<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
MAY 11, 1996
-----------------------------------------
Date of Report (Date of Earliest Event Reported)
SARGENT, INC.
---------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 0-19031 84-1215959
- - ------------------ ------------------ ------------------
(State or other (Commission (IRS Employer
jurisdiction of file Number) Identification No.)
incorporation or
organization)
5901 WEST OLYMPIC BOULEVARD
SUITE 109
LOS ANGELES, CALIFORNIA 90036
---------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (213) 935-5700
----------------
P.O. Box 12400
Denver, Colorado 80212
(303) 477-5788
------------------------------
(Former address and telephone number
of principal executive offices)
with copies to:
Jeffrey P. Berg, Esq.
Matthias & Berg
515 South Flower Street
Suite 700
Los Angeles, California 90071
Tel: 213-895-4200
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
SHARE EXCHANGE AGREEMENT. On May 11, 1996, Sargent, Inc., a Delaware
corporation (the "Company"), Los Angeles Community Dialysis, Inc. ("LACD"),
Victor Gura, M.D. ("Gura"), Avraham H. Uncyk, M.D. ("Uncyk") and Ronald P. Lang,
M.D. ("Lang") completed the transactions contemplated by an Agreement for
Exchange of Stock (the "Share Exchange Agreement"). In connection with the
Share Exchange Agreement, the Company issued an aggregate of 4,234,128 shares
(the "Exchanged Sargent Shares") of the common stock, par value $0.01 per share
(the "Common Stock") of the Company to Gura, Uncyk and Lang in exchange for 100%
of the issued and outstanding shares (the "Exchanged LACD Shares") of common
stock of LACD, as follows: (i) Gura (2,183,036 shares), (ii) Lang (727,679
shares), (iii) Uncyk (323,413 shares), and (iv) Medipace Medical Group, Inc.
("Medipace"), a California corporation owned by Gura, Lang and Uncyk (1,000,000
shares). The 1,000,000 shares issued to Medipace were originally issued to
Gura, Lang and Uncyk in their proportionate ownership interests in Medipace
(67.5%, 22.5% and 10%, respectively), and subsequently transferred to Medipace.
Prior to the closing (the "Closing") of the Share Exchange Agreement, the
Company had issued and outstanding 2,111,343 shares of Common Stock and options
to purchase up to 500,000 shares of Common Stock. At the Closing of the Share
Exchange Agreement, Sargent had 6,345,471 shares of Common Stock issued and
outstanding. As a result, the Exchanged Sargent Shares constituted
approximately 66.73% of the issued and outstanding shares of Common Stock of the
Company at the Closing.
ACQUISITION OF HEMODIALYSIS BUSINESS. In connection with and prior to the
Closing of the Share Exchange Agreement, as of May 8, 1996, LACD acquired
certain assets and assumed certain of liabilities related to the Hemodialysis
portion of the business operations of Medipace (the "Hemodialysis Business
Operations"), including the equipment, accounts receivable, contracts, payables
and leases related to such business operations. LACD acquired the Hemodialysis
Business Operations of Medipace in consideration of the cancellation of a
$150,000 loan made by LACD to Medipace and the transfer by Drs. Gura, Lang and
Uncyk of 1,000,000 shares of Common Stock of the Company which were issued to
Medipace in connection with the Closing of the Share Exchange Agreement. See
"Certain Relationships and Related Transactions" and "Financial Statements."
LACD is a high-quality provider of hemodialysis services for patients
suffering from chronic kidney failure, also known as end-stage renal disease
("ESRD").
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Hemodialysis, the most common form of ESRD treatment, is generally
performed either in a freestanding facility or in a hospital-based facility.
Hemodialysis uses an artificial kidney, called a dialyzer, to remove certain
toxins, fluids and salt from the patient's blood combined with a machine to
control external blood flow and to monitor certain vital signs of the patient.
The dialysis process occurs across a semi-permeable membrane that divides the
dialyzer into two distinct chambers. While blood is circulated through one
chamber, a pre-mixed dialyzer fluid is circulated through the other chamber.
The toxins and excess fluid from the blood selectively cross the membrane into
the dialysis fluid. A hemodialysis treatment usually lasts approximately three
hours and is performed three times per week per patient.
For the years ended December 31, 1995 and 1994, the Hemodialysis Business
Operations acquired by LACD had gross revenues of $2,658,551 and $2,578,630,
respectively, and net income of $908,386 and $647,569, respectively. See
"Financial Statements."
The Hemodialysis Business Operations have been in business since 1985 and
currently offer dialysis services through a dialysis center with ten (10) fully
equipped stations in Los Angeles, California and provide home dialysis services.
Further, the Hemodialysis Business Operations provide in-patient dialysis
services by contract to five (5) Los Angeles County hospitals. Payment for
services is primarily provided by third party payors, including Medicare, Medi-
Cal (a California state health agency) and commercial insurance companies.
ACQUISITION OF REAL PROPERTY. As of May 17, 1996, the Company acquired
that certain real property (the "Real Property") located at 6000 San Vicente
Boulevard, Los Angeles, California, for a purchase price of $2,055,000, as
adjusted for certain credits to the Company with respect to the purchase price.
The Real Property includes the improvement of a hospital facility. The Real
Property is subject to three (3) deeds of trust in the aggregate amount of
$2,025,000.
The loans on the Real Property are personally guaranteed by Ehud Barkai,
who is not an affiliate of the Company, and by Drs. Gura and Lang. The Company
has entered into an agreement (the "Agreement to Perform Loan Covenants") with
Mr. Barkai to perform the covenants, conditions and restrictions required of the
Company under the loan agreements with respect to the acquisition of the Real
Property. The Company has granted to Mr. Barkai's affiliated corporation, Aegis
Medical Systems, Inc. ("Aegis"), an all inclusive deed of trust ("AITD"), with
an assignment of rents, issues and profits and a power of sale to secure the
Company's agreement to repay the loans on the Real Property which are guaranteed
by Mr. Barkai.
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The Company also has executed a promissory note in the amount of $200,000
payable to Aegis, which is due and payable on August 15, 1996, as a fee in
connection with the purchase of the Real Property. The promissory note bears
interest at the rate of 1% PER ANNUM until August 15, 1996, and if not paid in
full by such date, bears interest at the rate of 10% PER ANNUM thereafter until
paid in full. The promissory note is secured by an AITD in favor of Aegis with
an assignment of rents, issues and profits and a power of sale.
The Company also has entered into a master lease agreement (the "Master
Lease") with Aegis for the Real Property at an annual rental rate of $1,000.
The Master Lease is subject to a written triple net lease dated January 16,
1980, with Avalon Memorial Hospital ("Avalon") as the current tenant in
possession. The term of the lease with Avalon extends through December 31,
1999, with options to extend the lease by Avalon for two (2) additional five (5)
year terms. The term of the Master Lease extends through May 31, 2026.
However, the Master Lease may be terminated earlier upon the cancellation,
exoneration or release of any guarantees by Aegis or Mr. Barkai with respect to
loan obligations secured by the Real Property. In connection with the Agreement
to Perform Loan Covenants, Barkai has agreed that if the net rents arising from
the Real Property are paid to Aegis in an amount or amounts sufficient to pay
all amounts due under such loans as they became due, the Company will be excused
from its duty to Barkai of payment under such loans, but only to that extent.
Currently, the aggregate monthly amount due under such loans is approximately
$20,290 and the current monthly rental payment of Avalon is approximately
$22,690.
CERTAIN INFORMATION REGARDING SHARES ISSUED TO NEW STOCKHOLDERS. Of the
1,000,000 shares registered in the name of Medipace, 600,000 of such shares are
pledged as collateral for certain obligations of Medipace pursuant to certain
pledge agreements. Further, an additional 93,500 shares registered in the name
of Dr. Gura are pledged as collateral for such obligations. So long as such
obligations are not in default, Medipace and Gura direct the voting of their
respective pledged shares. However, the issued and outstanding shares of
Medipace are also pledged as collateral for such obligations.
The remaining 3,140,628 shares collectively owned by Gura, Uncyk and Lang
have been deposited in escrow, and are subject to certain restrictions on
transferability and alienation until certain obligations of Medipace have been
paid in full. Further, the remaining 3,140,628 shares may be required to be
pledged as collateral for such obligations in the event that all of the
1,000,000 shares registered in the name of Medipace are sold pursuant to such
pledge agreements.
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Further, Lang, and Uncyk have granted Gura a proxy to vote the 1,051,092
shares collectively owned by Lang and Uncyk during the one year period
commencing May 11, 1996.
Further, up to an additional 4,210,644 shares of Common Stock and warrants
to purchase up to 500,000 shares of Common Stock may be issued in the aggregate
to Gura, Uncyk and Lang on the following basis, in the event that the Company
meets certain financial conditions based on the results of operations of the
Company as of the end of the fiscal years ending December 31, 1996 or December
31, 1997: (i) Gura (2,842,185 shares and 337,500 warrants), (ii) Lang (947,395
shares and 112,500 warrants), and (iii) Uncyk (421,064 shares and 50,000
warrants), which reflects the percentage distribution ratio for the initial
issuance of the Exchanged Sargent Shares to Gura, Lang and Uncyk, respectively.
EXECUTIVE OFFICERS AND DIRECTORS. In connection with the Share Exchange
Agreement, Victor Gura, M.D. and Ronald P. Lang, M.D. were named as directors of
the Company. Ten (10) days following the filing and the mailing to the
Company's stockholders of the information required under Rule 14f-1 of the
Securities Exchange Act of 1934, as amended, Avraham Uncyk, M.D. will become a
director of the Company and A. Vern Tharp and Edwin H. Hawkins, who were the
directors of the Company prior to the Closing of the Share Exchange Agreement,
have agreed to resign in their capacities as directors. Further, in connection
with the Share Exchange Agreement, Messrs. Tharp and Hawkins resigned as
officers of the Company, and Drs. Gura and Lang were appointed to the executive
offices described below. The following reflects certain biographical
information on Drs. Gura, Lang and Uncyk:
NAME POSITION AGE
---- -------- ---
Victor Gura, M.D. Director, President 53
and Chief Financial
Officer
Ronald P. Lang, M.D. Director and Secretary 46
Avraham H. Uncyk, M.D. Director 44
VICTOR GURA, M.D. has been a director and the President and Chief Financial
Officer of the Company since May 11, 1996. Dr. Gura is a medical doctor who is
board certified in internal medicine/nephrology. He has been a director of
Medipace Medical Group, Inc., a medical group in Los Angeles, California, since
1980. He has been an attending physician at Cedars-Sinai Medical Center since
1984 and the medical director of Midway Dialysis Center since 1985. Dr. Gura
also serves as a Clinical Assistant Professor at UCLA School of Medicine. Dr.
Gura graduated from the School of Medicine, Buenos Aires University in 1966,
completed his
5
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residency in internal medicine and nephrology in Israel, and was a fellow at the
nephrology departments at Tel Aviv University Medical School and USC Medical
Center.
RONALD P. LANG, M.D. has been a director and the Secretary of the Company
since May 11, 1996. Dr. Lang is a medical doctor who is board certified in
internal medicine/nephrology. He has been a physician with Medipace Medical
Group, Inc. since 1983. Dr. Lang graduated from the Ohio State University
College of Medicine in 1973, completed his residency at St. Luke's Medical
Center in Chicago, Illinois, and was a fellow in the nephrology department at
UCLA-Center for the Health Sciences/Wadsworth Veterans Hospital. Dr. Lang also
serves as a Clinical Assistant Professor of Medicine at UCLA School of Medicine.
Dr. Lang also received M.A. and M.Ph. degrees in economics from Yale University
and was an Economist - Program Analyst for the U.S. Department of Health,
Education and Welfare (office of the Assistant Secretary for Planning and
Education) from 1973 to 1974.
AVRAHAM H. UNCYK, M.D. will become a director of the Company in connection
with the Share Exchange Agreement, as set forth above. Dr. Uncyk is a medical
doctor with a speciality in internal medicine/endocrinology. He has been the
physician in charge of Medipace Medical Group, Inc. since 1986. Dr. Uncyk
graduated from the Israel Institute of Technology Faculty of Medicine in 1986,
completed his residency at the Long Island Jewish-Hillside Medical Center in
1985 and was a fellow at the Department of Medicine & Endocrinology at the
Harbor-UCLA Medical Center.
Prior to the closing of the Share Exchange Agreement, none of Drs. Gura,
Lang or Uncyk or their affiliates were the beneficial owners of any securities
of the Company.
The Company knows of no material legal actions, pending or threatened, or
judgments entered against Drs. Gura, Lang or Uncyk in their capacities as
directors or officers of the Company or its subsidiaries.
Drs. Gura, Lang and Uncyk received no compensation from the Company prior
to the Closing of the Share Exchange Agreement and have received no compensation
from the Company subsequent to the Closing.
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CERTAIN BENEFICIAL OWNERS OF THE COMPANY'S SECURITIES. The following table
reflects, as of May 11, 1996, giving effect to the Closing of the Share Exchange
Agreement, the beneficial Common Stock ownership of: (a) each director of the
Company, (b) each executive officer named in the summary compensation table (See
Item 8), (c) each person known by the Company to be a beneficial owner of five
percent (5%) or more of its Common Stock, and (d) all executive officers and
directors of the Company as a group:
PERCENTAGE AFTER
COMPLETION OF
NAME AND ADDRESS NO. OF SHARE EXCHANGE
OF BENEFICIAL OWNER SHARES(#) AGREEMENT
- - ------------------- -------- --------------
Medipace Medical Group, Inc.(1) 1,000,000 15.76
Victor Gura, M.D. (1,2) 4,234,128 66.73
Ronald P. Lang, M.D. (1,3) 1,727,679 27.23
Avraham H. Uncyk, M.D. (1,4) 1,323,413 20.86
A. Vern Tharp (5) 0 *
Edward H. Hawkins (6) 112,069 1.77
Orion Corporate Funding, Inc. (7) 473,002 7.45
Richard L. Messick (8) 479,588 7.56
All executive officers
and directors as a group
(5 persons) 4,346,197 68.49
____________________________
(FOOTNOTES ON FOLLOWING PAGE)
# PURSUANT TO THE RULES OF THE SECURITIES AND EXCHANGE COMMISSION, SHARES OF
COMMON STOCK WHICH AN INDIVIDUAL OR GROUP HAS A RIGHT TO ACQUIRE WITHIN 60
DAYS PURSUANT TO THE EXERCISE OF OPTIONS OR WARRANTS ARE DEEMED TO BE
OUTSTANDING FOR THE PURPOSE OF COMPUTING THE PERCENTAGE OWNERSHIP OF SUCH
INDIVIDUAL OR GROUP, BUT ARE NOT DEEMED TO BE OUTSTANDING FOR THE PURPOSE
OF COMPUTING THE PERCENTAGE OWNERSHIP OF ANY OTHER PERSON SHOWN IN THE
TABLE.
* LESS THAN 1%
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1. The address for Drs. Gura, Lang and Uncyk and Medipace Medical Group, Inc.,
is 5901 West Olympic Boulevard, Suite 300, Los Angeles, California 90036.
Medipace Medical Group, Inc., a California corporation ("Medipace") is
owned by Drs. Gura, Lang and Uncyk on a proportionate ownership interest of
67.5%, 22.5% and 10%, respectively. Medipace is the registered owner of
1,000,000 shares of Common Stock, and each of Drs. Gura, Lang and Uncyk are
deemed to be the beneficial owners of such 1,000,000 shares.
2. Dr. Gura is the registered owner of 2,183,036 shares and has been given a
proxy by Drs. Lang and Uncyk to vote 1,051,092 shares collectively owned by
such persons during the one year period commencing May 11, 1996.
3. Dr. Lang is the registered owner of 727,679 shares.
4. Dr. Uncyk is the registered owner of 323,413 shares.
5. Mr. Tharp is a director of the Company. Mr. Tharp will resign as a
director ten (10) days following the filing and mailing to the Company's
stockholders of this Schedule 14f-1. Mr. Tharp's address is 2854 Vrain
Street, Denver, Colorado 80212.
6. Mr. Hawkins is a director of the Company. Mr. Hawkins will resign as a
director ten (10) days following the filing and mailing to the Company's
stockholders of this Schedule 14f-1. Mr. Hawkins' address is 4155 Jewell
Avenue, Suite 909, Denver, Colorado 80222.
7. Pursuant to a Schedule 13D filed on behalf of Orion Corporate Funding, Inc.
("Orion"), Douglas Nutt, Trustee FBO Evelyn Sheerin Trust ("Sheerin
Trust"), Douglas Nutt, Trustee FBO Frances Nutt Trust ("Nutt Trust"),
Douglas Nutt, Trustee FBO Lorene Allison Trust ("Allison Trust") and Marion
Nutt, dated May 14, 1996, the foregoing persons own shares of Common Stock
of the Company, as follows: (a) Orion (473,002 shares), (b) Sheerin Trust
(10,086 shares), (c) Nutt Trust (6,724 shares), (d) Allison Trust (17,193
shares) and (e) Marion Nutt (10,086 shares). Douglas Nutt, as owner of
Orion, and Trustee of the Sheerin Trust, Nutt Trust and Allison Trust has
sole power to vote or to direct the vote with regard to the above-named
shares. Douglas Nutt is married to Marion Nutt. Douglas Nutt and Orion
disclaim any beneficial interest in the securities owned by the Sheerin
Trust, Allison Trust, Nutt Trust and Marion Nutt. Douglas Nutt, was found
to have violated the NASD bylaws with regard to conduct inconsistent with
just and equitable principals of trade and unfair markdowns on November 23,
1994. Such finding by the NASD was appealed to the Securities and Exchange
Commission and affirmed on November 23, 1995.
8. Mr. Messick's address is 2472 East Road, 8 North, Monte Vista, Colorado
81144. Does not include 85,000 shares of Common Stock held by Mrs. Richard
L. Messick.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. On or about November 15,
1995, the Company loaned the principal amount of $300,000 to Los Angeles
Community Dialysis, Inc. ("LACD"), an affiliate of Drs. Gura, Lang and Uncyk.
This loan was personally guaranteed by Dr. Gura and Medipace Medical Group, Inc.
("Medipace"). Subsequently, LACD loaned the principal amount of $150,000 to
Medipace. However, the $150,000 loan was cancelled in connection with the
acquisition of certain assets related to the hemodialysis segment of Medipace's
business by LACD on May 11, 1996 in connection with the Closing of the Share
Exchange Agreement. Further, in connection with the Closing of the Share
Exchange Agreement, LACD became a wholly-owned subsidiary of the Company and the
$300,000 loan became an intercompany obligation.
On or about May 14, 1996, the Company loaned the sum of $23,851.53 to
Medipace. Medipace executed a demand promissory note in favor of the Company
which bears interest at the rate of 8 1/2% PER ANNUM.
7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Statements of assets and liabilities of Los Angeles Community Dialysis
(a division of Medipace Medical Group, Inc.) as of December 31, 1995,
and the related statements of operations and cash flows for each of
the two years in the period ended December 31, 1995.
(b) PRO FORMA FINANCIAL INFORMATION.
1. Pro forma combined balance
sheet, as of December 31,
1995.
2. Pro forma consolidated
statement of operations for
the year ended December 31,
1995.
(c) EXHIBITS.
2.1 Agreement for Exchange of Stock, dated May 11, 1996, by and among
Sargent, Inc., Los Angeles Community Dialysis, Inc., Victor
Gura, M.D., Avraham H. Uncyk, M.D. and Ronald P. Lang, M.D.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto authorized.
SARGENT, INC.
Dated: May 24, 1996 By: /s/ Victor Gura, M.D.
---------------------------
Victor Gura, M.D.
Chief Executive Officer
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FINANCIAL STATEMENTS
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Medipace Medical Group, Inc.
We have audited the accompanying statements of assets and liabilities of Los
Angeles Community Dialysis (a division of Medipace Medical Group, Inc.) as of
December 31, 1995, and the related statements of operations and cash flows for
each of the two years in the period ended December 31, 1995. These financial
statements are the responsibility of the management of Medipace Medical Group,
Inc. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the assets and liabilities of Los Angeles Community
Dialysis as of December 31, 1995, and the results of its operations and its cash
flows for each of the two years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ Singer, Lewak, Greenbaum & Goldstein
- - -----------------------------------------
Los Angeles, California
March 16, 1996
<PAGE>
Los Angeles Community Dialysis
(A Division of Medipace Medical Group, Inc.)
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1995
ASSETS (note 4)
Current assets:
Accounts receivable, net of allowance for
doubtful accounts of $50,000 $ 333,325
Supplies inventory 21,771
----------
Total current assets 355,096
Furniture and equipment, net (note 2) 96,252
Deferred charges, net (note 3) 10,667
Other assets 461
----------
$ 462,476
----------
----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 401,146
Accrued expenses and other liabilities (note 5) 564,012
Current portion of long-term debt (note 4) 600,821
----------
Total current liabilities 1,565,979
Long-term debt (note 4) 3,645
----------
Total liabilities 1,569,624
Commitments and contingencies (note 6)
Net liabilities of division (1,107,148)
----------
$ 462,476
----------
----------
THE ACCOMPANYING NOTES ARE INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
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Los Angeles Community Dialysis
(A Division of Medipace Medical Group, Inc.)
STATEMENTS OF OPERATIONS
For the years ended December 31, 1995 and 1994
1995 1994
---------- ----------
Revenue $2,658,551 $2,578,630
---------- ----------
Costs and expenses:
Compensation and related expenses 702,555 722,391
Medical supplies 521,128 596,764
Outside services 222,968 252,737
Rent expense 79,130 108,012
Insurance 36,776 30,599
General and administrative 61,307 106,492
Depreciation and amortization 68,219 66,900
---------- ----------
1,692,083 1,883,895
---------- ----------
Income from operations 966,468 694,735
Interest expense 58,082 47,166
---------- ----------
Net income $908,386 $647,569
---------- ----------
---------- ----------
THE ACCOMPANYING NOTES ARE INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
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Los Angeles Community Dialysis
(A Division of Medipace Medical Group, Inc.)
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995 and 1994
1995 1994
---------- ----------
Cash flows from operating activities:
Net income $ 908,386 $ 647,569
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 36,220 34,900
Amortization 32,000 32,000
Increase in:
Accounts receivable (13,470) (6,107)
Supplies inventory (156) (21,615)
Increase in:
Accounts payable 257,554 51,821
Accrued expenses and other liabilities 100,364 113,488
---------- ----------
Net cash provided by operating activities 1,320,898 852,056
---------- ----------
Cash flows used in investing activities:
Purchase of furniture and equipment (2,995) (7,537)
---------- ----------
Cash flows from financing activities:
Application of discount on dialysis services
to note payable (6,561) (555)
Repayment of notes payable (109,612)
Intracompany transfer (1,201,730) (843,964)
---------- ----------
Net cash used in financing activities (1,317,903) (844,519)
---------- ----------
Net increase in cash 0 0
Cash, beginning of year 0 0
---------- ----------
Cash, end of year $ 0 $ 0
---------- ----------
---------- ----------
Supplemental Cash Flow Information
1995 1994
---------- ----------
Interest paid $ 58,993 $ 46,255
Noncash Financing Activities
In 1995, $243,897 of accounts payable was converted to long-term debt.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
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Los Angeles Community Dialysis
(A Division of Medipace Medical Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1995 and 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Medipace Medical Group, Inc. (Medipace) was incorporated in California in
January 1986. The operations of Medipace are carried out through its two
divisions, a general medical practice and Los Angeles Community Dialysis (the
Division). The accompanying financial statements include only the accounts
of the Division.
The Division offers outpatient kidney dialysis services through a dialysis
center with ten fully equipped stations in Los Angeles, California. Payment
for services is provided primarily by third-party payors such as Medicare,
Medi-Cal, and commercial insurance companies.
The Division has entered into several contracts with local hospitals to
provide inpatient kidney dialysis services to patients through a visiting
nurse program. Payment for these services is provided by the contracted
hospitals.
ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
DIVISIONAL EXPENSE RECOGNITION
The accompanying financial statements include expenses specifically
identified as being incurred by the Division, plus allocations for general
and administrative expenses generally based upon percentage-of-revenue and
square-footage, and other allocation methods determined by Medipace's
management. The management of Medipace believes that the expenses recorded
in the financial statements of the Division reflect the expense that would
have been incurred had the Division operated on a stand alone basis for the
years presented.
FURNITURE AND EQUIPMENT
Furniture and equipment are depreciated using the straight line method over
the estimated useful life of seven to ten years.
Expenditures for maintenance and repairs are charged to operations as
incurred, while renewals and betterments are capitalized.
DEFERRED CHARGES
Deferred charges are comprised of a covenant not-to-compete and goodwill
related to the acquisition of the dialysis center in 1991. Both the covenant
and goodwill are amortized on the straight-line basis over five years.
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Los Angeles Community Dialysis
(A Division of Medipace Medical Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1995 and 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
PATIENT REVENUE RECOGNITION
The Division recognizes fee income as services are provided, at a standard
fee rate. Since reimbursements for services are specified by various third-
party payors, the Division then records a provision to reduce fee income to
expected amounts. The accompanying statements of operations reflect net
collectible fees for services.
The Medicare and Medi-Cal programs, which are the largest payors for services
rendered by the Division, accounted for approximately 61% and 26% of the
Division's net revenues for the years ended December 31, 1995 and 1994,
respectively.
INCOME TAXES
Medipace has elected the federal and state income tax status of an "S"
Corporation; therefore, all income, losses, gains, and credits are passed
through to Medipace's stockholders and included in their personal income tax
returns. Accordingly, no provision for income taxes has been provided.
NOTE 2 - FURNITURE AND EQUIPMENT
Furniture and equipment consist of the following:
Medical equipment $ 212,622
Office furniture and equipment 46,100
----------
258,722
Less accumulated depreciation 162,470
----------
$ 96,252
----------
----------
Depreciation expense for 1995 and 1994 was $36,220 and $34,900, respectively.
NOTE 3 - DEFERRED CHARGES
Deferred charges consist of the following:
Covenants not to compete $ 135,000
Goodwill 25,000
----------
160,000
Less accumulated amortization 149,333
----------
$ 10,667
----------
----------
Amortization for 1995 and 1994 was $32,000 in each year.
6
<PAGE>
Los Angeles Community Dialysis
(A Division of Medipace Medical Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1995 and 1994
NOTE 4 - LONG-TERM DEBT
Long-term debt consists of the following:
Promissory note payable (A) $ 464,755
Promissory note payable (B) 39,581
Promissory note payable (C) 95,257
Other 4,873
----------
604,466
Current portion 600,821
----------
$ 3,645
----------
----------
(A) Note payable in connection with acquisition of the dialysis center in
1991. The note is secured by the assets of the Division, and is reduced
by discounted services provided to the seller of the dialysis center.
The note requires monthly payments of $10,000, including interest at 10%
per annum, and the unpaid principal is due September 1997. The Division
is delinquent in its payments under the note and all amounts have been
classified as current.
(B) The note is unsecured and is payable in monthly payments of $8,638,
including interest at 10%, with the unpaid balance due March 1996.
(C) The note is non-interest bearing and unsecured, and is payable in weekly
installments of $5,007, with the unpaid balance due May 1996.
NOTE 5 - ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consist of the following:
Accrued compensation and related expenses $ 51,950
Accrued rent 331,158
Collected receivables 173,704
Other 7,200
----------
$ 564,012
----------
----------
7
<PAGE>
Los Angeles Community Dialysis
(A Division of Medipace Medical Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1995 and 1994
NOTE 6 - COMMITMENTS AND CONTINGENCIES
LEASES
The Division has entered into a non-cancelable operating lease for its
medical office space.
Minimum rental commitments as of December 31, 1995, under the non-cancelable
operating lease are as follows:
DECEMBER 31,
------------
1996 $ 84,000
1997 84,000
1998 84,000
1999 84,000
2000 55,000
--------
Minimum lease payments $391,000
--------
--------
LOANS
The assets of the Division are also secured by notes payable by Medipace.
The total outstanding for these notes including accrued interest was
$1,158,902 at December 31, 1995.
In April 1996, Medipace entered into an agreement with lenders whose loans
are collateralized by the assets of the Division. The agreements provide for
the release of any claim against the assets of the Division and LACD, Inc.
(Note 8).
NOTE 7 - EMPLOYEE PROFIT SHARING PLAN
In April 1995, the Division enrolled with Medipace in a 401(k) profit sharing
plan covering substantially all employees who meet the eligibility
requirements of the plan. Contributions to the plan are made at the
discretion of management and vest over 7 years. There were no contributions
for 1995.
NOTE 8 - SUBSEQUENT EVENTS
On June 9, 1995, the shareholders of Medipace incorporated Los Angeles
Community Dialysis, Inc. ("LACD, Inc.") in which they are the sole
shareholders ("shareholders"). It is the shareholders' intention to transfer
the assets and operations ("the business") of the Division to LACD, Inc.
LACD, Inc. will succeed to the rights and obligations of the Division in
respect to the business.
8
<PAGE>
Los Angeles Community Dialysis
(A Division of Medipace Medical Group, Inc.)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1995 and 1994
NOTE 8 - SUBSEQUENT EVENTS (continued)
In February 1996, LACD, Inc. entered into an Agreement and Plan of
Reorganization ("Agreement") with Sargent, Inc. ("Sargent") and the LACD,
Inc. shareholders individually ("The Shareholders"). The Agreement provides
for a newly-formed California subsidiary of Sargent to be merged into LACD,
Inc. The Shareholders will exchange all their stock in LACD, Inc. for shares
of stock in Sargent. Immediately after the exchange, the Shareholders will
own approximately 60% of Sargent's common stock then issued and outstanding.
For accounting purposes, this is expected to be treated as a reverse merger,
with LACD, Inc. as the acquirer.
In April 1996, Medipace entered into an agreement with a creditor wherein
$1,058,763 of the Division's accrued expenses and a note of the Division, as
of December 31, 1995, will be settled for a note payable of a lesser amount.
The agreement provides for the release of any claim against the assets of the
Division and LACD, Inc.
9
<PAGE>
PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1995
<PAGE>
Sargent, Inc.
PRO FORMA FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma balance sheet and statement of operations give
effect to the following transactions:
1) The acquisition by Sargent, Inc.("Sargent") of Los Angeles Community
Dialysis, Inc.("LACD"). On May 11, 1996, Sargent acquired 100% of the
outstanding stock of LACD in exchange for 4,234,128 shares of common stock
or approximately 67% of the outstanding stock of Sargent after the
acquisition. The acquisition will be accounted for as a reverse
acquisition with LACD as the accounting acquirer. The historical financial
statements prior to May 1996 will be those of LACD and it's predecessor.
Prior to the acquisition , LACD entered in an agreement with the
shareholders of Medipace Medical Group, Inc.("Medipace"), pursuant to which
certain assets and liabilities and the operations of the dialysis
division(the "Division", the "Predecessor") were transferred to LACD.
2) The acquisition of a 20,755 square foot medical office building located in
Los Angeles, California. The purchase price is $2,055,000(adjusted for
certain credits) paid by trust deed notes payable in the aggregate amount
of $2,025,000 and the balance in cash. In addition an additional $200,000
fee was paid in connection with the purchase of the building, payable in
the form of a prommisory note.
The unaudited pro forma information is based on the historical financial
statements of LACD and it's Predecessor giving effect to the aforementioned
transactions as a reverse acquisition of LACD and the purchase of the office
building and the assumptions and adjustments in the accompanying notes to the
unaudited pro forma financial statements.
Since Sargent was a public company who's stock was not currently traded, the
assets and liabilities of Sargent have been recorded at historical cost. The
unaudited pro forma balance sheet as of December 31, 1995 gives effect to the
transactions as if they had been consummated on December 31, 1995.
The unaudited pro forma statement of operations for the year ended December 31,
1995 gives effect to the transactions as if they had occurred on January 1,
1995.
The unaudited pro forma financial statements are not necessarily indicative of
operating results which would nave been achieved had the acquisitions been
consummated as of the beginning of the year and should not be construed as
representative of the future operating results. The unaudited pro forma
financial statements should be read in conjunction with the financial statements
and notes of LACD, Sargent and the Division.
<PAGE>
Sargent, Inc.
PRO FORMA COMBINED BALANCE SHEET
December 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Historical Increase(Decrease)
-------------------------- Pro Forma
Predecessor * Sargent ** Medical Bldg. Other Combined
-------------- ---------- ------------- ----- --------
<S> <C> <C> <C> <C> <C>
Current assets
Cash $0 $518,000 ($188,700) $0 $329,300
Certificate of deposit 0 30,000 30,000
Accounts receivable 333,300 110,300 443,600
Inventories 21,800 97,700 119,500
Other current assets 0 21,500 21,500
-------------------------------------------------------- ----------
Total current assets 355,100 777,500 (188,700) 0 943,900
Machinery and equipment 96,300 1,787,000 2,185,000 4,068,300
Land held for sale 0 298,600 298,600
Deferred charges 10,700 0 10,700
Deposits and Other 400 13,900 53,700 68,000
-------------------------------------------------------- ----------
$462,500 $2,877,000 $2,050,000 $0 $5,389,500
-------------------------------------------------------- ----------
-------------------------------------------------------- ----------
Current liabilities
Accounts payable $401,100 $33,000 $0 $0 $434,100
Accrued expenses and
other liabitities 564,000 366,000 (504,900)(A) 425,100
Note payble 200,000 200,000
Current portion of
long-term debt 600,800 167,800 37,700 (464,800)(A) 341,500
-------------------------------------------------------- ----------
Total current
liabilities 1,565,900 566,800 237,700 (969,700) 1,400,700
Long-term debt 3,700 235,700 1,812,300 2,051,700
Net liabilities of
division (1,107,100) 969,700(A) (137,400)
Stockholders' equity 2,074,500 2,074,500
-------------------------------------------------------- ----------
$462,500 $2,877,000 $2,050,000 $0 $5,389,500
-------------------------------------------------------- ----------
-------------------------------------------------------- ----------
*As of December 31, 1995
**As of July 31, 1995
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT
OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1995
<PAGE>
Sargent, Inc.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the year ended December 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Pro Forma Adjustments
Historical Increase(Decrease)
------------------------- Pro Forma
Predecessor * Sargent ** Medical Bldg. Other Combined
------------- ---------- ------------- ----- ----------
<S> <C> <C> <C> <C> <C>
Revenue $2,658,600 $2,192,900 $188,400 (c) $0 $5,039,900
Costs and Expenses
Cost of goods sold 2,166,600 2,166,600
Compensation & related
expenses 702,600 702,600
Medical Supplies 521,100 521,100
Outside services 223,000 223,000
Rent expense 79,100 79,100
Insurance 36,800 36,800
Depreciation and
amortization 68,200 50,300 (a) 118,500
Selling, general and
administrative 61,300 1,099,100 1,160,400
------------------------------------------------------- ----------
Total costs and
Expenses 1,692,100 3,265,700 50,300 0 5,008,100
Income(loss) from
operations 966,500 (1,072,800) 138,100 0 31,800
Other income(expense)
Other income 10,000 10,000
Interest expense (58,100) (125,200) (188,400)(b) (371,700)
------------------------------------------------------- ----------
(58,100) (115,200) (188,400) 0 (361,700)
------------------------------------------------------- ----------
Net income(loss) from
operations before
provision for income
taxes 908,400 (1,188,000) (50,300) 0 (329,900)
Provision for income
taxes 0 0 0 0 0
------------------------------------------------------- ----------
Net income(loss) from
operations $908,400 ($1,188,000) ($50,300) $0 ($329,900)
------------------------------------------------------- ----------
------------------------------------------------------- ----------
Net loss per common share ($0.05)
----------
----------
Weighted average common
shares outstanding 6,345,471
----------
----------
</TABLE>
*For the year ended December 31, 1995
**For the year ended July 31, 1995
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT
<PAGE>
Sargent, Inc.
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following notes set forth an explanation of the assumptions used in
preparing the unaudited pro forma balance sheet and statement of operations.
ADJUSTMENTS TO DECEMBER 31, 1995 BALANCE SHEET
(A) To reflect the elimination of certain liabilities that were not assumed by
LACD
ADJUSTMENTS TO THE 1995 STATEMENTS OF OPERATIONS
(a) To reflect depreciation on the acquired building utilizing a 30 year life.
(b) To reflect interest expense on the trust deed notes payable from the
acquisition of the medical building.
(c) To reflect the scheduled rents on the medical building.
<PAGE>
EXHIBIT 2.1
<PAGE>
AGREEMENT FOR THE EXCHANGE OF STOCK
by and among
SARGENT, INC.
a Delaware corporation
and
LOS ANGELES COMMUNITY DIALYSIS, INC.
a California corporation
and
VICTOR GURA, M.D., an individual, AVRAHAM H. UNCYK, M.D.,
an individual, RONALD P. LANG, M.D., an individual
Dated: May 11, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I REPRESENTATIONS, COVENANTS AND WARRANTIES
OF LACD AND LACD STOCKHOLDERS
PAGE
----
Section 1.1 Organization 1
Section 1.2 Capitalization 2
Section 1.3 Subsidiaries and Predecessor
Corporations 2
Section 1.4 Options and Warrants 2
Section 1.5 Binding Obligation; No Default 2
Section 1.6 Compliance with Other
Instruments, etc. 2
Section 1.7 Consents 3
Section 1.8 Books and Records 3
Section 1.9 Financial Statements 3
Section 1.10 No Undisclosed Liabilities 3
Section 1.11 Absence of Certain Changes 3
Section 1.12 Plant and Equipment 6
Section 1.13 Leases 6
Section 1.14 Tax Returns 6
Section 1.15 Transactions with Affiliates 7
Section 1.16 Contracts and Commitments 8
Section 1.17 Compliance with Contracts;
Delivery of Certain Contracts 9
Section 1.18 Insurance 9
Section 1.19 Labor Difficulties 10
Section 1.20 Litigation 11
Section 1.21 No Condemnation or Expropriation 11
Section 1.22 Compliance with Law 12
Section 1.23 Environmental Compliance 12
Section 1.24 Employee Benefits 14
Section 1.25 Absence of Questionable Payments 15
Section 1.26 Personnel 16
Section 1.27 Real Property Holding Corporation 16
Section 1.28 Accuracy of Information Furnished 16
Section 1.29 Title to Patents and Trade Names 16
Section 1.30 Real Properties 18
Section 1.31 Title and Related Matters 18
Section 1.32 Title to the Exchanged LACD Stock 18
Section 1.33 Securities Warranties 19
Section 1.34 Certain Financial Representations 20
Section 1.35 Stark I and Stark II 21
Section 1.36 LACD Schedules 21
i
<PAGE>
ARTICLE II REPRESENTATIONS, COVENANTS AND
WARRANTIES OF SARGENT
PAGE
----
Section 2.1 Organization 21
Section 2.2 Capitalization 21
Section 2.3 Subsidiaries 22
Section 2.4 Options and Warrants 22
Section 2.5 Binding Obligation; No Default 22
Section 2.6 Compliance with Other
Instruments, etc. 22
Section 2.7 Consents 22
Section 2.8 Books and Records 23
Section 2.9 Financial Statements 23
Section 2.10 No Undisclosed Liabilities 23
Section 2.11 Absence of Certain Changes 23
Section 2.12 Plant and Equipment 26
Section 2.13 Leases 26
Section 2.14 Tax Returns 26
Section 2.15 Transactions with Affiliates 27
Section 2.16 Contracts and Commitments 28
Section 2.17 Compliance with Contracts;
Delivery of Certain Contracts 30
Section 2.18 Insurance 30
Section 2.19 Labor Difficulties 30
Section 2.20 Litigation 31
Section 2.21 No Condemnation or Expropriation 31
Section 2.22 Compliance with Law 32
Section 2.23 Environmental Compliance 32
Section 2.24 Employee Benefits 33
Section 2.25 Absence of Questionable Payments 34
Section 2.26 Personnel 35
Section 2.27 Real Property Holding Corporation 35
Section 2.28 Accuracy of Information Furnished 35
Section 2.29 Title to Patents and Trade Names 35
Section 2.30 Real Properties 36
Section 2.31 Title and Related Matters 36
Section 2.32 Title to the Exchanged Sargent Stock 37
Section 2.33 Certain Assets and Liabilities of
Sargent 37
Section 2.34 Compliance With Exchange Act 38
Section 2.35 Sargent Schedules 39
ii
<PAGE>
ARTICLE III PLAN OF REORGANIZATION
PAGE
----
Section 3.1 Plan of Reorganization 39
Section 3.2 Closing 39
Section 3.3 Closing Events 39
Section 3.4 Termination 40
Section 3.5 Directors of Sargent and LACD 41
Section 3.6 Officers of Sargent and LACD 41
Section 3.7 Additional Exchanged Sargent Stock
and Warrants 41
Section 3.8 Stock Options to Employees and
Consultants 42
ARTICLE IV SPECIAL COVENANTS
Section 4.1 Access to Properties and Records 42
Section 4.2 Availability of Rule 144 42
Section 4.3 Information for Sargent Registration
Statement and Public Reports 43
Section 4.4 Special Covenants and Representations
Regarding the Exchanged Sargent Stock 43
Section 4.5 Third Party Consents 43
Section 4.6 Actions Prior to Closing 43
Section 4.7 Indemnification 44
Section 4.8 Registration Rights 45
Section 4.9 Listing on NASDAQ Small-Cap Market 52
ARTICLE V CONDITIONS PRECEDENT TO OBLIGATIONS
OF SARGENT
Section 5.1 Accuracy of Representations 52
Section 5.2 Officer's Certificate 52
Section 5.3 No Material Adverse Change 52
Section 5.4 Opinion of Counsel to LACD 52
Section 5.5 Other Items 54
ARTICLE VI CONDITIONS PRECEDENT TO OBLIGATIONS OF LACD
Section 6.1 Accuracy of Representations 54
Section 6.2 Officer's Certificate 55
Section 6.3 No Material Adverse Change 55
Section 6.4 Opinion of Counsel to Sargent 55
Section 6.5 Other Items 57
ARTICLE VII MISCELLANEOUS
Section 7.1 Brokers and Finders 57
Section 7.2 Law Forum and Jurisdiction 57
Section 7.3 Notices 58
Section 7.4 Attorneys' Fees 58
Section 7.5 Confidentiality 58
Section 7.6 Schedules; Knowledge 59
Section 7.7 Third Party Beneficiaries 59
iii
<PAGE>
Section 7.8 Entire Agreement 59
Section 7.9 Survival; Termination 59
Section 7.10 Counterparts 59
Section 7.11 Amendment or Waiver 59
Section 7.12 Incorporation of Recitals 60
Section 7.13 Expenses 60
Section 7.14 Headings; Context 60
Section 7.15 Benefit 60
Section 7.16 Public Announcements 60
Section 7.17 Severability 60
Section 7.18 Failure of Conditions; Termination 60
Section 7.19 No Strict Construction 60
Section 7.20 Execution Knowing and Voluntary 61
iv
<PAGE>
AGREEMENT FOR THE EXCHANGE OF STOCK
THIS AGREEMENT FOR THE EXCHANGE OF STOCK (hereinafter referred to as the
"Agreement"), is entered into as of May 11, 1996, by and among Sargent, Inc., a
Delaware corporation ("Sargent"), Los Angeles Community Dialysis, Inc., a
California corporation ("LACD"), and Victor Gura, M.D., an individual, Avraham
H. Uncyk, M.D., an individual and Ronald P. Lang, M.D., an individual
(collectively, "LACD Stockholders").
PREMISES
A. This Agreement provides for the reorganization of corporate
operations of Sargent and LACD pursuant to the terms set forth in this
Agreement.
B. As part of this Agreement, Sargent shall exchange 4,234,728
shares (the "Exchanged Sargent Stock") of the common stock, par value $0.01 per
share, of Sargent (the "Sargent Common Stock") for 1,000 shares of the common
stock, no par value, of LACD, which constitutes 100% of the issued and
outstanding common stock of LACD, subject to the terms and conditions of this
Agreement.
AGREEMENT
NOW, THEREFORE, on the stated premises and for and in consideration of
the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived here from, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS AND WARRANTIES OF
LACD AND LACD STOCKHOLDERS
As an inducement to, and to obtain the reliance of Sargent, LACD represents
and warrants, and, with respect to Sections 1.32(b) and 1.33, the LACD
Stockholders represent and warrant, as follows:
Section 1.1 ORGANIZATION. LACD is a corporation duly organized, validly
existing and in good standing under the laws of the State of California and has
the corporate power and is duly authorized, qualified, franchised and licensed
under all applicable laws, regulations, ordinances and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, including qualification
to do business as a foreign corporation in the states in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification, except where the failure to so qualify would not have
a material Adverse Effect (as hereinafter defined) upon the assets, business,
properties or operations of LACD. Included in the LACD Schedules
1
<PAGE>
(as hereinafter defined) as Schedule 1.1 are complete and correct copies of the
articles of incorporation and bylaws of LACD as in effect on the date hereof.
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated by this Agreement in accordance with the terms
hereof will not, violate any provision of LACD's articles of incorporation or
bylaws. LACD has taken all action required by law, its articles of
incorporation, its bylaws or otherwise to authorize the execution and delivery
of this Agreement. LACD has full power, authority and legal right and has taken
all action required by law, its articles of incorporation, bylaws and otherwise
to consummate the transactions herein contemplated.
Section 1.2 CAPITALIZATION. The authorized capitalization of LACD
consists of 1,000 shares of common stock, no par value (the "LACD Common
Stock"). As of the Closing Date (defined below), there are 1,000 shares of LACD
Common Stock issued and outstanding. All issued and outstanding shares are
legally issued, fully paid and nonassessable, and are not issued in violation of
the preemptive or other rights of any person.
Section 1.3 SUBSIDIARIES AND PREDECESSOR CORPORATIONS. LACD does not have
any subsidiaries and does not own, beneficially or of record, any shares of any
other corporation.
Section 1.4 OPTIONS AND WARRANTS. There are no outstanding: (a)
securities convertible into or exchangeable for any of LACD's capital stock; or
(b) options, warrants, calls or other rights (including rights to demand
registration or to sell in connection with any registration by LACD under the
Securities Act of 1933, as amended (the "Securities Act") to purchase or
subscribe to capital stock of LACD or securities convertible into or
exchangeable for capital stock of LACD. LACD is not a party to any voting trust
agreement or other contract, agreement, arrangement, commitment, plan or
understanding restricting or otherwise relating to voting or dividend rights
with respect to the LACD Common Stock.
Section 1.5 BINDING OBLIGATION; NO DEFAULT. LACD has duly taken all
action necessary to authorize the execution, delivery and performance of this
Agreement and the other instruments and agreements contemplated hereby. Such
execution, delivery and performance does not and will not, to the best of LACD's
knowledge, constitute a default under or a violation of any agreement, order,
award, judgment, decree, statute, law, rule, regulation or any other instrument
to which LACD is a party or by which LACD or the property of LACD may be bound
or may be subject. This Agreement constitutes the legal, valid and binding
obligation of LACD, enforceable against LACD in accordance with its terms.
Section 1.6 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Neither the execution
and delivery of this Agreement by LACD nor compliance by LACD with the terms and
conditions of this Agreement will: (a)
2
<PAGE>
require LACD to obtain the consent of any governmental agency; (b) constitute a
material default under any indenture, mortgage or deed of trust to which LACD is
a party or by which LACD or its properties may be subject; (c) cause the
creation or imposition of any lien, charge or encumbrance on any of its assets;
or (d) breach any statute or regulation of any governmental authority, domestic
or foreign, or will on the Closing Date conflict with or result in a breach or
any of the terms or conditions of any judgment, order, injunction, decree or
ruling of any court or governmental authority, domestic or foreign, to which
LACD is subject.
Section 1.7 CONSENTS. No consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority or any third party is required to be made or obtained by LACD in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby.
Section 1.8 BOOKS AND RECORDS. The books of account and other financial
records of LACD are complete and correct in all material aspects. The minute
books of LACD, as previously made available to Sargent and its legal counsel,
contain records of all meetings and accurately reflect all other material
corporate action of the stockholders, directors and any committees of the Board
of Directors of LACD.
Section 1.9 FINANCIAL STATEMENTS. At the closing, LACD shall deliver to
Sargent true and correct copies of the audited statements of assets and
liabilities of LACD (a division of Medipace Medical Group, Inc.) as of December
31, 1994 and 1995 (the "LACD Audited Financial Statements"). The LACD Audited
Financial Statements shall fairly present the financial position of such
division at December 31, 1995, and the related statements of operations and cash
flows for each of two years in the period ended December 31, 1995. The audits
have been prepared in accordance with generally accepted accounting principles
("GAAP").
Section 1.10 NO UNDISCLOSED LIABILITIES. Except as set forth on Schedule
1.10 hereto, LACD does not have any material liabilities or obligations of any
nature (absolute, accrued, contingent or otherwise) which were not adequately
reflected or reserved against on the LACD Audited Financial Statements, except
for liabilities and obligations incurred since December 31, 1995 in the ordinary
course of LACD's business and consistent with past practice and which, in any
event, in the aggregate, would not have a Material Adverse Effect (as defined
hereinafter).
Section 1.11 ABSENCE OF CERTAIN CHANGES. Except as and to the extent set
forth on Schedule 1.11 hereto or except as otherwise expressly contemplated
hereby, since the date of the LACD Financial Statements, LACD has not:
3
<PAGE>
(a) Suffered any material adverse change in its financial condition,
assets, liabilities (absolute, accrued, contingent or otherwise), or reserves,
and no event has occurred and no action has been taken by LACD or, to the best
knowledge of LACD, any other person, nor is any such event or action
contemplated or, to the best knowledge of LACD, threatened, which might
reasonably be expected to have a material adverse effect on the assets or the
operations or condition (financial or otherwise) of LACD's business ("Material
Adverse Effect"), except that no representation or warranty is made as to
general economic conditions or matters affecting LACD's industry generally;
(b) Suffered any material adverse change in its business, operations
or prospects;
(c) Experienced any shortage of raw materials or supplies;
(d) Incurred any short-term or long-term liabilities or obligations
(absolute, accrued, contingent or otherwise) except items incurred in the
ordinary course of business and consistent with past practice, none of such
short-term or long-term liabilities or obligations exceeds $10,000 individually,
or $25,000 in the aggregate, (counting obligations or liabilities arising from
one transaction or a series of similar transactions, and all periodic
installments or payments under any lease or other agreement providing for
periodic installments or payments, as a single obligation or liability), or
increased or changed any assumptions underlying or method of calculating any bad
debt, contingency or other reserves;
(e) Paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and consistent with
past practice of liabilities and obligations reflected or reserved against in
the LACD Financial Statements or incurred in the ordinary course of business and
consistent with past practice since the date of the LACD Financial Statements;
(f) Permitted or allowed any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge of any kind;
(g) Written down the value of any inventory in excess of $10,000
(including write-downs by reason of shrinkage or markdown) or written down or
written off as uncollectible any notes or accounts receivable in excess of
$10,000;
(h) Canceled any debts or waived any claims or rights in excess of
$10,000;
4
<PAGE>
(i) Sold, transferred or otherwise disposed of any of its properties
or assets in excess of $10,000 (real, personal or mixed, tangible or
intangible);
(j) Disposed of or permitted to lapse any rights to the use of any
Patent or Trade Name (as defined hereinafter) necessary to permit LACD to
conduct its business or develop its products, or disposed of or disclosed to any
person, other than representatives of Sargent, any Proprietary Information or
Technical Information (as defined hereinafter) not theretofore a matter of
public knowledge necessary to permit LACD to conduct its business or develop its
products;
(k) Granted any general increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension, profit
sharing or other plan or commitment) other than in the ordinary course of
business and consistent with past practice, or any increase in the compensation
(including, without limitation, salary and bonus) payable or to become payable
to any officer or key employee;
(l) Made any single capital expenditure or commitment in excess of
$10,000 for additions to property, plant, equipment or intangible capital assets
or made aggregate capital expenditures and commitments in excess of $10,000 for
additions to property, plant, equipment or intangible capital assets;
(m) Declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or redeemed, purchased or otherwise
acquired, directly or indirectly, any shares of capital stock or other
securities of LACD;
(n) Made any change in any method of accounting or accounting
practice;
(o) Paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any
"Affiliate" or "Associate" of LACD as such terms are defined in Rule 405
promulgated by the Securities and Exchange Commission (the "Commission") under
the Securities Act, or any officer, director or stockholder of LACD
(collectively, "Affiliates" or individually, an "Affiliate");
(p) Made any gifts, or sold, transferred or exchanged any property of
any material value for less than the fair value thereof;
(q) Suffered any material casualty loss or damage (whether or not
covered by insurance); or
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(r) Agreed, whether in writing or otherwise, to take any action
described in this Section 1.11.
Section 1.12 PLANT AND EQUIPMENT. The material plants, buildings,
fixtures, structures and equipment owned, leased or used by LACD are in good
operating condition and repair, ordinary wear and tear excepted, are adequate
for the uses to which they are being put. Included in Schedule 1.12 hereto is
an accurate and complete list of all of the fixed assets of LACD with a value in
excess of $1,000.
Section 1.13 LEASES. Schedule 1.13 hereto is an accurate and complete
list of all leases pursuant to which LACD leases real property or any material
item of personal property. A true and correct copy of each such lease has been
delivered to Sargent, and no changes have been made thereto since the date of
delivery. Except as set forth in Schedule 1.13 hereto, each such lease is valid
and in full force and effect, there are no existing material defaults by LACD
thereunder, and, to the best knowledge of LACD, no event has occurred which
(with notice, lapse of time or both) would constitute a default thereunder by
any party. Except as set forth on Schedule 1.13 hereto, LACD is presently in
compliance in all material respects with all laws, rules, regulations and
ordinances relating to zoning and land use restrictions which are applicable to
any portion of the land subject to the real property leases set forth in
Schedule 1.13 hereto. Except as set forth on Schedule 1.13 hereto, no consent
is required from the lessor under any lease of real or personal property listed
on Schedule 1.13 prior to the consummation of the transactions contemplated
hereby.
Section 1.14 TAX RETURNS. Schedule 1.14 hereto are true and correct
copies of LACD's Tax Returns and Statements (as defined herein). Except as set
forth in LACD's Tax Returns and Statements, LACD has: (a) filed or has caused to
be filed all federal, state and local and all material foreign, territorial,
franchise, income, sales, gross receipts and all other tax returns and
statements required to be filed by LACD or on its behalf and which were due
prior to the date of this Agreement (the "Tax Returns and Statements"); (b) paid
within the time and in the manner prescribed by law all Taxes (as defined
below), due for all periods ending on or prior to the date of this Agreement,
except with respect to Taxes which are immaterial in amount and the failure to
so pay or file would not result in material penalties and would not have a
Material Adverse Effect; and (c) established adequate reserves for the payment
of all unpaid Taxes as of the date of the LACD Financial Statements. The Tax
Returns and Statements are true, complete and accurate, in all material
respects. Since January 31, 1996, no tax assessment or deficiency has been made
against LACD nor has any notice been given of any actual or proposed assessment
or deficiency which has not been paid or for which an adequate reserve has not
been set aside. Except as set forth in such Tax Returns and Statements, the Tax
Returns and Statements are not
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presently, nor have they since LACD's inception been, the subject of any audit
or other administrative or court proceeding by any federal, territorial, state,
local or foreign governmental agency. LACD has not received any notice that any
of the Tax Returns and Statements is now being or will be examined or audited,
and no consents extending any applicable statute of limitations have been filed.
For purposes of this Agreement, "Taxes" shall mean any and all taxes,
payroll and employment related taxes, levies, assessments, charges or other
fees, together with any interest, penalties or other additions, imposed by any
governmental authority upon LACD.
Section 1.15 TRANSACTIONS WITH AFFILIATES. Except as set forth on
Schedule 1.15 hereto, no Affiliate of LACD has any interest, directly or
indirectly, in any lease, lien, contract, license, encumbrance, loan or other
agreement to which LACD is a party, or any interest in any competitor, supplier
or customer of LACD. Except as set forth item by item on Schedule 1.15 hereto,
and except for loans made after the date of this Agreement by Affiliates to LACD
from time to time for working capital at interest rates not more than market
rates in the aggregate amount not to exceed $500,000 per month ("Affiliate
Working Capital Loans"), LACD is not indebted, directly or indirectly, to any
Affiliate of LACD, for any liability or obligation, whether arising by reason of
stock ownership, contract, oral or written agreement or otherwise. Except as
disclosed on Schedule 1.15, no Affiliate is indebted, directly or indirectly, to
LACD. Schedule 1.15 is a complete and accurate list of all employees of LACD
owing more than $5,000 in principal (provided that the aggregate principal
amount owed by employees to LACD not set forth on Schedule 1.15 shall not exceed
$25,000) plus accrued interest, to LACD, other than travel or other employee
advances (not exceeding $1,000 to any one person) in the ordinary course of
business, setting forth the amounts owed, the applicable interest rates, a
description of the security and the maturity dates of all such debts.
Except as set forth on Schedule 1.15 hereto, no Affiliate:(a) is a party to
any contract or arrangement with LACD pursuant to which it directly provides
material services to LACD; or (b) is a party to any contract or arrangement with
a third party, to which LACD is not a party, but under which LACD receives any
material amount of goods or services from said third party. Except as set forth
on Schedule 1.15 hereto, all goods and services provided to LACD by any of its
Affiliates and all goods and services provided to any of its Affiliates by LACD,
at any time since LACD's inception have been charged to the recipient at a price
that would have been acceptable to an unrelated third party receiving such goods
and services in an arm's-length transaction with the provider.
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Section 1.16 CONTRACTS AND COMMITMENTS. Except as set forth on Schedule
1.16:
(a) LACD has not entered into any outstanding agreements, contracts
or commitments or restrictions which, individually or in the aggregate, are
material to its business, operations or prospects, or which require the making
of any charitable contribution;
(b) No purchase contracts or commitments of LACD continue for a
period of more than 30 days or are in excess of the normal, ordinary and usual
requirements of its business or, to the best knowledge of LACD, at any excessive
price;
(c) LACD has not entered into any contracts or commitments pursuant
to which LACD is, as of the date hereof, required to obtain or maintain, on
behalf of itself or any of its directors, officers or employees, any facility or
personnel security clearances from the U.S. Department of Defense or any other
agency of the U.S. Government;
(d) There are no outstanding sales contracts, purchase orders,
commitments or proposals of LACD which continue for a period of more than 30
days or will likely result in any loss to LACD upon completion or performance
thereof;
(e) LACD has not entered into any outstanding contracts with
officers, employees, agents, consultants, advisors, salesmen, sales
representatives or suppliers that are not cancelable by it on notice of not
longer than 30 days and without liability, penalty or premium, or any agreement
or arrangements providing for the payment of any bonus or commission based on
sales or earnings;
(f) LACD has not entered into any outstanding employment agreement,
or any other outstanding agreement that contains any severance or termination
pay liabilities or obligations;
(g) LACD is not a party to any collective bargaining agreement or
other contract or agreement with any labor organization;
(h) LACD is not restricted by agreement from carrying on its business
anywhere in the world;
(i) LACD has not incurred any outstanding debt obligation for
borrowed money, including guarantees of or agreements to acquire any such debt
obligation of others other than as reflected on the LACD Financial Statements;
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(j) LACD is not a party to any contract, subcontract or agreement
with the U.S. Government or any agency or instrumentality thereof, or with any
territorial or state government or any agency or instrumentality thereof; and
(k) LACD has not entered into any outstanding loan with or to any
person other than (i) as reflected on the LACD Financial Statements, (ii) for
amounts not more than $5,000 to any individual and $25,000 in the aggregate, and
(iii) Affiliate Working Capital Loans.
Section 1.17 COMPLIANCE WITH CONTRACTS; DELIVERY OF CERTAIN CONTRACTS.
LACD is not in default under any material contract, commitment, obligation or
agreement, including, without limitation, those listed in Schedules 1.13, 1.16
and 1.30 hereto, except for those which would not have a Material Adverse
Effect, and no act or omission by LACD has occurred which, with notice or lapse
of time or both, would constitute such a default under any term or provision of
any such contract or agreement. To the best knowledge of LACD, each of the
agreements referred to in Schedules 1.13, 1.16 and 1.30 hereto is valid and in
full force and effect. To the best knowledge of LACD, no party is in default
under any agreement referred to in Schedules 1.13, 1.16 and 1.30 hereto, and to
the best knowledge of LACD, no act or omission has occurred by any party which,
with notice or lapse of time or both, would constitute such a default under any
term or provision thereof. LACD has previously delivered to Sargent a true and
correct copy of each agreement, contract, commitment or restriction listed on
Schedules 1.13, 1.16 and 1.30 hereto, including all amendments and modifications
thereof.
Section 1.18 INSURANCE. Schedule 1.18 contains an accurate and true
description of all existing policies of fire, liability, worker's compensation
and all other forms of insurance owned or held by, or covering the business,
properties or assets of, LACD. All such policies are in full force and effect,
all premiums with respect thereto covering all periods up to and including the
date hereof have been paid, and no notice of cancellation or termination has
been received by LACD with respect to any such policy. Such policies will
remain in full force and effect through the respective dates set forth on
Schedule 1.18 without additional premiums being paid or properly accrued as an
additional liability. Schedule 1.18 also: (a) describes all products liability
claims made since LACD's inception, and all other claims (except medical and
dental) pending or made since LACD's inception under such insurance policies;
and (b) identifies all types of insurable risks which LACD and its Board of
Directors has designated as being self insured. Except as set forth in Schedule
1.18, LACD has not been turned down at any time since LACD's inception for any
insurance with respect to its assets or operations, nor has its coverage been
limited by any insurance carrier to which it has applied for any
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such insurance or with which it has carried insurance during the last three
years.
Section 1.19 LABOR DIFFICULTIES. Except to the extent set forth in
Schedule 1.19:
(a) To the best knowledge of LACD, no employee of LACD is in
violation of, or has threatened any violation of, any material term of any
employment contract or any other contract or agreement relating to the
relationship of such employee with LACD or any other party, including any
employee handbook and/or personnel policy manual of LACD except for violations
which would not, individually or in the aggregate, have a Material Adverse
Effect;
(b) LACD has complied in all material respects with each and every
term, provision, section and part of any written employment contract or
agreement, including any employee handbook and/or personnel policy manual, that
LACD has or has had with any individual who has performed work for LACD;
(c) There is no unfair labor practice charge or similar charge,
complaint, allegation or other process or claim pending or, to the best
knowledge of LACD, threatened against LACD before the National Labor Relations
Board (the "NLRB") or any other federal, territorial, state or local
governmental agency or other entity;
(d) There is no labor dispute, strike, slowdown, work stoppage or
other job action pending or, to the best knowledge of LACD, threatened against
or otherwise affecting LACD;
(e) No petition for election or similar charge, complaint, allegation
or other process or claim is pending or, to the best knowledge of LACD,
threatened against LACD before the NLRB, any region of the NLRB, or any other
federal, territorial, state or local governmental agency or other entity, and no
organizing campaign or other effort is underway or, to the best knowledge of
LACD, threatened by any labor organization to organize any employees of LACD;
(f) LACD has not experienced any labor dispute, strike, slowdown,
work stoppage, or other job action since its inception; and
(g) There is not pending or, to the best knowledge of LACD,
threatened against LACD any complaint, charge, allegation or other process or
claim whatsoever, other than those which would not, individually or in the
aggregate, have a Material Adverse Effect: (i) alleging any violation of the
Occupational Safety and Health Act or any other federal, territorial, state or
local law governing health and/or safety in the workplace; (ii) seeking
compensation, benefits and/or penalties pursuant to any Workers'
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Compensation Act or similar law; (iii) seeking any compensation or benefits
pursuant to any Unemployment Insurance Act or similar law; (iv) alleging any
violation of the Immigration Reform and Control Act of 1986 or any similar law;
(v) alleging any violation of the Fair Labor Standards Act or any other federal,
territorial, state or local law governing wage and/or hour issues; (vi) alleging
any violation of any federal, territorial, state or local child labor law;
and/or (vii) alleging any other federal, territorial, state or local law
relating to or governing employment or labor matters.
Section 1.20 LITIGATION. Except as set forth in Schedule 1.20 hereto:
(a) There is no pending or, to the best knowledge of LACD, threatened
complaint, charge, claim, action, suit or arbitration proceeding before any
federal, territorial, state, municipal, foreign or other court or governmental
or administrative body or agency, or any private arbitration tribunal or any
investigation or inquiry before any federal, territorial, state, municipal,
foreign or other court or governmental or administrative body or agency against,
relating to or affecting: (i) LACD or any director, officer, agent or employee
thereof in his or her capacity as such; (ii) the assets, properties or business
of LACD; or (iii) the transactions contemplated by this Agreement, nor, to the
best knowledge of LACD, is there any basis for any such complaint, charge,
claim, action, suit, arbitration proceeding, investigation or inquiry which
could have an adverse effect on the assets, property, business or prospects of
LACD;
(b) There is not in effect any order, judgment or decree of any court
or governmental or administrative body or agency enjoining, barring, suspending,
prohibiting or otherwise limiting LACD or, to the best knowledge of LACD, any
officer, director, employee or agent thereof from conducting or engaging in any
aspect of the business of LACD, or requiring LACD or, to the best knowledge of
LACD, any officer, director, employee or agent thereof to take certain action
with respect to any aspect of the business of LACD which could reasonably be
anticipated to have a Material Adverse Effect; and
(c) LACD is not in violation of or default under any applicable
order, judgment, writ, injunction or decree of any federal, territorial, state,
municipal, foreign or other court or regulatory authority.
Section 1.21 NO CONDEMNATION OR EXPROPRIATION. Neither the whole nor any
portion of the leaseholds or any other assets of LACD is subject to any
governmental decree or order to be sold or is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to
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the best knowledge of LACD, has any such condemnation, expropriation or taking
been proposed.
Section 1.22 COMPLIANCE WITH LAW. The operations of LACD have been
conducted in accordance with all applicable laws, regulations and other
requirements of all national governmental authorities, and of all territories,
states, municipalities and other political subdivisions and agencies thereof
having jurisdiction over LACD, including, without limitation, all such laws,
regulations, ordinances and requirements relating to environmental, antitrust,
consumer protection, labor and employment, zoning and land use, currency
exchange, immigration, health, occupational safety, pension, securities, defense
procurement and trading with the enemy matters, except as disclosed in Schedule
1.22 hereto and except for violations which would not, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth in Schedule
1.22, LACD has not received any notification since its inception of any asserted
present or past failure by LACD to comply with such laws, regulations,
ordinances or requirements. LACD has all permits, authorizations and consents
necessary for the operation of its business except for those which the failure
to have would not, individually or in the aggregate, have a Material Adverse
Effect.
Section 1.23 ENVIRONMENTAL COMPLIANCE.
A. For purposes of this Agreement, the following terms shall have
the meanings set forth below:
(a) "PREMISES" means any property or facility LACD owns, operates or
leases which relate to the business of LACD or which constitute any of the LACD
Assets (as defined hereinafter);
(b) "HAZARDOUS SUBSTANCE" means, at any time, any substance,
material, chemical or waste the presence of which requires investigation or
remediation under, or which is or becomes regulated by, any federal, state or
local governmental authority due to its properties of being toxic, hazardous,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic, or
mutagenic, including, without limitation, any material, waste, chemical or
substance which is: (i) defined as a "hazardous," "extremely hazardous" or
"restricted hazardous" waste, material or substance under the laws of the
governmental jurisdiction where the Premises are located and/or to which the
Premises are subject; (ii) petroleum or a petroleum product, including, without
limitation, gasoline and diesel fuel; (iii) asbestos or asbestos containing;
(iv) polychlorinated biphenyls; (v) designated as a "hazardous substance"
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 ET SEQ.
(33 U.S.C. Section 1321) or listed pursuant to Section 307 of the Clean Water
Act (33 U.S.C. Section 1317); (vi) defined as a "hazardous waste" pursuant to
Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901 ET SEQ. (42 U.S.C.
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Section 6903); or (vii) defined as a "hazardous substance" pursuant to Section
101 of the Comprehensive Environmental Response, Compensation, and Liability
Act, 42 U.S.C. Section 9601 ET SEQ. ("CERCLA") (42 U.S.C. Section 9601);
(c) "HAZARDOUS MATERIALS LAW" means any national, territorial, state,
province or local statute, ordinance, order, rule or regulation of any type,
relating to pollution or the protection of worker safety, public safety, human
health, natural resources, or the environment, including laws, statutes,
ordinances, rules or regulations relating to the emission, discharge, release or
threatened release, of pollutants, contaminants or Hazardous Substances into
ambient air, surface water, ground water or land, or remediation or removal
thereof, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants or Hazardous Substances, including without limitation those
statutes and regulations referred to in Subparagraph (b) above, the Occupational
Health and Safety Act (29 U.S.C. Section 651 ET SEQ.); and
(d) "LOSS" means any and all of the following, whether the result of
any action of any governmental agency or a third party liabilities; penalties;
forfeitures; suits; losses; damages; expenses; debts; obligations; claims; fines
or civil liability for violation of any Hazardous Materials Law; costs
(including the costs of investigation, defense, settlement and attorneys' and
other professional fees whether or not litigation is instituted); or, costs and
capital expenditures required for compliance with Hazardous Materials Law.
B. Except as disclosed in Schedule 1.23 hereto:
(a) LACD has obtained, and is in full compliance with, all material
permits, licenses or other authorizations which are required under any Hazardous
Materials Law for the operations of the business of LACD;
(b) LACD is not aware of any material past, present or future events,
conditions, circumstances, activities, practices, incidents, actions or plans
which may interfere with, or prevent continued compliance by LACD with, any
Hazardous Materials Law, or which may give rise to Loss to LACD based on or
related to any Hazardous Materials Law;
(c) LACD has not entered into any agreement with any governmental
authority or agency, or with any private entity, including, but not limited to,
any prior owners of Premises, relating in any way to violation of any Hazardous
Materials Law, or to the presence, release, threat of release, disposal,
placement on, under or about any Premises of Hazardous Substances;
(d) LACD has not discovered or caused, and to the best
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of LACD's knowledge, no other person has discovered or caused, any discharge,
emission, disposal or release of Hazardous Substances on the Premises, on
property formerly owned, operated or leased by LACD or on the property of any
third party;
(e) LACD has not discovered, and to the best of LACD's knowledge, no
other person has discovered, any occurrence or condition on the Premises or on
any real property in the vicinity of the Premises, which could cause the
Premises to be subject to any restrictions on the ownership, occupancy,
transferability or use under any Hazardous Materials Law;
(f) LACD has not manufactured, stored or disposed of Hazardous
Substances at any location, including, without limitation, any disposal which
was in compliance with any Hazardous Materials Law;
(g) LACD does not use or maintain any underground storage tanks or
surface impoundments on the Premises and, to the best knowledge of LACD, no
underground storage tanks or surface impoundments are now, or ever have been,
located on the Premises; and
(h) LACD has not received notice of any lien in favor of any
governmental authority for: (i) any liability under any Hazardous Materials Law;
or (ii) damages arising from or costs incurred by such governmental authority in
response to a release of Hazardous Substances into the environment, nor has any
such lien ever been filed or attached to the Premises.
Section 1.24 EMPLOYEE BENEFITS.
(a) Except for the plans, agreements, arrangements and practices set
forth in Schedule 1.24 hereto (collectively, the "Employment Plans"), neither
LACD nor any Affiliate maintains or contributes to, or is obligated or required
to contribute to, any bonus, deferred compensation, severance or termination
pay, pension, profit sharing, stock purchase, stock grant, stock option, group
life insurance, health care, hospitalization insurance, disability, retirement
or any other employee benefit or fringe benefit plan, agreement, arrangement or
practice, whether formal or informal and whether legally binding or not, which
covers employees of LACD. Neither LACD nor any Affiliate has any commitment,
whether formal or informal and whether legally binding or not, to create or
contribute to any additional such plan.
(b) Each Employment Plan, including each Employment Plan which is an
"employee pension benefit plan," as such term is defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (the
"Pension Plans"), or an "employee welfare benefit plan," as such term is defined
in Section 3(l) of ERISA (the "Welfare Plans"), in all respects conforms to,
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and is and has been operated in compliance with, applicable law, including, but
not limited to, ERISA and the Internal Revenue Code of 1986, as amended (the
"Code").
(c) Neither LACD nor any Affiliate, nor any of the Pension Plans, nor
any of the Welfare Plans nor any trust created thereunder, nor, to the best
knowledge of LACD, any trustee or administrator thereof, has engaged in a
prohibited transaction (within the meaning of Section 406 of ERISA and Section
4975 of the Code) which might subject LACD to any material liability or civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section
4975 of the Code.
(d) Full payment has been duly made or reserved for by LACD of all
amounts that LACD or any Affiliate is required under the terms of all Employment
Plans to pay as contributions to such Employment Plans, with respect to
employees of LACD covered by such Plans, on or prior to the Closing Date.
(e) None of the Pension Plans is a "multiemployer plan," as such term
is defined in Section 3(37) of ERISA.
(f) Neither LACD, any Affiliate nor, to the best knowledge of LACD,
any administrator or fiduciary of any Pension Plan or Welfare Plan has engaged
in any transaction or acted or failed to act in a manner which could subject
LACD to any liability for a breach of fiduciary duty under ERISA.
(g) Neither LACD nor any Employment Plan is obligated to make payment
of post-retirement life, accidental death, medical or disability insurance
benefits of any type, excluding for this purpose the provision of any such
benefits as a result of an individuals exercise of his or her conversion rights
under the Consolidated Omnibus Budget Reconciliation Act of 1986, to, or with
respect to, any former employee of LACD.
(h) True and complete copies of each of the following documents have
been delivered to Sargent: (i) each Welfare Plan and each Pension Plan, related
trust agreements, annuity contracts, or other funding instruments; (ii) each
Employment Plan and complete descriptions of any such plans that are not in
writing; (iii) the most recent determination letter issued by the Internal
Revenue Service with respect to each Pension Plan; (iv) Annual Reports on Form
5500 Series required to be filed with any governmental agency for each Welfare
Plan and each Pension Plan for the two most recent plan years; and (v) actuarial
reports, consisting of the Schedule B and attachments to the Form 5500 Series
prepared for the last two plan years for each Pension Plan.
Section 1.25 ABSENCE OF QUESTIONABLE PAYMENTS. Neither LACD
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nor, to the best knowledge of LACD, any of its directors, officers, agents,
employees or other persons acting on its behalf or for its benefit has used any
corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political activity
to government officials or others or established or maintained any unlawful or
unrecorded funds for such purpose. Neither LACD nor, to the best knowledge of
LACD, any of its directors, officers, agents, employees or other persons acting
on its behalf or for its benefit has accepted or received any unlawful
contributions, payments, gifts or expenditures.
Section 1.26 PERSONNEL. Schedule 1.26 hereto is a true and complete list
of the wage rates for all non-salaried and salaried employees of LACD by
classification.
Section 1.27 REAL PROPERTY HOLDING CORPORATION. LACD is not a U.S. Real
Property Holding Corporation within the meaning of Section 897(c)(2) of the
Code.
Section 1.28 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty by LACD contained in this Agreement or in respect of the exhibits,
schedules or documents delivered to Sargent by LACD and expressly referred to
herein, and no statement contained in any certificate furnished or to be
furnished by or on behalf of LACD pursuant hereto, or in connection with the
transactions contemplated hereby, contains, or will contain as of the date such
representation or warranty is made or such certificate is or will be furnished,
and as of the Closing Date, any untrue statement of a material fact, or omits,
or will omit to state as of the date such representation or warranty is made or
such certificate is or will be furnished, any material fact which is necessary
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. True and correct
copies of each agreement and other document referred to in the schedules hereto
have been furnished by LACD to Sargent.
Section 1.29 TITLE TO PATENTS AND TRADE NAMES. LACD has good and
marketable title to the Patents set forth in Schedule 1.29(a) and Trade Names
set forth in Schedule 1.29(b), free and clear of any lien, mortgage, charge,
security interest, pledge or other encumbrance or other adverse claim or
interest of any nature. LACD is the sole and exclusive owner of the Patents and
Trade Names, the issued or granted Patents are valid, and in full force and
effect as of the Closing Date. LACD is the party named in the Patents and is
the party who made, or caused to be made, the application for the letters of
patents. LACD has the right and power to assign the Patents and Trade Names and
made no prior transfer, sale or assignment of all or any part of the Patents and
Trade Names and the exploitation of the Patents and Trade Names do not and will
not infringe the rights granted to any other person by any United States or
other patent or proprietary interest of any kind or
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nature. LACD further represents and warrants that the Patents and Trade Names
constitute all of LACD's rights and interests in, and LACD has not transferred
or conveyed to any other person or entity any right or interest in, any patents,
patents pending, industrial designs, utility models and applications for patent
and method of use or manufacture and any patents issued thereon and any
continuations or reissues thereof, including any continuation-in-part or
divisional patent application thereof, and all foreign counterparts and
extensions thereof, and all of the Technical Information and Proprietary
Information or improvements thereto in existence on the date hereof or
thereafter developed, including, but not limited to all information contained in
all pending patent applications or patents, that are pertinent in any manner
whatsoever to the development, testing, registration, assembly, manufacture, use
or sale of all products and services related to the business of LACD.
The following terms as used in this Agreement shall have the meanings set
forth below:
"PATENTS" shall mean the patents, patents pending, industrial designs,
utility models and applications for patent that are identified in Schedule
1.29(a) and 2.29(a) hereto, which relate to any products (or any component
thereof) or services related to the business of LACD or Sargent, as the case may
be, and its method of use or manufacture and any patents issued thereon and any
continuations or reissues thereof, including any continuation-in-part or
divisional patent application thereof and all foreign counterparts and
extensions thereof.
"PROPRIETARY INFORMATION" shall mean all of the information regarding any
products or services related to the business of LACD, including the Patents,
which constitute reliable trade secrets or proprietary business information,
including, without limitation, such information as encompassed in all drawings,
designs, formulas, devices, compilations, computer programs and software
devices, plans, manuals, proposals, financial information, costs, pricing
information, marketing or sales plans, accounting, customer lists or any other
trade secrets or proprietary information whether now existing or hereinafter
developed whether it gives the disclosing party any competitive advantage over
those who do not know or use it, or whether it is patentable or subject to
copyright or trademark protection.
"TECHNICAL INFORMATION" means all information, knowledge, engineering and
technical data, manufacturing data, raw data, developments, projections,
proprietary data, manufacturing drawings, product specifications, manufacturing
and assembly techniques, production descriptions, skills, methods, trade
secrets, processes, procedures and know how and other information or
improvements thereto in existence on the date hereof or thereafter developed,
including, but not limited to all information contained in all pending patent
applications or patents within the
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definition of Patents (as defined above), that is pertinent to the development,
testing, registration, assembly, manufacture, use or sale of any products or
services related to the Business of LACD or Sargent, as the case may be.
"TRADE NAMES" shall mean those tradenames, trademarks, service marks and
logos referenced on Schedule 1.29(b) hereto.
Section 1.30 REAL PROPERTIES. Schedule 1.30 hereto is an accurate and
complete list of all real property owned by LACD, together with a description of
every mortgage, deed of trust, pledge, lien, agreement, encumbrance, claim or
equity interest of any nature whatsoever in such real property.
Section 1.31 TITLE AND RELATED MATTERS. LACD has good and marketable title
to and is the sole and exclusive owner of all of its material properties,
inventory, interests in properties and assets, real and personal, Patents,
copyrights, trademarks, service marks and Trade Names (collectively, the "LACD
Assets") which are reflected in the most recent LACD balance sheet and the LACD
Schedules or acquired after that date (except properties, interests in
properties and assets sold or otherwise disposed of since such date in the
ordinary course of business), free and clear of all liens, pledges, charges or
encumbrances except: (a) statutory liens or claims not yet delinquent; (b) such
imperfections of title and easements as do not and will not, materially detract
from or interfere with the present or proposed use of the properties subject
thereto or affected thereby or otherwise materially impair present business
operations on such properties; and (c) as described in the LACD Schedules.
Except as set forth in the LACD Schedules, LACD owns free and clear of any
liens, claims, encumbrances, royalty interests or other restrictions or
limitations of any nature whatsoever, any and all products it is currently
manufacturing, including the underlying technology and data, and all procedures,
techniques, marketing plans, business plans, methods of management or other
information utilized in connection with LACD's business. Except as set forth in
the LACD Schedules, no third party has any right to, and LACD has not received
any notice of infringement of or conflict with asserted rights of others with
respect to any product, technology, data, trade secrets, know-how, proprietary
techniques, trademarks, service marks, trade names or copyrights which, singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have a Material Adverse Effect on the business, operations or
financial condition of LACD or any material portion of its properties, assets or
rights.
Section 1.32 TITLE TO THE EXCHANGED LACD STOCK. (a) Upon delivery to
Sargent of the certificates described in Section 3.3 of this Agreement, Sargent
will receive good and marketable title to the 1,000 shares of LACD Common Stock
(the Exchanged LACD Stock"), which shall constitute one hundred percent (100%)
of the issued and
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outstanding capital stock of LACD, all of such the Exchanged LACD Stock shall be
received by Sargent as validly issued, fully paid and nonassessable, free and
clear of all pledges, liens, encumbrances, security interests, equities,
options, claims, charges, limitations on voting rights or rights to receive
dividends, or other restrictions of any kind (other than any generally imposed
by federal, corporate or territorial securities laws or as otherwise provided
for in this Agreement); and
(b) From the date of this Agreement through the Closing Date, each of the
LACD Stockholders agrees that he will not sell, transfer, hypothecate, pledge,
assign, suffer any lien to be incurred with respect to or otherwise dispose of
any of the shares of Exchanged LACD Stock.
Section 1.33 SECURITIES WARRANTIES. With respect to the Exchanged Sargent
Stock to be delivered by Sargent pursuant to the provisions of Section 3.3
hereof, each of the LACD Stockholders hereby represents and warrants to Sargent
that:
(a) The shares of Exchanged Sargent Stock are being acquired for the
account of each of the LACD Stockholders and not with a view to sale in
connection with any distribution of the Exchanged Sargent Stock;
(b) Each of the LACD Stockholders is acquiring the Exchanged Sargent Stock
hereunder without having received any form of general solicitation or general
advertising;
(c) Each of the LACD Stockholders or his representative, if any, has been
provided with, or given reasonable access to, full and fair disclosure of all
material information concerning Sargent;
(d) Each of the LACD Stockholders has a preexisting personal or business
relationship with Sargent or certain of its officers, directors or controlling
persons, or by reason of its business or financial experience, each of the LACD
Stockholders could reasonably be assumed to have the capacity to represent his
own interests in connection with this Agreement;
(e) Each of the LACD Stockholders understands and hereby acknowledges that
the Exchanged Sargent Stock will be issued pursuant only to those restrictions
imposed by and exemptions available pursuant to applicable federal and state
laws and that the certificates to be issued in respect of the Exchanged Sargent
Stock may bear a legend in a form satisfactory to counsel for Sargent; in part,
Sargent's reliance upon such exemptions is based on the representations and
warranties made by each of the LACD Stockholders in this Section 1.33;
(f) Each of the LACD Stockholders agrees that the certificates
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to be issued in respect of the Exchanged Sargent Stock may bear a legend in a
form satisfactory to counsel for Sargent reflecting the status of the Exchanged
Sargent Stock as restricted securities under Rule 144(a)(3) promulgated under
the Securities Act and acknowledges that the transfer agent or registrar for
Sargent may be instructed to restrict the transfer of the Exchanged Sargent
Stock in accordance with such legend and any other restrictions provided in this
Agreement;
(g) Each of the LACD Stockholders hereby agrees that he will not sell,
transfer, hypothecate, pledge, assign or otherwise dispose of any of the
Exchanged Sargent Stock, except pursuant to the terms of this Agreement and to a
registration statement filed under the provisions of the Securities Act, a
favorable no-action or interpretive letter received from the Commission or an
opinion of counsel satisfactory to Sargent that such sale, transfer,
hypothecation, pledge, assignment or other disposition is exempt from the
registration requirements of the Securities Act and in California, pursuant to
an opinion of counsel satisfactory to Sargent that such sale, transfer,
hypothecation, pledge, assignment or other disposition is exempt from the
registration requirements of the Securities Act and does not in any way violate
the terms of this Agreement; and
(h) Each of the LACD Stockholders hereby acknowledges that: (i) the shares
of Exchanged Sargent Stock referred to herein are being acquired after adequate
investigation of the business plan and prospects of Sargent; (ii) that each of
the LACD Stockholders is not relying upon the accuracy of any predictions as to
the future prospects or developments of Sargent or its business and is well
informed as to the business of Sargent and has reviewed its operations and
financial statements; (iii) each of the LACD Stockholders or his professional
advisors have discussed the financial condition and business operations of
Sargent with the officers, directors and principal stockholders of Sargent and
has been afforded the opportunity to ask questions with respect thereto; and
(iv) each of the LACD Stockholders specifically acknowledges that the shares of
Exchanged Sargent Stock are speculative and involve a very high degree of risk
and that there can be no assurance that Sargent will achieve its business
objectives or, in particular, that it will ever have cash available for
distribution to its stockholders.
Section 1.34 CERTAIN FINANCIAL REPRESENTATIONS. At the Closing, LACD
shall have: (a) all of the assets necessary to operate LACD as a full service
dialysis business; (b) adjusted gross revenues, which on a annualized basis, for
the twelve (12) month period ending December 31, 1995, equal or exceed
$2,500,000; (c) pre-tax profits, which on an annualized basis for the twelve
(12) month period ending December 31, 1995, equal or exceed $900,000; and (d)
subject to the accuracy of the representations and warranties of Sargent set
forth in Section 2.33 of this
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Agreement, and purchase by LACD of that certain real estate to be acquired by
LACD subsequent to the closing on a combined basis with Sargent, total assets of
at least $4,000,000 and capital and surplus of at least $2,000,000, as these
amounts are determined pursuant to Schedule D of the "NASD Schedules to the By-
laws" with respect to initial inclusion in the NASDAQ Small-Cap Market.
Section 1.35 STARK I AND STARK II. LACD warrants that its business
activities subsequent to the Closing shall, at all times, conform to and be in
compliance in all material respects with Stark I, Stark II and Anti-Kickback
Laws.
Section 1.36 LACD SCHEDULES. LACD shall cause the LACD Schedules and the
instruments and data delivered to Sargent hereunder to be updated after the date
hereof up to and including the Closing Date, as hereinafter defined.
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
OF SARGENT
As an inducement to, and to obtain the reliance of LACD, Sargent represents
and warrants, as follows:
Section 2.1 ORGANIZATION. Sargent is corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware, and has
the corporate power and is duly authorized, qualified, franchised and licensed
under all applicable laws, regulations, ordinances and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, including qualification
to do business as a foreign corporation in the states in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification, except where the failure to so qualify would not have
a Material Adverse Effect upon the assets, business, properties or operations of
Sargent. Included in the Sargent Schedules as Schedule 2.1 (as hereinafter
defined) are complete and correct copies of the articles of incorporation,
amended articles of incorporation (collectively, hereinafter referred to as the
"articles of incorporation") and bylaws of Sargent as in effect on the date
hereof. The execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated by this Agreement in accordance
with the terms hereof will not, violate any provision of either the Sargent
articles of incorporation or bylaws. Sargent has taken all action required by
law, its articles of incorporation, bylaws or otherwise to authorize the
execution and delivery
of this Agreement. Sargent has the full power, authority and legal
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right and have taken all actions required by law, its articles of incorporation,
bylaws or otherwise to consummate the transactions herein contemplated.
Section 2.2 CAPITALIZATION. The authorized capitalization of Sargent
consists of 9,000,000 shares of common stock, par value $0.01 par share (the
"Sargent Common Stock") and 1,000,000 shares of preferred stock, par value
$0.01 per share ("Sargent Preferred Stock"). As of the Closing Date, there are
2,111,343 shares of Sargent Common Stock issued and outstanding and no shares of
Sargent Preferred Stock are issued and outstanding. All issued and outstanding
shares of Sargent are legally issued, fully paid and nonassessable and not
issued in violation of the preemptive rights or other rights of any person.
Section 2.3 SUBSIDIARIES. Sargent does not have any subsidiaries and does
not own, beneficially or of record, any other corporation.
Section 2.4 OPTIONS AND WARRANTS. Except as set forth on Schedule 2.4,
there are no outstanding: (a) securities convertible into or exchangeable for
any of Sargent's capital stock; or (b) options, warrants, calls or other rights
(including rights to demand registration or to sell in connection with any
registration by Sargent under the Securities Act to purchase or subscribe to
capital stock of Sargent or securities convertible into or exchangeable for
capital stock of Sargent. Sargent is not a party to any voting trust agreement
or other contract, agreement, arrangement, commitment, plan or understanding
restricting or otherwise relating to voting or dividend rights with respect to
the Sargent Common Stock.
Section 2.5 BINDING OBLIGATION; NO DEFAULT. Sargent has duly taken all
action necessary to authorize the execution, delivery and performance of this
Agreement and the other instruments and agreements contemplated hereby. Such
execution, delivery and performance does not and will not, to the best of
Sargent's knowledge, constitute a default under or a violation of any
agreement, order, award, judgment, decree, statute, law, rule, regulation or any
other instrument to which either Sargent is a party or by which Sargent or the
property of Sargent may be bound or may be subject. This Agreement constitutes
the legal, valid and binding obligation of Sargent, enforceable against Sargent
in accordance with its terms.
Section 2.6 COMPLIANCE WITH OTHER INSTRUMENTS, ETC. Except as set forth
on Schedule 2.6, neither the execution and delivery of this Agreement by Sargent
nor compliance by Sargent with the terms and conditions of this Agreement will:
(a) require Sargent to obtain the consent of any governmental agency; (b)
constitute a material default under any indenture, mortgage or deed of trust to
which Sargent is a party or by which Sargent or its properties may
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be subject; (c) cause the creation or imposition of any lien, charge or
encumbrance on any of its assets; or (d) breach any statute or regulation of any
governmental authority, domestic or foreign, or will on the Closing Date
conflict with or result in a breach or any of the terms or conditions of any
judgment, order, injunction, decree or ruling of any court or governmental
authority, domestic or foreign, to which Sargent is subject.
Section 2.7 CONSENTS. Except as set forth on Schedule 2.7, no consent,
approval or authorization of, or declaration, filing or registration with, any
governmental or regulatory authority or any third party is required to be made
or obtained by Sargent in connection with the execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
Section 2.8 BOOKS AND RECORDS. The books of account and other financial
records of Sargent are complete and correct in all material aspects. The minute
books of Sargent, as previously made available to LACD and its legal counsel,
contain records of all meetings and accurately reflect all other material
corporate action of the stockholders, directors and any committees of the Board
of Directors of Sargent.
Section 2.9 FINANCIAL STATEMENTS. Schedule 2.9 attached hereto are true
and correct copies of Sargent's audited financial statements, including
Sargent's audited consolidated balance sheets as of July 31, 1995, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the years ended July 31, 1994 and 1995 (the "Sargent Audited Financial
Statements"); and true and correct copies of Sargent's unaudited consolidated
balance sheets as of January 31, 1996, and the related unaudited consolidated
statements of operations and cash flows for the six (6) month periods ended
January 31, 1995 and 1996 (the "Sargent Unaudited Financial Statements"). The
Sargent Audited Financial Statements, together with the notes thereto, fairly
present the financial position of Sargent at July 31, 1995, and the consolidated
results of the operations and the changes in stockholders' equity and cash flows
for Sargent for the periods covered by the Sargent Audited Financial Statements
and have been prepared in accordance with GAAP consistently applied with prior
periods. The Sargent Unaudited Financial Statements fairly present the
financial position of Sargent at January 31, 1996, and the consolidated results
of the operations and cash flows for Sargent for the periods then ended and have
been prepared in accordance with GAAP consistently applied with prior periods.
(The Sargent Audited Financial Statements and Sargent Unaudited Financial
Statements are collectively referred to herein as the "Sargent Financial
Statements.")
Section 2.10 NO UNDISCLOSED LIABILITIES. Except as set forth
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on Schedule 2.10 hereto, Sargent does not have any material liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise) which
were not adequately reflected or reserved against on the Sargent Financial
Statements, and are not the subject of liens on or security interests in the
Warehouse (as defined herein), except for liabilities and obligations incurred
since the date thereof in the ordinary course of Sargent's business and
consistent with past practice and which, in any event, in the aggregate, would
not have a Material Adverse Effect.
Section 2.11 ABSENCE OF CERTAIN CHANGES. Except as and to the extent set
forth on Schedule 2.11 hereto or except as otherwise expressly contemplated
hereby, since the date of the Sargent Financial Statements, Sargent has not:
(a) Suffered any material adverse change in its financial condition,
assets, liabilities (absolute, accrued, contingent or otherwise), or reserves,
and no event has occurred and no action has been taken by Sargent or, to the
best knowledge of Sargent, any other person, nor is any such event or action
contemplated or, to the best knowledge of Sargent, threatened, which might
reasonably be expected to have a material adverse effect on the assets or the
operations or condition (financial or otherwise) of Sargent's business
("Material Adverse Effect"), except that no representation or warranty is made
as to general economic conditions or matters affecting Sargent's industry
generally;
(b) Suffered any material adverse change in its business, operations
or prospects;
(c) Experienced any shortage of raw materials or supplies;
(d) Incurred any short-term or long-term liabilities or obligations
(absolute, accrued, contingent or otherwise) except items incurred in the
ordinary course of business and consistent with past practice, none of such
short-term or long-term liabilities or obligations exceeds $10,000 individually,
or $25,000 in the aggregate, (counting obligations or liabilities arising from
one transaction or a series of similar transactions, and all periodic
installments or payments under any lease or other agreement providing for
periodic installments or payments, as a single obligation or liability), or
increased or changed any assumptions underlying or method of calculating, any
bad debt, contingency or other reserves;
(e) Paid, discharged or satisfied any claims, liabilities or
obligations (absolute, accrued, contingent or otherwise)
other than the payment, discharge or satisfaction in the ordinary
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course of business and consistent with past practice of liabilities and
obligations reflected or reserved against in the Sargent
Financial Statements or incurred in the ordinary course of business and
consistent with past practice since the date of the Sargent Financial
Statements;
(f) Permitted or allowed any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any mortgage,
pledge, lien, security interest, encumbrance, restriction or charge of any kind;
(g) Written down the value of any inventory in excess of $10,000
(including write-downs by reason of shrinkage or markdown) or written down or
written off as uncollectible any notes or accounts receivable in excess of
$10,000;
(h) Canceled any debts or waived any claims or rights in excess of
$10,000;
(i) Sold, transferred or otherwise disposed of any of its properties
or assets in excess of $10,000 (real, personal or mixed, tangible or
intangible);
(j) Disposed of or permitted to lapse any rights to the use of any
Patent or Trade Name necessary to permit Sargent to conduct its business or
develop its products, or disposed of or disclosed to any person, other than
representatives of LACD, any Proprietary Information or Technical Information
not theretofore a matter of public knowledge necessary to permit Sargent to
conduct its business or develop its products;
(k) Granted any general increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension, profit
sharing or other plan or commitment) other than in the ordinary course of
business and consistent with past practice, or any increase in the compensation
(including, without limitation, salary and bonus) payable or to become payable
to any officer or key employee;
(l) Made any single capital expenditure or commitment in excess of
$10,000 for additions to property, plant, equipment or intangible capital assets
or made aggregate capital expenditures and commitments in excess of $10,000 for
additions to property, plant, equipment or intangible capital assets;
(m) Declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or redeemed, purchased or otherwise
acquired, directly or indirectly, any shares of capital stock or other
securities of Sargent;
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(n) Made any change in any method of accounting or accounting
practice;
(o) Paid, loaned or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with, any
"Affiliate" or "Associate" of Sargent as such terms are defined in Rule 405
promulgated by the Commission under the Securities Act, or any officer, director
or stockholder of Sargent (collectively, "Affiliates" or individually, an
"Affiliate");
(p) Made any gifts, or sold, transferred or exchanged any property of
any material value for less than the fair value thereof;
(q) Suffered any material casualty loss or damage (whether or not
covered by insurance); or
(r) Agreed, whether in writing or otherwise, to take any action
described in this Section 2.11.
Section 2.12 PLANT AND EQUIPMENT. The material plants, buildings,
fixtures, structures and equipment owned, leased or used by Sargent are in good
operating condition and repair, ordinary wear and tear excepted, are adequate
for the uses to which they are being put. Included in Schedule 2.12 hereto is
an accurate and complete list of all of the fixed assets of Sargent with a value
in excess of $1,000.
Section 2.13 LEASES. Schedule 2.13 hereto is an accurate and complete
list of all leases pursuant to which Sargent leases real property or any
material item of personal property. A true and correct copy of each such lease
has been delivered to LACD, and no changes have been made thereto since the date
of delivery. Except as set forth in Schedule 2.13 hereto, each such lease is
valid and in full force and effect, there are no existing material defaults by
Sargent thereunder, and, to the best knowledge of Sargent, no event has
occurred which (with notice, lapse of time or both) would constitute a default
thereunder by any party. Except as set forth on Schedule 2.13 hereto, Sargent
is presently in compliance in all material respects with all laws, rules,
regulations and ordinances relating to zoning and land use restrictions which
are applicable to any portion of the land subject to the real property leases
set forth in Schedule 2.13 hereto. Except as set forth on Schedule 2.13 hereto,
no consent is required from the lessor under any lease of real or personal
property listed on Schedule 2.13 prior to the consummation of the transactions
contemplated hereby.
Section 2.14 TAX RETURNS. Schedule 2.14 hereto are true and correct
copies of Sargent's Tax Returns and Statements (as defined herein). Except as
set forth in Sargent's Tax Returns and
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Statements, Sargent has: (a) filed or has caused to be filed all federal, state
and local and all material foreign, territorial, franchise, income, sales, gross
receipts and all other tax returns and statements required to be filed by
Sargent or on its behalf and which were due prior to the date of this Agreement
(the "Tax Returns and Statements"); (b) paid within the time and in the manner
prescribed by law all Taxes (as defined below), due for all periods ending on or
prior to the date of this Agreement, except with respect to Taxes which are
immaterial in amount and the failure to so pay or file would not result in
material penalties and would not have a Material Adverse Effect; and (c)
established adequate reserves for the payment of all unpaid Taxes as of the date
of the Sargent Financial Statements. The Tax Returns and Statements are true,
complete and accurate, in all material respects. Since January 31, 1996, no tax
assessment or deficiency has been made against Sargent nor has any notice been
given of any actual or proposed assessment or deficiency which has not been paid
or for which an adequate reserve has not been set aside. Except as set forth in
such Tax Returns and Statements, the Tax Returns and Statements are not
presently, nor have they since Sargent's inception been, the subject of any
audit or other administrative or court proceeding by any federal, territorial,
state, local or foreign governmental agency. Sargent has not received any notice
that any of the Tax Returns and Statements is now being or will be examined or
audited, and no consents extending any applicable statute of limitations have
been filed.
For purposes of this Agreement, "Taxes" shall mean any and all taxes,
payroll and employment related taxes, levies, assessments, charges or other
fees, together with any interest, penalties or other additions, imposed by any
governmental authority upon Sargent.
Section 2.15 TRANSACTIONS WITH AFFILIATES. Except as set forth on
Schedule 2.15 hereto, no Affiliate of Sargent has any interest, directly or
indirectly, in any lease, lien, contract, license, encumbrance, loan or other
agreement to which Sargent is a party, or any interest in any competitor,
supplier or customer of Sargent. Except as set forth item by item on Schedule
2.15 hereto, and except for loans made after the date of this Agreement by
Affiliates to Sargent from time to time for working capital at interest rates
not more than market rates in the aggregate amount not to exceed $500,000 per
month ("Affiliate Working Capital Loans"), Sargent is not indebted, directly or
indirectly, to any Affiliate of Sargent, for any liability or obligation,
whether arising by reason of stock ownership, contract, oral or written
agreement or otherwise. No Affiliate is indebted, directly or indirectly, to
Sargent. Schedule 2.15 is a complete and accurate list of all employees of
Sargent owing more than $5,000 in principal (provided that the aggregate
principal amount owed by employees to Sargent not set forth on Schedule 2.15
shall not exceed $25,000) plus accrued interest, to Sargent, other than
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travel or other employee advances (not exceeding $1,000 to any one person) in
the ordinary course of business, setting forth the amounts owed, the applicable
interest rates, a description of the security and the maturity dates of all such
debts.
Except as set forth on Schedule 2.15 hereto, no Affiliate: (a) is a party
to any contract or arrangement with Sargent pursuant to which it directly
provides material services to Sargent; or (b) is a party to any contract or
arrangement with a third party, to which Sargent is not a party, but under which
Sargent receives any material amount of goods or services from said third party.
Except as set forth on Schedule 2.15 hereto, all goods and services provided to
Sargent by any of its Affiliates and all goods and services provided to any of
its Affiliates by Sargent, at any time since Sargent's inception have been
charged to the recipient at a price that would have been acceptable to an
unrelated third party receiving such goods and services in an arm's-length
transaction with the provider.
Section 2.16 CONTRACTS AND COMMITMENTS. Except as set forth on Schedule
2.16:
(a) Sargent has not entered into any outstanding agreements,
contracts or commitments or restrictions which, individually or in the
aggregate, are material to its business, operations or prospects, or which
require the making of any charitable contribution;
(b) No purchase contracts or commitments of Sargent continue for a
period of more than 30 days or are in excess of the normal, ordinary and usual
requirements of its business or, to the best knowledge of Sargent, at any
excessive price;
(c) Sargent has not entered into any contracts or commitments
pursuant to which Sargent is, as of the date hereof, required to obtain or
maintain, on behalf of itself or any of its directors, officers or employees,
any facility or personnel security clearances from the U.S. Department of
Defense or any other agency of the U.S. Government;
(d) There are no outstanding sales contracts, purchase orders,
commitments or proposals of Sargent which continue for a period of more than 30
days or will likely result in any loss to Sargent upon completion or performance
thereof;
(e) Sargent has not entered into any outstanding contracts with
officers, employees, agents, consultants, advisors, salesmen, sales
representatives or suppliers that are not cancelable by either of them on notice
of not longer than 30 days and without liability, penalty or premium, or any
agreement or arrangements providing for the payment of any bonus or commission
based on sales or earnings;
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(f) Sargent has not entered into any outstanding employment
agreement, or any other outstanding agreement that contains any severance or
termination pay liabilities or obligations;
(g) Sargent is not a party to any collective bargaining agreement or
other contract or agreement with any labor organization;
(h) Sargent is not restricted by agreement from carrying on its
business anywhere in the world;
(i) Sargent has not incurred any outstanding debt obligation for
borrowed money, including guarantees of or agree-ments to acquire any such debt
obligation of others other than as reflected on the Sargent Financial
Statements;
(j) Sargent is not a party to any contract, subcontract or agreement
with the U.S. Government or any agency or instrumentality thereof, or with any
territorial or state government or any agency or instrumentality thereof; and
(k) Sargent has not entered into any outstanding loan with or to any
person other than (i) as reflected on the Sargent Financial Statements, (ii) for
amounts not more than $5,000 to any individual and $25,000 in the aggregate, and
(iii) Affiliate Working Capital Loans.
Section 2.17 COMPLIANCE WITH CONTRACTS; DELIVERY OF CERTAIN CONTRACTS.
Sargent is not in default under any material contract, commitment, obligation or
agreement, including, without limitation, those listed in Schedules 2.13, 2.16
and 2.30 hereto, except for those which would not have a Material Adverse
Effect, and no act or omission by Sargent has occurred which, with notice or
lapse of time or both, would constitute such a default under any term or
provision of any such contract or agreement. Each of the agreements referred to
in Schedules 2.13, 2.16 and 2.30 hereto is valid and in full force and effect.
To the best knowledge of Sargent, no party is in default under any agreement
referred to in Schedules 2.13, 2.16 and 2.30 hereto, and to the best knowledge
of Sargent, no act or omission has occurred by any party which, with notice,
lapse of time or both, would constitute such a default under any term or
provision thereof. Sargent has previously delivered to LACD a true and correct
copy of each agreement, contract, commitment or restriction listed on Schedules
2.13, 2.16 and 2.30 hereto, including all amendments and modifications thereof.
Section 2.18 INSURANCE. Schedule 2.18 contains an accurate and true
description of all existing policies of fire, liability, worker's compensation
and all other forms of insurance owned or held by, or covering the business,
properties or assets of, Sargent. All such policies are in full force and
effect, all
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premiums with respect thereto covering all periods up to and including the date
hereof have been paid, and no notice of cancellation or termination has been
received by Sargent with respect to any such policy. Such policies will remain
in full force and effect through the respective dates set forth on Schedule 2.18
without additional premiums being paid or properly accrued as an additional
liability. Schedule 2.18 also: (a) describes all product liability claims made
since the inception of Sargent, and all other claims (except medical and dental)
pending or made since the inception of Sargent under such insurance policies;
and (b) identifies all types of insurable risks which Sargent and its Board of
Directors has designated as being self insured. Except as set forth in Schedule
2.18, Sargent has not been turned down at any time since the inception of
Sargent for any insurance with respect to its assets or operations, nor has its
coverage been limited by any insurance carrier to which it has applied for any
such insurance or with which it has carried insurance during the last three (3)
years.
Section 2.19 LABOR DIFFICULTIES. Except to the extent set forth in
Schedule 2.19:
(a) To the best knowledge of Sargent, no employee of SARGENT is in
violation of, or has threatened any violation of, any material term of any
employment contract or any other contract or agreement relating to the
relationship of such employee with Sargent or any other party, including any
employee handbook and/or personnel policy manual of Sargent except for
violations which would not, individually or in the aggregate, have a Material
Adverse Effect;
(b) Sargent has complied in all material respects with each and every
term, provision, section and part of any written employment contract or
agreement, including any employee handbook and/or personnel policy manual, that
Sargent has or has had with any individual who has performed work for Sargent;
(c) There is no unfair labor practice charge or similar charge,
complaint, allegation or other process or claim pending or, to the best
knowledge of Sargent, threatened against Sargent before the National Labor
Relations Board (the "NLRB") or any other federal, territorial, state or local
governmental agency or other entity;
(d) There is no labor dispute, strike, slowdown, work stoppage or
other job action pending or, to the best knowledge of Sargent, threatened
against or otherwise affecting Sargent;
(e) No petition for election or similar charge, complaint, allegation
or other process or claim is pending or, to the best knowledge of Sargent,
threatened against Sargent before the NLRB, any region of the NLRB, or any other
federal, territorial,
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state or local governmental agency or other entity, and no organizing campaign
or other effort is underway or, to the best knowledge of Sargent, threatened by
any labor organization to organize any employees of Sargent;
(f) Sargent has not experienced any labor dispute, strike, slowdown,
work stoppage, or other job action since its inception; and
(g) There is not pending or, to the best knowledge of Sargent,
threatened against Sargent any complaint, charge, allegation or other process or
claim whatsoever, other than those which would not, individually or in the
aggregate, have a Material Adverse Effect: (i) alleging any violation of the
Occupational Safety and Health Act or any other federal, territorial, state or
local law governing health and/or safety in the workplace; (ii) seeking
compensation, benefits and/or penalties pursuant to any Workers' Compensation
Act or similar law; (iii) seeking any compensation or benefits pursuant to any
Unemployment Insurance Act or similar law; (iv) alleging any violation of the
Immigration Reform and Control Act of 1986 or any similar law; (v) alleging any
violation of the Fair Labor Standards Act or any other federal, territorial,
state or local law governing wage and/or hour issues; (vi) alleging any
violation of any federal, territorial, state or local child labor law; and/or
(vii) alleging any other federal, territorial, state or local law relating to or
governing employment or labor matters.
Section 2.20 LITIGATION. Except as set forth in Schedule 2.20 hereto:
(a) there is no pending or, to the best knowledge of Sargent,
threatened complaint, charge, claim, action, suit or arbitration proceeding
before any federal, territorial, state, municipal, foreign or other court or
governmental or administrative body or agency, or any private arbitration
tribunal or any investigation or inquiry before any federal, territorial, state,
municipal, foreign or other court or governmental or administrative body or
agency against, relating to or affecting (i) Sargent or any director, officer,
agent or employee thereof in his or her capacity as such, (ii) the assets,
properties or business of Sargent, or (iii) the transactions contemplated by
this Agreement, nor, to the best knowledge of Sargent, is there any basis for
any such complaint, charge, claim, action, suit, arbitration proceeding,
investigation or inquiry which could have an adverse effect on the assets,
property, business or prospects of Sargent;
(b) There is not in effect any order, judgment or decree of any court
or governmental or administrative body or agency enjoining, barring, suspending,
prohibiting or otherwise limiting Sargent or, to the best knowledge of Sargent,
any officer, director, employee or agent thereof from conducting or engaging in
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any aspect of the business of Sargent, or requiring Sargent or, to the best
knowledge of Sargent, any officer, director, employee or agent thereof to take
certain action with respect to any aspect of the business of Sargent which could
reasonably be anticipated to have a Material Adverse Effect; and
(c) Sargent is not in violation of or default under any applicable
order, judgment, writ, injunction or decree of any federal, territorial, state,
municipal, foreign or other court or regulatory authority.
Section 2.21 NO CONDEMNATION OR EXPROPRIATION. Neither the whole nor any
portion of the leaseholds or any other assets of Sargent is subject to any
governmental decree or order to be sold or is being condemned, expropriated or
otherwise taken by any public authority with or without payment of compensation
therefor, nor, to the best knowledge of Sargent, has any such condemnation,
expropriation or taking been proposed.
Section 2.22 COMPLIANCE WITH LAW. The operations of Sargent have been
conducted in accordance with all applicable laws, regulations and other
requirements of all national governmental authorities, and of all territories,
states, municipalities and other political subdivisions and agencies thereof
having jurisdiction over Sargent, including, without limitation, all such laws,
regulations, ordinances and requirements relating to environmental, antitrust,
consumer protection, labor and employment, zoning and land use, currency
exchange, immigration, health, occupational safety, pension, securities, defense
procurement and trading with the enemy matters, except as disclosed in Schedule
2.22 hereto and except for violations which would not, individually or in the
aggregate, have a Material Adverse Effect. Except as set forth in Schedule
2.22, neither Sargent has not received any notification since its inception of
any asserted present or past failure by Sargent to comply with such laws,
regulations, ordinances or requirements. Sargent has all permits, authorizations
and consents necessary for the operation of its business except for those which
the failure to have would not, individually or in the aggregate, have a Material
Adverse Effect.
Section 2.23 ENVIRONMENTAL COMPLIANCE.
Except as disclosed in Schedule 2.23 hereto:
(a) Sargent has obtained, and is in full compliance with, all
material permits, licenses or other authorizations which are required under any
Hazardous Materials Law for the operations of the business of Sargent;
(b) Sargent is not aware of any material past, present or future
events, conditions, circumstances, activities, practices, incidents, actions or
plans which may interfere with, or prevent
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continued compliance by Sargent with, any Hazardous Materials Law, or which may
give rise to Loss to Sargent based on or related to any Hazardous Materials
Law;
(c) Sargent has not entered into any agreement with any governmental
authority or agency, or with any private entity, including, but not limited to,
any prior owners of Premises, relating in any way to violation of any Hazardous
Materials Law, or to the presence, release, threat of release, disposal,
placement on, under or about any Premises of Hazardous Substances;
(d) Sargent has not discovered or caused, and to the best of
Sargent's knowledge, no other person has discovered or caused, any discharge,
emission, disposal or release of Hazardous Substances on the Premises, on
property formerly owned, operated or leased by Sargent or on the property of
any third party;
(e) Sargent has not discovered, and to the best of Sargent's
knowledge, no other person has discovered, any occurrence or condition on the
Premises or on any real property in the vicinity of the Premises, which could
cause the Premises to be subject to any restrictions on the ownership,
occupancy, transferability or use under any Hazardous Materials Law;
(f) Sargent has not manufactured, stored or disposed of Hazardous
Substances at any location, including, without limitation, any disposal which
was in compliance with any Hazardous Materials Law;
(g) Sargent does not use or maintain any underground storage tanks or
surface impoundments on the Premises and, to the best knowledge of Sargent, no
underground storage tanks or surface impoundments are now, or ever have been,
located on the Premises; and
(h) Sargent has not received notice of any lien in favor of any
governmental authority for: (i) any liability under any Hazardous Materials Law;
or (ii) damages arising from or costs incurred by such governmental authority in
response to a release of Hazardous Substances into the environment, nor has any
such lien ever been filed or attached to the Premises.
Section 2.24 EMPLOYEE BENEFITS.
(a) Except for the plans, agreements, arrangements and practices set
forth in Schedule 2.24 hereto (collectively, the "Employment Plans"), neither
Sargent, nor any Affiliate, maintains or contributes to, or is obligated or
required to contribute to, any bonus, deferred compensation, severance or
termination pay, pension, profit sharing, stock purchase, stock grant, stock
option, group life insurance, health care, hospitalization insurance,
disability, retirement or any other employee benefit or fringe
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benefit plan, agreement, arrangement or practice, whether formal or informal and
whether legally binding or not, which covers employees of Sargent. Neither
Sargent nor any Affiliate has any commitment, whether formal or informal and
whether legally binding or not, to create or contribute to any additional such
plan.
(b) Each Employment Plan, including each Employment Plan which is an
"employee pension benefit plan," as such term is defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") (the
"Pension Plans"), or an "employee welfare benefit plan," as such term is defined
in Section 3(l) of ERISA (the "Welfare Plans"), in all respects conforms to, and
is and has been operated in compliance with, applicable law, including, but not
limited to, ERISA and the Internal Revenue Code of 1986, as amended (the
"Code").
(c) Neither Sargent nor any Affiliate, nor any of the Pension Plans,
nor any of the Welfare Plans nor any trust created thereunder, nor, to the best
knowledge of Sargent, any trustee or administrator thereof, has engaged in a
prohibited transaction (within the meaning of Section 406 of ERISA and Section
4975 of the Code) which might subject Sargent to any material liability or civil
penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by Section
4975 of the Code.
(d) Full payment has been duly made or reserved for by Sargent of all
amounts that Sargent or any Affiliate is required under the terms of all
Employment Plans to pay as contributions to such Employment Plans, with respect
to employees of Sargent covered by such Plans, on or prior to the Closing Date.
(e) None of the Pension Plans is a "multiemployer plan," as such term
is defined in Section 3(37) of ERISA.
(f) Neither Sargent nor any Affiliate nor, to the best knowledge of
Sargent, any administrator or fiduciary of any Pension Plan or Welfare Plan has
engaged in any transaction or acted or failed to act in a manner which could
subject Sargent to any liability for a breach of fiduciary duty under ERISA.
(g) Neither Sargent nor any Employment Plan is obligated to make
payment of post-retirement life, accidental death, medical or disability
insurance benefits of any type, excluding for this purpose the provision of any
such benefits as a result of an individuals exercise of his or her conversion
rights under the Consolidated Omnibus Budget Reconciliation Act of 1986, to, or
with respect to, any former employee of Sargent.
(h) True and complete copies of each of the following documents have
been delivered to LACD: (i) each Welfare Plan and each Pension Plan, related
trust agreements, annuity contracts, or other funding instruments; (ii) each
Employment Plan and complete
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descriptions of any such plans that are not in writing; (iii) the most recent
determination letter issued by the Internal Revenue Service with respect to each
Pension Plan; (iv) Annual Reports on Form 5500 Series required to be filed with
any governmental agency for each Welfare Plan and each Pension Plan for the two
most recent plan years; and (v) actuarial reports, consisting of the Schedule B
and attachments to the Form 5500 Series prepared for the last two plan years for
each Pension Plan.
Section 2.25 ABSENCE OF QUESTIONABLE PAYMENTS. Neither Sargent nor, to
the best knowledge of Sargent, any of each of its directors, officers, agents,
employees or other persons acting on its behalf or for its benefit has used any
corporate or other funds for unlawful contributions, payments, gifts, or
entertainment, or made any unlawful expenditures relating to political activity
to government officials or others or established or maintained any unlawful or
unrecorded funds for such purpose. Neither Sargent nor, to the best knowledge
of Sargent, any of each of its directors, officers, agents, employees or other
persons acting on its behalf or for its benefit has accepted or received any
unlawful contributions, payments, gifts or expenditures.
Section 2.26 PERSONNEL. Schedule 2.26 hereto is a true and complete list
of the wage rates for all non-salaried and salaried employees of Sargent by
classification.
Section 2.27 REAL PROPERTY HOLDING CORPORATION. Sargent is not a U.S.
Real Property Holding Corporation within the meaning of Section 897(c)(2) of the
Code.
Section 2.28 ACCURACY OF INFORMATION FURNISHED. No representation or
warranty by Sargent contained in this Agreement or in respect of the exhibits,
schedules or documents delivered to LACD by Sargent and expressly referred to
herein, and no statement contained in any certificate furnished or to be
furnished by or on behalf of Sargent pursuant hereto, or in connection with the
transactions contemplated hereby, contains, or will contain as of the date such
representation or warranty is made or such certificate is or will be furnished,
and as of the Closing Date, any untrue statement of a material fact, or omits,
or will omit to state as of the date such representation or warranty is made or
such certificate is or will be furnished, any material fact which is necessary
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. True and correct
copies of each agreement and other document referred to in the schedules hereto
have been furnished by Sargent to LACD.
Section 2.29 TITLE TO PATENTS AND TRADE NAMES. Sargent has good and
marketable title to the Patents set forth in Schedule 2.29(a) and Trade Names
set forth in Schedule 2.29(b), free and clear of any lien, mortgage, charge,
security interest, pledge or
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other encumbrance or other adverse claim or interest of any nature. Sargent is
the sole and exclusive owner of the Patents and Trade Names, the issued or
granted Patents are valid, and in full force and effect as of the Closing Date.
Sargent is the party named in the Patents and is the party who made, or caused
to be made, the application for the letters of patents. Sargent has the right
and power to assign each of its Patents and Trade Names and made no prior
transfer, sale or assignment of all or any part of the Patents and Trade Names
and the exploitation of the Patents and Trade Names do not and will not infringe
the rights granted to any other person by any United States or other patent or
proprietary interest of any kind or nature. Sargent further represents and
warrants that the Patents and Trade Names constitute all of Sargent's rights and
interests in, and Sargent has not transferred or conveyed to any other person or
entity any right or interest in, any patents, patents pending, industrial
designs, utility models and applications for patent and method of use or
manufacture and any patents issued thereon and any continuations or reissues
thereof, including any continuation-in-part or divisional patent application
thereof, and all foreign counterparts and extensions thereof, and all of the
Technical Information and Proprietary Information or improvements thereto in
existence on the date hereof or thereafter developed, including, but not limited
to all information contained in all pending patent applications or patents, that
are pertinent in any manner whatsoever to the development, testing,
registration, assembly, manufacture, use or sale of all products and services
related to the business of Sargent.
Section 2.30 REAL PROPERTIES. Schedule 2.30 hereto is an accurate and
complete list of all real property owned by Sargent, together with a description
of every mortgage, deed of trust, pledge, lien, agreement, encumbrance, claim or
equity interest of any nature whatsoever in such real property.
Section 2.31 TITLE AND RELATED MATTERS. Sargent has good and marketable title
to and is the sole and exclusive owner of all of its material properties,
inventory, interests in properties and assets, real and personal, Patent
copyrights, trademarks, service marks and Trade Names (collectively, the
"Sargent Assets") which are reflected in the most recent Sargent balance sheet
and the Sargent Schedules or acquired after that date (except properties,
interests in properties and assets sold or otherwise disposed of since such date
in the ordinary course of business), free and clear of all liens, pledges,
charges or encumbrances except: (a) statutory liens or claims not yet
delinquent; (b) such imperfections of title and easements as do not, and will
not, materially detract from or interfere with the present or proposed use of
the properties subject thereto or affected thereby or otherwise materially
impair present business operations on such properties; and (c) as described in
the Sargent Schedules. Except as set forth in the Sargent Schedules, Sargent
owns free and clear of any liens,
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claims, encumbrances, royalty interests or other restrictions or limitations of
any nature whatsoever, any and all products it is currently manufacturing,
including the underlying technology and data, and all procedures, techniques,
marketing plans, business plans, methods of management or other information
utilized in connection with Sargent's business. Except as set forth in the
Sargent Schedules, no third party has any right to, and Sargent has not
received any notice of infringement of or conflict with asserted rights of
others with respect to any product, technology, data, trade secrets, know-how,
proprietary techniques, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a Material Adverse Effect on the business,
operations or financial condition of Sargent or any material portion of its
properties, assets or rights.
Section 2.32 TITLE TO THE EXCHANGED SARGENT STOCK. Upon delivery to the
LACD Stockholders of the certificates described in Section 3.3 of this
Agreement, the LACD Stockholders will receive good and marketable title to the
Exchanged Sargent Stock, all of the Exchanged Sargent Stock shall be received
by the LACD Stockholders as validly issued, fully paid and nonassessable, free
and clear of all pledges, liens, encumbrances, security interests, equities,
options, claims, charges, limitations on voting rights or rights to receive
dividends, or other restrictions of any kind (other than any generally imposed
by federal, corporate or territorial securities laws or as otherwise provided
for in this Agreement).
Section 2.33 CERTAIN ASSETS AND LIABILITIES OF SARGENT. At the Closing
the financial condition of Sargent shall be as follows:
(a) Sargent shall have no less than $50,000 of readily available cash
on hand, total assets of no less than $2,000,000 and total liabilities of no
more than $900,000.
(b) the only debts and accounts payable of Sargent (including
Sargent's costs for professional services in connection with the reorganization)
which remain unpaid at the Closing shall be the amounts listed below less any
payments made by Sargent Potato Corporation between the date first appearing
above and the Closing Date of that certain Agreement for the Purchase and Sales
of Asset (Warehouse), as more fully set forth in Schedule 2.33, Item 5:
(i) mortgage liens on the Warehouse (defined below), totalling no
more than $228,195;
(ii) accounts payable totalling no more than $62,900 (See
Schedule 2.33, Item 5 and Schedule 2.10);
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(iii) settlement agreement with Medica Financial Corporation with
a balance owing of no more than $31,000;
(iv) settlement with the Internal Revenue Service of no more than
$50,712;
(v) settlement with Seaboard Surety Company totalling $110,000
(See Schedule 2.11, Item 2.11 [e]); and
(vi) that certain lease known as M&I\Reicam Lease for 2 X Self-
Propelled Potato Harvesters, totalling approximately $228,000, and whose current
payment schedule is $57,000 on December 15, 1996, $57,000 on March 15, 1997,
$57,000 on December 15, 1997 and $57,000 on March 15, 1998.
(c) That Sargent shall have an unencumbered net cash available to be
used in the operations of LACD, following the closing of the reorganization, of
$1,250,000. That amount shall be deemed to consist of:
(i) the cash on hand in Sargent at the Closing in the approximate
amount of $50,000;
(ii) the loan previously made to LACD in the amount of $300,000;
(iii) the repayment of certain debts by the Messick's or their
affiliates to Sargent in the amount of at least $182,947 (less the approximate
amount of $50,713 payable by Sargent to the Internal Revenue Service from such
amount) (See Schedule 2.33 Item 1 and Schedule 2.33.2, Items 1 and 2);
(iv) the payment of certain other amounts to Sargent from the
Messick's or their affiliates in the amount of $79,000 (See Schedule 2.33, Item
3 and Schedule 2.33, Item 6);
(v) net receipts to be received by Sargent from the sale of the
Warehouse of no less than $651,428, less those items within the Work Sheets 4.0
(See Schedule 2.33, Item 5) (which presumes the assumption of the liability of
Sargent for that certain potato harvesting equipment referred to in the Joint
Venture Agreement in the form attached hereto as Schedule 2.33.1 between Sargent
on the one hand and Vern Tharp and Doug Nutt on the other hand).
(vi) $25,000 from sale of assets to the Messicks under one of the
Messick agreements (defined below);;
(vii) Two (2) months rent ($30,334) on the warehouse (May and
June;
(viii) Value of shares returned by Seaboard Financial pursuant to
settlement, in the amount of $4,404; and
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(ix) Options purchased from Sargent totaling $40,500.
(d) certain stockholders of Sargent (the "Messicks") shall enter into
the following contracts with Sargent, Escrow Agreement, Agreement for the
Purchase and Sale of Assets, Option to Sell Agreement, Agreement to Terminate
Voting Trust, Agreement to related Issues and Addendum to Agreement to Related
Issues, in the forms attached hereto as Schedule 2.33.2 (collectively, the
"Messick Agreements"), by which Messick Agreements, the Messicks shall, INTER
ALIA, purchase from Sargent certain assets and that certain warehouse (the
"Warehouse") currently listed on the Sargent Financial Statements, the purchase
of which Warehouse shall close according to the terms of that certain Option to
Sell Agreement attached hereto as Schedule 2.33.2 (the "Warehouse Closing
Date"). The proceeds from the sale of the Warehouse shall be in an amount such
that Sargent shall receive, on the Warehouse Closing Date, no less than $687,000
of cash, net of any debts, liens, mortgages and closing costs that Sargent may
have relating specifically to the Warehouse as of the Warehouse Closing Date.
Section 2.34 COMPLIANCE WITH EXCHANGE ACT. As of the Closing, Sargent
shall be current in all filings required to be tendered to the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). LACD has heretofore been furnished with true, complete and correct copies
of the following: (a) Sargent's Annual Report on Form 10-KSB for the fiscal year
ended July 31, 1995, as filed with the Commission; (b) Sargent's Quarterly
Report on Form 10-QSB for the fiscal quarter ended January 31, 1996, as filed
with the Commission; and (c) all other reports or registration statements filed
by Sargent with the Commission since January 31, 1996 (collectively, the
"Commission Filings"). Since January 31, 1996, Sargent has filed all reports,
registration statements and other documents required to be filed by it under the
Exchange Act. The Commission Filings were prepared in accordance and complied
in all material respects with the applicable requirements of the Securities Act
or the Exchange Act, as the case may be. None of such forms, reports and
statements, including, without limitation, any financial statements, exhibits
and schedules included therein and documents incorporated therein by reference,
at the time filed, or declared or it became effective, as the case may be,
contained, or now contains, and at the Closing Date will contain, an untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
Section 2.35 Sargent Schedules. Sargent shall cause the Sargent
Schedules and the instruments to be delivered by Sargent hereunder to be
updated after the date hereof up to and including the Closing Date.
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ARTICLE III
PLAN OF REORGANIZATION
Section 3.1 PLAN OF REORGANIZATION. As a result of and immediately upon
the completion of the transactions contemplated by this Agreement: (a) the LACD
Stockholders shall own 4,234,128 shares of Exchanged Sargent Stock, and (b)
Sargent shall own 1,000 shares of Exchanged LACD Stock, which shall constitute
100% of the issued and outstanding LACD Common Stock. The transactions
contemplated by this Agreement are intended to qualify as a tax-free corporate
reorganization under Section 368(a)(1)B of the Internal Revenue Code of 1986, as
amended.
Section 3.2 CLOSING. The closing ("Closing") of the transactions
contemplated by this Agreement shall be on a date and at such time as the
parties may agree ("Closing Date"), prior to which the consummation of the
transactions contemplated hereby may not be effectuated. Such Closing shall
take place at a mutually agreeable time and place.
Section 3.3 CLOSING EVENTS. At the Closing, each of the respective
parties hereto shall execute, acknowledge, and deliver (or shall cause to be
executed, acknowledged, and delivered) any and all certificates, opinions,
financial statements, schedules, agreements, resolutions, rulings, or other
instruments required by this Agreement to be so delivered at or prior to the
Closing, together with such other items as may be reasonably requested by the
parties hereto and their respective legal counsel in order to effectuate or
evidence the transactions contemplated hereby. However, in no event shall the
Closing occur without the satisfaction or waiver of the conditions set forth in
Sections 5 and 6 of this Agreement.
Section 3.4 TERMINATION.
(a) This Agreement may be terminated by the board of directors of either
Sargent or LACD at any time prior to the Closing Date if:
(i) there shall be any actual or threatened action or proceeding
before any court or any governmental body which shall seek to restrain, prohibit
or invalidate the transactions contemplated by this Agreement and which, in the
judgment of such boards of directors, made in good faith and based on the advice
of their legal counsel, makes it inadvisable to proceed with the merger and
consolidation contemplated by this Agreement; or
(ii) any of the transactions contemplated hereby are disapproved by
any regulatory authority whose approval is required to consummate such
transactions or in the judgment of such boards of directors, made in good faith
and based on the advice of
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counsel, there is substantial likelihood that any such approval will not be
obtained or will be obtained only on a condition or conditions which would be
unduly burdensome, making it inadvisable to proceed with the merger and
consolidation.
In the event of termination pursuant to this paragraph (a) of Section 3.4,
no obligation, right or liability shall arise hereunder, and each party shall
bear all of the expenses incurred by it in connection with the negotiation,
drafting and execution of this Agreement and the transactions herein
contemplated;
(b) This Agreement may be terminated at any time prior to the Closing Date
by action of the boards of directors of Sargent if LACD shall fail to comply in
any material respect with any of its covenants or agreements contained in this
Agreement or if any of the representations or warranties of LACD contained
herein shall be inaccurate in any material respect. If this Agreement is
terminated pursuant to this paragraph (b) of Section 3.7, this Agreement shall
be of no further force or effect, and no obligation, right or liability shall
arise hereunder; and
(c) This Agreement may be terminated at any time prior to the Closing Date
by action of the board of directors of LACD if Sargent shall fail to comply in
any material respect with any of its covenants or agreements contained in this
Agreement or if any of the representations or warranties of Sargent contained
herein shall be inaccurate in any material respect. If this Agreement is
terminated pursuant to this paragraph (c) of Section 3.7, this Agreement shall
be of no further force or effect and no obligation, right or liability shall
arise hereunder.
Section 3.5 DIRECTORS OF SARGENT AND LACD. At the Closing, each of the
boards of directors of Sargent and LACD shall consist of three (3) directors.
Each of the directors shall hold office until his or her successors shall have
been duly elected and shall have qualified or until his or her earlier death,
resignation or removal. The names of these directors shall be as follows:
Victor Gura, M.D., Avraham H. Uncyk, M.D. and Ronald P. Lang, M.D.
Section 3.6 OFFICERS OF SARGENT AND LACD. At the Closing, the names of the
officers of Sargent and LACD who shall hold office
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subject to the Bylaws of each of Sargent and LACD shall be as follows: Victor
Gura, M.D., Avraham H. Uncyk, M.D. and Ronald P. Lang, M.D.
Section 3.7 ADDITIONAL EXCHANGED SARGENT STOCK AND WARRANTS. (a) In
addition to the Exchanged Sargent Stock to be issued to the LACD Stockholders
pursuant to Section 3.3 of this Agreement, for no additional consideration,
Sargent shall issue an additional 4,210,644 shares of Sargent Common Stock (the
"Additional Exchanged Sargent Stock") and certificates reflecting warrants to
purchase 500,000 shares of Sargent Common Stock, the form of which warrant
certificates shall be attached hereto as Schedule 3.3, which shall be
exercisable for a period of 36 months from the Closing Date (the "Additional
Exchanged Sargent Warrants") at an exercise price of $3.50 per share (the
Additional Exchanged Sargent Stock, the shares of Sargent Common Stock
underlying the Additional Exchanged Sargent Warrants and the Exchanged Sargent
Stock are collectively referred to herein as the "Combined Exchanged Sargent
Stock") in the event that:
(i)(A) the annual pre-tax earnings from operations of Sargent at the
end of the fiscal year ending December 31, 1996 shall equal or exceed $2,000,000
(exclusive of (1) fees and costs related to the Closing of the transactions
contemplated by this Agreement, and (2) any loss recognized by Sargent from the
sale of the Warehouse, as set forth in Section 2.33, for less than the value of
the Warehouse, as reflected in the most recent Sargent Financial Statements),
and (B) the Sargent Common Stock shall have a closing bid price in excess of
$3.00 per share on a national exchange, in a national market system or in the
over-the-counter market for any consecutive thirty (30) day period; or
(ii) the annual pre-tax earnings from operations of Sargent at the
end of the fiscal year ending December 31, 1997 or any fiscal year ending
December 31 thereafter during the four (4) year period ending December 31, 2001
shall equal or exceed $2,000,000.
(b) If the outstanding shares of Sargent Common Stock shall be subdivided
into a greater number of shares or combined into a smaller number of shares, or
a dividend in Sargent Common Stock or other securities of Sargent convertible or
exchangeable for Common Stock (in which latter event the number of shares of
Sargent Common Stock issuable upon the conversion or exchange of such securities
shall be deemed to have been distributed) shall be paid in respect of the
Sargent Common Stock, the number of shares of Additional Exchanged Sargent Stock
shall be proportionately increased or decreased, as the case may be, to reflect
any such adjustments in the outstanding shares of Sargent Common Stock.
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Section 3.8 STOCK OPTIONS TO EMPLOYEES AND CONSULTANTS. The parties
agree that, upon the Closing Date, Sargent has options (the "Sargent Options")
to issue up to 500,000 shares of Sargent Common Stock (the "Option Stock") to
certain employees and consultants of Sargent as compensation for BONA FIDE
services rendered to Sargent prior to the Closing Date, which services are or
were not in connection with the offer or sale of securities in a capital-raising
transaction. The Option Stock shall have the registration rights set forth in
Section 4.8.3 of this Agreement.
ARTICLE IV
SPECIAL COVENANTS
Section 4.1 ACCESS TO PROPERTIES AND RECORDS. Sargent, and LACD will each
afford to the officers and authorized representatives of the other full access
to the properties, books and records of Sargent, and LACD, as the case may be,
in order that each may have full opportunity to make such reasonable
investigation as it shall desire to make of the affairs of the other, and each
will furnish the other with such additional financial and operating data and
other information as to the business and properties of Sargent, and LACD, as the
case may be, as the other shall from time to time reasonably request.
Section 4.2 AVAILABILITY OF RULE 144. Each of the parties acknowledge that
the Exchanged Sargent Stock to be issued pursuant to this Agreement will be
"restricted securities," as that term is defined in Rule 144 promulgated
pursuant to the Securities Act. Sargent is under no obligation, except as set
forth herein, to register such shares under the Securities Act. Notwithstanding
the foregoing, however, Sargent will use its best efforts to: (a) make publicly
available on a regular basis not less than semi-annually, business and financial
information regarding Sargent so as to make available to the stockholders of
Sargent the provisions of Rule 144 pursuant to subparagraph (c)(1) thereof; and
(b) within ten (10) days of any written request of any stockholder of Sargent,
Sargent will provide to such stockholder written confirmation of compliance with
such of the foregoing subparagraph as may then be applicable. The stockholders
of Sargent holding restricted securities of Sargent as of the date of this
Agreement, and their respective heirs, administrators, personal representatives,
successors and assigns, are intended third party beneficiaries of the provisions
set forth herein. The covenants set forth in this Section 4.2 shall survive the
Closing and the consummation of the transactions herein contemplated.
Section 4.3 INFORMATION FOR SARGENT REGISTRATION STATEMENT AND PUBLIC
REPORTS. LACD and the LACD Stockholders will furnish Sargent with all
information concerning LACD and the LACD Stockholders, including all financial
statements, required for inclusion in any registration statement or public
report required to be filed
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by Sargent pursuant to the Securities Act, the Exchange Act or any other
applicable federal or state law. LACD represents and warrants to Sargent that,
to the best of its knowledge and belief, all information so furnished for either
such registration statement or other public release by Sargent, including the
financial statements described in Section 1.9, shall be true and correct in all
material respects without omission of any material fact required to make the
information stated not misleading.
Section 4.4 SPECIAL COVENANTS AND REPRESENTATIONS REGARDING THE EXCHANGED
SARGENT STOCK. The consummation of this Agreement and the transactions herein
contemplated, including the issuance of the Exchanged Sargent Stock to the LACD
Stockholders as contemplated hereby, constitutes the offer and sale of
securities under the Securities Act, and applicable state statutes. Such
transaction shall be consummated in reliance on exemptions from the registration
and prospectus delivery requirements of such statutes which depend, inter alia,
upon the circumstances under which the LACD Stockholders acquire such
securities.
Section 4.5 THIRD PARTY CONSENTS. Sargent and LACD agree to cooperate with
each other in order to obtain any required third party consents to this
Agreement and the transactions herein and therein contemplated.
Section 4.6 ACTIONS PRIOR TO CLOSING.
(a) From and after the date of this Agreement until the Closing Date and
except as set forth in the Sargent or LACD Schedules or as permitted or
contemplated by this Agreement, Sargent, and LACD, respectively, will each:
(i) carry on its business in substantially the same manner as it has
heretofore;
(ii) maintain and keep its properties in states of good repair and
condition as at present, except for depreciation due to ordinary wear and tear
and damage due to casualty;
(iii) maintain in full force and effect insurance comparable in amount
and in scope of coverage to that now maintained by it;
(iv) perform in all material respects all of its obligations under
material contracts, leases and instruments relating to or affecting its assets,
properties and business;
(v) use its reasonable commercial efforts to maintain and preserve
its business organization intact, to retain its key employees and to maintain
its relationship with its material suppliers and customers; and
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(vi) fully comply with and perform in all material respects all
obligations and duties imposed on it by all federal and state laws and all
rules, regulations and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement until the Closing Date,
neither Sargent nor LACD will:
(i) except as otherwise specifically set forth herein, make any
change in their respective certificates or articles of incorporation or bylaws;
(ii) take any action described in Section 1.11 in the case of LACD,
or in Section 2.11, in the case of Sargent (all except as permitted therein or
as disclosed in the applicable party's schedules); or
(iii) enter into or amend any contract, agreement or other instrument
of any of the types described in such party's schedules, except that a party may
enter into or amend any contract, agreement or other instrument in the ordinary
course of business involving the sale of goods or services.
Section 4.7 INDEMNIFICATION.
(a) LACD hereby agrees to indemnify Sargent and each of the officers and
directors of Sargent as of the date of execution of this Agreement and as of the
Closing Date against any loss, liability, claim, damage or expense (including,
but not limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened or any claim whatsoever), to which it or they may become subject
arising out of or based on any inaccuracy appearing in or misrepresentation made
in this Agreement. The indemnification provided for in this paragraph shall
survive the Closing and consummation of the transactions contemplated hereby and
termination of this Agreement; and
(b) Sargent hereby agrees to indemnify LACD and each of the officers and
directors of LACD as of the date of execution of this Agreement and as of the
Closing Date against any loss, liability, claim, damage or expense (including,
but not limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened or any claim whatsoever), to which it or they may become subject
arising out of or based on any inaccuracy appearing in or misrepresentation made
in this Agreement. The indemnification provided for in this Paragraph shall
survive the Closing and consummation of the transactions contemplated hereby and
termination of this Agreement.
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Section 4.8 REGISTRATION RIGHTS.
4.8.1 DEMAND REGISTRATIONS. (a) GENERAL. During the period commencing
six (6) months from the date that the Sargent Common Stock shall be listed for
trading on a national exchange, in a national market system or in the NASDAQ
Small-Cap Market (the "Demand Registration Period"), the LACD Stockholders shall
have the right, upon the written request of the LACD Stockholders who hold a
number of shares of Sargent Common Stock equal to no less than five percent (5%)
of the Exchanged Sargent Stock, that Sargent effect three (3) registrations of
the Combined Exchanged Sargent Stock, under and pursuant to the Securities Act,
owned by such holders and specifying the intended method of disposition thereof.
Sargent shall give prompt written notice (in any event within ten (10) business
days after its receipt of notice of any exercise of a Demand Registration) to
the other holders of Combined Exchanged Sargent Stock of its intention to effect
such a registration and shall use its best efforts to include in such
registration all of the Combined Exchanged Sargent Stock with respect to which
Sargent receives from any of such holders a written request for inclusion
therein within fifteen (15) days after the stockholder's receipt of Sargent's
notice, which request shall specify the number of the shares of Combined
Exchanged Sargent Stock to be disposed of by the requesting holder and the
intended method of disposition thereof. All registrations requested pursuant to
this Section 4.8.1(a) are referred to herein as "Demand Registrations."
(b) NUMBER OF DEMAND REGISTRATIONS. Subject to the provisions of
Section 4.8.1(a), the holders of the shares of Combined Exchanged Sargent Stock
shall be entitled, collectively, to request three (3) of Demand Registrations
during the Demand Registration Period. Transferees of the Combined Exchanged
Sargent Stock, other than such persons who shall have been issued the Exchanged
Sargent Stock pursuant to the terms of this Agreement, shall not have the right
to participate in any such registration statement and shall not be entitled to
exercise any of the rights provided for in this Section 4.8.
(c) REGISTRATION OF OTHER SECURITIES. Whenever Sargent shall effect a
Demand Registration pursuant to Section 4.8.1(a) in connection with an
underwritten offering by the holders of the Combined Exchanged Sargent Stock, no
securities other than the Combined Exchanged Sargent Stock shall be included
among the securities covered by such registration unless (i) the managing
underwriter of such offering shall have advised Sargent in writing that the
inclusion of such other securities would not adversely affect such offering or
(ii) such holders of Combined Exchanged Sargent Stock to be registered therein
shall have consented in writing to the inclusion of such other securities.
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(d) REGISTRATION STATEMENT FORM. A Demand Registration shall be on
such appropriate registration form of the Commission (i) as shall be selected by
Sargent and shall be acceptable to the requesting holder and (ii) as shall
permit the disposition of such Combined Exchanged Sargent Stock in accordance
with the intended method or methods of disposition specified in the request for
such registration. Sargent agrees to include in any such registration statement
all information that, in the opinion of counsel to the holder so requesting
registration, or counsel to Sargent, is required to be included.
(e) EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to Section 4.8.1(a) shall not be deemed to have been effected and will
not be considered one of the Demand Registrations which may be requested
pursuant to this Agreement if (i) a registration statement with respect thereto
has not become effective or if the request for the Demand Registration is
withdrawn prior to effectiveness, (ii) after it has become effective, it does
not remain effective for a period of at least 180 days (unless the stock
registered thereunder have been sold or disposed of prior to the expiration of
such 180-day period) or such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason and has not thereafter become effective, or (iii)
the conditions to closing specified in any underwriting agreement entered into
in connection with such registration are not satisfied or waived other than by
reason of the failure or refusal of the holder(s) of Combined Exchanged Sargent
Stock being sold to satisfy or perform a condition to such closing. In any
event, Sargent shall pay all Registration Expenses (as defined herein) in
connection with any such registration initiated but not so effected.
(f) PRIORITY ON DEMAND REGISTRATIONS. In the event that the managing
underwriters of a requested Demand Registration advise Sargent in writing that
in their opinion the number of shares of Combined Exchanged Sargent Stock
proposed to be included in any such registration exceeds the number of
securities which can be sold in such offering, Sargent shall include in such
registration only the number of shares of Combined Exchanged Sargent Stock (PRO
RATA in accordance with the number of shares of Combined Exchanged Sargent
Stock requested by each holder to be included in such registration) which in the
opinion of such underwriters can be sold.
(g) PERMITTED INTERRUPTIONS. Sargent may postpone (such postponement
is referred to herein as a "Permitted Interruption") for a reasonable period of
time (not to exceed 90 days, which may not thereafter be extended) the filing or
the effectiveness of a registration statement for a Demand Registration if, at
the time it receives a request for such registration (i) Sargent is engaged in
any active program for repurchase of Sargent Common Stock and
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furnishes an Officer's Certificate to that effect, (ii) Sargent is conducting or
about to conduct an offering of Sargent Common Stock and Sargent is advised by
the investment banker engaged by Sargent to manage such offering that such
offering would be affected adversely by the registration so demanded and Sargent
furnishes an Officer's Certificate to that effect, or (iii) the board of
directors of Sargent shall determine in good faith that such offering will
interfere with a pending or contemplated financing, merger, acquisition, sale of
assets, recapitalization or other similar corporate action of Sargent and
Sargent furnishes an Officer's Certificate to that effect. After such Permitted
Interruption Sargent shall effect such registration as promptly as practicable
without further request unless such request has been withdrawn.
(h) SELECTION OF UNDERWRITERS. The holder of Combined Exchanged
Sargent Stock requesting registration shall have the right to select such
investment banker(s) as shall be reasonably acceptable to Sargent to administer
the offering for which a Demand Registration is requested. Such holder(s)
shall, in its (their) sole discretion, negotiate the terms of the underwriters'
fees and expenses, the underwriting discount and commission and the transfer
taxes to be paid by such holder.
4.8.2. PIGGYBACK REGISTRATIONS. (a) GENERAL. Whenever Sargent proposes
to register any shares of Sargent common stock under the Securities Act (other
than a registrations on Form 10 or solely for shares to be issued in connection
with any employee benefit plan or a merger, consolidation or other business
combination registered on Form S-4, or any successor form thereto) and the
registration form to be used may be used for the registration of Combined
Exchanged Sargent Stock (a "Piggyback Registration"), Sargent shall give prompt
written notice (in any event within ten (10) business days after its receipt of
notice of any exercise of other registration rights) to the holder of Combined
Exchanged Sargent Stock of its intention to effect such a registration and shall
use its best efforts to include in such registration all of the Combined
Exchanged Sargent Stock with respect to which Sargent receives from any of such
holders a written request for inclusion therein within fifteen (15) days after
the stockholder's receipt of Sargent's notice, which request shall specify the
number of the shares of Combined Exchanged Sargent Stock to be disposed of by
the requesting holder and the intended method of disposition thereof. If
Sargent elects, prior to effectiveness, not to proceed with a primary
registration of its common stock, it shall not be obligated to register any
Combined Exchanged Sargent Stock.
(b) PRIORITY ON PRIMARY REGISTRATION. If a Piggyback Registration is
an underwritten primary registration on behalf of Sargent and the managing
underwriter(s) of such offering advise Sargent in writing that in their opinion
the number of securities requested to be included in such registration exceeds
the number
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which can reasonably be sold in such offering, then Sargent shall include in
such registration (i) first, the securities that Sargent proposes to sell, (ii)
second, the shares of Combined Exchanged Sargent Stock requested to be included
therein and (iii) third, other securities requested to be included in such
registration (PRO RATA in accordance with the number of shares of Combined
Exchanged Sargent Stock requested by each holder to be included in such
registration). If the managing underwriter of such offering subsequently
advises Sargent in writing that the number of securities which can be sold
exceeds the number of securities included in the offering, Sargent shall include
in the registration, first, the securities that Sargent proposes to sell and
second, such shares of Combined Exchanged Sargent Stock that the holder(s) had
originally requested to be included in the registration and third, such other
securities originally proposed for inclusion in such registration.
(c) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration
is an underwritten secondary registration on behalf of holders of Sargent's
securities other than the holder(s) of Combined Exchanged Sargent Stock and the
managing underwriter(s) of such offering advise Sargent in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can reasonably be sold in such offering, then Sargent
shall include in such registration (i) first, if such registration is being made
on behalf of other stockholders of Sargent exercising demand registration
rights, then the securities so requested to be included therein in accordance
with such demand registration rights, (ii) second, the shares of Combined
Exchanged Sargent Stock requested to be included in such registration (PRO RATA
in accordance with the number of shares of Combined Exchanged Sargent Stock
requested by each holder to be included in such registration), and (iii) third,
other securities requested to be included in such registration. If the managing
underwriter of such offering subsequently advises Sargent in writing that the
number of securities which can be sold exceeds the number of securities included
in the offering, Sargent shall include in the registration such additional
securities that (i) first, the holder(s) of Combined Exchanged Sargent Stock had
originally requested be included in the registration, and (ii) second, others
had originally proposed to include in the registration.
(d) OTHER REGISTRATION. If: (i) Sargent has previously filed a
registration statement with respect to any shares of Combined Exchanged Sargent
Stock pursuant to Section 4.8.1(a) or 4.8.2(b) and (ii) such previous
registration has not been withdrawn or abandoned, Sargent shall not file or
cause to be effective any other registration of any of its equity securities or
securities convertible or exchangeable into or exercisable for its equity
securities under the Securities Act (except on Form S-8 or S-4 or any successor
form), whether on its own behalf or at the request of
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any holder of such securities, until a period of at least three (3) months has
elapsed from the effective date of such previous registration.
(e) PIGGYBACK NOT A DEMAND REGISTRATION. Should a holder's
participation in a registration be pursuant to a Piggyback Registration in
connection with: (i) an underwritten primary registration on behalf of Sargent
as described in Section 4.8.2(b) or (ii) an underwritten secondary registration
on behalf of holders of Sargent securities other than holder(s) of Combined
Exchanged Sargent Stock as described in Section 4.8.2(c), then such
participation shall not constitute a Demand Registration for purposes of
determining the number of Demand Registrations to which holders of Combined
Exchanged Sargent Stock are entitled to pursuant Section 4.8.1(b).
4.8.3 Registration of Shares Underlying Sargent Options.
On February 7, 1996 Sargent adopted an Employees' Compensatory Stock Option Plan
(the "Plan") and in accordance therewith granted options to purchase 500,000
shares of its $0.01 par value Common Stock to certain employees and consultants.
A copy of the Plan is attached hereto as Schedule 4.8.3; in addition an exhibit
thereto shows the number of shares under option, the optionee's identity and the
exercise prices and terms of the options. Notwithstanding and superseding any
inconsistent provision in this Section 4.8.3 Sargent agrees as follows: (a) that
the registration statement on Form S-8 as filed with the Commission on, before
or immediately upon consummation of the transactions herein and covering the
500,000 shares underlying the options granted under the Plan, shall be kept in
effect, shall not be withdrawn, nor the securities covered therein be
deregistered prior to expiration of the exercise period described in the Plan,
without the written consent of a majority of the holders of the securities
(i.e., options or shares then covered thereby); (b) that Sargent will provide
any reoffer prospectus required under Section 10(a) of the Securities Act as may
be contemplated or required under General Instructions to Form S-8 adopted under
the Securities Act; and (c) Sargent will qualify any shares offered under the
above contemplated registration statement on Form S-8 in at least five states,
including states to be designated by a majority of the holders of the securities
referenced in (a) above.
4.8.4 LIMITATION ON DEMAND AND PIGGYBACK REGISTRATIONS.
Notwithstanding anything to the contrary in this Agreement, the Demand and
Piggyback Registration rights granted with respect to the Combined Exchanged
Sargent Stock pursuant to this Agreement shall not be effective unless, on the
date immediately preceding the declared effective date for the registration
statement with respect to such Demand or Piggyback Registration: (a) the closing
bid price of the Sargent Common Stock on the national exchange, in the national
market system or in the NASDAQ Small-Cap Market for the Sargent Common Stock
shall have been equal to or in excess of
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$1.00 per share; and (b) the aggregate market value of the shares of the
Combined Exchanged Sargent Stock so registered shall have an aggregate market
value, based on such closing bid price, not in excess of $3,000,000. Further,
the Demand and Piggyback registration rights granted with respect to the
Combined Exchanged Sargent Stock shall be utilized only for the purpose of
effectuating settlements for the benefit of creditors of LACD, Medipace, and the
LACD Stockholders, which creditors shall not be affiliates of Sargent at the
Closing Date.
4.8.5. REGISTRATION EXPENSES. (a) General. All expenses incident to
Sargent's performance and execution of Demand Registrations or Piggyback
Registrations and Sargent's performance of or compliance with this Agreement,
including without limitation, all registration and filing fees, fees and
expenses of compliance with securities or Blue Sky Laws, expenses and fees for
listing the securities on the appropriate securities exchanges, cost of
liability insurance, all internal expenses, the expense of any annual audit or
quarterly review, printing expenses allocable to the registration of securities
other than the Combined Exchanged Sargent Stock or the Option Stock and fees and
disbursements of counsel for Sargent and all independent certified public
accountants (including the expenses of any special audit and "cold comfort"
letters required by or incident to such performance) (all such expenses being
herein call "Registration Expenses") shall be borne by Sargent.
(b) PAYMENT OF EXPENSES BY THE HOLDER(S). The holder(s) shall pay the
underwriters' fees and expenses, the underwriters' discount and commission and
the commissions and fees, if any, payable in respect of selling brokers, dealer
managers or similar securities industry professionals, fees and expenses of
holder's counsel, and transfer taxes allocable to the registration of the
holder(s) securities so included in any Demand or Piggyback Registration
pursuant to this Agreement.
Section 4.9 LISTING ON NASDAQ SMALL-CAP MARKET. As soon as Sargent meets
all of the minimum requirements for listing on the NASDAQ Small-Cap Market,
Sargent shall apply for listing thereon and shall pursue such listing to
completion.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
OF SARGENT
The obligations of Sargent under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
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Section 5.1 ACCURACY OF REPRESENTATIONS. The representations and
warranties made by LACD in this Agreement were true when made and shall be true
at the Closing Date with the same force and effect as if such representations
and warranties were made as of the date of this Agreement (except for changes
therein permitted by this Agreement), and LACD shall have performed or complied
with all covenants and conditions required by this Agreement to be performed or
complied with by LACD prior to or at the Closing. Sargent shall be furnished
with a certificate, signed by a duly authorized officer of LACD and dated the
Closing Date, to the foregoing effect.
Section 5.2 OFFICER'S CERTIFICATE. Sargent shall have been furnished with
a certificate dated the Closing Date and signed by a duly authorized officer of
LACD, in the form of Schedule 5.2, to the effect that no litigation, proceeding,
investigation or inquiry is pending or, to the best knowledge of LACD,
threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Agreement or, to the
extent not disclosed in the LACD Schedules, by or against LACD which might
result in any material adverse change in any of the assets, properties, business
or operations of LACD.
Section 5.3 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial condition,
business or operations of nor shall any event have occurred which, with the
lapse of time or the giving of notice, may cause or create any material adverse
change in the financial condition, business or operations of LACD.
Section 5.4 OPINION OF COUNSEL TO LACD. Sargent shall receive an opinion,
dated the Closing Date, of Matthias & Berg LLP, counsel to LACD, in
substantially the following form:
(a) LACD is a corporation duly organized, validly existing, and in good
standing under the laws of the state of California and has the corporate power
and is duly authorized, qualified, franchised and licensed under all material
applicable laws, regulations, ordinances and orders of public authorities to own
all of its properties and assets and to conduct its business as now conducted,
including qualification to do business as a foreign corporation in the states in
which the character and location of the assets owned by it or the nature of the
business transacted by it requires qualification;
(b) To the best knowledge of such legal counsel, the execution and
delivery by LACD of this Agreement and the consummation of the transactions
contemplated by this Agreement in accordance with the terms hereof will not
conflict with or result in the breach of any term or provision of LACD's
articles of incorporation or bylaws or constitute a default or give rise to a
right of termination, cancellation or acceleration under any
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material mortgage, indenture, deed of trust, license, agreement or other
obligation or violate any court order, writ, injunction or decree applicable to
LACD, or its properties or assets;
(c) LACD has no subsidiaries;
(d) The authorized capitalization of LACD consists of 1,000 shares of
common stock, no par value. As of the Closing Date, there are 1,000 shares of
common stock issued and outstanding. All issued and outstanding shares are
legally issued, fully paid and nonassessable and not issued in violation of the
preemptive rights of any person. To the best of such counsel's knowledge,
except as set forth above, there are no outstanding: (i) securities convertible
into or exchangeable for any of LACD's capital stock; or (ii) options, warrants,
calls or other rights (including rights to demand registration or to sell in
connection with any registration by LACD under the Securities Act to purchase or
subscribe to capital stock of LACD or securities convertible into or
exchangeable for capital stock of LACD). To the best of such counsel's
knowledge, LACD is not a party to any voting trust agreement or other contract,
agreement, arrangement, commitment, plan or understanding restricting or
otherwise relating to voting or dividend rights with respect to the Common
Stock;
(e) The shares of LACD common stock to be transferred to Sargent pursuant
to the terms of this Agreement will be, when transferred in accordance with the
terms hereof, legally issued, fully paid and nonassessable and not issued in
violation of the rights of any person and shall be free and clear of all liens,
encumbrances, security interests, equities, options, claims, charges,
limitations on voting rights or rights to receive dividends, or other
restrictions of any kind (other than any generally imposed by federal, corporate
or territorial securities laws or as otherwise provided for in this Agreement;
(f) To the best of such counsel's knowledge, the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby have
been duly authorized and approved by all necessary action of the Board of
Directors and stockholders of LACD, and there are no dissenters' rights or
rights of appraisal with respect to the authorization, approval, execution and
completion of the transactions contemplated by this Agreement. This Agreement
has been duly and validly authorized, executed and delivered and constitutes the
legal and binding obligations of LACD, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors generally;
(g) To the best knowledge of such legal counsel, except as set forth in
the LACD Schedules, there are no actions, suits or proceedings pending or
threatened by or against or affecting LACD
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or its properties, at law or in equity, before any court or other governmental
agency or instrumentality, domestic or foreign or before any arbitrator of any
kind;
(h) To the best of such counsel's knowledge, no consent, approval or
authorization of or filing or registration with any governmental body or agency
of the United States federal government or of any state is required for the
execution and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement. LACD has taken all actions required by the
applicable laws of the State of California to permit the transfer of the shares
of LACD Common Stock to Sargent; and
(i) Upon delivery to Sargent of the certificates described in Section 3.3
of this Agreement, Sargent will receive good and marketable title to the
Exchanged LACD Stock, which shall constitute one hundred percent (100%) of the
issued and outstanding capital stock of LACD.
Section 5.5 OTHER ITEMS. Sargent shall have received such further
documents, certificates or instruments relating to the transactions contemplated
hereby as Sargent may reasonably request, which shall include, but not be
limited to the unqualified audit opinion described in Section 1.9 above along
with PROFORMA financial information (unaudited) attached hereto as Schedule 5.5
giving effect to the transaction contemplated herein which shall provide a
reasonable basis to management of Sargent that qualification on the NASDAQ
Small-Cap Market is possible; nor shall the PRO-FORMA financial statements fail
to meet the reasonable basis standard set forth herein;
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF LACD
The obligations of LACD under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 6.1 ACCURACY OF REPRESENTATIONS. The representations and
warranties made by Sargent in this Agreement were true when made and shall be
true as of the Closing Date (except for changes therein permitted by this
Agreement) with the same force and effect as if such representations and
warranties were made at and as of the date of this Agreement, and Sargent shall
have performed and complied with all covenants and conditions required by this
Agreement to be performed or complied with by Sargent prior to or at the
Closing. LACD shall have been furnished with a certificate, signed by a duly
authorized executive officer of Sargent and dated the Closing Date, to the
foregoing effect.
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Section 6.2 OFFICER'S CERTIFICATE. LACD shall have been furnished with a
certificate dated the Closing Date and signed by duly authorized officers of
Sargent to the effect that no litigation, proceeding, investigation or inquiry
is pending or, to the best knowledge of Sargent, threatened, which might result
in an action to enjoin or prevent the consummation of the transactions
contemplated by this Agreement or, to the extent not disclosed in the Sargent
Schedules, by or against Sargent, which might result in any material adverse
change in any of the assets, properties, business or operations of Sargent, in
the form of Schedule 6.2.
Section 6.3 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial condition,
business or operations of, nor shall any event have occurred which, with the
lapse of time or the giving of notice, may cause or create any material adverse
change in the financial condition, business or operations of, Sargent.
Section 6.4 OPINION OF COUNSEL TO SARGENT. LACD shall receive an opinion,
dated the Closing Date, of Jones & Keller, counsel to Sargent, and other counsel
to Sargent who may deliver an opinion with respect to issues of Delaware,
Colorado or California law, as the case may be, in substantially the following
form:
(a) Sargent is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware, and has the corporate
power and is duly authorized, qualified, franchised and licensed under all
applicable laws, regulations, ordinances and orders of public authorities to own
all of its properties and assets and to carry on its business in all material
respects as it is now being conducted, including qualification to do business as
a foreign corporation in the states in which the character and location of the
assets owned by it or the nature of the business transacted by it requires
qualification;
(b) To the best knowledge of such legal counsel, the execution and
delivery by Sargent of this Agreement and the consummation of the transactions
contemplated by this Agreement in accordance with the terms hereof will not
conflict with or result in the breach of any term or provision of Sargent's
articles of incorporation or bylaws or constitute a default or give rise to a
right of termination, cancellation or acceleration under any material mortgage,
indenture, deed of trust, license agreement or other obligation or violate any
court order, writ, injunction or decree applicable to Sargent or its properties
or assets;
(c) The authorized capitalization of Sargent consists of 9,000,000 shares
of common stock and 1,000,000 shares of preferred stock, par value $0.01 per
share. As of the Closing Date, there are 2,111,343 shares of Sargent Common
Stock issued and outstanding. All issued and outstanding shares are legally
issued, fully paid and nonassessable and not issued in violation of the preemp-
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tive rights of any person. To the best of such counsel's knowledge, except as
set forth in Schedule 2.4 of this Agreement, there are no outstanding: (i)
securities convertible into or exchangeable for any of Sargent's capital stock;
or (ii) options, warrants, calls or other rights (including rights to demand
registration or to sell in connection with any registration by Sargent under the
Securities Act) to purchase or subscribe to capital stock of Sargent or
securities convertible into or exchangeable for capital stock of Sargent. To
the best of such counsel's knowledge, Sargent is not a party to any voting trust
agreement or other contract, agreement, arrangement, commitment, plan or
understanding restricting or otherwise relating to voting or dividend rights
with respect to the Sargent Common Stock;
(d) The shares of Sargent Common Stock to be issued to the LACD
Stockholders pursuant to the terms of this Agreement will be, when issued in
accordance with the terms hereof, legally issued, fully paid and nonassessable
and not issued in violation of the rights of any person;
(e) To the best of such counsel's knowledge, the execution and delivery
of this Agreement and consummation of the transactions contemplated hereby have
been duly authorized and approved by all necessary action of each of the Boards
of Directors and stockholders of Sargent, and there are no dissenters' rights or
rights of appraisal with respect to the authorization, approval, execution and
completion of the transactions contemplated by this Agreement. This Agreement
has been duly and validly authorized, executed, and delivered and constitutes
the legal and binding obligation of Sargent, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors generally;
(f) To the best knowledge of such counsel, except as set forth in the
Sargent Schedules, there are no actions, suits or proceedings pending or
threatened by or against Sargent or affecting Sargent's properties, at law or in
equity, before any court or other governmental agency or instrumentality,
domestic or foreign or before any arbitrator of any kind;
(g) To the best of such counsel's knowledge, no consent, approval or
authorization of or filing or registration with any governmental body or agency
of the United States federal government or of any state is required for the
execution and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement. Sargent has taken all actions required by the
applicable laws of the State of Delaware to permit the issuance of the shares of
Exchanged Sargent Stock to the LACD Stockholders; and
(h) Upon delivery to the LACD Stockholders of the certificates described in
Section 3.3 of this Agreement, the LACD Stockholders will receive good and
marketable title to the Exchanged Sargent Stock, all of such Exchanged Sargent
Stock shall be received by the
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LACD Stockholders as validly issued, fully paid and nonassessable, free and
clear of all liens, encumbrances, security interests, equities, options, claims,
charges, limitations on voting rights or rights to receive dividends, or other
restrictions of any kind (other than any generally imposed by federal, corporate
or territorial securities laws or as otherwise provided for in this Agreement).
Section 6.5 OTHER ITEMS. LACD and the LACD Stockholders shall have
received such further documents, certificates, or instruments relating to the
transactions contemplated hereby as THEY may reasonably request.
ARTICLE VII
MISCELLANEOUS
Section 7.1 BROKERS AND FINDERS. Except for the Sargent Options which may
be issued pursuant to Section 3.8 of this Agreement, neither Sargent, nor LACD,
nor any of their respective officers, directors, agents or employees has
employed any investment banker, broker or finder, or incurred any liability on
behalf of Sargent, or LACD, as the case may be, for any investment banking fees,
brokerage fees, commissions or finders' fees, in connection with the
transactions contemplated by this Agreement. The parties each agree to
indemnify the other against any other claim by any third person for any
commission, brokerage or finder's fee or other payment with respect to this
Agreement or the transactions contemplated hereby based on any alleged agreement
or understanding between the indemnifying party and such third person, whether
express or implied from the actions of the indemnifying party.
Section 7.2 LAW, FORUM AND JURISDICTION. This Agreement shall be construed
and interpreted in accordance with the laws of the State of California. The
parties agree that any dispute arising under this Agreement, whether during the
term of the Agreement or at any subsequent time, shall be resolved exclusively
in the courts of the State of California and the parties hereby submit to the
jurisdiction of such courts for all purposes provided herein and appoint the
Secretary of State of the State of California as agent for service of process
for all purposes provided herein.
Section 7.3 NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to it
or sent by overnight mail, registered mail or certified mail, postage prepaid,
or by prepaid telegram, or when telecopied and followed by confirmation copy
hand-delivered or sent by first class mail, addressed as follows:
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If to LACD or to the
LACD Stockholders, to: Los Angeles Community Dialysis, Inc.
Victor Gura, M.D., President
5901 West Olympic Boulevard
Suite 300
Los Angeles, California 90036
(213) 933-8836 (Telecopier No.)
With copies to: Matthias & Berg LLP
Attorneys at Law
515 South Flower Street
Suite 700
Los Angeles, California 90071
Attn: Jeffrey P. Berg, Esq.
(213) 895-4058 (Telecopier No.)
If to Sargent, to: Sargent, Inc.
A. Vern Tharp, President
2472 East Road 7 North
Monte Vista, Colorado 81144
(303) 477-3217 (Telecopier No.)
With copies to: Jones & Keller
1625 Broadway
Suite 1600
Denver, Colorado 80202
Attn: Sam Wing, Esq.
(303) 628-9240 (Telecopier No.)
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed or telegraphed.
Section 7.4 ATTORNEYS' FEES. In the event that any party institutes any
action or suit to enforce this Agreement or to secure relief from any default
hereunder or breach hereof, the breaching party or parties shall reimburse the
non-breaching party or parties for all costs, including reasonable attorneys'
fees, incurred in connection therewith and in enforcing or collecting any
judgment rendered therein.
Section 7.5 CONFIDENTIALITY. Each party hereto agrees with the other
parties that, unless and until the reorganization contemplated by this Agreement
has been consummated, they and their representatives will hold in strict
confidence all data and information obtained with respect to another party or
any subsidiary thereof from any representative, officer, director or employee,
or from any books or records or from personal inspection, of such other party,
and shall not use such data or information or disclose the same to others,
except: (a) to the extent such data is a matter of public knowledge or is
required by law to be published;
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and (b) to the extent that such data or information must be used or disclosed in
order to consummate the transactions contemplated by this Agreement.
Section 7.6 SCHEDULES; KNOWLEDGE. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
Section 7.7 THIRD PARTY BENEFICIARIES. This Agreement is solely among
Sargent, the LACD Stockholders and LACD and, except for Section 4.8 and as
otherwise as specifically provided, no director, officer, stockholder, employee,
agent, independent contractor or any other person or entity shall be deemed to
be a third party beneficiary of this Agreement.
Section 7.8 ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties relating to the subject matter hereof. This
Agreement alone fully and completely expresses the agreement of the parties
relating to the subject matter hereof. There are no other courses of dealing,
understandings, agreements, representations or warranties, written or oral,
except as set forth herein.
Section 7.9 SURVIVAL; TERMINATION. The representations, warranties and
covenants of the respective parties shall survive the Closing Date of the
reorganization and the consummation of the transactions herein contemplated.
Section 7.10 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 7.11 AMENDMENT OR WAIVER. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether conferred herein,
at law, or in equity, and may be enforced concurrently herewith, and no waiver
by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance hereof may be extended by a
writing signed by the party or parties for whose benefit the provision is
intended. This Agreement may not be amended or modified, except by a written
agreement signed by all parties hereto.
Section 7.12 INCORPORATION OF RECITALS. All of the recitals hereof are
incorporated by this reference and are made a part hereof as though set forth at
length herein.
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Section 7.13 EXPENSES. Each of the parties to this Agreement shall bear
all of its own expenses incurred by it in connection with the negotiation of
this Agreement and in the consummation of the transactions provided for herein
and the preparation therefor.
Section 7.14 HEADINGS; CONTEXT. The headings of the sections and
paragraphs contained in this Agreement are for convenience of reference only and
do not form a part hereof and in no way modify, interpret or construe the
meaning of this Agreement.
Section 7.15 BENEFIT. This Agreement shall be binding upon and shall
inure only to the benefit of the parties hereto, and their permitted assigns
hereunder. This Agreement shall not be assigned by any party without the prior
written consent of the other party.
Section 7.16 PUBLIC ANNOUNCEMENTS. Except as may be required by law,
neither party shall make any public announcement or filing with respect to the
transactions provided for herein without the prior consent of the other party
hereto.
Section 7.17 SEVERABILITY. In the event that any particular provision or
provisions of this Agreement or the other agreements contained herein shall for
any reason hereafter be determined to be unenforceable, or in violation of any
law, governmental order or regulation, such unenforceability or violation shall
not affect the remaining provisions of such agreements, which shall continue in
full force and effect and be binding upon the respective parties hereto.
Section 7.18 FAILURE OF CONDITIONS; TERMINATION. In the event any of the
conditions specified in this Agreement shall not be fulfilled on or before the
Closing Date, the parties, or any one of them, have the right either to proceed
or, upon prompt written notice to the other, to terminate and rescind this
Agreement without liability to any other party. The election to proceed shall
not affect the right of such electing party reasonably to require the other
party to continue to use its efforts to fulfill the unmet conditions.
Section 7.19 NO STRICT CONSTRUCTION. The language of this Agreement shall
be construed as a whole, according to its fair meaning and intendment, and not
strictly for or against either party hereto, regardless of who drafted or was
principally responsible for drafting the Agreement or terms or conditions
hereof.
Section 7.20 EXECUTION KNOWING AND VOLUNTARY. In executing this Agreement,
the parties severally acknowledge and represent that each: (a) has fully and
carefully read and considered this Agreement; (b) has been or has had the
opportunity to be fully apprised of its attorneys of the legal effect and
meaning of this
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document and all terms and conditions hereof; (c) has been afforded the
opportunity to negotiate as to any and all terms hereof; and (d) is executing
this Agreement voluntarily, free from any influence, coercion or duress of any
kind.
IN WITNESS WHEREOF, the corporate parties hereto have caused this Agreement
to be executed by their respective officers, hereunto duly authorized, and
entered into and closed as of the date first above written at Los Angeles,
California.
("Sargent")
SARGENT, INC.
By: /s/ A. Vern Tharp
A. Vern Tharp
President
("LACD")
LOS ANGELES COMMUNITY DIALYSIS, INC.
By: /s/ Victor Gura, M.D.
Victor Gura, M.D.
President
("LACD Stockholders")
/s/ Victor Gura, M.D.
Victor Gura, M.D., an individual
/s/ Avraham H. Uncyk, M.D.
Avraham H. Uncyk, M.D., an individual
/s/ Ronald P. Lang, M.D.
Ronald P. Lang, M.D., an individual
61
