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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 28, 1997
CONSOLIDATED HEALTH CARE ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Nevada 0-15893 91-1256470
(State or Other Jurisdiction of Commission File No. (I.R.S. Employer
Incorporation or Organization) Identification No.)
38 Pond Street, Suite 305
Franklin, Massachusetts 02038
(Address of principal executive offices) (Zip Code)
(508) 520-2422
Registrant's telephone number including
area code
Not Applicable
Former name, former address and former fiscal
year, if changed since last report
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<PAGE>
Item 2. Acquisition or Disposition of Assets
(a) The disposition
(I) On February 28, 1997 pursuant to an Asset Purchase Agreement,
Consolidated Health Care Associates, Inc. consummated the sale of
three of its four Pennsylvania clinics to Richard and Vicky
Tribbitt. The clinics included those located in Millersburg, PA,
Mechanicsburg, PA, and Shermans Dale, PA. The Company had
purchased these clinics from the Buyer in 1993.
(II) The Asset Purchase Agreement also provided for the assignment of
trade receivables, assignments of leases, collection agreements,
security agreements, a service agreement, the assignment of trade
payables, rights to the use of names similar to "CPRS" and
"RSCP", and certain fixed assets used in the business of the
clinics involved.
The consideration for the sale of the clinics and related assets
was $900,000 in cash and a $150,000 five year note receivable at
9%. The Buyer also assumed $230,000 of associated liabilities.
In January 1997, prior to entering into the Asset Purchase
Agreement, the Company agreed to satisfy a note of the Company
held by the Buyer issued in connection with the 1993 business
acquisition in the amount of $413,259 by assignment to the Buyer
of $484,000 in face amount of receivables, but only to the extent
of collections in the amount due under the note.
Pursuant to the Asset Purchase Agreement, the Buyer agreed to
advance certain operating expenses of the clinics proposed to be
sold, which advances would be deducted from the cash portion of
the purchase price. The Buyer advanced $100,000 which amount was
deducted from the $900,000 cash portion of the sale
consideration.
2
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Pro Forma Financial Data
The following Unaudited Pro Forma Consolidated Balance Sheet and Unaudited
Pro Forma Consolidated Statements of Operations give effect to the sale of three
of the Company's Pennsylvania clinics pursuant to the terms of an Asset Purchase
Agreement between the Company and the prospective purchaser (the "Disposition").
These Unaudited Pro Forma Consolidated Financial Statements have been derived
from the statements of operations of the Company for the fiscal year ended
December 31, 1995 and the nine months ended September 30, 1996. The Unaudited
Pro Forma Consolidated Balance Sheet gives effect to the Disposition as if it
had occurred on September 30, 1996. The Unaudited Pro Forma Consolidated
Statements of Operations give effect to the Disposition as if it had occurred at
the beginning of each of the periods presented.
The Unaudited Pro Forma Consolidated Financial Statements should be read in
conjunction with the notes thereto and the Company's consolidated financial
statements and related notes. The Unaudited Pro Forma Consolidated Financial
Statements are presented for informational purposes only and do not purport to
be indicative of the results of operations that actually would have resulted if
the Disposition had been consummated previously nor which may result from future
operations.
Unaudited Pro Forma Consolidated Balance Sheet
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------
ASSETS ACTUAL ADJUSTMENTS PRO FORMA
Current Assets:
<S> <C> <C> <C>
Cash and cash equivalents $90,782 $ 900,000 (1) $990,782
Accounts receivable, net 2,076,023 (805,168) (2) 1,270,855
Prepaid expenses and other current assets 268,099 (21,500) (3) 246,599
Notes receivable - current portion 0 30,000 (1) 30,000
------------ ------------ ----------
Total current assets 2,434,904 103,332 2,538,236
Property, plant and equipment, net 501,008 (34,763) (4) 466,245
Goodwill, net 2,447,213 0 2,447,213
Note receivable - long term portion 0 120,000 (1) 120,000
Deferred charges and other assets, net 235,445 0 235,445
------------ ------------ ----------
5,618,570 188,569 5,807,139
============ ============ ==========
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities
Accounts payable and notes payable 714,990 (136,299) (2) 578,691
Current portion long-term debt 371,454 0 371,454
Accrued expenses 782,864 (89,701) (2) 693,163
------------ ------------ ----------
Total current liabilities 1,869,308 (226,000) 1,643,308
Long-term debt 1,672,151 (413,259) (2) 1,258,892
Other accrued debt 0 0 0
Stockholders' equity (deficiency):
Common Stock, $0.012 par value,
50,000,000 shares authorized; Issued
16,273,500 195,282 0 195,282
Preferred stock, 10,000,000 shares
authorized; Issued: 1,727,305 1,727,305 0 1,727,305
Accumulated deficit (7,957,366) 827,828 (5) (7,129,538)
Additional paid-in Capital 8,199,390 0 8,199,390
Less - treasury stock, 700,000 shares
at cost (87,500) 0 (87,500)
------------ ------------ ----------
Total stockholders' equity (deficiency) 2,077,111 827,828 2,904,939
------------ ------------ ----------
5,618,570 188,569 5,807,139
============ ============ ==========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Balance Sheet
3
<PAGE>
Notes To Unaudited Pro Forma Consolidated Condensed Balance Sheet
(1) Adjustments to reflect proceeds received by the Company from the
Disposition. The adjustments reflects proceeds of $900,000 in cash and a
$150,000 five year note.
Cash at closing $ 900,000
Note receivable-current portion 30,000
Note receivable-long term portion 120,000
----------
Total purchase price $1,050,000
==========
(2) Adjustment to reflect the exchange of certain accounts pursuant to the
Disposition and related transactions. The buyer will receive $805,168 of
net accounts receivable related to the assets to be disposed of and will
assume $226,000 of accounts payable. In January 1997, the Company agreed to
satisfy a note of the Company held by the buyer in the amount of $413,259,
out of the proceeds of $484,000 in face amount of the aforesaid
receivables. Accordingly, the pro forma adjustments also reflect
elimination of the liability under the note.
(3) Adjustment to reflect deferred financing expense that will be expensed on
the completion of the Disposition. In April of 1996, the Company
renegotiated a promissory note in the principal amount of $413,259, which
note was issued to the buyer in connection with the acquisition by the
Company of certain assets included in the Disposition. In consideration of
the renegotiation of the note, the Company issued to the noteholder 120,000
shares of Common Stock deemed valued at $.25 per share, or $30,000 in the
aggregate. This amount was being amortized as a deferred financing cost.
The remaining unamortized portion of this deferred financing cost in the
amount of $21,500 will be expensed upon the completion of the Disposition.
(4) Adjustment to eliminate the net value of the assets included in the
Disposition, as follows:
Fixed asset acquisition cost $89,030
Accumulated depreciation 54,287
------
Net fixed assets 34,743
======
(5) Adjustment to reflect the gain realized upon the Disposition.
4
<PAGE>
<TABLE>
<CAPTION>
Unaudited Pro Forma Consolidated Statements Of Operations
Fiscal Year Ended Nine Months Ended
December 31, 1995 September 30, 1996
----------------------------------------- --------------------------------------------
Pro Forma Pro Forma
Actual adjustments Pro Forma Actual adjustments Pro Forma
------ ----------- --------- ------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenue, net $ 8,617,798 $ 1,916,763(1) $ 6,701,035 $ 6,901,137 $ 1,614,032(1) $ 5,287,105
Costs and expenses:
Operating costs 7,244,196 1,707,506(2) 5,536,690 5,258,134 1,450,203(2) 3,807,931
Administrative and
selling 1,641,099 0(3) 1,641,099 1,662,655 0(3) 1,662,655
Depreciation and
amortization 230,115 9,600(4) 220,515 175,486 7,600(4) 167,886
--------- --------- --------- --------- --------- ---------
Total operating costs 9,115,410 1,717,106 7,398,304 7,096,275 1,457,803 5,638,472
--------- --------- --------- --------- --------- ---------
Operating loss (497,612) 199,657 (697,269) (195,138) 156,229 (351,367)
Interest expense, net 183,023 31,854(5) 151,169 207,356 28,568(5) 178,788
Other expense (income) (81,780) 0 (81,780) 0 0 0
--------- --------- --------- --------- --------- ---------
Income (loss) before
taxes and extraordinary
income (charge) (598,855) 167,803 (766,658) (402,494) 127,661 (530,155)
Provision for taxes 10,000 0(6) 10,000 55,788 0(6) 55,788
--------- --------- --------- --------- --------- ---------
Income (loss) before
extraordinary income
(charge) (608,855) 167,803 (776,658) (458,282) 127,661 (585,943)
========= ========= ========= ========= ========= =========
Income (loss) before
extraordinary income
(charge) per share of
common stock (0.06) (0.04)
=========== ============
Average number of 13,267,333 14,787,803
common shares =========== ===========
outstanding
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Operations
5
<PAGE>
Notes to Unaudited Pro Forma Consolidated Statements of Operations
(1) Adjustment to eliminate actual net revenues for the periods presented
attributable to the assets to be disposed of.
(2) Adjustment to eliminate direct actual and accrued expenses relating to the
assets to be disposed of, which consist principally of salaries, wages,
fringe benefits and other clinical costs.
(3) Assumes no reduction in the Company's administrative and selling expenses
resulting from the Disposition.
(4) Adjustment to eliminate actual depreciation expense for the periods
presented attributable to the assets to be disposed of.
(5) In January 1997, the Company agreed to satisfy a note of the Company held
by the buyer in the amount of $413,259, out of the proceeds of $484,000 in
face amount of receivables attributable to the assets to be disposed of.
The pro forma adjustment eliminates actual and accrued interest expense
attributable to this note. Lower interest expense resulting from the use of
proceeds of the Disposition to reduce the Company's outstanding debt is not
reflected in the pro forma adjustments.
(6) Excludes extraordinary income resulting from the gain on the sale of the
Disposition. Accordingly, the pro forma adjustments do not assume any
change in Federal and state income tax.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
Date: March 14, 1997 By: __________________________
Robert M. Whitty, President
Date: March 14, 1997 By: __________________________
Raymond L. LeBlanc, Chief Financial Officer
6
<PAGE>
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
Date: March 14, 1997 By: /s/ Robert M. Whitty
-------------------------
Robert M. Whitty, President
Date: March 14, 1997 By: /s/ Raymond L. LeBlanc
---------------------------
Raymond L. LeBlanc, Chief Financial Officer
7
<PAGE>
Exhibit Index
2.1 Asset Purchase Agreement between the Company and Richard and Vicky
Tribbitt, dated February 28, 1997.
2.2 Assumption Agreement & Release between the Company and Richard and Vicky
Tribbitt, dated February 28, 1997.
8
ASSET PURCHASE AGREEMENT
THIS AGREEMENT made and entered into this 28 day of February, 1997, by and
between CENTRAL PENNSYLVANIA REHABILITATION SERVICES, INC. ("CPRS") and REHAB
SERVICES OF CENTRAL PENNSYLVANIA, INC. ("RSCP"), both being Pennsylvania
corporations, parties of the first part, hereinafter collectively referred to as
"Sellers", and RICHARD M. TRIBBITT and VICKY L. TRIBBITT, his wife
("Tribbitts"), parties of the second part, and CENTRAL PA REHABILITATION
SERVICES, INC. ("CPARS") and REHAB SERVICES OF CENTRAL PA, INC. ("RSCPA"), both
being Pennsylvania Close Corporations, parties of the third part, hereinafter
collectively referred to as "Purchasers, witnesses that:
WHEREAS, Sellers own and operate offices for the practice of physical
therapy, occupational therapy and speech therapy in Millersburg, Mechanicsburg
and Shermans Dale, Pennsylvania ("Clinics"); and
WHEREAS, Sellers entered into a certain Letter of Intent dated February 6,
1997, with Tribbitts for the sale by Sellers and the purchase by Tribbitts of
the assets of those Clinics; and
WHEREAS, Tribbitts have assigned most of their rights and obligations in
and under the said Letter of Intent to Purchasers, except for their obligation
to assume those liabilities of Sellers that are owed to Tribbitts, which said
obligation they expressly retain without merger and agree to immediately convey,
together with good will, to Purchasers at Closing. Sellers shall have no
responsibility or liability for the conveyance from Tribbitts to Purchasers as
described in the preceding sentence, except that for the convenience of the
parties and to save additional documentation and closing costs, the parties
agree that Sellers shall convey all assets and liabilities assumed directly to
Purchasers at Closing; and
WHEREAS, Seller and Purchasers have come to an agreement upon the final
terms and conditions of said sale and purchase of assets and wish to document
said terms and conditions as more fully set forth herein.
NOW, THEREFORE, in consideration of the foregoing, as well as in
consideration of the mutual promises, covenants and agreements hereinafter set
forth, the parties hereto covenant and agree as follows:
SECTION 1. SUBJECT MATTER.
1.1 At the Closing, Sellers shall sell, grant, convey, transfer, assign and
deliver to Purchasers, upon the terms and subject to the conditions of this
Agreement, free and clear of all liens, encumbrances and charges except as
specifically set forth in this Agreement, the following assets of CPRS and RSCP:
<PAGE>
(a) all of the furniture, equipment, fixtures and leasehold improvements owned
by Sellers and located at the Clinics as of the date of Closing, including but
not limited to the items set forth on Schedule 1.1(a) attached hereto;
(b) all accounts receivable owed to and owed by Sellers as of the date of
Closing, including accounts for services rendered but not yet billed as of date
of Closing, as set forth on Schedule 1.1(b);
(c) all supplies and inventories located at the Clinics as of the date of the
Closing;
(d) all patient lists of the Clinics as of the date of the Closing;
(e) all contracts for services to be performed as of the date of the Closing and
all provider numbers of Sellers, except for the Medicare provider number of
CPRS, as set forth on Schedule 1.1(e) attached hereto.
(f) all existing leases for the Clinics;
(g) telephone numbers and yellow pages advertising;
(h) consent to the use of corporate names similar to Sellers;
(I) covenants not to compete as set forth in Section B, below.
1.2 At the Closing, Purchasers shall purchase from Sellers, upon terms and
subject to the conditions of this Agreement, and in reliance upon the
representations and warranties of Sellers in this Agreement and the exhibits or
schedules attached hereto, the assets to be acquired as aforesaid, and, as
consideration therefor, shall pay to Sellers the purchase price as more fully
set forth in Section 2, below.
1.3. This is an Agreement only for the acquisition of certain of Sellers'
assets as enumerated herein, including accounts receivable, but does not include
Sellers' cash on hand, which shall remain the sole and separate property of
Sellers. Except as provided in Paragraph 2.2(c), below, all liabilities and
obligations of Sellers, whether known or unknown, direct or contingent, in
litigation or threatened or not yet asserted by attributable to services
rendered or purchased by or products sold or purchased by Sellers prior to the
Closing, are and shall remain the responsibility of Sellers. Without limiting
the generality of the foregoing, specifically retained by Sellers are any
liabilities of the Sellers with respect to any federal,
-2-
<PAGE>
estate, local or foreign income, franchise, payroll or other taxes imposed upon
the Sellers, any obligation of Sellers for any employee grievance pending at the
Closing date, any obligations of Sellers arising out of any litigation pending
at the Closing date, or any claim by Richard's Healthcare for services rendered
before the Closing date, for all of which Sellers shall remain responsible. In
no event shall Purchasers assume or incur any liability or obligation with
respect to any income or other tax payable by sellers incident to or arising as
a consequence of the consummation by Sellers of this Agreement, or any cost or
expense incurred by Sellers incident to or arising as a consequence of such
consummation of the negotiations in connection with this Agreement.
SECTION 2. CONSIDERATION.
2.1 the full purchase price and consideration for this sale and purchase of
assets shall be the sum of $1,050,000.00, plus Purchasers' assumption of certain
of Sellers; liabilities as more fully enumerated and identified in Schedule
2.2(C) attached hereto and made a part hereof, all of which shall be allocated
among the assets to be acquired as follows:
(a) Assets of CPRS:
(1) equipment, furniture, fixtures: $ 556,000.00
(2) accounts receivables: 275,000.00
(3) supplies and inventories: 2,000.00
(4) good will and covenant not
to compete: 145,000.00
(5) liabilities assumed: (135,000.00)
--------------
Total: $ 843,000.00
==============
(b) Assets of RSCP:
(1) accounts receivable: $ 125,000.00
(2) good will and covenant not
to compete: 82,000.00
--------------
Total: $ 207,000.00
==============
(c) Assets to Tribbitts:
(1) good will: $ 100,000.00
(2) liabilities assumed (owed by
Sellers to Tribbitts): (100,000.00)
--------------
Total: 0.00
==============
2.2 Said purchase price and consideration shall be paid by Purchasers to
Sellers at Closing as follows:
<PAGE>
(a) an amount to $900,000.00 less the total amount, if any of all
funds advanced by Tribbitts to Sellers during February 1997, for operating
expenses for the clinics, as well as rent and interest owed to Tribbitts
for the month of February and Maintenance expenses owed to Buildings &
Grounds for the month of February, all as set forth in Schedule 2.2(a)
(which funds are hereby credited against the cash portion of the purchase
price), to be paid in cash to or at the direction of Sellers by bank wire
transfer, certified check, cashiers check or attorney's trust or escrow
account check.
(b) the execution and delivery to sellers of a promissory note in the
principal amount of $150,000.00, with simple interest at the rate of 9% per
annum, monthly payments of at least $2,413.36 amortized over 7 years, and a
balloon payment after five years, as provided in the amortization schedule
attached hereto as Schedule 2.2(b)
(c) Purchasers' written assumption of Sellers' liabilities to the
extent and only as set forth in Schedule 2.2(C) attached hereto and made a
part hereof, and no others. Purchasers' assumption hereunder is expressly
limited to the creditors and amounts as set forth on Schedule 2.2 (c).
Amounts in excess of that set forth on Schedule 2.2(C) for particular
claim, or claims not included in Schedule 2.2(c), and the entire amount of
any claim by Richard's Healthcare, shall remain the liability of Sellers,
who hereby agree to indemnify and save Purchasers harmless therefrom in
accordance with Paragraph 10.2 below;
(d) Purchasers' written assumption of the existing leases for the
Clinics.
2.3. As security for the prompt payment of the promissory note from
Purchasers to Seller herein, Purchasers hereby grant to Sellers a present and
continuing security interest in all of Purchasers' accounts receivable, whether
acquired hereby or generated after Closing. Purchasers will execute and deliver
to Sellers financing statements, together with other information, documents or
copies as may be necessary to perfect Sellers' security interests against the
rights or interests of third persons, except that Sellers' security interests
may be subordinate to any similar security interest required by any corporate
lender lending funds to Purchasers to complete this transaction. Purchasers
shall have the right to cure any default before disposition of Collateral by
Sellers.
Section 3. Closing.
3.1 The Closing of this sale and purchase of assets shall be held on
February 28, 1997, at or about 11:30 o'clock A.M., at the offices of Marlin R.
McCaleb, Esquire, 219 East Main Street, Mechanicsburg, Pennsylvania.
3.2 At the Closing, Sellers shall deliver to Purchasers such bills of sale,
endorsements, assignments and other good and sufficient instruments of
conveyance and transfer, in form and substance reasonably satisfactory to
Purchasers' counsel, as shall be effective to vest in Purchasers all of Sellers'
right, title and interest in and to the assets to be acquired. The assignments
shall include an assignment of al contracts for services and provider numbers as
set forth in Schedule
<PAGE>
1.1(e) attached hereto and made a part hereof. To facilitate the assignment of
accounts receivable, the parties shall enter into a Collection Agreement at
Closing that will provide for the disposition of accounts receivable represented
by checks or other drafts payable to Sellers.
3.3 At the Closing, Purchasers shall pay to Sellers the purchase price and
consideration in accordance with Section 2 hereof.
3.4. At prior to the Closing, Sellers shall deliver all necessary
releases of liens and Uniform Commercial Code termination statements in forms
reasonably acceptable to Purchasers' counsel so that sellers' title to the
assets to be acquired is in conformity with Paragraph 4.3 hereof.
3.5 At the Closing Sellers shall assign to Purchasers all of Sellers'
rights, title and interest as tenants in and under the existing leased for the
Clinics and Purchasers shall assume and pay the rent accruing under said leases
from and after the date of Closing. Sellers shall be released from further
obligation under the leases held by Tribbitts. Sellers shall also be released
from the lease for the Shermans Dale office or Purchasers hereby are free to
indemnify and save Sellers harmless from any liability thereunder in accordance
with Paragraph 10.3, below.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF SELLER.
To the best of their knowledge and belief, Sellers represent and warrant as
follows:
4.1 Each Seller is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania, each has the
corporate power and authority to own its properties and assets and to carry on
its business and each has the corporate power to enter into the Agreement and to
carry out its obligations hereunder.
4.2 This sale and purchase of assets, and the terms and conditions of this
Agreement, have been approved by the shareholders and the Boards of Directors of
CPRS and RSCP.
4.3 Sellers own outright, and have good and marketable title to, all of the
assets to be acquired hereunder free and clear of all liens, pledges, mortgages,
security interests, conditional sales contracts or other encumbrances or
conflicting claims of any nature whatsoever, except only certain claims and
liens in favor of Tribbitts as more fully set forth is a certain letter
agreement dated January 22, 1997, and Sellers shall be released from liability
on all such claims and liens in favor of Tribbitts at Closing.
4.4 Seller have filed or will cause to be filed all federal, state and
local income, unemployment and payroll withholding tax returns and reports of
the Sellers due as of the date of Closing and have paid or caused to be paid all
taxes or assessments of taxes due as of date of Closing, except taxes or
assessments that are being contested in good faith and which have been
adequately reserved against (with proof of such reserves having been given to
Purchasers). Such returns may not have been audited and Sellers have received no
notice of, and to the knowledge of Sellers there is no pending or threatened
proceedings or claims by any governmental agency for assessment or collection of
taxes from Sellers. All such returns that have been filed and provided
<PAGE>
or displayed to Purchasers are true, complete and accurate, have been prepared
on the same basis as that of previous years and in accordance with all
applicable laws, regulations and requirement, and accurately reflect the taxable
income (or other measure of tax) of Sellers.
4.5 There is no dispute, claim, action, suit, proceeding, arbitration or
Sellers, threatened against Sellers, their Clinics, or the assets being acquired
by Purchasers, and Sellers are not in default with respect to any order, writ,
injunction or decree of any court or governmental department, commission, board,
bureau, agency or instrumentality, which involves the possibility of any
judgement or liability which may result in any material adverse change in the
financial condition of Sellers, their Clinics or the assets being acquired by
Purchasers.
4.6 Sellers are not parties to any debenture, not, conditional sale loan or
other borrowing agreement with respect to their Clinics or any of the assets
used therein, including but not limited to the assets being acquired pursuant to
this Agreement, except as provided in Paragraph 4.3 above.
4.7 Sellers neither own, have in existence, have any right or interest to
nor use in their Clinics:
(a) any trademark, registered trade or registered fictitious name or
any copyright, invention, letters patent or application for letters patent;
(b) any equipment lease by which Sellers lease from any person or
entity any of the equipment, apparatus, furniture, fixtures or other
personal property being conveyed hereunder (except that to the extent there
is a lease for the copier it is being assigned to Purchasers);
(c) any agreement or other arrangement under which the Sellers have
agreed or are obligated to render services at any time after the Closing
date, except for contracts being conveyed hereunder as set forth in
Schedule 3.2;
4.8 Sellers are not subject to any judgment, order, writ, injunction or
decree which materially adversely affects, or, so far as the Sellers can now
foresee, may in the future materially adversely affect the Clinics or the assets
being acquired by Purchasers hereunder.
4.9 Sellers have complied with and are not in default under, or in
violation of, any law, ordinance, rule, regulation or order (including, without
limitation, any environmental, zoning, safety, health or price or wage control
law, ordinance, rule, regulation or order) applicable to their Clinics as
presently constituted which materially adversely affects, or, so far as the
Sellers can now foresee, may in the future materially adversely affect their
Clinics or the assets being acquired by Purchasers hereunder.
4.10 No representation or warranty by Sellers in this Agreement or in any
other exhibit, list, certificate or document delivered pursuant to this
Agreement, contains or will contain at Closing any untrue statement of material
fact or omits or will omit to state any material fact
<PAGE>
necessary to make any statement herein and therein not misleading.
4.11 All financial information, including but not limited to records or
liabilities, furnished by Sellers to Purchasers on or before the date of Closing
are true, complete and accurate as of the date that they were prepared, and are
in accordance with the books and records of Sellers as of the date whey they
were prepared.
4.12 As of the date of Closing, with respect to any pension,
profit-sharing, stock bonus, stock option, employment or severance agreements,
deferred compensation plan, or other employment plan ("Plan") maintained by or
on behalf of Sellers for the benefit of Sellers' employees: (a) are in
substantial compliance with the Employee Retirement Income Security Act of 1974,
as amended and the regulations promulgated thereunder ("ERISA") and the Internal
Revenue Code ("IRC"); (b) Sellers have not engaged in any activity with respect
to any such Plan that could subject Sellers to any tax or penalty imposed under
ERISA or the IRC; (c) no event has occurred and there exist no conditions or set
of circumstances in connection with which Sellers could be, directly or
indirectly, subject to any material liability under ERISA, the IRC or any other
law, regulation or governmental order; (d) there is no material pending or
threatened litigation relating to any Plan; (e) no Plan has been terminated, no
filing for termination has been made by Sellers, and no proceeding has been
initiated by the Pension Benefit Guaranty Corporation ("PBGC") to terminate any
such Plan, and Sellers have not incurred and do not reasonably expect to incur
any liability, directly or indirectly, with respect to any Plan termination,
whether by the PBGC or otherwise; (f) all contributions required to be made
under the terms of any Plan, as of the date of Closing, have been timely made,
or if not due until after the date of Closing will be timely made; and (g) the
consummation of the transactions contemplated by this Agreement will not result
in any liability of Sellers with respect to any such Plan.
4.13 There have been no amendments to the Articles of Incorporation or the
By-Laws of Sellers since March 31, 19993.
4.14 The total amount of all liabilities of Sellers for which Sellers
remain liable as provided in Paragraph 1.3, above, does not exceed the sum of
$1,100,000.00 being paid by Purchasers to Sellers as provided in Paragraph 2.1,
above.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
5.1 Each Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania, each has the
corporate power and authority to own its properties and assets and to carry on
its business and each has the corporate power to enter into this Agreement and
to carry out its obligations hereunder.
5.2 This sale and purchase of assets, and the terms and conditions of this
Agreement, have been approved by the shareholders of CPARS and RSCPA.
5.3 This Agreement and the Note described in Paragraph 2.2(b), above, do
not violate
<PAGE>
or breach the Articles of Incorporation or the By-Laws of Purchasers, This
Agreement constitutes, and the Note when issued will constitute, the legal,
valid and binding obligations of Purchasers, enforceable in accordance with
their terms, except as enforceability may be limited by bankruptcy,
reorganization, insolvency or other laws affecting creditors rights generally or
equitable principles of specific performance.
5.4 Purchasers hereby agree to indemnify and save Sellers harmless from any
liability for the liabilities being assumed by Purchasers as set forth in
Paragraph 2.2 (c), above, in accordance with Paragraph 10.3, below.
SECTION 6. CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS.
All obligations of the Purchasers under this Agreement are subject to the
fulfillment, prior to or at the Closing, of each of the Following conditions
unless otherwise waived in writing by Purchasers:
6.1 Sellers' representations and warranties contained in this Agreement or
in any list, certificate or document delivered pursuant to the provisions hereof
shall be true at and as the time of Closing.
6.2 Sellers shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing.
6.3 There shall not have been a material adverse change, occurrence or
casualty in or to the assets being acquired hereunder, whether covered by
insurance or not.
6.4 Sellers shall have delivered to Purchasers the documents and other
items described in Paragraphs 3.2, 3.4 and 3.5 hereof.
6.5 Sellers shall have delivered to Purchasers true copies, certified by
the corporate secretaries, of the resolutions of the shareholders and of the
Boards of Directors of CPRS and RSCP approving and authorizing this transaction
and of the Articles of Incorporation and the By-Laws of CPRS and RSCP as the
same are in force on the date of Closing
6.6 Sellers shall have delivered to Purchasers the written certificates of
the corporate secretaries identifying the directors and shareholders of CPRS and
RSCP as of the dates of the resolutions described in Paragraph 6.5, above, and
the officers of CPRS and RSCP as of the date of Closing.
6.7 Sellers shall have delivered to Purchasers the written certificates of
the Presidents of CPRS and RSCP confirming the satisfaction of the conditions
set forth in Paragraphs 6.1, 6.2 and 6.3, above.
6.8 There shall not be any pending, or to the knowledge of Sellers,
threatened action,
<PAGE>
proceeding or investigation by or before any court, arbitrator, governmental
body or agency which shall seek to restrain, prohibit or invalidate the
transactions contemplated hereby or which, if adversely determined, would result
in a breach of a representation, warranty or covenant by either party herein.
6.9 Sellers shall have delivered to Purchasers a favorable written opinion
of Sellers' counsel, dated as of the Closing date, addressed to Purchasers.
SECTION 7. CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS.
All obligations of the Sellers under this Agreement are subject to the
fulfillment, prior to or at the Closing, of the following conditions:
7.1 Purchasers' representations and warranties contained in this Agreement
shall be true at and as of the time of Closing.
7.2 Purchasers shall have performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by them
prior to or at the Closing.
7.3 Purchasers shall have paid the purchase price to Sellers as described
in Section 2, above, including without limitation payment of the cash portion of
the purchase price and execution and delivery of the note and related financing
statements pertaining to the balance of the purchase price.
7.4 Purchasers shall have delivered to Sellers true copies, certified by
the corporate secretaries, of the resolutions of the shareholders of CPARS and
RSCPA approving and authorizing this transaction and of the Articles of
Incorporation and the By-Laws of CPARS and RSCPA as the same are in force on the
date of Closing.
7.5 Purchasers shall have delivered to Sellers the written certificates of
the corporate secretaries identifying the shareholders of CPARS and RSCPA as of
the dates of the resolutions described in Paragraph 7.4, above, and the officers
as of the date of Closing.
7.6 Purchasers shall have delivered to Sellers the written certificates of
the Presidents of CPARS and RSCPA confirming the satisfaction of the conditions
set forth in Paragraphs 7.1 and 7.2, above.
7.7. There shall not be any pending or threatened action, proceeding or
investigation by or before any court, arbitrator, governmental body or agency
which shall seek to restrain, prohibit or invalidate the transactions
contemplated hereby or which, if adversely determined, would result in a breach
of a representation, warranty or covenant of either party herein.
7.8 Purchasers shall have delivered to Sellers a favorable written opinion
of Purchasers' counsel, dated as of the Closing date, addressed to Sellers.
<PAGE>
SECTION 8. COVENANT NOT TO COMPETE.
8.1 In consideration of that portion of the purchase price allocated to
these covenants, Sellers, Consolidated Health Care Associates, Inc. ("CHCA"),
PTS Rehab, Inc. ("PTS") and Robert M. Whitty, individually, agree that for a
term of 5 years after the date of Closing, they will not engage directly or
indirectly, whether individually or in partnership or in conjunction with any
other person, firm, association, syndicate or corporation, as principal, agent,
shareholder, employee, officer, director, consultant or in any manner
whatsoever, in the conduct or operation of an office for the practice of
physical therapy, occupational therapy or speech therapy within 25 miles of the
Millersburg, Mechanicsburg or Shermans Dale offices of Purchasers.
8.2 The parties agree that the limitations set forth in Paragraph 8.1,
above, are reasonable in time and geographic scope, and if any provision thereof
is held invalid or unenforceable, the remainder shall nevertheless remain in
full force and effect. In particular, Sellers, CHCA, PTS and Robert M. Whitty
agree that if any court of competent jurisdiction shall determine that the
duration or geographical limit of the foregoing non-competition covenant is
invalid or unenforceable, it is the intention of the parties that it shall not
be terminated thereby but shall be deemed to be amended to the extent required
to render it valid and enforceable, such amendment to apply only with respect to
the jurisdiction of the court making such adjudication.
8.3 Sellers, CHCA, PTS and Robert M. Whitty further acknowledge and agree
that any violation of any of the covenants of this Section 8 would cause
substantial and irreparable injury to Purchasers, whereupon Sellers, CHCA and
PTS, and Robert M. Whitty, jointly and severally, may be enjoined from any
breach or threatened breach thereof, in addition to, but not in limitation of,
any other rights or remedies to Purchasers are or may be entitled to at law or
in equity or under this Agreement or otherwise.
8.4 CHCA, PTS and Robert M. Whitty join in the execution of this Agreement
for the purpose of accepting and agreeing to all terms and conditions of this
Section 8 and to be bound thereby.
SECTION 9. BULK SALES.
9.1 Sellers shall furnish Purchasers with a list of Sellers' existing
creditors signed and sworn to by Sellers, containing the business address and
amount due to each creditor. Sellers shall provide Purchasers with a written
opinion of Sellers' counsel that the bulk sales provisions of Massachusetts law
(M.G.L.A. c. 106, 6.-101 et seq.) do not apply to this transaction, setting
forth the reasons therefor and the legal authorities relied upon.
9.2 Prior to closing, Sellers have prepared and caused to be filed Form
REV-181, Application for Tax Clearance Certificate, with the Pennsylvania
Department of Revenue and the Pennsylvania Department of Labor and Industry, for
all corporate income, unemployment compensation and payroll withholding taxes.
Sellers shall pay all taxes determined by either Department to be due and owing
by Sellers and Sellers hereby agree to indemnify and save
<PAGE>
Purchasers harmless from the same in accordance with Paragraph 10.2, below.
SECTION 10. INDEMNIFICATION.
10.1 All representations, warranties and agreements made by Sellers and
Purchasers in this Agreement or in any document or certificate delivered
pursuant hereto shall be deemed and construed to survive the Closing.
10.2 Sellers shall defend, indemnify and hold Purchasers harmless from and
against any and all liabilities and obligations or, or claims against, Sellers
and all actual or potential claims, demands, liabilities, damages, losses and
out-of-pocket expenses including reasonable attorneys and accountants fees,
whether or not reduced to judgment, order or award, caused by or arising out of
the breach of any agreement of or any representation or warranty or
indemnification made by Sellers in this Agreement or in any exhibit, list,
certificate or document delivered by Sellers pursuant hereto, excepting only for
those liabilities expressly assumed by Purchasers as provided in Section 2,
above.
10.3 Purchasers shall defend, indemnify and hold Sellers harmless from and
against all actual or potential claims, demands, liabilities, damages, losses
and out-of-pocket expenses including reasonable attorneys and accountants fees,
whether or not reduced to judgment, order or award, caused by or arising out of
the breach of any agreement of or any representation or warranty or
indemnification made by Purchasers in this Agreement or in any exhibit, list,
certificate or document delivered by Sellers pursuant hereto, excepting only for
those liabilities expressly assumed by Purchasers as provided in Section 2,
above.
10.4 Promptly after receiving notice of a claim, or service of process by
or from any third person in any litigation, in respect of which indemnity may be
sought from the other party pursuant to this Section 10, the party so served or
notified shall notify the indemnifying party of the claim or the commencement of
such litigation and the indemnifying party shall be entitled to assume the
defense thereof at its expense with counsel of its own choosing. The
indemnifying party shall not settle or compromise any claim without the consent
of the party to be indemnified.
10.5 If and to the extent that any party, after compliance with the terms
of Paragraph 10.4, above, is required to pay any claim, liability or expense for
which it is indemnified against by another party as provided in Paragraph 10.2
or 10.3, above, the indemnified part shall have the right of set off of such
payment, dollar for dollar, against any amounts owed by it to the indemnifying
party, including with respect to Purchasers any amounts of principal and/or
interest owed by them to Sellers under the promissory note described in Section
2, above. This right of set off shall be in addition to, but not in limitation
of, any other rights or remedies that Purchasers may have against Sellers at law
or in equity, or under this Agreement or otherwise.
SECTION 11. POST-CLOSING MATTERS.
11.1 At the request of Purchasers from time to time, Sellers will execute
and deliver such further reasonable instruments and will take such other
reasonable action more effectively to
<PAGE>
consummate the transactions contemplated by this Agreement and to put Purchasers
into ownership, possession and control of all of the assets being acquired
hereunder to the exclusion of all others who claims may have arisen prior to the
Closing date.
11.2 Sellers shall be responsible for all present or future litigation and
claims for injury and related expenses arising out of their operation of the
Clinics up to the time of Closing, and Sellers shall be responsible for all
claims for injury arising out of services rendered by them or their agents and
employees prior to the Closing date. Sellers shall direct or control, or
continue to direct or control, as the case may be, the conduct of such
litigations. Purchasers shall cooperate with any reasonable requests of the
Sellers or their attorneys in the defense of such litigation, including the
availability of records, books or other documents included in the assets to be
acquired hereby. To the extent that testimony of Purchaser' employees is
necessary, Purchasers shall make them available consistent with the needs of the
business and shall be reimbursed for all out-of-pocket expenses incurred by the
Purchasers or individual employees and pro-rata salaries and payroll costs for
the time such employees devote to complying with the requests of Sellers
hereunder.
11.3 Purchasers shall have no liability for, and Sellers agree to defend,
indemnify and hold the Purchasers harmless with respect to any claims for wages
or otherwise arising out of services rendered prior to the Closing date by any
persons employed prior to the Closing by Sellers, in accordance with Paragraph
10.2, above. Sellers shall have no liability for, and Purchasers agree to
defend, indemnify and hold the Sellers harmless with respect to any claims for
wages or otherwise arising out of services rendered from and after the Closing
date by any persons employed from and after the Closing date by Purchasers, in
accordance with Paragraph 10.3, above. An employee of Sellers who participated
in any Plan described in Paragraph 4.12, above, shall have the rights, upon
termination of employment with Sellers, as provided in that Plan, including, to
the extent permitted by the Plan, ERISA and the IRC, the right to roll over any
lump sum distribution in the Plan into another Plan in which the employee is
then a participant (if permitted by the other Plan).
11.4 Upon receipt of a Tax Clearance Certificate as described in Paragraph
9.2, above, Sellers shall immediately provide Purchaser with a true copy of
same.
11.5 Sellers shall arrange with Capital Healthcare Financing ("Capital")
for the termination of the Intercreditor Agreement dated January 22, 1997,
between Capital on the one part and Tribbitts on the other part.
11.6 In the event of a default in payment by CPRS of any amount owed by it
under a Therapy Services Agreement of this same date, between CPRS and CPARS, or
under a Lease Agreement of this same date, between CPRS and Tribbitts,
Purchasers shall have the right of set off, dollar for dollar, against any
amounts of principal and/or interest owed by them to Sellers under the
promissory note described in Section 2, above.
<PAGE>
SECTION 12. MISCELLANEOUS
12.1 This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the Commonwealth of Pennsylvania and any actions to
enforce, or to recover damages for the breach of, any of the terms and
conditions hereof shall be brought only in the sate or federal courts of
Pennsylvania.
12.2 Each party hereto shall pay its own expenses incidental to the
preparation of this Agreement and the consummation of the transactions
contemplated hereby.
12.3 This Agreement shall not be assignable by either party without the
prior written approval of the other party. To the extent assignable, this
Agreement shall be binding upon, and inure to the benefit of, the Purchaser and
their successors and assigns and the Seller and their successors and assigns.
12.4 Any notice, communication, demand or other writing (a "notice")
required or permitted to be given, made or accepted by any party to this
Agreement shall be given by personal delivery or by depositing the same in the
United States mail, properly addressed, postage prepaid and registered or
certified with return receipt requested. A notice given by personal delivery
shall be effective upon delivery and a notice given by registered or certified
mail shall be deemed effective on the second day after such deposit. For
purposes of notice, the addresses of the parties shall be, until changed by a
notice given in accordance herewith, as follows:
If to the Purchaser:
Central PA Rehabilitation Services, Inc.
75 Evelyn Drive
Millersburg, PA 17061
Rehab Services of Central PA, Inc.
75 Evelyn Drive
Millersburg, PA 17061
With a required copy to:
Marlin R. McCaleb, Esquire
219 East Main Street
P.O. Box 230
Mechanicsburg, PA 17055
If to the Seller:
Central Pennsylvania Rehabilitation Services, Inc.
c/o Consolidated Health Care Associates, Inc.
38 Pond Street
Franklin, MA 02038
<PAGE>
Rehab Services of Central Pennsylvania, Inc.
c/o Consolidated Health Care Associates, Inc.
38 Pond Street
Franklin, MA 02038
With a required copy to:
Blake J. Godbout, Esquire
DiMaria & Godbout
15 Broad Street
Boston, MA 02109
12.5 This document states the entire agreement reached between the parties
hereto with respect tot the transactions contemplated hereby and supersedes all
prior or contemporaneous agreements, understanding, representations and
warranties between the parties, and may not be amended except by written
instrument executed by the parties hereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
the day and year first above written, intending thereby to be legally bound.
CENTRAL PENNSYLVANIA REHABILITATION SERVICES, INC.
By: /s/Robert M. Whitty
-----------------------
Robert M. Whitty
President
REHAB SERVICES OF CENTRAL PENNSYLVANIA, INC.
By: /s/Robert M. Whitty
-----------------------
Robert M. Whitty
President
CONSOLIDATED HEALTH CARE ASSOCIATES, INC.
By: /s/Robert M. Whitty
-----------------------
Robert M. Whitty
President
PTS REHAB, INC.
By: /s/Robert M. Whitty
-----------------------
Robert M. Whitty
President
<PAGE>
By: /s/Robert M. Whitty
-----------------------
Robert M. Whitty
(Individually)
(Robert M. Whitty executes this Agreement only for the purpose of accepting the
terms and conditions of Section 8 and is not obligated under the provision of
any other Section.)
CENTRAL PA REHABILITATION SERVICES, INC.
By: /s/Richard M. Tribbitt
-----------------------
Richard M. Tribbitt
President
REHAB SERVICES OF CENTRAL PA, INC.
By /s/Richard M. Tribbitt
-----------------------
Richard M. Tribbitt
President
/s/Richard M. Tribbitt
-----------------------
Richard M. Tribbitt
(Individually)
/s/Vicky L. Tribbitt
-----------------------
Vicky L. Tribbitt
(Individually)
<PAGE>
Existing Contracts of Central Pennsylvania Rehabilitation Services, Inc.
1. CAIU
P.O. Box 489
Summerdale, PA 17093-0489
2. Professional Home Health Care Agency
325 North 2nd Street
P.O.Box 200
Wormleyburg,PA 17043
Existing Contracts of Rehabilitation Services of Central Pennsylvania, Inc.
1. Health Reach Home Care & Hospice
409 S. Second Street
Suite 2F
Harrisburg, PA 17104-1612
2. Kimberly Care & Nurses House Call (Olsten Health Services)
205 Gradview Ave.
Suite 404
Camp Hill, PA 17011
3. Cumberland/Perry MHMR
Suite 301
Human Services Bldg.
16 W. High Street
Carlisle, PA 17013-2963
4. Dauphin County MHMR
Human Services Bldg.
25 S. Front Street
Harrisburg, PA 17101-2025
.
5. Easter Seal Society
331 Bridge Street
New Cumberland, PA 17070
6. The Kepler Home
44 S. Market Street
Elizabeth, PA 17023
7. Kinkora Pythian Home
25 Cove Road
Duncannon, PA 17020
<PAGE>
8. Comfort Care
P.O. Box 309
Camp Hill, PA 17001-0309
9. Millersburg Community Nurse Association
Market Street
Millersburg, PA 17061
10. Milton Hershey School
P.O. Box 830
Harrisburg, PA 17061
11. Susquehana Lutheran Village
990 Medical Road
Millersburg, PA 17061
12. Staff Builders
1820 Linglestown Road
Harrisburg, PA 17061
13. CASHA
1300 Market Street
Suite 200
Lemoyne, PA 17043
Provider Numbers for Central Pennsylvania Rehabilitation Services, Inc.
Blue Shield: No. 124933
Keystone Health Plan: No. 396549
Provider Numbers for Central Pennsylvania Rehabilitation Services, Inc.
Medical Assistance: No. 1503864
EXHIBIT 2.2
ASSUMPTION AGREEMENT
In accordance with the provisions of Paragraph 2.2(c) of the Asset Purchase
Agreement of this date providing for the sales of assets by CENTRAL PENNSYLVANIA
REHABILITATION SERVICES, INC. ("CPRS") and REHAB SERVICES OF CENTRAL
PENNSYLVANIA, INC. ("RSCP"), Sellers, to CENTRAL PA REHABILITATION SERVICES,
INC. ("CPARS") and REHAB SERVICES OF CENTRAL PA, INC. ("RSCPA") Purchasers,
Purchasers hereby assume and agree to pay and discharge those liabilities of
Sellers as set forth in Schedule 2.2(c) of the Asset Purchase Agreement, which
is incorporated herein by reference.
Purchasers hereby agree to indemnify and hold Sellers harmless from and
against any liability on account of the liabilities hereby assumed.
IN WITNESS WHEREOF, Purchasers have caused this Assumption Agreement to be
executed this 28th day of February, 1997.
CENTRAL PA REHABILITATION SERVICES, INC.
By: Richard M. Tribbitt
- ----------------------------------
Richard M. Tribbitt
President
REHAB SERVICES OF CENTRAL PA, INC.
By: Richard M. Tribbitt
- ----------------------------------
Richard M. Tribbitt
President
RELEASE
For good and valuable consideration received, we hereby release and forever
discharge Consolidated Health Care Associates, Inc., Central Pennsylvania
Rehabilitation Services, Inc. and Rehab Services of Central Pennsylvania, Inc.,
from all liabilities to us that are included in the foregoing Assumption of
Liabilities, including but not limited to a certain Judgment Note given to us by
CPRS on January 22, 1997, in the amount of $80,522.63.
By: Vicky L. Tribbitt By: Richard M. Tribbitt
- ---------------------------------- ----------------------------------
Vicky L. Tribbitt Richard M. Tribbitt
Date: February 28, 1997
