SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 0-12927
NATIONAL HOME HEALTH CARE CORP.
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(Exact name of Registrant as Specified in Its Charter)
Delaware 22-2981141
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(State or Other Jurisdiction of (IRS Employer Identification No.)
Incorporation or Organization)
700 White Plains Road, Scarsdale, New York 10583
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(Address of Principal Executive Offices with Zip Code)
Registrant's Telephone Number Including Area Code: 914-722-9000
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Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [_]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents and
reports required by Section 12, 13 or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes [_] No [_]
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares of common stock outstanding as of June 10, 1997 was
5,100,621
<PAGE>
NATIONAL HOME HEALTH CARE CORP.
FORM 10-Q
FOR THE QUARTER ENDED APRIL 30, 1997
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets as of April 30,
1997 and July 31, 1996 (unaudited) 3-4
Consolidated Statements of Operations for the
three months ended April 30, 1997 and April 30,
1996 and the nine months ended April 30, 1997
and April 30, 1996 (unaudited) 5
Consolidated Statements of Cash Flows for the
nine months ended April 30, 1997 and April 30,
1996 (unaudited) 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II. OTHER INFORMATION 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
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NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
April 30, 1997 July 31, 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,533,000 $ 8,929,000
Investments 508,000 528,000
Accounts receivable-less allowance for doubtful
accounts of $353,000 at April 30, 1997 and
$414,000 at July 31, 1996 8,641,000 8,499,000
Income taxes receivable 200,000 203,000
Prepaid expenses and other assets 194,000 218,000
Deferred taxes 238,000 304,000
----------- -----------
Total current assets 19,314,000 18,681,000
Furniture, equipment and leasehold
improvements, net 349,000 319,000
Excess of cost over fair value of net assets of
businesses acquired, net 2,773,000 2,557,000
Other intangible assets, net 425,000 132,000
Deposits and other assets 122,000 110,000
Investment in unconsolidated investee 2,273,000 2,622,000
----------- -----------
TOTAL $25,256,000 $24,421,000
=========== ===========
</TABLE>
(Continued)
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<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
UNAUDITED
<TABLE>
<CAPTION>
April 30, 1997 July 31, 1996
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,080,000 $ 1,315,000
Estimated third-party payor settlements 787,000 1,078,000
------------ ------------
Total current liabilities 1,867,000 2,393,000
Deferred tax liability 406,000 524,000
------------ ------------
Total liabilities 2,273,000 2,917,000
Stockholders' equity:
Common stock, $.001 par value; authorized
20,000,000 shares, issued 6,055,621 and
6,050,321 shares 6,000 6,000
Additional paid-in capital 17,673,000 17,660,00
Retained earnings 6,255,000 4,789,000
------------ ------------
23,934,000 22,455,000
Less treasury stock
(955,000 shares) at cost (951,000) (951,000)
------------ ------------
Total stockholders' equity 22,983,000 21,504,000
------------ ------------
TOTAL $ 25,256,000 $ 24,421,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
April 30, April 30,
-------------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net patient revenue $ 8,476,000 $ 9,760,000 $25,854,000 $29,800,000
----------- ----------- ----------- -----------
Operating expenses:
Cost of revenue 5,459,000 6,245,000 16,783,000 18,954,000
General and administrative 2,149,000 2,571,000 6,337,000 8,226,000
Amortization of intangibles 55,000 73,000 152,000 219,000
----------- ----------- ----------- -----------
Total operating expenses 7,663,000 8,889,000 23,272,000 27,399,000
----------- ----------- ----------- -----------
Income from operations 813,000 871,000 2,582,000 2,401,000
Other income:
Interest income 118,000 99,000 326,000 302,000
(Loss) from equity investee (171,000) (349,000)
----------- ----------- -----------
Income before taxes 760,000 970,000 2,559,000 2,703,000
Provision for income taxes 326,000 437,000 1,094,000 1,246,000
----------- ----------- ----------- -----------
NET INCOME $ 434,000 $ 533,000 $ 1,465,000 $ 1,457,000
=========== =========== =========== ===========
Net income per share of
common stock $ 0.09 $ 0.11 $ 0.29 $ 0.29
=========== =========== =========== ===========
Weighted average
shares outstanding 5,097,763 5,026,350 5,096,117 5,009,802
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
For the nine months ended
April 30,
-------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,465,000 $ 1,457,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 234,000 374,000
Loss from equity investee 349,000 --
Deferred tax (51,000) --
Changes in operating assets and liabilities:
(Increase) in accounts receivable (142,000) (138,000)
Decrease in income taxes receivable 3,000 446,000
Decrease (increase) in prepaid expenses and other assets 12,000 (155,000)
(Decrease) in accounts payable and accrued expenses (235,000) (273,000)
(Decrease) in estimated third party payor settlements (291,000) (864,000)
----------- -----------
Net cash provided by operating activities 1,344,000 847,000
----------- -----------
Cash flows from investing activities:
Proceeds of investments 20,000 285,000
Purchase of property, plant and equipment (101,000) (91,000)
Purchase of assets of business (672,000) --
Purchase of Nurse Care, Inc., net of cash acquired -- (2,595,000)
----------- -----------
Net cash (used in) investing activities (753,000) (2,401,000)
----------- -----------
Cash flows from financing activities:
Proceeds from exercise of stock options 13,000 70,000
Decrease in notes receivable -- 1,039,000
Principal payments under capital lease obligations -- (20,000)
----------- -----------
Net cash provided by financing activities 13,000 1,089,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 604,000 (465,000)
Cash and cash equivalents-beginning of period 8,929,000 9,237,000
----------- -----------
CASH AND CASH EQUIVALENTS-END OF PERIOD $ 9,533,000 $ 8,772,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Taxes $ 1,228,000 $ 1,263,000
Interest 5,000 13,000
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
NATIONAL HOME HEALTH CARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of Management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine month periods ended
April 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending July 31, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended July 31, 1996.
NOTE 2 - INITIAL PUBLIC OFFERING OF SUNSTAR HEALTHCARE, INC.
On May 21, 1996, the initial public offering of common stock by
SunStar Healthcare, Inc. ("SunStar") was consummated. Prior to the offering,
SunStar had been a wholly-owned subsidiary of the Company, consisting of its
Florida outpatient medical center operations. As a result of the offering, the
Company currently owns 900,000 shares, or approximately 37.6%, of SunStar. The
Company is accounting for its investment in SunStar using the equity method of
accounting.
NOTE 3 - ACQUISITION
On March 25, 1997, the Company acquired certain assets of C.J. Home
Care, Inc., d/b/a Garden City Home Care, a New York State licensed home health
care company which provides home care services in Nassau County, New York for
$672,000 in cash, including acquisition costs of $22,000. Garden City Home Care
has annual revenues of approximately $2,000,000.
NOTE 4 - INCOME TAXES
The Joint Committee on Taxation has taken no exception to the
conclusions the Internal Revenue Service made in the examination of federal tax
returns for the years ending July 31, 1991 through July 31, 1994. The Internal
Revenue Service had previously assessed the Company an immaterial amount.
NOTE 5 - SUBSEQUENT EVENTS
On May 29, 1997, the Company acquired certain assets of Home Health
Aides, Inc. and H.H.A. Aides, Inc., two New York State licensed home health care
companies which provide home care services in both Nassau and Suffolk Counties,
New York for $1,213,000 in cash, including
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acquisition costs of approximately $77,000. The two companies have combined
annual revenues of approximately $3,400,000.
On May 28, 1997, the Company entered into a non-binding Letter of
Intent to acquire a Medicare certified and licensed home health care company
along with an affiliated home care company located in the State of Connecticut.
The consummation of the proposed transaction is subject to entering into a
binding agreement as well as regulatory and other approvals and conditions. The
two companies to be acquired have combined annual revenues of $6 - 7 million.
The acquisition is expected to be completed by August 1997.
On May 29, 1997, the Company entered into a non-binding Letter of
Intent to acquire three affiliated licensed home health care agencies located in
the State of New York, New Jersey and Maryland. The consummation of the proposed
transaction is subject to entering into a binding agreement as well as
regulatory and other approvals and conditions. The three target companies have
combined annual revenues of approximately $8,000,000. The acquisition is
expected to be completed by December 1997.
-8-
<PAGE>
ITEM 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations and Effects of Inflation
- ----------------------------------------------
Three Months Ended April 30, 1997 Compared to Three Months Ended April 30, 1996
- -------------------------------------------------------------------------------
For the three months ended April 30, 1997, net patient revenue was
$8,476,000 as compared to $9,760,000 for the three months ended April 30, 1996.
This decrease is primarily attributable to the absence of revenue from
outpatient medical services during the recent period (as a result of the public
offering by SunStar in May 1996 and its resulting accounting treatment using the
equity method) as compared with such revenue of $1,190,000 during the earlier
period. Revenue from home health care services decreased $94,000 or 1% from
$8,476,000 for the three months ended April 30, 1997 from $8,570,000 for the
three months ended April 30, 1996. Revenue from Health Acquisition Corp., the
subsidiary providing home health care services in the New York metropolitan area
decreased $138,000 or 3% as a result of increased competition and price
pressures from the certified home health care agencies with which it contracts.
Revenue from New England Care, Inc. and Nurse Care. Inc., the subsidiaries
providing home health care services in Fairfield and New Haven Counties,
Connecticut increased $44,000 over the comparable period of 1996.
Cost of revenue relating to home health care services as a percentage
of net patient revenue was 64% for both the three months ended April 30, 1997
and three months ended April 30, 1996.
General and administrative expenses was $2,149,000 for the three
months ended April 30, 1997 as compared to $2,571,000 for the three months ended
April 30, 1996. Eliminating all general and administrative expenses relating to
outpatient medical services as a result of the SunStar public offering, general
and administrative expenses decreased $62,000 or 3% from the three month ended
April 30, 1996. This decrease is primarily attributable to improved efficiencies
implemented in the operations of New England Home Care, Inc. and Nurse Care,
Inc.
Amortization of intangibles decreased to $55,000 for the three months
ended April 30, 1997 from $73,000 for the three months ended April 30, 1996 as a
result of certain intangible assets from prior acquisitions being fully
amortized.
Interest income increased to $118,000 for the three months ended
April 30, 1997 from $99,000 for the three months ended April 30, 1996. This
increase of $19,000 or 19% is the result of the Company's increased cash flow
over the comparable period of 1996.
The Company recorded a loss from equity invested of $171,000
representing its share of the SunStar net loss for the three months ended April
30, 1997.
The Company's effective tax rate decreased to approximately 43% for
the three months ended April 30, 1997 from 45% for the three months ended April
30, 1996. This decrease is
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attributable to the Company changing to combined filing for state tax purposes
and the availability of Work Opportunity Tax Credits in the current fiscal year.
As a result of all of the foregoing, net income for the three months
ended April 30, 1997 was $434,000, or $.09 per share, as compared to a net
income of $533,000, or $.11 per share, for the three months ended April 30,
1996. Excluding the loss relating to the Company's investment in SunStar, net
income for the three months ended April 30, 1997 was $547,000 or $.11 per share.
Nine Months Ended April 30, 1997 Compared to Nine Months Ended April 30, 1996
- -----------------------------------------------------------------------------
For the nine months ended April 30, 1997, net patient revenue was
$25,854,000 as compared to $29,800,000 for the nine months ended April 30, 1996.
This decrease is primarily attributable to the absence of revenue from
outpatient medical services during the nine months ended April 30, 1997 as
compared with such revenue of $3,693,000 during the nine months ended April 30,
1996. Revenue from home health care services decreased to $25,854,000 for the
nine months ended April 30, 1997 from $26,107,000 for the nine months ended
April 30, 1996. This decrease of $253,000 or 1% is explained in the above
three-month discussion.
Cost of revenue relating to home health care services as a percentage
of net patient revenue was 65% for both the nine months ended April 30, 1997 and
April 30, 1996.
General and administrative expenses were $6,337,000 for the nine
months ended April 30, 1997 as compared to $8,226,000 for the nine months ended
April 30, 1996. Eliminating all general and administrative expenses relating to
outpatient medical services as a result of the SunStar public offering, general
and administrative expenses decreased $124,000 or 2% during the recent
nine-month period as compared to the nine months ended April 30, 1996. This
decrease is explained in the above three-month discussion.
Amortization of intangibles decreased to $152,000 for the nine months
ended April 30, 1997 from $219,000 for the nine months ended April 30, 1996 as a
result of certain intangible assets from prior acquisitions being fully
amortized.
Interest income increased to $326,000 for the nine months ended April
30, 1997 from $302,000 for the nine months ended April 30, 196. This increase of
$24,000 or 8% is the result of the Company's increased cash flow over the
comparable period of 1996.
The Company recorded a loss from equity investee of $349,000,
representing its share of the SunStar net loss for the nine months ended April
30, 1997.
The Company's effective tax rate decreased to approximately 43% for
the nine months ended April 30, 1997 from 46% for the nine months ended April
30, 1996. This decrease is explained in the above three-month discussion.
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<PAGE>
As a result of the foregoing, net income for the nine months ended
April 30, 1997 was $1,465,000 or $.29 per share as compared to $1,457,000 or
$.29 per share for the nine months ended April 30, 1996. Excluding the loss
relating to the Company's investment in SunStar, net income for the nine months
ended April 30, 1997 was $1,696,000 or $.33 per share.
The rate of inflation had no material affect on operations for the
nine months ended April 30, 1997.
Financial Condition and Capital Resources
- -----------------------------------------
Current assets increased to approximately $19,314,000 and current
liabilities decreased to $1,867,000, respectively, at April 30, 1997. These
results increased working capital by $1,159,000 from $16,288,000 at July 31,
1996 to $17,447,000 at April 30, 1997 and the current ratio increased from 7.8x
at July 31, 1996 to 10.3x at April 30, 1997. Cash and cash equivalents at April
30, 1997 were $9,533,000 as compared with $8,929,000 at July 31, 1996.
The Company recorded net cash from operating activities of $1,344,000
for the nine months ended April 30, 1997 as compared to net cash from operating
activities of $847,000 for the nine months ended April 30, 1996. This increase
is primarily attributable to a decrease in estimated third party payor
settlements at April 30, 1997 of $291,000 as compared to a decrease of $864,000
at April 30, 1996. Historically, the Company has financed its working capital
requirements through cash flow from operating activities. Net cash used in
investing activities for the nine months ended April 30, 1997 reflects the
purchase of assets of business and the purchase of equipment, offset by proceeds
of investments. For the nine months ended April 30, 1996, net cash used in
investing activities consisted of the purchase of Nurse Care, Inc. and the
purchase of equipment, offset by proceeds of investments. For the nine months
ended April 30, 1997, the Company realized cash from the exercise of stock
options. For the nine months ended April 30, 1996, the Company realized cash
from financing activities from payments received on notes receivable and
proceeds from the exercise of stock options, offset by payments under capital
lease obligations.
The Company believes that it has sufficient cash to fund its
operations for at least the ensuing twelve month period. The Company also has
available a $2,000,000 secured offering line of credit with the Bank of New
York. In addition, New England Home Care, Inc. has a secured advised line of
credit with the Bank of New York, the maximum amount of which shall not exceed
the lesser of eligible accounts receivable or $2,000,000. Both facilities are at
the alternate base commercial lending rate of the bank and expire January 30,
1998. As of April 30, 1997, there were no outstanding balances under either line
of credit.
In May 1997, the Company acquired certain assets of two home health
care companies for $1,213,000 in cash. In addition, the Company has signed
Letters of Intent for acquisitions that will contemplate a use of approximately
$6,000,000 in cash to cover the purchase price for both potential acquisitions,
along with the working capital requirements to finance approximately $15,000,000
in
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added revenues. The Company believes that its current cash balances and
available credit will allow it to continue to make acquisitions in the home
health care field without affecting its liquidity needs.
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits:
*10.4 Asset Purchase Agreement dated February 19,
1997 among Home Health Aides, Inc., H.H.A.
Aides, Inc., and Health Acquisition Corp. d/b/a
Allen Health Care Services.
27 Financial Data Schedule.
(b) Reports on Form 8-K
None
- -----------------------------
* Enclosed herewith in its complete form. This exhibit, with the names and
addresses of the sellers redacted pursuant to a request for
confidentiality, was originally filed with the Company's Quarterly Report
on Form 10-Q for the period ended January 31, 1997.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
National Home Health Care Corp.
Date: June 11, 1997 /s/ Robert P. Heller
--------------------------------
Robert P. Heller
Vice President of Finance,
Chief Financial and Accounting Officer
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Commission File No. 0-12927
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
to
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED APRIL 30, 1997
NATIONAL HOME HEALTH CARE CORP.
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<PAGE>
EXHIBIT
NUMBER DOCUMENT PAGE NUMBER
- ------ -------- -----------
*10.4 Asset Purchase Agreement dated February 19,
1997 among Home Health Aides, Inc., H.H.A.
Aides, Inc., and Health Acquisition Corp. d/b/a
Allen Health Care Services.
27 Financial Data Schedule.
- --------------------------
* Enclosed herewith in its complete form. This exhibit, with the names and
addresses of the sellers redacted pursuant to a request for
confidentiality, was originally filed with the Company's Quarterly Report
on Form 10-Q for the period ended January 31, 1997.
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Exhibit 10.4
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated this 19th day of February, 1997, by
and between
HOME HEALTH AIDES, INC., a New York corporation, with offices at 50
Clinton Street, Hempstead, New York 11550 ("Home Health") and H.H.A.
AIDES, INC., a New York corporation, with offices located at 1787
Veterans Highway, Islandia, New York 11779 ("HHA") (Home Health and
HHA are sometimes referred to individually as "Seller" and
collectively as "Sellers"); and
HEALTH ACQUISITION CORP. D/B/A ALLEN HEALTH CARE SERVICES, a New York
corporation, with offices at 175-20 Hillside Avenue, Jamaica, New
York 11432 ("Buyer").
RECITALS
A. Sellers are engaged in the business of providing home health care
in Nassau and Suffolk Counties in the State of New York.
B. Sellers desire to sell and transfer to Buyer, and Buyer desires to
acquire from Sellers, certain of the assets of the Sellers' business, subject to
and upon the conditions and terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals, the
mutual representations, warranties, covenants and agreements herein set forth,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions:
For all purposes of this Agreement, except as otherwise expressly
provided,
(i) the terms defined in this Agreement include the plural as well as
the singular,
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(ii) all accounting terms not otherwise defined herein have the
meanings assigned under generally accepted accounting principles,
(iii) all references in this Agreement to designated "Articles,"
"Sections," "Subsections" and other subdivisions are to the designated Articles,
Sections, Subsections and other subdivisions of the body of this Agreement,
(iv) all references in this Agreement to "Exhibits" or "Schedules"
are to the Exhibits and Schedules attached to this Agreement,
(v) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms, and
(vi) unless the context requires otherwise, the words "herein,"
"hereof" and "hereunder," and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section, Subsection or
other subdivision.
As used in this Agreement and the Exhibits, the following definitions
shall apply:
"Agreement" means this Asset Purchase Agreement by and between Buyer
and Sellers, as the same may be amended or supplemented in a writing signed by
duly authorized representatives of both parties, together with the Exhibits
hereto.
"Assumed Liabilities" mean the liabilities or obligations of Seller
relating to the Business that are specifically assumed by Buyer pursuant to
Section 2.3.
"Business" means the business of providing home health care in the
Counties of Nassau and Suffolk, State of New York and the incidents of such
business, including income, cash flow, operations, condition (financial or
other), anticipated revenues and prospects.
"Buyer's Escrow Agent" means Robinson Brog Leinwand Greene Genovese &
Gluck, P.C.
"Claim" means a claim of a Loss arising in connection with any of the
matters set forth in Section 10.2 or 10.3.
"Closing" means the consummation of the purchase and sale transaction
contemplated by this Agreement and shall be deemed to have occurred effective as
of 12:01 a.m. on the Closing Date.
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"Closing Date" means the day on which the Closing actually occurs.
"Closing Escrow Agreement" means the escrow agreement among Buyer,
Sellers and Buyer's Escrow Agent in the form annexed hereto as Exhibit 3.1(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Contract Escrow Agreement" means the escrow agreement among Buyer,
Sellers and Sellers' Escrow Agent in the form annexed hereto as Exhibit 3.1(a).
"Contracts" means the contracts to which either Seller is a party or
by which it is bound as set forth on Schedule 2.1(a).
"Deposit" means the payment made by Buyer pursuant to Section 3.1(a).
"Discharge Plan" means the plan to be submitted by Sellers to the New
York State Department of Health for the surrender of their licenses and the
discharge of their patients.
"Encumbrance" means in respect of any property or right, any claim,
charge, covenant, easement, encumbrance, security interest, lien (tax or
otherwise), option, pledge, right of another, servitude, or restriction (whether
on sale, transfer, disposition or otherwise), whether imposed by agreement,
understanding, law, equity or otherwise.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" means those assets of Seller referred to in Section
2.2.
"Fixed Assets" means the fixed, tangible assets listed on Schedule
2.1(c).
"Guaranty" means the Guaranty of Paul Manson and Cora Baliff annexed
hereto as Exhibit 4.2(e).
"Hours Measuring Period" means the four week period commencing on
April 28, 1997 and ending on May 25, 1997, provided the conditions to the
obligations of Buyer have been satisfied and Sellers have notified Buyer they
are ready to close on or before June 6, 1997, but if such conditions have not
been satisfied or Sellers are not ready to close, the Hours Measuring Period
shall be the four weeks immediately prior to the Closing Date.
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"Indemnifiable Claim" means any Loss for or against which any party
is entitled to indemnification under this Agreement; "Indemnified Party" means
the party entitled to indemnity hereunder; and "Indemnifying Party" means the
party obligated to provide indemnification hereunder.
"Leases" means the lease agreements covering the leasehold interests
at 50 Clinton Street, Hempstead, New York 11550 and 1787 Veterans Highway,
Islandia, New York 11779, together with all amendments, modifications,
alterations and other changes thereto (each, individually referred to as a
"Lease").
"Loss" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, obligation, penalty, fine, assessment or settlement
of any kind or nature, whether foreseeable or unforeseeable, including but not
limited to, interest or other carrying costs, penalties, legal, accounting or
other professional fees or expenses incurred in the investigation, collection,
prosecution or defense of claims, inquiries, hearings or other legal or
administrative proceedings, and amounts paid in settlement, that may be imposed
on or otherwise incurred or suffered by the specified person.
"Order" means any decree, injunction, preliminary injunction,
temporary restraining order, judgment, order, ruling, assessment or writ except
for (i) Permits issued to Sellers or statutes and regulations applicable to the
parties in the ordinary course of business and (ii) the assignment of cases and
directions and orders relating thereto from Nassau or Suffolk County officials
in the ordinary course of Sellers' business.
"Past Practice" means a lawful practice followed or observed by
Seller in its operation of the Business during the twelve-month period ended
December 31, 1996.
"Permit" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any governmental entity in connection with, and necessary to the operation of,
the Business.
"Plan" means any "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA) or any "employee pension benefit plan" (as defined in
Section 3(2) of ERISA and not exempted under Section 4(b) or 201 of ERISA),
including any "multi-employer pension plan" (as defined in Section 3(37) of
ERISA).
"Purchased Assets" means the assets of Seller described in Section
2.1.
"Purchase Price" has the meaning set forth in Section 3.1.
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"Rate" means a uniform statewide PCA Level II Medicaid rate for home
health care services applicable for the year 1997, if any, or if in lieu of such
uniform statewide rate there are two separate (but uniform within each region)
rates established statewide, one for the so-called "upstate" and the other for
the "downstate" region, the uniform rate that is applicable to the "downstate"
region. Any rate for 1997 for home health care services other than the Rate
shall for purposes of this Agreement be defined as a "Nonuniform Rate".
"Required Consents" means the consents, waivers, approvals, licenses
and authorizations listed on Schedule 5.2.
"Sellers' Escrow Agent" means Hoffinger Friedland Dobrish Bernfeld &
Stern, P.C.
"Tax" means any foreign, federal, state, county or local income,
sales and use, excise, franchise, real and personal property, transfer, gross
receipt, capital stock, production, business and occupation, disability,
employment, payroll, severance or withholding tax or charge imposed by any
governmental entity, any interest and penalties (civil or criminal) related
thereto or to the nonpayment thereof, and any Loss in connection with the
determination, settlement or litigation of any Tax liability.
ARTICLE II
SALE OF ASSETS
2.1 Purchased Assets: Subject to this Agreement, Sellers shall, at
the Closing, sell, assign, transfer and convey to Buyer, and Buyer shall then
purchase and acquire from Sellers, all of Sellers' right, title and interest in
and to:
(a) the Contracts and all Sellers' rights and interests arising
thereunder;
(b) the Leases;
(c) the Fixed Assets;
(d) subject to regulatory approval(s), if required, patient lists and
patient files of such patients as elect to be transferred to Buyer on or about
the Closing Date pursuant to the Discharge Plan; and
(e) employee lists and files, including names, addresses and
telephone numbers.
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2.2 Excluded Assets: The Excluded Assets shall be all of Sellers'
assets except for those included within the Purchased Assets, including, without
limitation, the following Excluded Assets:
(a) cash, accounts receivable on invoices for sales and services
prior to the Closing Date whether invoiced before or after the Closing Date, and
prepaid expenses of Sellers;
(b) rights of Sellers under this Agreement;
(c) Sellers' canceled checks, bank statements and tax returns;
(d) claims, refunds, rights, choses in action and litigation and the
proceeds thereof received or to be received by Sellers, irrespective of the date
on which any such claim, refund, or right may arise or accrue;
(e) Sellers' corporate minute books and stock records, tax records,
general ledger and other books of original entry, and original payroll records;
(f) all books, records, manuals and other materials relating to
Sellers' business, including, without limitation, advertising matter,
correspondence, sales materials and research and accounting records;
(g) Sellers' Federal Tax Identification Numbers, Sellers' Department
of Health License Number(s) and Sellers' Medicaid Provider Number(s);
(h) Sellers' trade names "H.H.A.", "Home Health" and all derivatives
thereof; and
(i) the items of personal property listed on Schedule 2.2(i).
2.3 Assumption of Certain Liabilities; Excluded Liabilities: Buyer
shall, at the Closing, assume only those liabilities of Sellers that are
expressly set forth on Schedule 2.3, provided that with respect to all leases,
contracts, commitments, licenses, agreements and arrangements assumed by Buyer
pursuant to this Section 2.3, all obligations of Sellers arising thereunder and
to be performed prior to the Closing Date shall not be assumed by Buyer. Assumed
Liabilities shall not include any other liabilities of Sellers of any kind or
nature, whether absolute, contingent, accrued, known or unknown, which shall
remain the liabilities of Sellers. Buyer shall not be obligated to engage any of
Sellers' employees after the Closing. Sellers shall at or before Closing pay its
employees all salary, bonus, vacation and sick pay, and other similar benefits
that may have accrued to such employees as of the Closing Date, no part of which
shall be assumed by Buyer; and in the event Buyer shall engage any of Sellers'
employees after the Closing, Sellers shall have no responsibility for
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any salary, bonus, vacation and sick pay, and other similar benefit Buyer may
agree to pay such employees after the Closing (even if it purports to relate to
a period prior to the Closing Date).
ARTICLE III
PURCHASE PRICE
3.1 Purchase Price: The price for the Purchased Assets shall be One
Million One Hundred Fifty Thousand ($1,150,000) Dollars (the "Purchase Price").
The Purchase Price shall be payable to Sellers as follows:
(a) $50,000, to Sellers' Escrow Agent, by the delivery to
Sellers' Escrow Agent concurrent with the execution hereof of a
check, subject to collection, payable to Sellers' Escrow Agent in
such amount, to be held by Sellers' Escrow Agent in accordance with
the terms of the Contract Escrow Agreement;
(b) $50,000, to Buyer's Escrow Agent, by the delivery to
Buyer's Escrow Agent at Closing of a certified or bank cashier's
check, drawn on a New York clearing house member, payable to Buyer's
Escrow Agent in such amount, to be held by Buyer's Escrow Agent until
the first anniversary of the Closing Date as security for the
obligations of Sellers pursuant to Section 10.2 hereof in accordance
with the terms of the Closing Escrow Agreement; and
(c) the balance, subject to the provisions of Section
3.3(a)(i), by delivery by Buyer to Sellers at Closing of a certified
or bank cashier's check, drawn on a New York clearing house member,
or, at the option of Buyer, by wire transfer in such amount to an
account designated by Sellers. As additional consideration, Buyer
shall assume the Assumed Liabilities.
3.2 Prorations: At the Closing, the parties shall apportion any rents
or other charges paid or payable under the Leases for the periods prior to and
subsequent to the Closing Date and Buyer shall reimburse Sellers for any
security deposits, utility deposits, etc. assigned by Sellers to Buyer in
connection with the Leases or other Purchased Assets.
3.3 Adjustments: The Purchase Price shall be subject to either or
both of the following adjustments:
(a) If a Rate shall have been fixed and at an amount less
than $11.82 per hour, the Purchase Price shall be reduced by One
Thousand Five Hundred Thirty-One and 25/100 ($1,531.25) Dollars for
each one ($.01) cent the Rate is fixed below $11.82 per hour. For
purposes of example only, if the Rate is fixed at $11.02, the
Purchase Price shall be reduced by One Hundred Twenty-Two Thousand
Five Hundred ($122,500) Dollars. In the event no Nonuniform Rate and
no Rate has been
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fixed prior to the Closing Date, and all of the other conditions to
Closing have been satisfied or waived by the party entitled to waive
such conditions, the parties shall nevertheless close pursuant to the
terms of this Agreement, as follows:
(i) Buyer shall pay to Buyer's Escrow Agent the
sum of $50,000 pursuant to Section 3.1(b) and shall pay to
Sellers' Escrow Agent the balance of the Purchase Price
(less (x) any credit for the Deposit [which shall continue
to be held by Sellers' Escrow Agent], (y) the sum of
$250,000, which shall be paid to Sellers in the manner
provided in Section 3.1(c), without reference to this
subparagraph, and (z) any reduction resulting from the
application of Section 3.3(b) following), to be held by
Sellers' Escrow Agent in accordance with the terms of the
Contract Escrow Agreement until a Nonuniform Rate or a
Rate has been fixed or as hereinafter provided.
(ii) If (x) a Nonuniform Rate is fixed, or a
Rate is fixed at $11.82 per hour or higher, the entire
amount in escrow, together with the Deposit, shall be paid
to Sellers free of escrow, or (y) a Rate (if any) is fixed
at less than $11.82 per hour, Sellers' Escrow Agent shall
pay to Buyer an amount equal to the reduction in the
Purchase Price calculated in accordance with the formula
set forth above and shall pay to Sellers the balance of
the amount in escrow, together with the Deposit.
(iii) Notwithstanding the foregoing, if no
Nonuniform Rate or no Rate has been fixed prior to
December 31, 1997, Seller's Escrow Agent shall, in
accordance with the terms of the Contract Escrow
Agreement, pay to Sellers out of the funds held in escrow
an amount that, when added to subparagraph (i)(y), will
cause Sellers to have received payments on account of the
Purchase Price to which Sellers would be entitled were the
Rate to be fixed at $10.22 per hour, less the $50,000
which has been paid to Buyer's Escrow Agent pursuant to
Section 3.1(b). Further, if no Nonuniform Rate or no Rate
has been fixed prior to March 31, 1998, Seller's Escrow
Agent shall, in accordance with the terms of the Contract
Escrow Agreement, pay to Sellers on account of the
Purchase Price the balance of the funds it is then holding
in escrow.
(iv) In the event that by virtue of the
payments set forth in subparagraphs (i) or (iii) of this
Section 3.3(a), Sellers shall receive a greater portion of
the Purchase Price than they are found to be entitled to
once the Rate has been fixed, Sellers shall promptly upon
demand from Buyer pay to Buyer the amount of any excess
Purchase Price received by them. To secure such prompt
payment, Paul Manson and Cora Baliff, the principals of
Sellers, shall at Closing execute and deliver to Buyer the
Guaranty.
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(b) If for the Hours Measuring Period, Sellers shall have
averaged 4,795 or more hours serviced per week in their combined
operations, calculated in a manner consistent with Sellers' usual
practice, but fewer than 5,100 hours, the Purchase Price shall be
reduced by Two Hundred Ninety-Four and 12/100 ($294.12) Dollars for
each hour the average serviced hours are below 5,100. For purposes of
example only, if the average serviced hours during the Hours
Measuring Period is 4,962, the Purchase Price shall be reduced by
Forty Thousand Five Hundred Eighty-Eight and 56/100 ($40,588.56)
Dollars. For purposes of calculating serviced hours hereunder, there
shall be included (x) any hours serviced during the Hours Measuring
Period by aides and field personnel employed by Buyer who were on the
date of this Agreement employed by either of the Sellers and (y) any
hours serviced during the Hours Measuring Period (except for hours
already credited pursuant to clause (x) hereof) by any employee of
Buyer with respect to cases that were on the date of this Agreement
cases of either of the Sellers, except that no credit shall be given
for cases of Sellers that were removed from Sellers during the Hours
Measuring Period by the Nassau or Suffolk Department of Social
Services at the patient's request or otherwise and subsequently
offered to Buyer in the ordinary rotation of cases by such
departments. In the event of a dispute between Buyer and Sellers as
to the average serviced hours in the Hours Measuring Period, such
dispute shall be submitted to Manzi Pino, P.C., or such other
accounting firm as may be mutually agreeable to the parties, for
resolution, the decision of which firm being final and binding on the
parties.
3.4 Allocation of Purchase Price: The Purchase Price shall be
allocated by the Buyer among the Purchased Assets in accordance with Schedule
3.4 annexed hereto and made a part hereof. Such allocation shall be conclusive
and binding for all purposes and the parties shall file all income or other tax
returns in a manner consistent with such allocation.
ARTICLE IV
CLOSING
4.1 Closing Date: The Closing under this Agreement shall take place
at the offices of Robinson Brog Leinwand Greene Genovese & Gluck, P.C., 1345
Avenue of the Americas, New York, New York 10105, at 10:00 A.M. not later than
ten (10) days after all Required Consents have been obtained in writing (or at
such other time or place as Buyer and Seller may mutually agree). At the
Closing, Sellers shall sell, assign and transfer the Purchased Assets to Buyer,
and Buyer shall pay the Purchase Price in accordance with Section 3.1 and assume
the Assumed Liabilities.
4.2 Sellers Closing Documents: At the Closing, Sellers shall execute
and deliver or cause to be executed and delivered to Buyer, at Sellers' cost and
expense, the following:
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(a) such bills of sale, assignments and other instruments of transfer
as shall be necessary or required to sell, assign and transfer to Buyer all its
right, title and interest in and to the Purchased Assets;
(b) a certificate of each Seller's Secretary, reasonably satisfactory
to Buyer, including a certificate of incumbency of all officers of each Seller
executing any documents pursuant hereto and certifying the resolutions adopted
by each Seller's directors and shareholders approving the sale of the Business
and the Purchased Assets pursuant hereto;
(c) the certificate referred to in Section 9.1(c);
(d) the Escrow Agreement;
(e) the Guaranty;
(f) Assignment to Buyer of all right, title and interest of Sellers
in and to all Leases included in the Purchased Assets (subject to the receipt of
the Required Consents of the landlords), assignment of security deposits made by
Sellers pursuant to any of the Leases, and assignment to Buyer of Sellers'
rights to all damages in respect of exercise of the powers of eminent domain or
similar power whether received before or after the Closing;
(g) New York State sales tax filings, if required;
(h) Certificate of good standing of each Seller from Secretary of
State of the State of New York; and
(i) Such other instruments of transfer, agreements, certificates and
other documents as Buyer shall reasonably request.
4.3 Buyer Closing Documents: At the Closing, Buyer shall execute and
deliver to Seller or effect the following:
(a) the checks or wire transfer as provided in Section 3.1 hereof;
(b) A certificate of Buyer's Secretary, reasonably satisfactory to
Sellers, including a certificate of incumbency of all officers of Buyer
executing any documents pursuant hereto and certifying the resolutions adopted
by Buyer's directors and shareholders approving the purchase of the Purchased
Assets pursuant hereto;
(c) the Escrow Agreement;
(d) the certificate referred to in Section 9.2(c);
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(e) certificate of good standing for Buyer from the Secretary of
State of the State of New York;
(f) A check, subject to collection, payable to the New York State
Sales Tax Bureau in the amount of the state and/or local sales tax on the
portion, if any, of the Purchase Price allocated to Purchased Assets that are
subject to sales tax; and
(g) such other agreements, certificates and documents as Sellers
shall reasonably request.
4.4 Proceedings: All proceedings taken and all documents executed and
delivered by the parties on the Closing Date shall be deemed to have been taken
and executed simultaneously, and no proceeding shall be deemed taken nor any
document executed or delivered until all have been taken, executed and
delivered.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to Buyer, with
the understanding that Buyer is relying on these representations and warranties
in entering into this Agreement, as follows:
5.1 Organization, Good Standing, Capitalization and Ownership: Each
of the Sellers is a corporation duly organized, validly existing and in good
standing under the laws of the State of New York and has all requisite corporate
power and authority to own, operate and lease its properties and the Purchased
Assets and to carry on the Business as the same is now being conducted. Each of
the Sellers only conducts its Business within the State of New York.
5.2 Authority Relative to Agreements, etc.: Each of the Sellers has
the requisite corporate power and authority to execute, deliver and perform its
obligations under this Agreement and each agreement, document, certificate or
instrument contemplated hereby. The execution, delivery and performance by each
Seller of this Agreement and each such agreement, document, certificate or
instrument, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by all necessary action on the part of the
Board of Directors and shareholders of each Seller and except for the Required
Consents, (i) do not require the consent, waiver, approval, license or
authorization of any person, entity, or public authority, (ii) do not violate,
with or without the giving of notice and/or the passage of time, any law, rule,
or regulation, and (iii) subject to Schedule 5.2, will not conflict with or
result in a breach or termination of any provision of, or constitute a default
or give rise to a right of termination or acceleration under, or pursuant to any
corporate charter, by-law, mortgage, deed of trust, indenture, written or oral,
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or agreement, written or oral, or instrument, or any Order, law, rule,
regulation or any other restriction of any kind or character, to which each
Seller is a party or by which it, the Business or any of the Purchased Assets
may be bound, or result in the creation of any lien, charge or encumbrance upon
any of the Purchased Assets or the Business in favor of any third party.
5.3 Effect of Agreement: This Agreement has been duly executed and
delivered by each Seller and constitutes, and each other agreement, document,
certificate or instrument contemplated by this Agreement when executed and
delivered hereunder shall constitute, a legal, valid and binding obligation of
that Seller, enforceable against that Seller in accordance with its terms.
5.4 Title to Assets: Subject to the Required Consents, each of the
Sellers has good, valid and marketable title to its properties and assets, real,
personal and mixed, that would be included in the Purchased Assets if the
Closing took place on the date hereof, free and clear of all mortgages, liens,
pledges, security interests, charges, claims, restrictions and other
encumbrances and defects of title of any nature whatsoever.
5.5 Contracts: Except for the Contracts and Leases, neither Seller is
a party to or bound by any written or oral contracts, leases, licenses,
agreements, permits, plans, commitments or binding arrangements relating to or
affecting the Business or the Purchased Assets which would be binding upon
Buyer. Subject to the Required Consents, each of the Contracts is in full force
and effect and has not been assigned by Sellers, modified, supplemented or
amended, and neither Sellers nor, to Sellers' knowledge, the other party to the
Contracts, are in default under any of the Contracts.
5.6 No Material Adverse Change: Except as set forth in Schedule 5.6,
since November 30, 1996, there has been no change in the business, operations,
assets or condition, financial or otherwise, of the Business from that in
existence on such date other than changes occurring in the ordinary course of
business, which changes have not, in the aggregate, materially adversely
affected, and are not expected to materially adversely affect, the Business, and
no employee or group of employees have terminated or noticed termination of
their employment, voluntarily or involuntarily, which termination(s) would,
except to the extent such employees have been engaged as employees by Buyer,
materially reduce Sellers' workforce or result in the loss of a material part of
Sellers' Business.
5.7 No Outstanding Decrees: There are no Orders of any federal,
state, county, municipal, foreign or other government or of any court,
department, commission, board, bureau, agency or other instrumentality thereof
outstanding against, or relating or applicable to either Seller or to any of its
assets, properties or businesses including the Purchased Assets and the
Business.
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5.8 Compliance with Law; Permits: Sellers have not received notice of
any violation, nor to the best knowledge of Sellers are Sellers in violation of,
any law, statute, ordinance, rule, regulation, order, judgment, writ,
injunction, decree, registration or permit of any foreign, federal, state,
county, municipal or other government or of any court, department, commission,
board, bureau, agency or other instrumentality thereof, in each case limited to
and relating to or in connection with the Purchased Assets or the Business.
5.9 Litigation and Claims: Except as set forth on Schedule 5.9, there
is no action, suit, legal or administrative proceeding, arbitration,
investigation or other proceeding or claim pending or, to the knowledge of
Sellers, threatened against, or affecting Sellers or any part of the Business or
the Purchased Assets that, if adversely determined, might reasonably be expected
to have a material adverse effect on the Business, the Purchased Assets (or the
use, operation or value thereof), or either Seller's ability to perform this
Agreement or any aspect of the transactions contemplated by this Agreement .
5.10 Labor Matters:
(a) Except as set forth on Schedule 5.10, there are no unfair labor
practice, equal employment opportunity or wage and hour complaints against
either Seller pending or threatened in writing before any court, arbitrator or
the National Labor Relations Board or any other governmental or regulatory board
or agency performing functions relating to employee rights or benefits. There is
no labor strike, walkout, dispute, slowdown, disturbance or stoppage pending or
threatened against or involving either Seller. There is no pending or, to the
knowledge of Sellers, threatened representation question or organizational
activities concerning the employees of either Seller.
(b) There is no collective bargaining agreement affecting Sellers and
there is no union representing the interests of any of the employees of either
Seller. Except as set forth on Schedule 5.10, there are no pending suits,
actions, administrative proceedings, arbitration or other proceedings between
Sellers and any of their employees. To the best of their knowledge, except as
set forth in Schedule 5.10, Sellers have complied in all material respects with
all laws relating to the employment of labor, including any provisions thereof
relating to wages, hours, collective bargaining and the payment of social
security and similar taxes, and Sellers are not liable for any arrears of wages
or any taxes or penalties for failure to comply with any of the foregoing.
5.11 Compliance with ERISA; Pension and Benefit Plans: Neither Seller
maintains, or makes contributions to, or has in the past maintained or made
contribution to, any Plan.
5.12 Taxes: Each Seller has duly and timely (after giving effect to
all appropriate extensions) filed or caused to be filed all federal, state,
county, municipal,
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foreign and other income, franchise, excise, sales, use, withholding,
unemployment and other tax returns and reports required to be filed by it. There
are no unpaid Taxes and there are no known or proposed deficiency assessments in
respect of any federal, state, county, municipal or other tax return filed by
Sellers that might adversely affect the Purchased Assets or the Business. All
monies required to be withheld by Sellers from employees for income taxes,
social security and unemployment insurance taxes have been collected or
withheld, and either paid to the respective governmental agencies or set aside
in accounts for such purpose, or accrued, reserved against, and entered upon the
books of Sellers in the ordinary course of the Business in accordance with Past
Practice.
5.13 Insurance: Set forth on Schedule 5.13 is a list of all policies
of liability, fire, workers' compensation, and other forms of insurance
(including self-insurance) owned or held by, or relating to, Sellers. There are
no pending material liability or casualty claims by or against Sellers, the
Purchased Assets or the Business not covered under any such policy. To the best
of Sellers' knowledge, they are not in default with respect to any provision
contained in any insurance policy, nor have Sellers failed to give any notice
regarding or present any pending or threatened claim under any insurance policy
in due and timely fashion.
5.14 No Third Party Options: There are no existing options or rights
held by or in favor of any person or entity to acquire any of the Purchased
Assets or the Business or any interest therein.
5.15 Books of Account: The books, records and accounts of Sellers
maintained with respect to the Business, accurately and fairly reflect the
transactions, assets and liabilities of each Seller with respect to the Business
in all material respects.
5.16 Condition of Tangible Assets: The Fixed Assets are in operating
condition and repair, subject to normal wear, tear and maintenance, are usable
in the regular and ordinary course of business and conform to all applicable
laws, rules and regulations relating to their construction, use and operation.
5.17 Real Property:
(a) All real property and improvements located on the premises leased
to Sellers and included in the Leases are set forth on Schedule 2.1(a). With
respect to each rental property leased to or occupied by Sellers and identified
on Schedule 2.1(a):
(i) Sellers have, prior to execution of this Agreement,
delivered to Buyer a true and complete copy of every Lease with
respect to which either Seller is a tenant, sublessor or subtenant;
and
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(ii) each Lease is in full force and effect and has not
been assigned by the Seller/Tenant, modified, supplemented or
amended, and neither Seller/Tenant nor the landlord under any such
lease is in default under any of the Leases, and no circumstances or
state of facts exists that, with the giving of notice or passage of
time, or both, would permit the landlord under any Lease to terminate
the Lease.
(b) The water, electric, gas and sewer utility services currently
available to Sellers under the Leases are adequate for the present use of the
Leases by Sellers in conducting the Business.
(c) Neither Seller has received a notice, oral or written, from any
insurance carrier of such Seller of fire hazards with respect to the premises
covered by the Leases.
(d) Neither Seller has received a notice, oral or written, that any
governmental body has commenced or intends to exercise the power of eminent
domain or a similar power with respect to all or any part of the property leased
to Sellers included in the Purchased Assets.
(e) To the best of Sellers' knowledge, the Leases and the present
uses thereof comply with the regulations of governmental bodies having
jurisdiction over the relevant property, and neither Seller has received a
notice, oral or written, from any governmental body that the Leases or any
improvements erected or situate on the leased property, or the uses conducted
thereon or therein, violate any regulations of any governmental body having
jurisdiction over the Leases.
(f) The improvements located on the premises subject to the Leases
are in good condition and Sellers have no knowledge that such premises are not
structurally sound or that the mechanical and other systems located therein are
not in operating condition or that any condition exists requiring material
repairs, alterations or corrections.
5.18 Employees: There are, and at Closing there will be, no
liabilities, claims or obligations to or by former or current employees of
Sellers, including without limitation any severance obligations and liabilities
of Sellers in connection with any retirement or pension program, any other
employee benefit plans or collective bargaining, labor or employment agreement
or other similar arrangement or obligations in respect of employee or retiree
health benefits or health care plans and insurance that will become liabilities
or obligations of Buyer after Closing; or any liability arising out of
employment actions taken or not taken by Sellers prior to Closing, including but
not limited to offers of employment, liability under Title VII of the Civil
Rights Act of 1964, the Age Discrimination in Employment Act, any state fair
employment statute, any unemployment or workers'
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compensation statute, or any statutory or common law theory of liability for
alleged wrongful termination, failure to hire, promote, transfer, or provide any
other incident of employment.
5.19 Regulatory Audits: Since January 1, 1992, neither Seller has
been compliance audited or examined by any federal, state, local or private
payor representatives, except for those examinations the reports of which
Sellers have previously delivered to Buyer for review.
5.20 Disclosure: To the best knowledge of Sellers, neither this
Agreement, nor any certificate, exhibit, schedule, list or other document or
data furnished or to be furnished to Buyer by or on behalf of Sellers pursuant
to or in connection with the negotiation, execution and delivery of this
Agreement and transactions contemplated by this Agreement contains or will
contain any untrue statement of any material fact, or omits or will omit to
state a material fact (i) necessary to make the statements herein or therein not
misleading, or (ii) necessary in order to provide Buyer with materially accurate
and substantially complete information with respect to the matters covered
thereby.
ARTICLE VI
REPRESENTATIONS AND
WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers as follows:
6.1 Organization and Good Standing: Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, has all requisite corporate power to own, operate and lease its
properties and carry on its business as the same is now being conducted.
6.2 Corporate Authority: Buyer has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement,
and each agreement, document or instrument required to be delivered hereby. The
execution, delivery and the performance by Buyer of this Agreement, and each
such agreement, document or instrument, and the consummation of the transactions
contemplated hereby and thereby, have been authorized by all necessary action
and except for the Required Consents, (i) do not require the consent, waiver,
approval, license or authorization of any person, entity, or public authority,
(ii) do not violate, with or without the giving of notice and/or the passage of
time, any provision of law, and (iii) will not conflict with or result in a
breach or termination of any provision of, or constitute a default or give rise
to a right of termination or acceleration under, any corporate charter, by-law,
mortgage, deed of trust, indenture or other agreement or instrument or any
order, judgment, decree, statute, regulation or any other restriction of any
kind or character, to which Buyer is a party or by which any of its assets or
properties
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may be bound, or result in the creation of any lien, charge or encumbrance upon
any of the properties or assets of Buyer.
6.3 Effect of Agreement, etc.: This Agreement has been duly executed
and delivered by Buyer and constitutes, and each other document contemplated by
this Agreement when executed and delivered in accordance with the provisions
hereof shall constitute, a legal, valid and binding obligation of Buyer,
enforceable against it in accordance with its terms.
6.4 No Outstanding Decrees: There are no Orders of any federal,
state, county, municipal, foreign or other government or of any court,
department, commission, board, bureau, agency or other instrumentality thereof
outstanding against, or relating or applicable to Buyer or to any of its assets,
properties or business.
6.5 Compliance with Law; Permits: Buyer has not received notice of
any violation, nor to the best knowledge of Buyer is Buyer in violation of, any
law, statute, ordinance, rule, regulation, order, judgment, writ, injunction,
decree, registration or permit of any foreign, federal, state, county, municipal
or other government or of any court, department, commission, board, bureau,
agency or other instrumentality thereof, in each case limited to and relating to
or in connection with its assets, properties or business.
6.6 Litigation and Claims: There is no action, suit, legal or
administrative proceeding, arbitration, investigation or other proceeding or
claim pending or, to the knowledge of Buyer, threatened against, or affecting
Buyer that, if adversely determined, might reasonably be expected to have a
material adverse effect on Buyer's ability to perform this Agreement or any
aspect of the transactions contemplated by this Agreement.
6.7 Disclosure: To the best knowledge of Buyer, neither this
Agreement, nor any certificate, exhibit, schedule, list or other document or
data furnished or to be furnished to Sellers by or on behalf of Buyer pursuant
to or in connection with the negotiation, execution and delivery of this
Agreement and transactions contemplated by this Agreement contains or will
contain any untrue statement of any material fact, or omits or will omit to
state a material fact (i) necessary to make the statements herein or therein not
misleading, or (ii) necessary in order to provide Sellers with materially
accurate and substantially complete information with respect to the matters
covered thereby.
ARTICLE VII
COVENANTS OF SELLER
Seller covenants and agrees as follows:
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7.1 Actions Pending the Closing: With respect to the operation of the
Business and the ownership of the Purchased Assets between the signing of this
Agreement and until the Closing:
(a) Each Seller shall keep its corporate franchise and all other
franchises and rights in full force and effect and shall not acquire any stock
or business or assets of any other person, corporation or entity;
(b) Each Seller shall use its best efforts to keep the Business
intact and to preserve and maintain the Purchased Assets and preserve the
goodwill of its patients, suppliers, referral sources and third party payors;
(c) Each Seller shall conduct the Business and use the Purchased
Assets only in the ordinary and usual course and in a manner consistent with
Past Practice;
(d) Except to the extent consistent with prior practice, neither
Seller shall increase the compensation or rate of compensation payable to any
field personnel nor shall any bonus or other extraordinary compensation be paid
to any such person;
(e) Sellers shall not enter into, create or assume any indebtedness
for borrowed money or create any lien, encumbrance, mortgage or security
interest in any of their properties or assets, or assume, guaranty, endorse or
otherwise become liable with respect to the obligations of any other person or
entity;
(f) Sellers shall continue to maintain in full force and effect all
policies of insurance described on Schedule 5.13 or comparable replacement
insurance;
(g) Sellers shall not amend or enter into any contract, agreement,
lease, plan or other instrument or commitment to which either Seller is a party
which would be binding on Buyer except in the ordinary course of the Business,
and Sellers shall not enter into any long-term commitment to purchase or lease
any capital assets which would be binding on Buyer;
(h) Neither Seller shall enter into any transaction or take any other
action that, if effected or taken prior to the date hereof, would constitute a
breach of the representations, warranties or agreements set forth herein; and
(i) If Sellers become aware of same, Sellers shall promptly notify
Buyer of the existence of any condition or event that would constitute a breach
of the representations and warranties hereunder.
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7.2 Compliance with Conditions: Sellers shall use their reasonable
efforts in good faith to cause the Closing to be consummated and to cause the
execution and delivery of the documents referred to in Section 4.2 hereof and to
bring about the satisfaction of the conditions to the obligations of Buyer set
forth in Section 9.1, provided that Sellers shall not be required to incur any
significant or extraordinary expense or commence any litigation in order to
satisfy such conditions, it being specifically understood that Sellers shall not
be required to make any payments to any landlord to obtain said landlord's
consent to an assignment of lease.
7.3 Access: Buyer acknowledges that each Seller has caused its
officers, directors, employees and agents to give to Buyer and its officers,
employees and counsel reasonable access to the facilities, assets, properties,
books of account, leases, agreements, records and personnel of the Business, and
to furnish to Buyer or its representatives certain information concerning the
Business as Buyer has requested in connection with its due diligence. Pending
the Closing and thereafter, Sellers shall continue to provide Buyer with such
information and data in Sellers' possession as Buyer may reasonably request.
7.4 Cessation of Operations: Commencing on the Closing Date, Sellers
shall suspend all of their business operations and shall diligently proceed to
lay off all of their field personnel, cease providing any and all services to
their patients, and surrender their home care licenses under Article 36 of the
New York State Public Health Law pursuant to the Discharge Plan.
ARTICLE VIII
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
8.1 Compliance with Conditions: Buyer shall use its reasonable
efforts in good faith to cause the Closing to be consummated and to cause the
execution and delivery of the documents referred to in Section 4.3 hereof and to
bring about the satisfaction of the conditions of the obligations of Sellers set
forth in Section 9.2, provided that Buyer shall not be required to incur any
significant or extraordinary expense or commence any litigation in order to
satisfy such conditions, it being specifically understood that Buyer shall not
be required to make any payments to any landlord to obtain said landlord's
consent to an assignment of lease.
8.2 No Solicitation: During the period between the date hereof and
the Closing, Buyer shall not initiate or seek contact with any of Sellers' home
health care aides, Sellers' other employees or any patients (or their family
members) serviced by Sellers; nor shall Buyer (i) directly solicit for
employment any of either Seller's officers, directors, employees or agents,
including Sellers' field personnel or (ii) seek to obtain any of the
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patients serviced by Sellers or their cases, in whole or in part.
Notwithstanding the foregoing, Buyer may during such period engage any personnel
who are on the date hereof employees of Sellers who may respond to Buyer's
newspaper advertisements or who may voluntarily seek employment with Buyer and
may accept patient cases offered to it by the Department of Social Services or
otherwise coming available through the voluntary actions of the subject patient.
8.3 Post-Closing Access: After the Closing, for a period of seven (7)
years from the Closing Date, Buyer (and any successors or assigns) shall retain
and make available to Sellers for any lawful purpose, upon reasonable notice and
at reasonable times, those books and records of the Business delivered by
Sellers to Buyer as provided herein with respect to periods prior to the Closing
and to actions and events after the Closing to the extent they relate to periods
prior to the Closing, provided that such seven year period shall be extended for
as long as is reasonably necessary to enable Sellers or their representatives to
conduct or maintain any actions or suits accruing on or before the Closing Date,
with respect to the specific categories of documents that Sellers notified Buyer
are germane to such actions or suits.
8.4 Maintenance of Records: Buyer (and any successors or assigns)
shall maintain in their current condition all patient records delivered by
Sellers to Buyer for a period commencing on the Closing Date and continuing
until the later to occur of (i) seven (7) years after the date of the last entry
in the medical record or (ii) one (1) year after any patient or former patient
who was a minor on the Closing Date reaches his or her majority, or (iii) any
time period required by applicable law, or Federal, state or local agency
regulation, provided that any such period shall be extended for as long as is
reasonably necessary to enable Sellers or their representatives to conduct or
maintain any actions or suits accruing on or before the Closing Date. If Buyer
ceases to conduct operations prior to the end of such seven year period, Buyer
shall give Sellers sixty (60) days' prior written notice and an opportunity to
accept from Buyer a transfer of such patient records from Buyer, and if Sellers
elect not to accept such patient records, Buyer's obligations under this Section
8.3 shall cease. This covenant shall be contained in any subsequent sale or
transfer of the Business by Buyer.
ARTICLE IX
CONDITIONS TO THE OBLIGATIONS OF THE PARTIES
9.1 Conditions to the Obligations of Buyer: The obligations of Buyer
hereunder shall be subject, to the extent not waived by Buyer, to the following
conditions:
(a) The representations and warranties of Sellers set forth herein
shall be true and correct in all material respects as of the date when made and
shall be deemed to be made again at and as of the time of the Closing and shall
then be true and correct, provided,
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however, that for purposes of this condition, any representation or warranty
that is by its terms limited to the knowledge of Sellers shall not be deemed so
limited.
(b) Each Seller shall have performed and complied with all covenants
required by this Agreement to be performed or complied with by it prior to or at
the Closing.
(c) Each Seller shall deliver to Buyer a certificate, dated as of the
Closing Date, signed by the Chief Executive Officer of such Seller, certifying
to the fulfillment as to such Seller of the conditions specified in
subparagraphs (a) and (b) hereof.
(d) All corporate action required to be taken by Sellers in
connection with the transactions contemplated by this Agreement shall have been
taken, all documents incident thereto shall be reasonably satisfactory in
substance and form to Buyer, and Buyer shall have received such originals or
copies of such documents as it may reasonably request.
(e) No order of any court or governmental agency shall be in effect
that restrains or prohibits the consummation of the transactions contemplated by
this Agreement, or that would limit or adversely affect the ability of Buyer to
own or control the Purchased Assets or to operate the Business, nor shall there
be pending or threatened in writing any action or proceeding by or before any
such court or governmental agency seeking to prohibit or delay or challenging
the validity of this Agreement or the transactions contemplated by this
Agreement.
(f) No suit, action, investigation, inquiry or proceeding by any
person or entity or by any governmental body or other legal or administrative
proceedings shall have been instituted that questions the validity or legality
of this Agreement, the consummation of the transactions contemplated hereby, the
sale of the Business and the Purchased Assets by the Seller, or the operation of
the Business by Buyer.
(g) There shall have been no material adverse change in the nature of
Sellers' Business or in the workforce of home health aides between the date
hereof and the Closing Date. Specifically, but not by way of limitation of this
provision, it shall be deemed a material change in Sellers' business if for the
four weeks immediately prior to the Closing Date, Sellers have averaged fewer
than 4,795 serviced hours in their combined operations, calculated in a manner
consistent with Sellers' usual practice.
(h) Buyer shall have received the consent of the landlord to the
assignment to Buyer of the Lease for the space located at 50 Clinton Street,
Hempstead, New York together with the landlord's estoppel letter concerning Home
Health, or Sellers shall have waived Buyer's obligations to assume the Lease (in
which event Buyer shall not have the right to occupy such premises).
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(i) Buyer shall have received the consent of the landlord to the
assignment to Buyer of the Lease for the space located at 1787 Veterans Highway,
Islandia, New York together with the landlord's estoppel letter concerning HHA,
or Sellers shall have waived Buyer's obligations to assume the Lease (in which
event Buyer shall not have the right to occupy such premises).
(j) Sellers' Closing documents described in Section 4.2 hereof in a
form reasonably satisfactory to Buyer shall have been executed and delivered.
(k) Buyer shall have received all the Required Consents necessary to
be received by Buyer and Sellers shall concurrent with the Closing surrender
their home care licenses under Article 36 of the New York State Public Health
Law. All parties hereto represent each knows of no reason why the Required
Consents should not be issued and all parties shall diligently pursue the
Required Consents. Each party agrees to assist the other from time to time in
complying with reasonable requests for such information as may be required to
obtain the Required Consents.
9.2 Conditions to the Obligations of Sellers: All the obligations of
Sellers hereunder shall be subject, to the extent not waived by Sellers, to the
following conditions:
(a) All representations and warranties of Buyer contained in this
Agreement shall be true and accurate in all material respects as of the date
when made and shall be deemed to be made again at and as of the Closing and
shall then be true and accurate in all material respects.
(b) Buyer shall have performed and complied with all covenants
required by this Agreement to be performed or complied with by it prior to or at
the Closing.
(c) Buyer shall deliver to Sellers a certificate, dated as of the
Closing Date, signed by the Chief Executive Officer of Buyer, certifying to the
fulfillment of the conditions specified in subparagraphs (a) and (b) hereof.
(d) All corporate action required to be taken by Buyer in connection
with the transactions contemplated by this Agreement shall have been taken, all
documents incident thereto shall be reasonably satisfactory in substance and
form to Sellers, and Sellers shall have received such originals or copies of
such documents as they may reasonably request.
(e) No order of any court or governmental agency shall be in effect
that restrains or prohibits the consummation of the transactions contemplated by
this Agreement, or that would limit or adversely affect the ability of Buyer to
own or control the Purchased Assets or to operate the Business, nor shall there
be pending or threatened in writing any
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action or proceeding by or before any such court or governmental agency seeking
to prohibit or delay or challenging the validity of this Agreement or the
transactions contemplated by this Agreement.
(f) Buyer's Closing documents described in Section 4.3 hereof in a
form reasonably satisfactory to Sellers shall have been executed and delivered.
(g) No suit, action, investigation, inquiry or proceeding by any
person or entity or by any governmental body or other legal or administrative
proceedings shall have been instituted that questions the validity or legality
of this Agreement, the consummation of the transactions contemplated hereby, or
the operation of the Business by Buyer.
(h) Sellers shall have received all the Required Consents necessary
to be received by Sellers.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; DAMAGES; INDEMNIFICATION
10.1 General Survival: Notwithstanding any investigation or audit
conducted before or after the Closing Date, each party shall be entitled to rely
upon the representations and warranties in this Agreement to the extent
hereinafter set forth. The parties hereto agree that the representations and
warranties of the parties contained in this Agreement shall survive for the
period of time represented by three months following the expiration of
applicable statute of limitations to claims asserted by a party concerning such
matters.
10.2 Indemnification by Sellers:
(a) Sellers hereby, jointly and severally, covenant and agree with
Buyer that they shall indemnify Buyer and its directors and officers and each of
their successors and assigns, and the directors and officers of any such
successors and assigns, and hold them harmless from, against and in respect of
any Indemnifiable Claims incurred by any of them arising out of:
(i) the operation of the Business prior to the Closing
Date and the liabilities of Sellers, whether accrued, absolute,
contingent or otherwise, to the extent not included in the Assumed
Liabilities;
(ii) any breach of any of the representations and
warranties of Sellers that survive Closing pursuant to Section 10.1
to the extent and for the period of such survival, provided, however,
that for purposes of this
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indemnity, any representation or warranty that is by its terms
limited to the knowledge of Sellers shall not be deemed so limited
and provided further, that Buyer shall be entitled to indemnity under
this Section 10.2(a)(ii) only if and to the extent that Sellers'
breach of any representation or warranty results in monetary damage
to Buyer;
(iii) Buyer's waiver of Sellers' compliance with any
applicable Bulk Sales Law; and
(iv) any action, suit, proceeding, compromise, settlement,
assessment or judgment relating to any Indemnifiable Claim.
(b) If, by reason of the assertion of an Indemnifiable Claim by any
third party, a lien, attachment, garnishment or execution is placed upon any of
the property or assets of an Indemnified Party, Sellers shall furnish an
indemnity bond so as to obtain the prompt release of such lien, attachment,
garnishment or execution. Buyer shall notify Sellers of any Indemnifiable
Claims, promptly after Buyer becomes aware of any such Claims. If any Claims are
litigated, arbitrated, settled or reduced to final judgment and Buyer is
reimbursed by a third party for any costs advanced by Seller pursuant to this
Section 10.2, Buyer shall return such sums to Sellers together with interest to
the extent Buyer received interest on such sums.
10.3 Indemnification by Buyer.
(a) Buyer hereby covenants and agrees with Sellers that it shall
indemnify Sellers and their respective directors and officers and each of their
successors and assigns and the directors and officers of any such successors and
assigns, and hold them harmless from, against and in respect of any
Indemnifiable Claim arising out of:
(i) the operation of the Business on and following the
Closing Date and the liabilities of Buyer, whether accrued, absolute,
contingent or otherwise;
(ii) any breach of any of the representations and
warranties of Buyer that survive Closing pursuant to Section 10.1 to
the extent and for the period of such survival, provided that a
Seller shall be entitled to indemnity under this Section 10.3(a)(ii)
only if and to the extent that Buyer's breach of any representation
or warranty results in monetary damage to that Seller;
(iii) the breach or cancellation of any Contract or the
payment, settlement or other disposition of any of the Assumed
Liabilities; and
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(iv) any action, suit, proceeding, compromise, settlement,
assessment or judgment relating to any Indemnifiable Claim.
(b) If, by reason of the assertion of an Indemnifiable Claim by any
third party, a lien, attachment, garnishment or execution is placed upon any of
the property or assets of an Indemnified Party, Buyer shall furnish an indemnity
bond so as to obtain the prompt release of such lien, attachment, garnishment or
execution. Sellers shall notify Buyer of any Indemnifiable Claims, promptly
after Sellers become aware of any such Claims, which could be made pursuant to
this Section 10.3. If any Claims are litigated, arbitrated, settled or reduced
to final judgment and either Seller is reimbursed by a third party for any costs
advanced by Buyer pursuant to this Section 10.3, such Seller shall return such
sums to Buyer together with interest to the extent such Seller received interest
on such sums.
10.4 Right to Defend, Etc. If the facts giving rise to an
Indemnifiable Claim pursuant to Section 10.2 or 10.3 involve any actual Claim or
demand by any third party against an Indemnified Party, the Indemnifying Party
shall be entitled to notice of and be entitled (without prejudice to the right
of any Indemnified Party to participate at its expense through counsel of its
own choosing) to defend or prosecute such Claim at its expense and through
counsel of its own choosing, which counsel shall be reasonably satisfactory to
the Indemnified Party, if it gives written notice of its intention to do so to
the Indemnified Party; provided that if the defendants in any action shall
include both an Indemnified Party and an Indemnifying Party and the Indemnified
Party shall have reasonably concluded, after consultation with the Indemnifying
Party, that counsel selected by the Indemnifying Party has a conflict of
interest because of the availability of different or additional legal defenses
to the Indemnified Party, the Indemnified Party shall have the right to select
separate counsel to participate in the defense of such action on its behalf, at
the expense of the Indemnifying Party. All notices under this Section 10.4 shall
be given prior to the time by which the interests of the party or parties to be
notified will be materially prejudiced as a result of the failure to have
received such notice. Such Indemnified Party shall cooperate fully in the
defense of such Claim and shall make available to the Indemnifying Party, as the
case may be, all pertinent information under its control relating thereto, but
shall be entitled to be reimbursed, as provided in Section 10.2 or 10.3, for all
costs and expenses incurred by it in connection therewith.
10.5 Non-Waiver: Failure of an Indemnified Party to give reasonably
prompt notice of any Claim or Claims shall not release, waive or otherwise
affect an Indemnifying Party's obligations with respect thereto except to the
extent that the Indemnifying Party can demonstrate actual loss and prejudice as
a result of such failure or that the failure to give notice by the Indemnified
Party was intentional.
10.6 Payment of Claim: Upon the determination of the liability of
Sellers or Buyer under Section 10.2 or 10.3, as the case may be, after payment
by the Indemnified
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Party of, or upon entry of final judgment or reaching of a settlement in respect
of, an Indemnifiable Claim, or determination of the Loss of Indemnified Party of
the Loss occasioned by the breach of a representation and warranty by the
Indemnifying Party, and notice thereof to the Indemnifying Party, the
Indemnifying Party shall within thirty (30) days after receipt of such notice
pay to the Indemnified Party the amount of the payment, judgment, settlement or
Loss, as the case may be, or, if the Indemnified Party has not yet paid the
Indemnifiable Claim to any third party giving rise thereto, pay the amount of
the Indemnifiable Claim thus determined directly to such third party.
10.7 Other Rights and Remedies Not Affected: The indemnification
rights of the parties under this Article X are independent of and in addition to
such rights and remedies as the parties may have at law or in equity or
otherwise for any misrepresentation, breach of warranty or failure to fulfill
any agreement or covenant hereunder on the part of any party hereto, including
without limitation the right to seek specific performance, rescission or
restitution, none of which rights or remedies shall be affected or diminished
hereby; and the Deposit is not intended to be the full measure of any damages to
which Sellers may be entitled in the event of a default by Buyer, provided that
in the event Buyer shall be held liable to Sellers for damages, Buyer shall
receive a credit against such damages in the event the Deposit is paid to
Sellers.
ARTICLE XI
POST-CLOSING OBLIGATIONS
11.1 Further Assurances: If, at any time after the Closing, either
party shall consider or be advised that any further assignments, conveyances,
certificates, filings, instruments or documents or any other things are
necessary or desirable to vest, perfect or confirm in Buyer title to the
Purchased Assets, or to consummate any of the transactions contemplated by this
Agreement, the other party shall, upon request and at the requesting party's
expense, promptly execute and deliver all such proper deeds, assignments,
certificates, filings, instruments and documents and do all things reasonably
necessary and proper to vest, perfect or confirm title in Buyer and to otherwise
carry out the purposes of this Agreement.
11.2 Transfer of Funds: Buyer shall promptly transfer to Home Health
or HHA, as appropriate, any sums received by Buyer after Closing (whether the
result of inadvertent or erroneous collections of accounts receivable,
retroactive increases in rates payable to Sellers prior to Closing, or
otherwise) that are properly payable to the Sellers.
11.3 Restrictive Covenant: In further consideration of the Purchase
Price, after the Closing, Paul Manson and Cora Baliff, the principals of
Sellers, shall not
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(a) for five (5) years after the Closing Date, directly or
indirectly, as principal, agent, partner or consultant or in any other capacity,
or through any affiliated entity over which they have control or with which they
are associated in any way, engage, within the New York State counties of New
York, Bronx, Kings, Queens, Staten Island, Nassau, Suffolk, Westchester,
Rockland, Duchess, Putnam, Sullivan, Ulster and Orange, in any business or
venture that offers home health care services. For purposes of this paragraph,
direct or indirect ownership by Paul Manson and Cora Baliff of securities in the
aggregate not in excess of 2% of any class of securities of a public company
shall not be considered competition with Buyer;
(b) solicit for themselves or any person other than Buyer the
business of any person that is a referral source, customer, patient or client of
Sellers, or was Sellers' referral source, customer, patient or client within two
years prior to the Closing Date;
(c) persuade or attempt to persuade any employee of either Seller or
any individual who was Sellers' employee during the two years prior to the
Closing Date, to leave the employ of Buyer; or
(d) recognizing that Sellers' information regarding the property and
business of Sellers' past and present clients, patients, customers and
contracting parties ("Confidential Information") are valuable, special and
unique assets of Sellers, use for their own benefit or for the benefit of any
other employer or other person or disclose to any business, firm, corporation,
association, venture or other entity or person for any reason or purpose
whatsoever Sellers' Confidential Information or any part thereof.
(e) Paul Manson and Cora Baliff acknowledge and agree that the
covenants and undertakings contained in this Agreement relate to matters that
are of a special, unique and extraordinary character and that a violation of any
of the terms of this Section 11.2 will cause irreparable injury to Buyer and
that the amount of such injury will be difficult, if not impossible, to estimate
or determine and cannot be adequately compensated by monetary damages.
Therefore, they agree that Buyer shall be entitled, in addition to all other
rights and remedies available under this Agreement and applicable law, as a
matter of course, to an injunction, restraining order or other equitable relief
from any court of competent jurisdiction, restraining any violation or
threatened violation of any of such terms by Paul Manson and Cora Baliff and by
such other persons as the court shall order.
ARTICLE XII
MISCELLANEOUS
12.1 Termination of Agreement: This Agreement may be terminated by
Sellers (but only acting jointly) or Buyer by delivering written notice to the
other at any time prior to the Closing Date:
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(a) by the mutual written consent of all the parties hereto; or
(b) by Sellers if there has been a material breach by Buyer of any
representation, warranty, covenant or agreement contained herein or if any
condition contained in this Agreement that must be met by Buyer becomes
impossible to fulfill; or
(c) by Buyer if there has been a material breach by Sellers of any
representation, warranty or agreement or if any condition contained in this
Agreement that must be met by Sellers becomes impossible to fulfill;
(d) by either party if with respect to items 1 through 4 of Schedule
5.2, any of the applicable governmental agencies has formally rejected Buyer's
application for a Required Consent; or
(e) by either party if the Required Consents have not been received
on or before July 1, 1998.
12.2 Termination Liabilities: In the event this Agreement is
terminated pursuant to Section 12.1 above, no party hereto shall have any
liability to any other party hereto for costs, expenses, damages, loss of
anticipated profits or otherwise; provided, that if termination occurs because
of any misrepresentation or breach of warranty herein by a party hereto, such
termination shall not preclude any rights that the other party hereto may have
against such party for costs, expenses, damages, loss of anticipated profits or
otherwise on account of such party's misrepresentation or breach.
12.3 Bulk Transfer Law: Buyer hereby waives compliance by Sellers
with the provisions of any so-called bulk transfer law of any jurisdiction in
connection with the sale of the Purchased Assets to Buyer hereunder. Nothing
herein contained shall be deemed to imply that any of the parties hereto asserts
that any so-called bulk transfer law in fact applies to the within transaction.
12.4 Waivers and Amendments:
(a) This Agreement may be amended, modified or supplemented only by a
written instrument executed by the parties hereto. The provisions of this
Agreement may be waived only by an instrument in writing executed by the party
granting the waiver. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a further or continuing
waiver of such breach or as a waiver of any other or subsequent breach.
(b) No failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall
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any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law.
12.5 Fees and Expenses: Except as otherwise expressly provided in
this Agreement, Buyer shall be responsible for all its fees and expenses
incurred in connection with this transaction, and Seller shall be responsible
for all its fees and expenses incurred in connection with this transaction.
Buyer shall at the Closing pay to Sellers, in addition to the Purchase Price,
the New York State and applicable local sales tax, if any, on the portion of the
Purchase Price allocated to the Fixed Assets.
12.6 Attorneys' Fees: In the event of any litigation concerning any
controversy, claim or dispute between the parties hereto arising out of or in
relation to this Agreement, or the breach hereof, or the interpretation hereof,
the prevailing party shall be entitled to recover from the losing party
reasonable attorneys' fees, and costs and expenses incurred therein or in the
enforcement or collection of any judgment or award rendered therein. The
"prevailing party" means the party determined by the court or arbitration panel
to have most nearly prevailed, even if such party did not prevail in all
matters, and not necessarily the one in whose favor a judgment is rendered.
12.7 Notices: All notices, requests, demands and other communications
required or which may be given under this Agreement shall be in writing and
shall be deemed to have been duly given or made: if by hand, immediately upon
delivery; if by telecopier immediately upon sending, provided it is sent during
business hours on a business day, but if not, then immediately upon the
beginning of the first business day after being sent; if by Federal Express,
Express Mail or any other overnight delivery service, on the first business day
after timely dispatch; and if mailed by certified mail, return receipt
requested, two (2) days after receipt or the return of the notice to sender
marked "unclaimed". All notices, requests and demands are to be given or made to
the parties at the following addresses (or to such other address as either party
may designate by notice in accordance with the provisions of this paragraph):
If to Home Health: c/o Paul Manson
248 West Shore Road
New Preston, CT 06777
Telephone: (860) 868-7541
Telecopier: (860) 868-9375
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<PAGE>
If to HHA: c/o Cora Baliff
72 Bacon Road
Old Westbury, NY 11568
Telephone: (516)
Telecopier: (516)
With a copy to: Hoffinger Friedland Dobrish Bernfeld & Stern, P.C.
110 East 59th Street
New York, New York 10022
Attention: David B. Bernfeld, Esq.
Telephone: (212) 421-4000
Telecopier: (212) 223-3857
If to Buyer: 175-20 Hillside Avenue
Jamaica, New York 11432
Attention: Richard Garofalo, President
Telephone: (718) 657-2966
Telecopier: (718) 291-5987
With a copy to: Robinson Brog Leinwand Greene Genovese & Gluck, P.C.
1345 Avenue of the Americas
New York, New York 10105
Attention: Marshall J. Gluck, Esq.
Telephone: (212) 586-4050
Telecopier: (212) 956-2164
12.8 Entire Agreement: This Agreement and the schedules and exhibits
hereto set forth the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersede any prior
negotiations, agreements, letters of intent, understandings or arrangements
between the parties hereto with respect to the subject matter hereof.
12.9 Schedules: Any information or data disclosed on any schedule to
this Agreement that is also relevant to any other schedule to this Agreement
shall be deemed to be included in such other schedule as if set forth therein in
full.
12.10 Binding Effect; Benefits: This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto, or their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
12.11 Non-Assignability: This Agreement and any rights and
obligations pursuant hereto shall not be assignable by any party hereto without
the prior written consent of the other party.
12.12 Brokers. The parties hereby represent to each other that no
person or entity has acted as investment banker, broker or finder hereunder
except for Stewart
-30-
<PAGE>
Kramer or his business entity, for whose fees Sellers shall be responsible and
except for Robert Chestman, for whose fee Buyer shall be responsible. Sellers
agree to indemnify and hold Buyer harmless from and against any and all
liability to which Buyer may be subjected by reason of the fees for Stewart
Kramer or his business entity, and by reason of any other investment banker's,
broker's, finder's or similar fee with respect to the transactions contemplated
by this Agreement to the extent such fee is attributed to any action undertaken
by or on behalf of Sellers. Buyer agrees to indemnify and hold harmless Sellers
from and against any and all liability to which Sellers may be subjected by
reason of the fee of Robert Chestman and by reason of any other investment
banker's, broker's, finder's or similar fee with respect to the transactions
contemplated by this Agreement to the extent such fee is attributable to any
action undertaken by or on behalf of Buyer or any of its subsidiaries or
affiliates.
12.13 Applicable Law; Venue; Jurisdiction: This Agreement and the
legal relations between the parties hereto shall be governed by and construed in
accordance with the laws of the State of New York, applicable to contracts made
and to be enforced in such state. Sellers and Buyer each hereby consent to the
personal jurisdiction of the courts of the State of New York and the federal
courts situated therein over any judicial proceeding under or that may otherwise
arise out of this Agreement and agree not to contest venue for any such
proceeding commenced in the courts of the State of New York in New York County
or in the United States District Court for the Southern District of New York.
Buyer hereby irrevocably appoints Robinson Brog Leinwand Greene Genovese & Gluck
P.C. as agents for service of process for any such proceeding and each agree
process for any such proceeding may be served by personally delivering a copy of
the process to Robinson Brog Leinwand Greene Genovese & Gluck P.C., 1345 Avenue
of the Americas, New York, New York 10105, Attention: Marshall J. Gluck, Esq.
Sellers hereby irrevocably appoint Hoffinger Friedland Dobrish Bernfeld & Stern,
P.C. as agent for service of process for any such proceeding and agrees process
for any such proceeding may be served by personally delivering a copy of the
process to Hoffinger Friedland Dobrish Bernfeld & Stern, P.C., 110 East 59th
Street, New York, New York 10022, Attention: David B. Bernfeld, Esq.
12.14 Public Announcements: The parties agree that public announce
ments of this transaction shall be made on the following schedule:
(a) Concurrent with the execution hereof, Buyer may issue
a press release containing the text set forth in Exhibit 12.14(a)
annexed hereto and made a part hereof.
(b) On April 17, 1997, provided Buyer has obtained the
applicable approval of the New York State Hospital Review and
Planning Council, or as soon thereafter as such approval has been
obtained by Buyer,
-31-
<PAGE>
Buyer may issue a press release containing the text set forth in
Exhibit 12.14(b) annexed hereto and made a part hereof.
Thereafter, each party is entitled to release to the public any and all
information regarding the terms of this Agreement, including Buyer's filing of
forms 8-K and related public announcements pursuant to applicable securities
laws and regulations.
12.15 No Further Negotiation. Sellers agree that they shall not enter
into any negotiation with any third party for the sale of the Purchased Assets
from the date hereof unless this Agreement is terminated pursuant to its terms.
12.16 No Benefit to Others: The representations, warranties,
covenants and agreements contained in this Agreement are for the sole benefit of
the parties hereto, and their successors and assigns, and they shall not be
construed as conferring any rights on any other persons.
12.17 Section and Other Headings: The section and other headings
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
12.18 Counterparts: This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-32-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date and year first above written.
HOME HEALTH AIDES, INC.
By:___________________________
Name: Paul Manson
Office: President
H.H.A. AIDES, INC.
By:_____________________________
Name: Paul Manson
Office: Vice President
HEALTH ACQUISITION CORP.
D/B/A ALLEN HEALTH CARE SERVICES
By:___________________________
Name: Richard Garofalo
Office: President
WITH RESPECT TO
SECTIONS 3.3(a)(iv) AND 4.2(e) ONLY:
___________________________
PAUL MANSON
___________________________
CORA BALIFF
-33-
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