attorney at Law, hereby executes this agreement for the sole
purpose of agreeing to serve as Escrow Agent in accordance with the provisions
of Article 13 of this agreement.
-------------------------------
Jerry Shames, Attorney at Law
13
<PAGE>
STATE OF NEW YORK, COUNTY OF , SS.:
On the ____ day of August, 1996, before me personally came
______________________________________, to me known, who being duly sworn, did
depose and say that he resides at _____________________________________________
______________________________________________________________; that he is the
_______________________________________________________________________________
of Orthopedic & Sports Therapy Services of Queens, L.P., the Limited Partnership
and the ______________________________ of Parkside of Queens, Inc. the General
Partner described herein and which executed the foregoing Agreement of Sale; and
that he signed his name thereto by the order of the Limited and General Partners
of the Limited Partnership.
-------------------------------
Notary Public
My commission expires on
STATE OF NEW YORK, COUNTY OF , SS.:
On the day of August, 1996, before me personally came Gary Danziger, to
me known to be the individual described in and who executed the foregoing
Agreement of Sale, and acknowledged that he executed said Agreement of Sale.
-------------------------------
Notary Public
My commission expires on
STATE OF NEW YORK, COUNTY OF , SS.:
On the ____ day of August, 1996, before me personally came
______________________________________, to me known, who being duly sworn, did
depose and say that he resides at _____________________________________________
______________________________________________________________; that he is the
President of Oak Tree Medical Management, Inc., the corporation described in and
which executed the foregoing Agreement of Sale; and that he signed his name
thereto by the order of the board of directors of the said corporation.
-------------------------------
Notary Public
My commission expires on
14
<PAGE>
EXHIBIT A-1
Equipment and General Assets
15
<PAGE>
EXHIBIT A-2
Improvements
16
<PAGE>
EXHIBIT A-3
The Lease
17
<PAGE>
EXHIBIT A-4
Contracts and Equipment Leases
Indebtedness under executory contracts or leases:
18
<PAGE>
EXHIBIT A-5
Provider Agreements
19
<PAGE>
EXHIBIT A-6
Bank Accounts, Safe Deposit Boxes, Lines of Credit and
Persons Authorized to Access Each
20
<PAGE>
EXHIBIT A-7
ACCOUNTS RECEIVABLE
21
<PAGE>
EXHIBIT B
Existing Indebtedness, Collateral, Copies of Security Agreements
22
<PAGE>
===========================================
ASSIGNMENT OF LEASE
dated August ___, 1996
from
Orthopedic & Sports Therapy Services of Queens, L.P.
Seller
to
Oak Tree Medical Management, Inc.,
Purchaser
===========================================
23
<PAGE>
EXHIBIT C
ASSIGNMENT OF LEASE
KNOW THAT, for valuable consideration, Orthopedic & Sports Therapy
Services of Queens, L.P., a Virginia Limited Partnership, having an address
at_____________________________ ("Assignor") hereby assigns unto Oak Tree
Medical Management, Inc., a New York corporation, having an address at 2 Gannett
Drive Suite 215, White Plains, NY 10604 ("Assignee") all right, title and
interest of Assignor as lessee under the following lease:
Banle Associates to Orthopedic & Sports Therapy Services of Queens, L.P. Dated
September 14, 1992.
TO HAVE AND TO HOLD said lease unto Assignee and the heirs, executors,
administrators, successors and assigns of Assignee from and after the date
hereof, for the rest of the term of said lease, as the same may be modified or
extended.
Assignee hereby assumes and agrees to perform, from and after the date
hereof, all of the terms, covenants and conditions of said lease to be performed
by the lessee thereunder.
IN WITNESS WHEREOF, Assignor and Assignee have duly executed this
assignment and assumption on August ___, 1996.
ORTHOPEDIC & SPORTS THERAPY SERVICES OF QUEENS, L.P.
ATTEST:
By ________________________
General Partner
By ____________________
Managing Partner
OAK TREE MEDICAL MANAGEMENT, INC.
ATTEST:
By ________________________
President
By ____________________
Secretary
24
<PAGE>
STATE OF NEW YORK, COUNTY OF , SS.:
On the ______ day of August, 1996, before me personally came
_______________________________________________________________________, to me
known, who being duly sworn, did depose and say that he resides at
_____________________________________________
_______________________________________________________________________; that he
is the ______________________ of Orthopedic & Sports Therapy Services of Queens,
L.P., the Limited Partnership described herein and which executed the foregoing
instrument; and that he signed his name thereto by the order of the Limited and
General Partners of the Limited Partnership.
-------------------------------
Notary Public
My commission expires on
STATE OF NEW YORK, COUNTY OF , SS.:
On the ______ day of August, 1996, before me personally came
_________________________________ , to me known, who being duly sworn, did
depose and say that he resides at ________________________________________; that
he is the President of Oak Tree Medical Management, Inc., the corporation
described herein and which executed the foregoing instrument; and that he signed
his name thereto by the order of the board of directors of the said corporation.
-------------------------------
Notary Public
My commission expires on
The undersigned, as lessor under the lease described in the foregoing
assignment of lease, hereby consents to said assignment of the lease.
-------------------------------
Banle Associates
25
<PAGE>
EXHIBIT D
FINANCIAL STATEMENTS
26
===========================================
AGREEMENT OF SALE
dated August __, 1996
between
Parkside Physical Therapy Services, P.C.
Seller
and
New Medical Practice, P.C.
Purchaser
===========================================
<PAGE>
AGREEMENT OF SALE
AGREEMENT OF SALE, made August __, 1996, among Parkside Physical Therapy
Services, P.C., a New York corporation, having an address at 250 West 100th
Street, New York, NY ("Seller"), Gary Danziger, having an address at 1 Crooked
Mile Road, Westport, CT 06880 ("Shareholder"), and New Medical Practice, P.C., a
New York professional corporation, having an address at 2 Gannett Drive, Suite
215, White Plains, NY 10604 ("Purchaser").
W I T N E S S E T H:
WHEREAS, Purchaser desires to acquire, and Seller desires to sell, the assets of
the business known as Parkside Physical Therapy Services, P.C. hereinafter
specified, upon the terms and conditions hereinafter set forth, and
WHEREAS, Shareholder is the shareholder of Seller.
NOW, THEREFORE, in consideration of the covenants and agreements hereafter set
forth, and other valuable consideration, the receipt and sufficiency of which
hereby is acknowledged, the parties hereto agree as follows:
1. Agreement To Sell. Seller agrees to sell, transfer and deliver to Purchaser,
and Purchaser agrees to purchase, upon the terms and conditions hereinafter set
forth, all of the assets of the business known as Parkside Physical Therapy
Services, P.C. (the "Assets"), including without limitation the following:
(a) the equipment, name, patient files and general assets described in
Exhibit A-1 hereto and all similar equipment acquired or owned by the
business on or before the closing date (the "General Assets");
(b) the furniture, fixtures and improvements described in Exhibit A-2
hereto and all similar items acquired or owned by the business on or
before the closing date (the "Improvements");
(c) the lease described in Exhibit A-3 hereto (the "Lease");
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<PAGE>
(d) the equipment leases, contracts and agreements described in Exhibit
A-4 hereto (the "Contracts");
(e) the Provider Agreements described and attached in Exhibit A-5
hereto (the "Provider Agreements");
(f) the bank accounts, lines of credit and safe deposit boxes,
including a list of the persons authorized to access the bank accounts
and safe deposit boxes, described in Exhibit A-6 hereto (the "Bank
accounts and Boxes").
(g) the accounts receivable listed in Exhibit A-7 hereto (the "Accounts
Receivable").
Notwithstanding anything to the contrary contained herein, there shall be
excluded from the Assets, all cash on hand and in Seller's bank accounts.
2. Purchase Price. The purchase price to be paid by Purchaser is Two Hundred
Fifty Thousand Dollars ($250,000.00), payable as follows:
(a) Two Hundred Fifty Thousand Dollars ($250,000.00) at the closing.
3. The Closing. The "closing" means the settlement of the obligations of Seller
and Purchaser to each other under this agreement, including the payment of the
purchase price to Seller as provided in Article 2 hereof and the delivery of the
closing documents provided for in Article 4 hereof. The closing shall be held at
the offices of Robert P. Borsody, P.C., 250 Park Avenue, New York, NY 10177, and
shall take place within thirty (30) days of completion of Purchaser's audit,
(the "closing date"), but in no event later than September 30, 1996.
4. Closing Documents. At the closing Seller shall execute and deliver to
Purchaser:
(a) a Bill of Sale
(b) an Assignment of the rights of the lessee under the Lease,
substantially in the form of Exhibit C hereto
(c) certified copies of resolutions duly adopted by the Board of
Directors and shareholder of Seller authorizing the sale of the Assets
and the performance by Seller of its obligations hereunder
(d) an opinion of Seller's counsel, Jerry Shames, Esq. dated as of the
closing date, in form and substance satisfactory to Purchaser's
counsel, stating such counsel's opinion that: (i) Seller is a
corporation duly organized, validly existing and in good standing under
the laws of New York; (ii) Seller has full power and authority,
corporate and otherwise, to enter into this agreement and perform its
obligations hereunder; (iii) the execution and delivery of this
agreement and the performance by Seller of its obligations hereunder
have been duly authorized by the Board of Directors and shareholder of
Seller and no further action or approval is required in order to
2
<PAGE>
constitute this agreement as the binding obligation of Seller,
enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, moratorium, insolvency or other laws
affecting creditor's rights generally; (iv) the execution and delivery
of this agreement and the performance by Seller of its obligations
hereunder do not and will not violate any provision of the Certificate
of Incorporation or Bylaws of Seller; and (v) except as may be set
forth in this agreement, such counsel is not representing Seller in any
suit, action or proceeding against Seller which, if adversely
determined, would prohibit the consummation of the transactions
contemplated by this agreement
(e) Restrictive Covenant as enumerated in Article Ten (10).
(f) such other instruments and information in form and substance
satisfactory to Purchaser's attorneys as may be necessary or proper to
transfer to Purchaser good and marketable title to all other ownership
interests in the Assets to be transferred under this agreement.
At the closing Seller shall deliver to Purchaser all keys for the business. If
any keys for the business or assets are held by employees or others, Seller
shall identify such individuals, their addresses and their relationship to the
Seller. Seller shall do all further acts and things as may be necessary, or
reasonably requested by Purchaser, to consummate the transactions contemplated
by this agreement, including the acquisition of possession of the Assets. Seller
shall advise Purchaser of, and cause to be delivered to Purchaser, all trade
secrets and proprietary information pertaining to the assets of the business.
After the closing, Seller shall make available to Purchaser, at reasonable times
upon reasonable notice, access to all books and records of Seller relating to
the Assets; however, such books and records shall remain the property of Seller.
At the closing Purchaser shall execute and deliver to Seller:
(a) an Assumption of the obligations of the lessee under the Lease,
substantially in the form of Exhibit C hereto
Except as expressly provided herein, Purchaser shall not be obligated to pay or
perform any obligations or liabilities of Seller including without limitation
obligations or liabilities of Seller to its creditors or any legal, accounting,
brokerage or finder's fees or any taxes or other expenses in connection with
this agreement or the consummation of the transactions contemplated hereby.
5. Closing Adjustments. The following items shall be apportioned as of midnight
of the day preceding the closing date:
(a) rent, including any additional rent, under the Lease
(b) taxes and applicable common charges under the lease
(c) water and sewer charges
3
<PAGE>
(d) utilities, as applicable
(e) employee salaries and benefits
Any errors or omissions in computing apportionments shall be corrected after the
closing, with both parties fully cooperating.
6. Waiver Of Bulk Transfer Requirements. Purchaser, at the request of Seller,
hereby waives compliance with the bulk transfer provisions of the Uniform
Commercial Code which may be applicable to this transaction. Seller agrees to
pay and to indemnify Purchaser against all claims made by the creditors of
Seller, other than the Existing Indebtedness to which this sale is subject.
At the closing, Seller shall deposit with the Escrow Agent hereinafter
identified the sum of $5,000.00 to be held in escrow as security for the payment
of any and all liabilities due the State of New York or any other governmental
authority for sales taxes. Said sum shall be released from escrow and delivered
to Seller at such time as a receipt or receipts evidencing payment of said
liabilities of Seller, or appropriate releases, are delivered to Purchaser.
7. Representations And Warranties Of Seller. Seller represents and warrants to
Purchaser as follows:
(a) Seller is a corporation duly organized and validly existing under
the laws of New York, and is duly qualified to do business in New York.
Seller has full power and authority to own its properties and to
conduct its business as now carried on, and to carry out and perform
its undertakings and obligations as provided herein. The execution and
delivery by Seller of this agreement and the consummation of the
transactions contemplated herein have been duly authorized by the Board
of Directors of Seller and will not conflict with or breach any
provision of the Certificate of Incorporation or Bylaws of Seller, and
do not and will not conflict with or result in any breach of any
condition or provision of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon the
Assets by reason of the provisions of any contract, lien, lease,
agreement, instrument or judgment to which Seller is a party, or which
is or purports to be binding upon Seller or which affects or purports
to affect the Assets. No further action or approval, corporate or
otherwise, is required in order to constitute this agreement the
binding and enforceable obligation of Seller.
(b) No action, approval, consent or authorization, including without
limitation any action, approval, consent or authorization of any
governmental or quasi-governmental agency, commission, board, bureau or
instrumentality, is necessary for Seller to constitute this agreement
the binding and enforceable obligation of Seller or to consummate the
transactions contemplated hereby.
(c) Seller is the owner of and has good and marketable title to the
Assets, free of all liens, claims and encumbrances, except as set forth
herein.
4
<PAGE>
(d) There are no violations, potential claims of violations or
questions of irregularity regarding any law or governmental rule or
regulation pending or, to the best of Seller's knowledge, threatened
against Seller or the Assets. Seller has complied with all laws and
governmental rules and regulations applicable to the business or the
Assets. Seller has duly notified all insurance carriers or third party
payors of any suspected or known claims or potential claims which may
be asserted against Seller or the Assets.
(e) There are no judgments, liens, suits, actions or proceedings
pending or, to the best of Seller's knowledge, threatened against
Seller or the Assets. Neither Seller nor the Assets are a party to,
subject to or bound by any agreement or any judgment or decree of any
court, governmental body or arbitrator which would conflict with or be
breached by the execution, delivery or performance of this agreement,
or which could prevent the carrying out of the transactions provided
for in this agreement, or which could prevent the use by Purchaser of
the Assets or adversely affect the conduct of the business by
Purchaser.
(f) Seller has not entered into, and the Assets are not subject to,
any: (i) written contract or agreement for the employment of any
employee of the business; (ii) contract with any labor union or guild;
(iii) pension, profit-sharing, retirement, bonus, insurance, or similar
plan with respect to any employee of the business; or (iv) similar
contract or agreement affecting or relating to the Assets.
(g) At the time of the closing, there will be no (secured or unsecured)
creditors of Seller, other than the holders of the Existing
Indebtedness, Exhibit B and other than the general business creditors
and equipment lessors as listed in Exhibit A-4 attached hereto. Except
as set forth herein, Seller and Shareholder shall be liable for all
obligations of Seller which are incurred prior to the closing date.
(h) The Lease is in full force and effect and without any default by
Seller thereunder. All copies of the Lease provided by Seller to
Purchaser are true and complete copies of the original Lease.
The lease may be assigned to Purchaser.
(i) Identified Contracts and Equipment Leases are in full force and
effect and without any default by Seller thereunder. All copies of the
Contracts and Leases provided by Seller to Purchaser are true and
complete copies of the original Contracts. Seller is not indebted under
any executory Contracts or Leases, except as may be set forth in
Exhibit A-4 hereto.
(j) Any and all Provider Agreements are in full force and effect. True
and complete copies of such Agreements are attached hereto as Exhibit
A-5.
(k) Seller has filed each tax return, including without limitation all
income, excise, property, gain, sales, franchise and license tax
returns, required to be filed by Seller prior to the date hereof. Each
such return is true, complete and correct, and Seller has paid all
taxes, assessments and charges of any governmental authority required
to be paid by it and has created reserves or made provision for all
taxes accrued but not yet payable. No
5
<PAGE>
government is now asserting, or to Seller's knowledge threatening to
assert, any deficiency or assessment for additional taxes or any
interest, penalties or fines with respect to Seller. Seller's federal
tax identification number is _________________. Seller and Shareholder
shall hold Purchaser harmless and indemnify Purchaser against all
claims for taxes due from and owed by Seller or Shareholder.
(l) The attached financial statements in Exhibit D are true and
accurate. The financial statements fairly and correctly present the
financial position of the Seller and will so represent such as of the
date of closing.
At the closing Seller shall execute and deliver an affidavit setting forth the
above representations as of the date of the closing.
8. Representations And Warranties Of Purchaser. Purchaser represents and
warrants to Seller as follows:
(a) Purchaser is a corporation organized under the laws of New York,
and is duly qualified to do business in New York. Purchaser has full
power and authority to carry out and perform its undertakings and
obligations as provided herein. The execution and delivery by Purchaser
of this agreement and the consummation of the transactions contemplated
herein have been duly authorized by the Board of Directors of Purchaser
and will not conflict with or breach any provision of the Certificate
of Incorporation or Bylaws of Purchaser. No further action or approval,
corporate or otherwise, is required in order to constitute this
agreement the binding and enforceable obligation of Purchaser.
(b) No action, approval, consent or authorization, including without
limitation any action, approval, consent or authorization of any
governmental or quasi-governmental agency, commission, board, bureau or
instrumentality, is necessary for Purchaser to constitute this
agreement the binding and enforceable obligation of Purchaser or to
consummate the transactions contemplated hereby.
9. Conditions To Closing. The obligations of Purchaser to close hereunder are
subject to the following conditions:
(a) All of the terms, covenants and conditions to be complied with or
performed by Seller under this agreement on or before the closing shall
have been complied with or performed in all material respects.
(b) All representations or warranties of Seller herein are true in all
material respects as of the closing date. Such representations and
warranties shall also survive closing.
(c) Satisfactory results of financial audit.
(d) All assets are in good working order, as applicable.
(e) On the closing date, there shall be no liens or encumbrances
against the Assets, except as provided for herein.
6
<PAGE>
(f) The business of the Seller will have been conducted only in the
ordinary course of business. No contracts or purchase agreements/orders
will have been entered into, other than in the ordinary course of
business. No expenditures or credit purchases will be made by Seller,
other than in the ordinary course of business.
(g) Seller, Shareholder and their representatives and advisors will
supply, upon request by Purchaser and its representatives, such
pertinent information as may be required by Purchaser in order to
conduct its due diligence survey of Seller. It is agreed that any
documents or information provided hereunder shall be kept in full and
complete confidence
Seller promptly shall notify the lessor under the Lease (the "Lessor") of the
proposed assignment of the Lease to Purchaser, and shall request the consent of
the Lessor thereto. Seller and Purchaser shall furnish to the Lessor such
information as may reasonably be required in connection with the procuring of
such consent, and shall otherwise cooperate in an effort to expeditiously
procure such consent. Purchaser agrees to pay to the Lessor an amount of up to
$4,012.50 in consideration for the consent of Lessor to the assignment of the
Lease to Purchaser. If the Lessor shall fail or refuse to grant such consent in
writing within thirty days after the date of this agreement (the "Outside
Date"), or shall require as a condition of the granting of such consent that
additional consideration be paid to the Lessor (in excess of the aforesaid
$4,012.50 to be paid by Purchaser) which neither Seller nor Purchaser is willing
to pay, then Purchaser may terminate this agreement, by written notice to the
other delivered within ten days after the Outside Date.
If this agreement is terminated as provided above in this Article 9, Seller
shall return any payments made by Purchaser on account of the purchase price,
whereupon all rights of Purchaser hereunder and to the business shall terminate,
and neither Seller nor Purchaser shall have any further claim against the other
hereunder.
10. Restrictive Covenant Not to Compete. Seller and Shareholder will not, for a
period of four (4) years from the date of closing, either directly or indirectly
engage in the practice of physical therapy or related services, within lower
Westchester County, NY (up to and including latitude of White Plains, NY),
Fairfield County, CT and within a ten (10) mile radius of Seller's current
address at 250 West 100th Street, New York, NY 10025. Seller and Shareholder
shall execute at closing, such documents as will evidence this surviving
provision.
11. Indemnification. Each party hereto, including Shareholder, shall indemnify
and hold the other parties harmless from and against all liability, claim, loss,
damage or expense, including reasonable attorneys' fees, incurred or required to
be paid by such other parties by reason of any breach or failure of observance
or performance of any representation, warranty, covenant or other provision
(including lists and Exhibits) of this agreement by such party. Seller shall
indemnify and hold Purchaser harmless against all actions, suits, proceedings,
judgments, costs and expenses incurred by or levied against Purchaser, due to
Seller's or Shareholder's prior acts, omissions, negligence or other wrongful
conduct.
12. Risk Of Loss. The risk of loss to the assets of the business sold hereunder,
until the closing, is assumed and shall be borne by Seller. Seller agrees to
keep all of its assets fully insured against any
7
<PAGE>
loss, either by fire, theft or casualty, to the date of closing. In the event
that prior to closing, such Assets are totally or substantially damaged by
reason of fire, theft or casualty, Purchaser may, in its sole discretion,
terminate the within transaction. In such case, all money heretofore deposited
with Seller or Seller's representative shall be refunded to Purchaser and the
parties shall be released from any further liability hereunder. If the Purchaser
elects to consummate this transaction despite such loss or damage, it may do so
by paying the purchase price set forth herein, reduced by any insurance proceeds
received by Seller.
13. Escrow Conditions. At the closing, Seller is to deliver to Jerry Shames,
Attorney at Law, having an address at 16 Taylor Place, Westport, CT 06880
("Escrow Agent"), the sum of $5,000.00 to be held in escrow as security for the
payment of certain liabilities of Seller, as provided in Article Six (6) above.
Escrow Agent shall hold the foregoing $5,000.00 in accordance with this
agreement, or a joint instruction signed by Seller and Purchaser, or separate
instructions of like tenor signed by Seller and Purchaser, or a final judgment
of a court of competent jurisdiction.
14. Brokerage. The parties hereto represent and warrant to each other that they
have not dealt with any broker or finder in connection with this agreement other
than the broker, American Health Resources, LLC with offices at 21394 Marina
Cove Circle, Suite H11, North Miami Beach, FL 33180 (the "broker"). The
Purchaser shall be solely responsible for and shall pay at closing all
commission, fees, expenses and charges due or owing to the Broker in connection
with this transaction, pursuant to a separate agreement between the Purchaser
and Broker. Purchaser and Seller shall indemnify, defend and hold each other
harmless from and against any loss, cost, expense, claim or liability
(including, without limitation, reasonable attorney's fees) arising under or in
respect of any claim by any person or entity for any commission, fee or expense
in respect of the transaction contemplated by this Agreement, where such claim
is based in whole or in part upon any act of the indemnifying party or its
representatives. The provisions of this Article shall survive the expiration,
termination or cancellation of this Agreement, but shall not be construed as a
covenant for the benefit of any third party.
15. The Shareholder. Shareholder hereby confirms all of the representations and
warranties of Seller, and agrees to indemnify and hold Purchaser harmless from
and against misrepresentation or breach of any warranty by Seller, or any breach
or failure by Seller to comply with any term, covenant or condition of this
agreement, as fully as if Shareholder was the Seller herein. Shareholder
represents and warrants that he is the shareholder of Seller, and that he has
full power and authority to carry out and perform his undertakings and
obligations as provided herein. Shareholder agrees as aforesaid to induce
Purchaser to enter into this agreement. No action or inaction of Seller or
Purchaser, including the giving of notices, shall affect, change or discharge
the obligations of the Purchaser's Guarantor hereunder.
16. Notices. All notices, demands and other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
properly given if delivered by hand or by registered or certified mail, return
receipt requested, with postage prepaid, to Seller's attorney, Jerry Shames,
Esq. at 16 Taylor Place, Westport, CT 06880, and to Purchaser's attorney,
Frederick C. Veit,
8
<PAGE>
Esq., at 21 Gordon Avenue, Briarcliff Manor, NY 10510. The respective attorneys
for the parties hereby are authorized to give any notice required or permitted
hereunder and to agree to adjournments of the closing.
17. Survival. The representations, warranties and covenant contained herein or
in any document, instrument, certificate or schedule furnished in connection
herewith shall survive the delivery of the Bill of Sale and shall continue in
full force and effect after the closing, except to the extent waived in writing.
18. Further Assurances. In connection with the transactions contemplated by this
agreement, the parties agree to execute and deliver such further instruments,
and to take such further actions, as may be reasonably necessary or proper to
effectuate and carry out the transactions contemplated in this agreement.
19. Changes Must Be In Writing. No delay or omission by either Seller or
Purchaser in exercising any right shall operate as a waiver of such right or any
other right. This agreement may not be altered, amended, changed, modified,
waived or terminated in any respect or particular unless the same shall be in
writing signed by the party to be bound. No waiver by any party of any breach
hereunder shall be deemed a waiver of any other or subsequent breach.
20. Captions And Exhibits. The captions in this agreement are for convenience
only and are not to be considered in construing this agreement. The Exhibits
annexed to this agreement are an integral part of this agreement, and where
there is any reference to this agreement it shall be deemed to include said
Exhibits.
21. Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of New York.
22. Binding Effect. This agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
23. Cancellation. Purchaser reserves the right to cancel this Agreement, without
penalty, if any negative disclosure is discovered regarding Seller or its
Assets, which would materially affect the value of Seller's Assets.
24. Confidentiality. Each party acknowledges and agrees that any information or
data it has acquired from the other party, not otherwise properly in the public
domain, was received in confidence. Each party hereto agrees not to divulge,
communicate or disclose, except as may be required by law or for the performance
of this Agreement (including conducting due diligence or notifying a party's
lender), or use to the detriment of the disclosing party or for the benefit of
any other person or persons, or misuse in any way, any confidential information
of the disclosing party concerning the subject matter hereof, including any
trade or business secrets of the disclosing party and any technical or business
materials that are treated by the disclosing party as confidential or
proprietary, including without limitation information (whether in written, oral
or machine readable form) concerning: general business operations: methods of
doing business, servicing clients, client
9
<PAGE>
relations, and of pricing and making charge for services and products; financial
information, including costs, profits and sales; marketing strategies; business
forms developed by or for the disclosing party; names of suppliers, personnel,
clients and potential clients; negotiations or other business contacts with
suppliers, personnel, clients and potential clients; form and content of bids,
proposals and contracts; the disclosing party's internal reporting methods;
technical and business data and documentation; software programs, however
embodied; diagnostic techniques; and information obtained by or given to the
disclosing party about or belonging to third parties.
IN WITNESS WHEREOF, the parties have executed this agreement the date first
above written.
By_________________________
Gary Danziger
PARKSIDE PHYSICAL THERAPY SERVICES, P.C.
ATTEST:
By ________________________
President
By ____________________
Secretary
NEW MEDICAL PRACTICE, P.C.
ATTEST:
By ________________________
President
By ____________________
Secretary
Jerry Shames, Attorney at Law, hereby executes this agreement for the sole
purpose of agreeing to serve as Escrow Agent in accordance with the provisions
of Article 13 of this agreement.
-------------------------------
Jerry Shames, Attorney at Law
10
<PAGE>
STATE OF NEW YORK, COUNTY OF , SS.:
On the day of August, 1996, before me personally came
, to me known, who being duly sworn, did depose
and say that he resides at
; that he is the President of Parkside Physical
Therapy Services, P.C., the corporation described in and which executed the
foregoing Agreement of Sale; and that he signed his name thereto by the order of
the board of directors of the said corporation.
-------------------------------
Notary Public
My commission expires on
STATE OF NEW YORK, COUNTY OF , SS.:
On the day of August, 1996, before me personally came Gary Danziger, to
me known to be the individual described in and who executed the foregoing
Agreement of Sale, and acknowledged that he executed said Agreement of Sale.
-------------------------------
Notary Public
My commission expires on
STATE OF NEW YORK, COUNTY OF , SS.:
On the day of August, 1996, before me personally came
, to me known, who being duly sworn, did depose
and say that he resides at
; that he is the President of New Medical
Practice, P.C., the corporation described in and which executed the foregoing
Agreement of Sale; and that he signed his name thereto by the order of the board
of directors of the said corporation.
-------------------------------
Notary Public
My commission expires on
EXHIBIT A-1
Equipment and General Assets
<PAGE>
EXHIBIT A-2
Improvements
<PAGE>
EXHIBIT A-3
The Lease
<PAGE>
EXHIBIT A-4
Contracts and Equipment Leases
Indebtedness under executory contracts or leases:
<PAGE>
EXHIBIT A-5
Provider Agreements
<PAGE>
EXHIBIT A-6
Bank Accounts, Safe Deposit Boxes, Lines of Credit and
Persons Authorized to Access Each
<PAGE>
EXHIBIT A-7
Accounts Receivable
<PAGE>
EXHIBIT B
Existing Indebtedness, Collateral, Copies of Security Agreements
<PAGE>
===========================================
ASSIGNMENT OF LEASE
dated August ___, 1996
from
Parkside Physical Therapy Services, P.C.
Seller
to
New Medical Practice, P.C.
Purchaser
===========================================
<PAGE>
EXHIBIT C
ASSIGNMENT OF LEASE
KNOW THAT, for valuable consideration, Parkside Physical Therapy
Services, P.C., a New York corporation, having an address at 41 West 96th
Street, New York, NY 10025 ("Assignor") hereby assigns unto New Medical
Practice, P.C., a New York professional corporation, having an address at 2
Gannett Drive, Suite 215, White Plains, NY 10604 ("Assignee") all right, title
and interest of Assignor as lessee under the following lease:
Whitehall Apartment Company to Parkside Physical Therapy Services
Dated November 22, 1994.
TO HAVE AND TO HOLD said lease unto Assignee and the heirs, executors,
administrators, successors and assigns of Assignee from and after the date
hereof, for the rest of the term of said lease, as the same may be modified or
extended.
Assignee hereby assumes and agrees to perform, from and after the date
hereof, all of the terms, covenants and conditions of said lease to be performed
by the lessee thereunder.
IN WITNESS WHEREOF, Assignor and Assignee have duly executed this
assignment and assumption on August ___, 1996.
PARKSIDE PHYSICAL THERAPY SERVICES, P.C.
ATTEST:
By ________________________
President
By ____________________
Secretary
NEW MEDICAL PRACTICE, P.C.
ATTEST:
By ________________________
President
By ____________________
Secretary
<PAGE>
STATE OF NEW YORK, COUNTY OF , SS.:
On the day of August, 1996, before me personally came
, to me known, who being duly sworn, did depose
and say that he resides at
; that he is the President of Parkside Physical
Therapy Services, P.C., the corporation described in and which executed the
foregoing instrument; and that he signed his name thereto by the order of the
board of directors of the said corporation.
-------------------------------
Notary Public
My commission expires on
STATE OF NEW YORK, COUNTY OF , SS.:
On the day of August, 1996, before me personally came
, to me known, who being duly sworn, did depose
and say that he resides at
; that he is the President of New Medical
Practice, P.C., the corporation described in and which executed the foregoing
instrument; and that he signed his name thereto by the order of the board of
directors of the said corporation.
-------------------------------
Notary Public
My commission expires on
The undersigned, as lessor under the lease described in the foregoing
assignment of lease, hereby consents to said assignment of the lease.
-------------------------------
Whitehall Apartment Company
<PAGE>
EXHIBIT D
FINANCIAL STATEMENTS
===========================================
AGREEMENT OF SALE
dated August __, 1996
between
Gary Danziger,
Seller
PTSR, Inc.
and
Oak Tree Medical Management, Inc.
Purchaser
===========================================
<PAGE>
AGREEMENT OF SALE
AGREEMENT OF SALE, made August __, 1996, among PTSR, Inc., a New York
corporation, having an address at 1725 Tenbroeck Avenue, Bronx, NY 10461
("PTSR"), Gary Danziger, having an address at 1 Crooked Mile Road, Westport, CT
06880 ("Seller"), and Oak Tree Medical Management, Inc., a New York corporation,
having an address at 2 Gannett Drive Suite 215, White Plains, NY 10604
("Purchaser").
W I T N E S S E T H:
WHEREAS, Purchaser desires to acquire, and Seller desires to sell, the stock of
the corporation known as PTSR, Inc., ("PTSR") hereinafter specified, upon the
terms and conditions hereinafter set forth, and
WHEREAS, Seller is the shareholder of PTSR.
NOW, THEREFORE, in consideration of the covenants and agreements hereafter set
forth, and other valuable consideration, the receipt and sufficiency of which
hereby is acknowledged, the parties hereto agree as follows:
1. Agreement To Sell. Seller agrees to sell, transfer and deliver to Purchaser,
and Purchaser agrees to purchase, upon the terms and conditions hereinafter set
forth, all of the capital stock of the New York corporation, PTSR, Inc. such
shares totaling (100) One Hundred. Said shares constitute all of the authorized
and issued shares of the corporation (the "Shares").
2. The Assets of the Corporation. It is the understanding of the parties that
PTSR is the owner of the following assets (the "Assets"):
(a) the equipment, patient files, name and general assets described in
Exhibit A-1 hereto and all similar equipment acquired or owned by the
business on or before the closing date (the "General Assets");
(b) the furniture, fixtures and improvements described in Exhibit A-2
hereto and all similar items acquired or owned by the business on or
before the closing date (the "Improvements");
(c) the lease described in Exhibit A-3 hereto (the "Lease");
2
<PAGE>
(d) the equipment leases, contracts and agreements described in Exhibit
A-4 hereto (the "Contracts");
(e) the Provider Agreements described and attached in Exhibit A-5 hereto
(the "Provider Agreements");
(f) the bank accounts, lines of credit and safe deposit boxes, including a
list of the persons authorized to access the bank accounts and safe
deposit boxes, described in Exhibit A-6 hereto (the "bank accounts and
boxes");
(g) The accounts receivable listed in Exhibit A-7 (the "Accounts
Receivable").
Notwithstanding anything to the contrary contained herein, there shall be
excluded from the Assets, all cash on hand and in PTSR's bank accounts.
3. Purchase Price. The purchase price to be paid by Purchaser is Four Hundred
Twenty Five Thousand Dollars ($425,000.00), payable as follows:
(a) Twenty Five Thousand Dollars ($25,000.00) at the closing.
(b) Four Hundred Thousand Dollars ($400,000.00) at the closing by
taking title subject to and assuming payment of the Existing
Indebtedness owed to Lea Adar identified in Exhibit B hereto in said
principal amount, and paying the same according to the terms thereof.
If on the closing date the outstanding principal balance of the
Existing Indebtedness is less than $400,000.00, the $25,000.00 to be
paid at the closing by check pursuant to clause (a) above shall be
increased by the amount that such outstanding principal balance shall
be less than $400,000.00. IN NO CASE SHALL PRUCHASER BE RESPONSIBLE
FOR MORE THAN THE PRINCIPAL OF $400,000.00 OF THIS DEBT.
4. The Closing. The "closing" means the settlement of the obligations of
Seller and Purchaser to each other under this agreement, including the
payment of the purchase price to Seller as provided in Article 3 hereof and
the delivery of the closing documents provided for in Article 5 hereof. The
closing shall be held at the offices of Robert P. Borsody, P.C., 250 Park
Avenue, New York, NY 10177, and shall take place within thirty (30) days of
completion of Purchaser's audit, (the "closing date"); but in no event
shall closing take place later than September 30, 1996.
5. Closing Documents. At the closing Seller shall execute and deliver to
Purchaser:
(a) an Assignment of the rights of the lessee under the Lease,
substantially in the form of Exhibit C hereto
(b) certified copies of resolutions duly adopted by the Board of Directors
and Shareholder of Seller authorizing the sale of the Stock and the
performance by Seller of its obligations hereunder
3
<PAGE>
(c) an opinion of Seller's counsel, Jerry Shames, Esq. dated as of the
closing date, in form and substance satisfactory to Purchaser's
counsel, stating such counsel's opinion that: (i) PTSR is a
corporation duly organized, validly existing and in good standing
under the laws of New York; (ii) PTSR and Seller have full power and
authority, corporate and otherwise, to enter into this agreement and
perform its obligations hereunder; (iii) the execution and delivery of
this agreement and the performance by PTSR of its obligations
hereunder have been duly authorized by the Board of Directors and
Shareholder of PTSR and no further action or approval is required in
order to constitute this agreement as the binding obligation of Seller
or PTSR, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, moratorium, insolvency or
other laws affecting creditor's rights generally; (iv) the execution
and delivery of this agreement and the performance by PTSR of its
obligations hereunder do not and will not violate any provision of the
Certificate of Incorporation or Bylaws of PTSR; and (v) except as may
be set forth in this agreement, such counsel is not representing
Seller or PTSR in any suit, action or proceeding against them which,
if adversely determined, would prohibit the consummation of the
transactions contemplated by this agreement,
(d) the certificate or certificates for the Shares, duly endorsed so as to
effectively transfer ownership of the Shares to Purchaser, together
with all appropriate federal and state transfer tax stamps affixed,
(e) letters of resignation from each director and officer of PTSR,
effective as of the closing hereunder,
(f) the Certificate of Incorporation, filing receipt and other
organizational documents of PTSR, and the Bylaws, minute book, stock
certificate book and seal of PTSR; any bills, vouchers, records
showing the ownership of the assets used in the operation of PTSR; and
all other books of account, records and contracts of PTSR
(g) Restrictive Covenant as enumerated in Article Ten (10),
(h) Statement executed by Lea Adar and Seller that Existing Debt
identified in Exhibit B herein is currently paid, to date of closing.
Statement shall also note that any payments in arrears have been
brought current, to date of closing,
(i) Statements executed by Lea Adar and Seller, releasing and indemnifying
Purchaser from any and all obligations and liabilities in excess of
the principal of Four Hundred Thousand Dollars ($400,000.00) of the
Existing Debt identified in Exhibit B herein. Lea Adar shall state
that she will look only to Seller for any sums due her in excess of
$400,000.00 principal obligation, assumed by Purchaser,
(j) such other instruments and information in form and substance
satisfactory to Purchaser's attorneys as may be necessary or proper to
transfer to Purchaser good and marketable title to all other ownership
interests in the Stock to be transferred under this agreement.
At the closing Seller shall deliver to Purchaser all keys for the business. If
any keys for the business or assets are held by employees or others, Seller
shall identify such individuals, their
4
<PAGE>
addresses and their relationship to the Seller. Seller shall do all further acts
and things as may be necessary, or reasonably requested by Purchaser, to
consummate the transactions contemplated by this agreement, including the
acquisition of possession of the Assets. Seller shall advise Purchaser of, and
cause to be delivered to Purchaser, all trade secrets and proprietary
information pertaining to the assets of the business.
At the closing Purchaser shall execute and deliver to Seller:
(a) an Assumption of the obligations of the lessee under the Lease,
substantially in the form of Exhibit C hereto
(b) an Assumption of the Existing Indebtedness
Except as expressly provided herein, Purchaser shall not be obligated to pay or
perform any obligations or liabilities of Seller including without limitation
obligations or liabilities of Seller to its creditors or any legal, accounting,
brokerage or finder's fees or any taxes or other expenses in connection with
this agreement or the consummation of the transactions contemplated hereby.
6. Closing Adjustments. The following items shall be apportioned as of midnight
of the day preceding the closing date:
(a) rent, including any additional rent, under the Lease
(b) taxes and applicable common charges under the lease
(c) water and sewer charges
(d) utilities , as applicable
(e) employee salaries and benefits
(f) interest on the Existing Indebtedness
Any errors or omissions in computing apportionments shall be corrected after the
closing, with both parties fully cooperating.
7. Representations And Warranties Of Seller. Seller represents and warrants to
Purchaser as follows:
(a) PTSR is a corporation duly organized and validly existing under the
laws of New York, and is duly qualified to do business in New York.
PTSR has full power and authority to own its properties and to conduct
its business as now carried on, and to carry out and perform its
undertakings and obligations as provided herein. The execution and
delivery by PTSR of this agreement and the consummation of the
transactions contemplated herein have been duly authorized by the
Board of Directors of PTSR and will not conflict with or breach any
provision of the Certificate of Incorporation or Bylaws of PTSR, and
do not and will not conflict with or result in any breach of any
condition or provision of, or constitute a default under, or result in
the creation or imposition of any
5
<PAGE>
lien, charge or encumbrance upon the Assets by reason of the
provisions of any contract, lien, lease, agreement, instrument or
judgment to which Seller or PTSR is a party, or which is or purports
to be binding upon Seller or PTSR or which affects or purports to
affect the Assets. No further action or approval, corporate or
otherwise, is required in order to constitute this agreement the
binding and enforceable obligation of Seller or PTSR.
(b) No action, approval, consent or authorization, including without
limitation any action, approval, consent or authorization of any
governmental or quasi-governmental agency, commission, board, bureau
or instrumentality, is necessary for Seller or PTSR to constitute this
agreement the binding and enforceable obligation of Seller or PTSR or
to consummate the transactions contemplated hereby.
(c) Seller is the owner of the Shares, and the Shares are all of the
issued and outstanding shares of stock of PTSR. All of the Shares have
no par value, are fully paid and non-assessable, have not been
assigned, pledged or hypothecated, and are free of all liens, claims
and encumbrances, except as set forth herein. PTSR is the owner of and
has good and marketable title to the Assets, free of all liens, claims
and encumbrances, except as set forth herein.
(d) There are no violations, potential claims of violations or questions
of irregularity regarding any law or governmental rule or regulation
pending or, to the best of Seller's knowledge, threatened against
Seller, PTSR or the Assets. Seller and PTSR have complied with all
laws and governmental rules and regulations applicable to the business
or the Assets. Seller and PTSR have duly notified all insurance
carriers or third party payors of any suspected or known claims or
potential claims which may be asserted against seller, PTSR or the
Assets.
(e) There are no judgments, liens, suits, actions or proceedings pending
or, to the best of Seller's knowledge, threatened against Seller, PTSR
or the Assets. Neither Seller, PTSR nor the Assets are a party to,
subject to or bound by any agreement or any judgment or decree of any
court, governmental body or arbitrator which would conflict with or be
breached by the execution, delivery or performance of this agreement,
or which could prevent the carrying out of the transactions provided
for in this agreement, or which could prevent the use by Purchaser of
the Stock or Assets or adversely affect the conduct of the business by
Purchaser.
(f) PTSR has not entered into, and the Assets are not subject to, any: (i)
written contract or agreement for the employment of any employee of
the business; (ii) contract with any labor union or guild; (iii)
pension, profit-sharing, retirement, bonus, insurance, or similar plan
with respect to any employee of the business; or (iv) similar contract
or agreement affecting or relating to the Stock or Assets.
(g) At the time of the closing, there will be no (secured or unsecured)
creditors of PTSR or Seller, other than the holders of the Existing
Indebtedness, Exhibit B. Such payments on
6
<PAGE>
the Existing Indebtedness are current and no payments are in arrears.
General business creditors and equipment lessors are listed in Exhibit
A-4 attached hereto. Except as set forth herein, Seller shall be
liable for all other obligations incurred by PTSR or Seller prior to
closing.
(h) The Lease is in full force and effect and without any default by PTSR
thereunder. All copies of the Lease provided by Seller to Purchaser
are true and complete copies of the original Lease. The lease may be
assigned to Purchaser.
(i) Identified Contracts and Equipment Leases are in full force and effect
and without any default by Seller or PTSR thereunder. All copies of
the Contracts and Leases provided by Seller to Purchaser are true and
complete copies of the original Contracts. Seller and PTSR are not
indebted under any executory Contracts or Leases, except as may be set
forth in Exhibit A-4 hereto.
(j) Any and all Provider Agreements are in full force and effect. True and
complete copies of such Agreements are attached hereto as Exhibit A-5.
(k) Seller and PTSR have filed each tax return, including without
limitation all income, excise, property, gain, sales, franchise and
license tax returns, required to be filed by Seller and PTSR prior to
the date hereof. Each such return is true, complete and correct, and
Seller has paid all taxes, assessments and charges of any governmental
authority required to be paid by it and has created reserves or made
provision for all taxes accrued but not yet payable. No government is
now asserting, or to Seller's knowledge threatening to assert, any
deficiency or assessment for additional taxes or any interest,
penalties or fines with respect to Seller. Seller's federal tax
identification number is _________________. Seller shall hold
purchaser harmless and indemnify Purchaser against all claims for
taxes due from and owed by Seller or PTSR.
(l) The attached financial statements in Exhibit D are true and accurate.
The financial statements fairly and correctly present the financial
position of the Seller and will so represent such as of the date of
closing.
At the closing Seller shall execute and deliver an affidavit setting forth the
above representations as of the date of the closing.
8. Representations And Warranties Of Purchaser. Purchaser represents and
warrants to Seller as follows:
(a) Purchaser is a corporation organized under the laws of New York, and
is duly qualified to do business in New York. Purchaser has full power
and authority to carry out and perform its undertakings and
obligations as provided herein. The execution and delivery by
Purchaser of this agreement and the consummation of the transactions
contemplated herein have been duly authorized by the Board of
Directors of Purchaser and will not conflict with or breach any
provision of the Certificate of Incorporation or Bylaws of Purchaser.
No further action or approval, corporate or otherwise, is required in
order to constitute this agreement the binding and enforceable
obligation of Purchaser.
7
<PAGE>
(b) No action, approval, consent or authorization, including without
limitation any action, approval, consent or authorization of any
governmental or quasi-governmental agency, commission, board, bureau or
instrumentality, is necessary for Purchaser to constitute this
agreement the binding and enforceable obligation of Purchaser or to
consummate the transactions contemplated hereby.
9. Conditions To Closing. The obligations of Purchaser to close hereunder are
subject to the following conditions:
(a) All of the terms, covenants and conditions to be complied with or
performed by Seller under this agreement on or before the closing
shall have been complied with or performed in all material respects.
(b) All representations or warranties of Seller herein are true in all
material respects as of the closing date. Such representations and
warranties shall also survive closing.
(c) Satisfactory results of financial audit.
(d) All assets are in good working order, as applicable.
(e) On the closing date, there shall be no liens or encumbrances against
the Assets, except as provided for herein.
(f) The business of PTSR will have been conducted only in the ordinary
course of business. No contracts or purchase agreements/orders will
have been entered into, other than in the ordinary course of business.
No expenditures or credit purchases will be made by Seller, other than
in the ordinary course of business.
(g) Seller, PTSR and their representatives and advisors will supply, upon
request by Purchaser and its representatives, such pertinent
information as may be required by Purchaser in order to conduct its
due diligence survey of PTSR. It is agreed that any documents or
information provided hereunder shall be kept in full and complete
confidence.
(h) All payments under the Existing Indebtedness are current and not in
arrears, to date of closing.
Seller promptly shall notify the lessor under the Lease (the "Lessor") of the
proposed assignment of the Lease to Purchaser, and shall request the consent of
the Lessor thereto. Seller and Purchaser shall furnish to the Lessor such
information as may reasonably be required in connection with the procuring of
such consent, and shall otherwise cooperate in an effort to expeditiously
procure such consent. Purchaser agrees to pay to the Lessor an amount of up to
$10,000.00 in consideration for the consent of Lessor to the assignment of the
Lease to Purchaser. If the Lessor shall fail or refuse to grant such consent in
writing within thirty days after the date of this agreement (the "Outside
Date"), or shall require as a condition of the granting of such consent that
additional consideration be paid to the Lessor (in excess of the aforesaid
$10,000.00 to be paid by Purchaser) which neither Seller nor Purchaser is
willing to pay, then Purchaser may terminate this agreement, by written notice
to the other delivered within ten days after the Outside Date.
8
<PAGE>
If this agreement is terminated as provided above in this Article 9, Seller
shall return any payments made by Purchaser on account of the purchase price,
whereupon all rights of Purchaser hereunder and to the business shall terminate,
and neither Seller nor Purchaser shall have any further claim against the other
hereunder.
10. Restrictive Covenant Not to Compete. Seller will not, for a period of four
(4) years from the date of closing, either directly or indirectly engage in the
practice of physical therapy or related services, within lower Westchester
County, NY (up to and including latitude of White Plains, NY), Fairfield County,
CT and within a ten (10) mile radius of PTSR's current address at 1725 Tenbroeck
Avenue, Bronx, NY 10461. Seller shall execute at closing, such documents as will
evidence this surviving provision.
11. Indemnification. Each party hereto shall indemnify and hold the other
parties harmless from and against all liability, claim, loss, damage or expense,
including reasonable attorneys' fees, incurred or required to be paid by such
other parties by reason of any breach or failure of observance or performance of
any representation, warranty, covenant or other provision (including lists and
Exhibits) of this agreement by such party. Seller shall indemnify and hold
Purchaser harmless against all actions, suits, proceedings, judgments, costs and
expenses incurred by or levied against Purchaser, due to Seller's or PTSR's
prior acts, omissions, negligence or other wrongful conduct.
12. Risk Of Loss. The risk of loss to the assets of the business sold hereunder,
until the closing, is assumed and shall be borne by Seller. Seller and PTSR
agree to keep all of its assets fully insured against any loss, either by fire,
theft or casualty, to the date of closing. In the event that prior to closing,
such Assets are totally or substantially damaged by reason of fire, theft or
casualty, Purchaser may, in its sole discretion, terminate the within
transaction. In such case, all money heretofore deposited with Seller or
Seller's representative shall be refunded to Purchaser and the parties shall be
released from any further liability hereunder. If the Purchaser elects to
consummate this transaction despite such loss or damage, it may do so by paying
the purchase price set forth herein, reduced by any insurance proceeds received
by Seller.
13. Brokerage. The parties hereto represent and warrant to each other that they
have not dealt with any broker or finder in connection with this agreement other
than the broker, American Health Resources, LLC with offices at 21394 Marina
Cove Circle, Suite H11, North Miami Beach, FL 33180 (the "Broker"). The
Purchaser shall be solely responsible for and shall pay at closing all
commission, fees, expenses and charges due or owing to the Broker in connection
with this transaction, pursuant to a separate agreement between the Purchaser
and Broker. Purchaser and Seller shall indemnify, defend and hold each other
harmless from and against any loss, cost, expense, claim or liability
(including, without limitation, reasonable attorney's fees) arising under or in
respect of any claim by any person or entity for any commission, fee or expense
in respect of the transaction contemplated by this Agreement, where such claim
is based in whole or in part upon any act of the indemnifying party or its
representatives. The provisions of this Article shall survive the expiration,
termination or cancellation of this Agreement, but shall not be construed as a
covenant for the benefit of any third party.
14. The Seller. Seller hereby confirms all of the representations and warranties
of PTSR, and agrees to indemnify and hold Purchaser harmless from and against
misrepresentation or breach of any warranty by PTSR, or any breach or failure by
Seller to comply with any term, covenant or condition of this
9
<PAGE>
agreement. Seller represents and warrants that he is the shareholder of PTSR,
and that he has full power and authority to carry out and perform his
undertakings and obligations as provided herein. Seller agrees as aforesaid to
induce Purchaser to enter into this agreement. No action or inaction of Seller
or Purchaser, including the giving of notices, shall affect, change or discharge
the obligations of the Purchaser's Guarantor hereunder.
15. Notices. All notices, demands and other communications required or permitted
to be given hereunder shall be in writing and shall be deemed to have been
properly given if delivered by hand or by registered or certified mail, return
receipt requested, with postage prepaid, to Seller's attorney, Jerry Shames,
Esq. at 16 Taylor Place, Westport, CT 06880, and to Purchaser's attorney,
Frederick C. Veit, Esq., at 2 Gannett Drive Suite 215, White Plains, NY 10604.
The respective attorneys for the parties hereby are authorized to give any
notice required or permitted hereunder and to agree to adjournments of the
closing.
16. Survival. The representations, warranties and covenant contained herein or
in any document, instrument, certificate or schedule furnished in connection
herewith shall survive the delivery of the Bill of Sale and shall continue in
full force and effect after the closing, except to the extent waived in writing.
17. Further Assurances. In connection with the transactions contemplated by this
agreement, the parties agree to execute and deliver such further instruments,
and to take such further actions, as may be reasonably necessary or proper to
effectuate and carry out the transactions contemplated in this agreement.
18. Changes Must Be In Writing. No delay or omission by either Seller or
Purchaser in exercising any right shall operate as a waiver of such right or any
other right. This agreement may not be altered, amended, changed, modified,
waived or terminated in any respect or particular unless the same shall be in
writing signed by the party to be bound. No waiver by any party of any breach
hereunder shall be deemed a waiver of any other or subsequent breach.
19. Captions And Exhibits. The captions in this agreement are for convenience
only and are not to be considered in construing this agreement. The Exhibits
annexed to this agreement are an integral part of this agreement, and where
there is any reference to this agreement it shall be deemed to include said
Exhibits.
20. Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of New York.
21. Binding Effect. This agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
22. Cancellation. Purchaser reserves the right to cancel this Agreement, without
penalty, if any negative disclosure is discovered regarding Seller, PTSR or its
Assets, which would materially affect the value of PTSR's Assets.
23. Taxes. Purchaser agrees to treat the current taxable year (ending December
31, 1996) of PTSR as if it consisted of two taxable years, the first such
taxable year ending on the Closing Date, and to cause
10
<PAGE>
PTSR to file a Section 1377 (a) (2) Election when filing the corporate tax
return for the taxable year. Purchaser agrees that it will not allow the
Corporation to file the tax return or any K-1s without the prior consent (such
consent not to be unreasonably withheld) of the Seller and that prior to filing
any K-1s, the Seller shall have the right to review the tax return and the K-1s.
If Seller or PTSR has not maintained adequate books and records to comply with
this provision, Seller shall be responsible for the accounting costs in assembly
adequate records needed to comply with this provision.
24. Confidentiality. Each party acknowledges and agrees that any information or
data it has acquired from the other party, not otherwise properly in the public
domain, was received in confidence. Each party hereto agrees not to divulge,
communicate or disclose, except as may be required by law or for the performance
of this Agreement (including conducting due diligence or notifying a party's
lender), or use to the detriment of the disclosing party or for the benefit of
any other person or persons, or misuse in any way, any confidential information
of the disclosing party concerning the subject matter hereof, including any
trade or business secrets of the disclosing party and any technical or business
materials that are treated by the disclosing party as confidential or
proprietary, including without limitation information (whether in written, oral
or machine readable form) concerning: general business operations: methods of
doing business, servicing clients, client relations, and of pricing and making
charge for services and products; financial information, including costs,
profits and sales; marketing strategies; business forms developed by or for the
disclosing party; names of suppliers, personnel, clients and potential clients;
negotiations or other business contacts with suppliers, personnel, clients and
potential clients; form and content of bids, proposals and contracts; the
disclosing party's internal reporting methods; technical and business data and
documentation; software programs, however embodied; diagnostic techniques; and
information obtained by or given to the disclosing party about or belonging to
third parties.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this agreement the date first
above written.
SELLER:
By_________________________
Gary Danziger
PTSR, INC.
ATTEST:
By ________________________
President
By ____________________
Secretary
OAK TREE MEDICAL MANAGEMENT, INC.
ATTEST:
By ________________________
President
By ____________________
Secretary
12
<PAGE>
STATE OF NEW YORK, COUNTY OF , SS.:
On the ____ day of August, 1996, before me personally came
__________________________________________________ , to me known, who being duly
sworn, did depose and say that he resides at __________________________________
_________________________ ; that he is the President of PTSR, Inc., the
corporation described in and which executed the foregoing Agreement of Sale; and
that he signed his name thereto by the order of the board of directors of the
said corporation.
-------------------------------
Notary Public
My commission expires on
STATE OF NEW YORK, COUNTY OF , SS.:
On the day of August, 1996, before me personally came Gary
Danziger, to me known to be the individual described in and who executed the
foregoing Agreement of Sale, and acknowledged that he executed said Agreement of
Sale.
-------------------------------
Notary Public
My commission expires on
STATE OF NEW YORK, COUNTY OF , SS.:
On the _____ day of August, 1996, before me personally came
________________________________________________ , to me known, who being duly
sworn, did depose and say that he resides at __________________________________
__________________________________________________ ; that he is the President of
Oak Tree Medical Management of New York Inc., the corporation described in and
which executed the foregoing Agreement of Sale; and that he signed his name
thereto by the order of the board of directors of the said corporation.
-------------------------------
Notary Public
My commission expires on
13
<PAGE>
EXHIBIT A-1
Equipment and General Assets
14
<PAGE>
EXHIBIT A-2
Improvements
15
<PAGE>
EXHIBIT A-3
The Lease
16
<PAGE>
EXHIBIT A-4
Contracts and Equipment Leases
Indebtedness under executory contracts or leases:
17
<PAGE>
EXHIBIT A-5
Provider Agreements
18
<PAGE>
EXHIBIT A-6
Bank Accounts, Safe Deposit Boxes, Lines of Credit and
Persons Authorized to Access Each
19
<PAGE>
EXHIBIT A-7
Accounts Receivable
20
<PAGE>
EXHIBIT B
Existing Indebtedness, Collateral, Copies of Security Agreements
21
<PAGE>
===========================================
ASSIGNMENT OF LEASE
dated August ___, 1996
from
PTSR, Inc.
Seller
to
Oak Tree Medical Management, Inc.
Purchaser
===========================================
22
<PAGE>
EXHIBIT C
ASSIGNMENT OF LEASE
KNOW THAT, for valuable consideration, PTSR, Inc., a New York
corporation, having an address at 1725 Tenbroeck Avenue, Bronx, NY 10461
("Assignor") hereby assigns unto Oak tree Medical Management, Inc., a New York
corporation, having an address at 2 Gannett Drive Suite 215, White Plains, NY
10604 ("Assignee") all right, title and interest of Assignor as lessee under the
following lease:
Physur Realty Associates to PTSR, Inc.
Dated December 1, 1991.
TO HAVE AND TO HOLD said lease unto Assignee and the heirs, executors,
administrators, successors and assigns of Assignee from and after the date
hereof, for the rest of the term of said lease, as the same may be modified or
extended.
Assignee hereby assumes and agrees to perform, from and after the date
hereof, all of the terms, covenants and conditions of said lease to be performed
by the lessee thereunder.
IN WITNESS WHEREOF, Assignor and Assignee have duly executed this
assignment and assumption on August ___, 1996.
PTSR, INC.
ATTEST:
By ________________________
President
By ____________________
Secretary
OAK TREE MEDICAL MANAGEMENT, INC.
ATTEST:
By ________________________
President
By ____________________
Secretary
23
<PAGE>
STATE OF NEW YORK, COUNTY OF , SS.:
On the _____ day of August, 1996, before me personally came
_______________________________________ , to me known, who being duly sworn,
did depose and say that he resides at __________________________
___________________________________________; that he is the President of PTSR,
Inc., the corporation described in and which executed the foregoing instrument;
and that he signed his name thereto by the order of the board of directors of
the said corporation.
-------------------------------
Notary Public
My commission expires on
STATE OF NEW YORK, COUNTY OF , SS.:
On the ____ day of August, 1996, before me personally came
___________________________ , to me known, who being duly sworn, did depose and
say that he resides at _________________________________________________
_________________________________________________ ; that he is the President of
Oak Tree Medical Management, Inc., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by the
order of the board of directors of the said corporation.
-------------------------------
Notary Public
My commission expires on
The undersigned, as lessor under the lease described in the foregoing assignment
of lease, hereby consents to said assignment of the lease.
-------------------------------
Physur Realty Associates
24
<PAGE>
EXHIBIT D
FINANCIAL STATEMENTS
25
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 106,894
<SECURITIES> 0
<RECEIVABLES> 5,159,797
<ALLOWANCES> 1,486,270
<INVENTORY> 0
<CURRENT-ASSETS> 3,849,012
<PP&E> 552,228
<DEPRECIATION> 175,227
<TOTAL-ASSETS> 10,508,757
<CURRENT-LIABILITIES> 1,462,237
<BONDS> 0
0
0
<COMMON> 25,292
<OTHER-SE> 7,772,677
<TOTAL-LIABILITY-AND-EQUITY> 10,508,757
<SALES> 1,002,463
<TOTAL-REVENUES> 1,002,463
<CGS> 176,427
<TOTAL-COSTS> 550,152
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,072
<INCOME-PRETAX> 232,812
<INCOME-TAX> 87,426
<INCOME-CONTINUING> 145,386
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 145,386
<EPS-PRIMARY> .06
<EPS-DILUTED> .04
</TABLE>