SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
date of Report (Date of earliest event reported): January 9,
1998
CONSOLIDATED HEALTH CARE ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Nevada 0-15893 91-1256470
State or Other Commission File No. (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation or
Organization)
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
Item 2. Acquisition or Disposition of Assets
(I) On January 5, 1998, pursuant to an Asset Purchase
Agreement, Consolidated Health Care Associates,
Inc. consummated the sale of three of its Delaware
clinics and its remaining Pennsylvania clinic to
HealthSouth Corporation. The clinics included
three located in Newark, DE, and one clinic in
Philadelphia, PA. The Pennsylvania clinic was
purchased by the Company in 1992 and the Delaware
clinics were purchased by the Company in 1993.
(II) The Asset Purchase Agreement also provided for the
assignment of trade receivables, assignments of
leases, the assignment of certain liabilities, and
the sale of certain fixed assets used in the
business of the clinics involved.
The consideration for the sale of the clinics and
related assets was $800,000 in cash. The Buyer
also assumed approximately $5,000 of associated
liabilities.
In conjunction with this transaction, in January
1998 prior to the execution of the Asset Purchase
Agreement, the Company agreed to satisfy two notes
of the Company held by the former owner of the
Delaware clinics issued in connection with the
1993 business acquisition in the approximate
amount of $609,000 through an agreed upon
settlement payment of approximately $130,000.
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: January 9, 1998 By: /s/ Robert M. Whitty
Robert M. Whitty
President
Date: January 9, 1998 By: /s/Raymond L. LeBlanc
Raymond L. LeBlanc
Chief Financial Officer
Exhibit Index
10.01 Asset Purchase Agreement between the Company and
HealthSouth Corporation, dated January 5, 1998.
10.02 Release Agreement between the Company and Sally
Hoover dated January 5, 1998.
AGREEMENT TO PURCHASE ASSETS
AGREEMENT dated as of the 5th day of January, 1998, among
PTS Rehab Philadelphia, Inc., a Pennsylvania corporation and
Physical Therapy Associates, Inc., a Delaware corporation
(collectively referred to as the "Seller"), and Consolidated
HealthCare Associates, Inc., a Nevada corporation (the "Owner"),
and HEALTHSOUTH Holdings, Inc., a Delaware corporation
("HEALTHSOUTH").
WITNESSETH:
WHEREAS, the Seller desires to sell to HEALTHSOUTH, and
HEALTHSOUTH desires to purchase and acquire, substantially all of
the business and assets of the Seller's rehabilitation and
therapy business operated at 635 Churchman's Road, Newark,
Delaware 19702, 314 East Main Street, Suite 304, Newark, Delaware
19711 and St. Leonard's Court, 39th and Chestnut Street,
Philadelphia, Pennsylvania 19104 (the "Seller's Business"), all
upon the terms and subject to the conditions hereinafter set
forth; and
WHEREAS, the Owner is the sole owner of all of the issued
and outstanding capital stock of the Seller and join in this
Agreement as an inducement to the consummation of the purchase
and sale contemplated by this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the contemplated payment by
HEALTHSOUTH to the Seller of the purchase price herein provided
for, and other good and valuable consideration, the receipt and
sufficiency of all of which are hereby acknowledged, the Seller,
the Owner and HEALTHSOUTH hereby agree as follows:
Section 1. Terms of the Sale and Purchase of Assets.
The sale of the properties. assets and business of the
Seller's Business to be sold hereunder and the acquisition
thereof by HEALTHSOUTH shall be made and be effective as of the
close of business on December 31, 1997, and shall be based on the
respective representations, warranties and agreements of the
Seller and the Owner, on the one hand, and HEALTHSOUTH, on the
other hand.
1.1. Included and Excluded Assets. (a) Seller hereby sells,
transfers, assigns, conveys, releases and delivers to
HEALTHSOUTH, effective as of the close of business on December
31, 1997, all of the properties, assets and business of the
Seller's Business, as a composite going concern, whether or not
any of such assets have any value for accounting purposes,
including, specifically, but without limiting the generality of
the foregoing:
(i) All accounts receivable related to the Seller's
Business which are outstanding at the close of business on
December 31, 1997, including, without limitation, those
accounts receivable listed on Exhibit A to this Agreement.
The total face value of the accounts receivable transferred
to HEALTHSOUTH hereunder shall not total less than $630,148.
(ii) All assets utilized in or related to the Seller's
Business, including, without limitation, those which are
listed on Exhibit B, but excluding the assets specifically
excluded below in Section 1.1.(b) of this Agreement.
(iii) All of the Seller's rights to the use of the
trade name "Physical Therapy Associates" and "Philadelphia
Institute for Physical Therapy" and any variations thereof.
(iv) Goodwill, customer and patient lists, telephone
numbers, trade secrets, patents, copyrights, trademarks,
service marks, advertising and marketing ideas, items and
rights and all other property rights required for or
incident to the marketing or the performance of
rehabilitation and therapy services by the Seller and all
books and records relating thereto.
(v) Subject to Section 1.10 of this Agreement, all
contracts, leases and agreements set forth or referred to in
Exhibit C to this Agreement and any and all prepayments,
deposits and similar assets associated with such contracts,
leases and agreements, and all licenses, certificates of
need and other regulatory approvals relating to or necessary
for the operation of the Seller's Business.
(b) There shall be excluded from the properties and assets
of the Seller's Business transferred and conveyed to HEALTHSOUTH
hereunder, the minute books, stock records and related internal
records of the Seller and the Seller's cash and securities. All
other books and records of the Seller related to the Seller's
Business, together with all the other assets to be acquired
pursuant to this Agreement, shall be delivered to HEALTHSOUTH or
such person as HEALTHSOUTH may specify, upon the execution and
delivery of this Agreement.
1.2. Patient lnformation and Financial Information.
The agreements between the parties evidenced by this Agreement
have been reached based on the audited financial and other
information about the Seller's Business to be acquired hereunder
as of September 30, 1997, provided HEALTHSOUTH by the Seller and
the Owner. The summary of patient visits attached to this
Agreement as part of Exhibit D is sometimes referred to herein
as the "Seller's Patient Information". The unaudited balance
sheet of the Seller and the unaudited income statement of the
Seller are also attached to this Agreement as part of Exhibit D
and are sometimes referred to herein as the "Seller's Financial
Information".
1.3. Considerations. In exchange for the transfer
referred to in Section 1.1, HEALTHSOUTH will provide the Seller
with the following considerations:
(a) The total purchase price for all of the business,
properties and assets of the Seller to be conveyed, sold,
transferred, assigned and delivered to HEALTHSOUTH under
this Agreement by the Seller is $ 650,000 plus the
assumption of the Seller's liability (i) for any sick leave
or vacation benefits (calculated as earned time by the
Seller) of the Seller's employees on Exhibit F which are
employed by HEALTHSOUTH, and (ii) under the contracts,
leases and agreements of the Seller described in (b) below.
Such $650,000 shall be payable in good funds to Seller upon
execution and delivery of this Agreement.
(b) Subject to Section 1. 10 of this Agreement,
HEALTHSOUTH shall assume the contracts, leases and
agreements of the Seller relating to the Seller's Business
which are listed on Exhibit C attached to this Agreement,
provided that HEALTHSOUTH shall not be deemed to assume any
liability which may be incurred by reason of any breach of
or default under any such contract, lease or agreement
which occurred prior to the execution and delivery of this
Agreement and which is not disclosed in Exhibit C hereto.
The Owner and the Seller, at their expense, shall use its
best efforts to provide HEALTHSOUTH with valid and
enforceable assignments to all such contracts, leases and
agreements.
(c) Except as expressly provided in Exhibit C,
HEALTHSOUTH shall not be deemed to assume any liability of
the Seller or the Owner whatsoever. Without limiting the
generality of the foregoing, HEALTHSOUTH shall not be
deemed to have assumed, nor shall HEALTHSOUTH assume, any
liability based upon or arising out of any tortious or
wrongful actions of Seller or Owner, or any liability for
the payment of (i) any taxes of the Seller arising out of
transactions occurring on or prior to the execution and
delivery of this Agreement; (ii) any taxes of the Seller or
the Owner arising in connection with the transactions
contemplated by this Agreement; (iii) except as expressly
provided in Exhibit F, any salary, wage, benefit, bonus,
vacation pay (calculated as earned time by the Seller),
sick leave, insurance, employment tax or similar liability
of Seller to any employee, officer, director or other
person or entity allocable to services performed on or
prior to the execution and delivery of this Agreement; or
(iv) any liabilities arising in connection with any
malpractice or other liability arising in connection with
the Seller's or the Owner's physical therapy practices.
HEALTHSOUTH shall have no liability whatsoever, for
contributions or otherwise, for any pension, employee
benefit or profit sharing plan of the Seller or any of the
Owner for the benefit of Seller's employees, officers or
directors.
(d) Except as otherwise agreed by the parties, the
parties agree that the cash portion of the purchase price
shall be allocated and reported to the Internal Revenue
Service and similar governmental agencies as follows:
Equipment, furnishings, supplies,
deposits, leasehold improvements
and fixtures $ 90,000
Accounts Receivable $250,000
Goodwill $310,000
1.4. Power of Attorney. The Seller hereby constitutes and
appoints HEALTHSOUTH and its successors and assigns, the true and
lawful attorneys for the Seller, with full power of substitution,
in the name of the Seller, but on behalf of and for the benefit
of and at the expense of HEALTHSOUTH, to institute and prosecute,
in the name of the Seller or otherwise, all proceedings which
HEALTHSOUTH may deem proper in order to collect, assert or
enforce any claim, right or title of any kind in or to the assets
to be transferred to HEALTHSOUTH pursuant to this Agreement, to
defend and compromise any and all actions, suits or proceedings
in respect of any such assets, and to do all such acts and things
in relation thereto as HEALTHSOUTH shall reasonably deem
advisable. The Seller agrees that the foregoing powers are
coupled with an interest and shall be irrevocable by the Seller
or by its dissolution or in any manner or for any reason. The
Seller shall pay to HEALTHSOUTH, when received, any amounts which
shall be received by such Seller in respect of any assets
transferred to HEALTHSOUTH.
1.5. Bill of Sale. Contemporaneously with the execution and
delivery of this Agreement, the Seller shall execute and deliver
a Bill of Sale and such other necessary transfer documents
required by law to transfer the assets described herein to
HEALTHSOUTH.
1.6. Non-Competition Agreement. Contemporaneously with the
execution and delivery of this Agreement, the Seller, the Owner
and HEALTHSOUTH shall execute and deliver a Non-Competition
Agreement, providing that the Seller and the Owner will not enter
into competition with the rehabilitation business to be operated
by HEALTHSOUTH during the term of such Non-Competition Agreement.
1.7. Lease or Lease Assignment. Contemporaneously with the
execution and delivery of this Agreement, HEALTHSOUTH shall be
provided by the Seller and the Owner, at their cost and expense,
with a valid and enforceable lease or lease assignment enabling
HEALTHSOUTH, as lessee, to occupy the space currently occupied by
the Seller located at 635 Churchman's Road, Newark, Delaware
19702, 314 East Main Street, Suite 304, Newark, Delaware 19711
and St. Leonard's Court, 39th and Chestnut Street, Philadelphia,
Pennsylvania 19104, at the same rental paid by Seller. Such
lease or lease assignment shall be in form and substance
satisfactory to HEALTHSOUTH and its counsel.
1.8. Costs and Expenses. Each of the parties to this
Agreement shall pay all of the costs and expenses incurred by it
in connection with the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing,
whether or not they may be deemed to have been incurred in the
ordinary course of business, HEALTHSOUTH shall not be liable for
or required to pay, either directly or indirectly, any of the
following liabilities or expenses incurred by the Seller or the
Owner: (a) fees and expenses of any person for financial
services or services as a finder rendered to the Seller or the
Owner in connection with the sale contemplated by this
Agreement; (b) fees and expenses of legal counsel retained by
the Seller or the Owner for services rendered to the Seller or
the Owner in connection with the sale contemplated by this
Agreement; (c) fees and expenses of auditors and accountants
retained by the Seller or the Owner for services rendered to the
Seller or the Owner in connection with the sale contemplated by
this Agreement; (d) fees and expenses incurred by the Seller or
the Owner in connection with the making of this Agreement or any
fees or expenses for the assignment of any lease or agreement to
HEALTHSOUTH; or (e) taxes or other similar charges incurred by
the Seller or the Owner in connection with the making of this
Agreement or the transfer of property to HEALTHSOUTH.
1.9. Further Instruments of Conveyance. The Seller and
the Owner agree to execute and deliver, from time to time
hereafter, at the request of HEALTHSOUTH, all such further
instruments of conveyance, assignment and further assurance as
may reasonably be required in order to vest in and confirm to
HEALTHSOUTH full and complete title to, and the right to use and
enjoy, the properties, assets, contracts and business hereby
agreed to be, and intended to be, conveyed and transferred to
HEALTHSOUTH.
1.10. Assignments and Consents, Nothing contained in
this Agreement shall be construed as an attempt to agree to
assign any contract which by law is nonassignable without the
consent of the other party or parties thereto, unless such
consent shall be given. The Seller and the Owner shall use its
best efforts to obtain all such necessary assignments and
consents of the parties to any such contracts and shall pay all
costs and expenses for obtaining such assignments and consents.
1.11. Documents to be Provided by Seller at Closing.
Contemporaneously with the execution and delivery of this
Agreement, the Seller agrees to furnish HEALTHSOUTH with copies
of the following documents:
(a) Certificates of good standing (with tax
certifications) for the Seller from the proper official of
the state of the Seller's organization.
(b) Resolutions, duly adopted by the Board of
Directors and the Owner of the Seller, authorizing and
adopting this Agreement and the sale, transfer and
transactions provided for herein, certified by the
Secretary of the Seller.
(c) Consents, executed and delivered by all persons
and entities necessary to authorize the transactions
contemplated herein, to authorize the assignment of
agreements listed on Exhibit C, or to release liens or
encumbrances on assets to be transferred to HEALTHSOUTH.
(d) Lien searches by the proper officials of the State
of Pennsylvania and its political subdivisions, showing all
liens and encumbrances, if any, on the property and assets
of the Seller, including fixtures and similar items, which
liens and encumbrances shall be paid in full, released and
removed by the Seller upon transfer of such property and
assets to HEALTHSOUTH.
1. 12. Legal Opinion. Contemporaneously with the execution
and delivery of this Agreement, the Seller agrees to furnish to
HEALTHSOUTH the opinion, dated as of the date of the execution
of this Agreement, of legal counsel for the Seller and the
Owner, in form and substance satisfactory to HEALTHSOUTH and its
counsel, to the effect that:
(a) The Seller is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Pennsylvania and the State of Delaware.
(b) The Seller has the corporate authority to own all
of its properties and assets and to carry on its business
as it is being conducted at the date of the execution of
this Agreement. The Seller has full right, power and
authority to enter into this Agreement, the Non-Competition
Agreement, the Bill of Sale and the Consents to Assignment
of Lease Agreement.
(c) The execution and delivery of this Agreement, the
Bill of Sale, the Non-Competition Agreement and the
Consents to Assignment of Lease Agreement does not, and the
consummation of the transactions contemplated hereby and
thereby will not, violate the Articles or Certificate of
Incorporation or Bylaws of the Seller, or the provisions of
any mortgage, lien, lease, agreement, instrument, statute,
order, arbitration award, judgment or decree, of which such
counsel has knowledge, to which the Seller is a party or by
which Seller is bound, or violate any bulk sale or similar
laws to which the Seller or HEALTHSOUTH may be subject to
because of the transactions contemplated herein.
(d) The Owner is the sole owner of all of the issued
and outstanding capital stock of the Seller.
(e) Such counsel is not aware of any litigation,
proceeding or governmental investigation, pending or
threatened against or relating to the Seller or the Owner,
or their properties or business, or the transactions
contemplated by this Agreement other than those disclosed
on Exhibit E.
(f) This Agreement and the Non-Competition Agreement
have both been duly executed and delivered by the Seller
and the Owner and constitute the legal, valid and binding
obligations of the Seller and the Owner, enforceable in
accordance with their respective terms.
(g) The Bill of Sale is sufficient under Pennsylvania
law to transfer title to the assets described therein to
HEALTHSOUTH.
(h) The Bill of Sale and the Consents to Assignment of
Lease Agreement have been duly executed and delivered by the
Seller and constitute the legal, valid and binding
obligations of the Seller, enforceable in accordance with
their respective terms.
(1) The execution and delivery of this Agreement and
the NonCompetition Agreement by the Owner and the
consummation of the transactions herein and therein
contemplated will not conflict with or result in the breach
of, or accelerate the performance required by any of the
terms of any agreement, statute, order, arbitration award,
judgment or decree, of which such counsel has knowledge, to
which any of the Owner is now a party, or constitute a
default thereunder, or result in the creation of any lien,
charge or encumbrance on any of the property or assets of
any of the Owner.
In rendering its opinion such counsel may rely on title
certificates, abstracts or policies, and certificates of public
officials as to factual matters not independently established by
such counsel, provided that the extent of such reliance is
specified in such opinion and that copies of such documents so
relied upon are delivered to HEALTHSOUTH.
1.13. Transition of Business. The Seller and the Owner
agree to cooperate with HEAI,THSOUTH and to use their best
efforts in the transition and change of ownership of the assets
and business being transferred hereunder.
1.14. Confidential Information. The Seller, the Owner
and HEALTHSOUTH each acknowledge and agree that the terms and
conditions of this Agreement and the NonCompetition Agreement are
confidential and will not be disclosed to any third party without
the prior written consent of the Seller and HEALTHSOUTH; provided
that the parties may disclose the terms and conditions hereof to
their third-party licensed accountants and attorneys, provided
such third parties agree to maintain the confidentiality of such
information and will not disclose it to any other third parties.
Section 2. Representations and Warranties of the Seller and
the Owner. The Seller and the Owner, jointly and severally,
hereby represent and warrant to HEALTHSOUTH as follows:
2.1. Corporate Authority and Existence. The Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Pennsylvania and the State of
Delaware. The Seller has all necessary power to own all of its
properties and assets and to carry on its business as now being
conducted. The Seller has all necessary power and is duly
authorized to convey, assign and transfer the properties, assets
and business specified in this Agreement.
2.2. Ownership of Seller. The Owner is the only owner of
the Seller. The Seller does not own equity in, or control,
directly or indirectly, any other entity, nor is the Seller a
party to any joint venture or partnership.
2.3. No Conflicting Obligations: Seller. The Seller has the
power and authority to execute, deliver and perform this
Agreement and all agreements executed and delivered by it
pursuant to this Agreement, and has taken all action required by
law, its Articles or Certificate of Incorporation, its Bylaws or
otherwise, to authorize the execution, delivery and performance
of this Agreement and such related documents. The execution and
delivery of this Agreement does not and, subject to the receipt
of consents to assignments of leases and other contracts where
required, the consummation of the sale contemplated hereby will
not, violate any provisions of the Articles or Certificate of
Incorporation or Bylaws of the Seller or any provisions of, or
result in the acceleration of, any obligation under any mortgage,
lien, lease, agreement, instrument, order, arbitration award,
judgment or decree, to which the Seller is a party, or by which
it is bound. This Agreement and the Non-Competition Agreement
have both been duly executed and delivered by the Seller and the
Owner and constitute the legal, valid and binding obligations of
the Seller and the Owner, enforceable in accordance with their
respective terms. The Bill of Sale and the Consents to
Assignment of Lease Agreement have been duly executed and
delivered by the Seller and constitute the legal, valid and
binding obligations of the Seller, enforceable in accordance with
their respective terms.
2.4. Authority of Owner. The Owner has full right,
power and authority to enter into this Agreement and to
consununate the transactions contemplated hereby.
2.5. No Conflicting Obligations: Owner. The execution
and delivery of this Agreement by the Owner and the consummation
of the transactions herein contemplated will not conflict with
or result in the breach of, or accelerate the performance
required by any of the terms of any agreement to which the Owner
is now a party, or constitute a default thereunder, or result in
the creation of any lien, charge or encumbrance upon any of the
property or assets of the Owner.
2.6. Accuracy of Patient Information and Financial
Information. The Seller and the Owner have heretofore furnished
HEALTHSOUTH ,with complete copies of the Seller's Patient
Information and the Seller's Financial Information. All the
Seller's Patient Information is, to the best of Seller's
knowledge, true and correct and presents fairly the number of
legitimate, paying patients treated by the Seller for the
periods indicated and the result of patient operations for the
periods indicated. The Seller's Financial Information has been
prepared in accordance with generally accepted accounting
principles consistently followed throughout the periods
indicated and fairly and accurately presents the financial
condition of the Seller's Business at such date and the results
of operation for the periods included therein.
2.7. No Similar Business. The Seller does not own or
control any other business or entity which provides
rehabilitation and therapy services similar to the Seller's
Business. The Owner does not own nor is
involved with any other rehabilitation or therapy business
providing services similar to the Seller's Business in the
states of Delaware and Pennsylvania. All of the assets and
business of the Seller's rehabilitation and physical therapy
business, except for the assets described in Section 1.1(b) are
being transferred to HEALTHSOUTH.
2.8. Contracts. Exhibit C to this Agreement sets forth
a list of all contracts, leases and agreements which shall be
assumed by HEALTHSOUTH. All such contracts, leases and
agreements listed in Exhibit C are valid and effective in
accordance with their respective terms, and there is not under
any such documents any existing default or breach, or any
condition or event which with notice or lapse of time, or both,
would constitute a default or breach. All payments and actions
required by the Seller through the date of the execution and
delivery of this Agreement pursuant to such contracts, leases
and agreements have been paid and performed. The Seller and the
Owner warrant that all such agreements are for the benefit of
the Seller's Business, regardless of whether they are in the
name of the Seller, the Owner or otherwise, and the Seller has
the authority to transfer such agreements to HEALTHSOUTH.
2.9. Buildings and Operations. The buildings and
operations of the Seller located at 635 Churchman's Road,
Newark, Delaware 19702, 314 East Main Street, Suite 304, Newark,
Delaware 19711 and St. Leonard's Court, 39th and Chestnut
Street, Philadelphia, Pennsylvania
19104,donotviolateorconflictwithanyrestrictivecovenant,zoningord
inance, lease restriction, administrative regulation, or
provision of law in effect which in any material respect
interferes with or prevents the continued use of such buildings
and operations for rehabilitation and therapy purposes or which
would materially affect the value of such continued use thereof
for rehabilitation and therapy purposes.
2.10. Liens and Encumbrances. The Seller owns all of
the assets, properties and business being transferred to
HEALTHSOUTH pursuant to Section 1.1 of this Agreement, free and
clear of any liens, claims, charges, exceptions or encumbrances.
All inventories, supplies, equipment, furniture and other
tangible assets listed on Exhibit B to this Agreement currently
are used by or are useful to the Seller in the ordinary course
of business of the y Seller's Business and are in good operating
condition and in a state of reasonable maintenance and repair.
2.11. Litigation. There is no litigation, governmental
investigation or other proceeding pending or, so far as is known
to either the Seller or its officers or the Owner, threatened
against or relating to the Seller, its properties or business, or
the transaction contemplated by this Agreement and, so far as is
known to either the Seller or its officers or the Owners, no
basis for any such action exists except as those disclosed on
Exhibit.E.
2.12. No Liability for Seller's Contracts. Prior to the
execution and delivery of this Agreement, the Seller and the
Owner have delivered to HEALTHSOUTH true copies of all material
contracts, obligations and commitments of the Seller related to
the Seller's Business, each of which is listed on Exhibit C
attached to this Agreement. There exists no material agreements
of the parties to the documents listed on Exhibit C which are not
reflected in such documents. The Seller is not a party to any
written or oral: (a) contract with any labor union; (b) bonus,
pension, profit sharing, retirement, stock purchase,
hospitalization, insurance or similar plan providing for employee
benefits to employees of the Seller's Business for which
HEALTHSOUTH shall become liable; (c) contract for the future
purchase of materials, supplies or equipment for the Seller's
Business for which HEALTHSOUTH shall become liable; or (d)
contract related to the Seller's Business for the performance of
services for or by the Seller for which HEALTHSOUTH shall become
liable.
2.13. Material Changes. Except as set forth in Exhibit E to
this Agreement, since November 1, 1997, the Seller has not (a)
incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) related to Seller's Business; (b) sold
or transferred any of the assets used in connection with the
Seller's Business, or canceled any debts or claims or waived any
rights related to the Seller's Business, except in the ordinary
course of business; (c) increased the compensation of any
officer, employee, consultant or agent in connection with
Seller's Business; (d) authorized any capital expenditures in
connection with Seller's Business in excess of $1,000 in the
aggregate; (e) except for this Agreement, entered into any
material transaction in connection with Seller's Business, other
than in the ordinary course of business; (f) experienced damage,
destruction or loss (whether or not covered by insurance)
materially and adversely affecting any of the properties, assets
or business used in connection with Seller's Business, or
experienced any other material adverse change in the assets or
business of Seller's Business.
2.14. Taxes. The Seller has not been notified that any
income tax returns of the Seller are currently under audit by the
Internal Revenue Service or any state or local tax agency, and
any such prior audits have been finally and fully concluded and
all taxes owed or claimed to be owed pursuant thereto have been
paid in full. No agreements have been made by the Seller for the
extension of time or the waiver of the statute of limitation for
the assessment of any tax. The Seller and the Owner represent
and warrant that all taxes of the Seller shall be paid in full as
they become due and payable (unless properly bonded and appealed)
and no liens or other encumbrances shall attach to the assets and
business transferred to HEALTHSOUTH as a result of the non-
payment or late payment of any tax.
2.15. Agency Reports. The Seller has filed all Medicare
reports and similar state and federal documents and is in good
standing with the United States Department of Health and Human
Services which includes the Health Care Financing Administration
("DHHS") and any similar state agencies. Neither the Seller, nor
the Owner, has been reprimanded or sanctioned by DHHS or any
similar state agency for any alleged fraud, abuse or other
wrongful conduct. Neither DHHS, nor any similar state agency,
has any claim or, to the best knowledge of the Seller and the
Owner, any possible claim, for monies due or to become due from
the Seller or the Owner.
2.16. Insurance. The Seller has policies of insurance
on its facilities, equipment and inventory with extended coverage
in connection with the Seller's Business in amounts deemed by the
management of the Seller to be sufficient. Valid policies in
such amounts will be outstanding and duly in force for at least
five days after the execution and delivery of this Agreement,
unless a termination thereof is consented to by HEALTHSOUTH.
2.17. Material Changes in Patient Information. Since
November 30,1997, there has not been any material adverse change
in the assets or business of the Seller's Business or in the type
or number of Seller's rehabilitation and therapy patients. The
Seller and the Owner are unaware of any event which may
materially change the type or number of Seller's rehabilitation
or therapy patients after the consummation of the transactions
contemplated by this Agreement.
2.18. Commissions or Fees. There are no claims for
brokerage commissions or finder's fees in connection with the
transactions contemplated by this Agreement resulting from any
action taken by the Seller or by its officers or directors or the
Owner, or by any of them or their agents.
2.19. Compliance with Laws. To the best knowledge of
the Seller and the Owner, the Seller has complied with all
federal, state and local laws, regulations and ordinances
relating to the Seller's Business, including, without limitation,
the Federal Environmental Protection Act, the Occupational and
Safety Hazards Act, Medicare and Medicaid rules and regulations,
all federal, state and local licensing and health laws and
requirements and other similar statutes and no notice of any
pending inspection or violation of any such act or statute has
been received by the Seller in connection with the Seller's
Business.
2.20. Accounts Receivable. All of Seller's accounts
receivable are being transferred to HEALTHSOUTH and are valid
debts incurred by the obligors thereunder to the Seller, are not
subject to counterclaims or set-offs, and the Seller has taken
all acts necessary to insure their ultimate collectibility,
including timely compliance with all regulatory requirements of
Medicare and other third party payors. Nothing prevents Seller
from transferring good and valid title to such accounts
receivable to HEALTHSOUTH, and Seller knows of no fact or
occurrence that would prevent HEALTHSOUTH from collecting such
accounts receivable in the ordinary course of business. The
Seller and the Owner agree to remain responsible for all current
credit balances on such accounts receivable and HEALTHSOUTH shall
have no liability whatsoever for maintaining, paying, creating a
reserve for or any other action concerning such credit balances,
it being expressly understood that the Seller and the Owner
assume all liability therefor and indemnify HEALTHSOUTH from all
liability, including reasonable attorneys' fees, therefrom. The
representations and warranties stated above are made to induce
HEALTHSOUTH to enter into this Agreement and to accept the
accounts receivable of the Seller.
2.21. Tax Identification Number. The Seller is not a
foreign partnership, corporation, entity or individual pursuant
to the Internal Revenue Code and HEALTHSOUTH is not required to
withhold any part of the purchase price, or otherwise comply wi
'th Section 1445 of the Internal Revenue Code. The federal tax
identification number of Physical Therapy Associates, Inc. is 51-
0255225. The federal tax identification number of PTS Rehab
Philadelphia, Inc. is 23-2685486.
2.22. Creditors of Seller's Business. Seller and Owner
covenant and agree that all of the creditors of Seller's Business
will be paid in full by Seller prior to the execution and
delivery of this Agreement, or within such other period as is
normally permitted by such creditors in the ordinary course of
business. If requested in writing by HEALTHSOUTH, Seller and
Owner shall furnish HEALTHSOUTH with proof of payment of all
creditors of Seller's Business. Seller and Owner agree to
indemnify and hold HEALTHSOUTH harmless from any loss or expense,
including reasonable attorneys' fees, arising out of their
failure to pay, when due, the creditors of Seller's Business.
Seller may, if in good faith and upon reasonable grounds, dispute
the amount or validity of any such debts, and contest and defend
same, and in good faith diligently conduct any necessary
proceedings to prevent and avoid same.
Section 3. Covenants of the Seller and the Owner.
3.1. Preservation of Seller's Business. The Seller and the
Owner will use their best efforts to preserve the business
organization of the Seller's Business intact, to keep available
to IIEALTHSOUTH, at the request of HEALTHSOUTH, the services of
the present employees of the Seller's Business, and to preserve
for HEALTHSOUTH the goodwill of the patients, suppliers,
customers and others associated with the Seller's Business.
3.2. Indemnification for Transactions Prior to Closing. The
Seller and the Owner agree to indemnify and hold harmless
HEALTHSOUTH and its affiliates from and against any and all
taxes, expenses, liabilities and damages (including reasonable
attorneys' fees) arising from the transaction of the Seller's
Business or the Owner's physical therapy practices prior to the
close of business on the date this Agreement is executed and
delivered.
3.3. Employees. The Seller and the Owner hereby covenant
and agree to indemnify HEALTHSOUTH with respect to any and all
liability that for whatever reason may accrue to HEALTHSOUTH in
connection with any employee payment or benefit described herein
allocable to services performed on or prior to the date of the
execution and delivery of this Agreement, except for the accrued
sick leave and vacation benefits (calculated as earned time by
the Seller) for the employees listed in Exhibit F who are hired
by HEALTHSOUTH, which accrued sick leave and vacation benefits
(calculated as' earned time by the Seller) shall be assumed by
HEALTHSOUTH in accordance with its standard policies and
procedures concerning sick leave and vacation benefits calculated
as earned time by the Seller) for similar employees. All persons
listed on Exhibit F who may be hired by HEALTHSOUTH shall be "at
will" employees of HEALTHSOUTH, regardless of any contracts or
agreements any such employees may have with the Seller.
HEALTHSOUTH shall not assume any contracts or agreements between
the employees of Seller listed on Exhibit F and the Seller, the
Owner or any other entity, and the Seller and the Owner shall be
responsible for termination of all such contracts and agreements,
and any liability resulting therefrom. The Seller and the Owner
represent and warrant that the persons listed on Exhibit F are
citizens of the United States of America. Except as provided on
.
Exhibit.F, to the best knowledge of the Seller and the Owner, no
employee listed thereon has any pre-existing medical conditions.
Notwithstanding anything to the contrary contained in this
Agreement, if HEALTHSOUTH assumes any vacation (calculated as
earned time by the Seller) or sick leave by reason of HEALTHSOUTH
hiring any employee listed on Exhibit F, and such employee
voluntarily terminates work for HEALTHSOUTH for at least 60 days
after the date of this Agreement, the Seller and the Owner shall
reimburse HEALTHSOUTH for any monies 1 't pays to such employee
for vacation (calculated as earned time by the Seller) or sick
leave termination benefits.
Section 4. Access to Information and Documents.
4.1. Books and Records. The Seller, the Owner and
HEALTHSOUTH hereby agree to comply with all applicable
provisions of 42 U.S.C. 1395x(v)I, which is incorporated
herein by reference, and all similar federal and state statutes
concerning providing information to the Secretary of the United
States Department of Health and Human Services and the
Comptroller General of the United States General Accounting
Office, or their authorized representatives. Disclosure
pursuant to this Section shall not be construed as a waiver of
any other legal right to which any party may be entitled under
law or regulation.
4.2. Sharing of Information. For a period of four
years after the date of the execution and delivery of this
Agreement, or for such longer period as may exist under any
applicable statute of limitations, the Seller, the Owner and
HEALTHSOUTH shall, during normal business hours, afford the
other parties and their counsel and accountants, full access to
the books, records and other data retained by such parties
pursuant to this Agreement, as may reasonably be requested.
Section 5. Nature and Survival of Representations and
Warranties.
5.1. Survival of Representations and Warranties. All
statements contained in this Agreement or in any Exhibit
attached hereto, any agreement executed pursuant hereto, and any
certificate or other instrument delivered by or on behalf of
either party pursuant to the terms of this Agreement, shall
constitute representations and warranties. All representations,
warranties and covenants of the parties shall survive the date
of this Agreement, and the parties shall be entitled to rely
upon such representations, warranties and covenants irrespective
of any investigations made by such parties.
5.2. Indemnification for Breach. Each of the parties
hereto indemnities the other against any loss, liability,
damage, cost or expense, including reasonable attorneys' fees,
on account of a breach of any warranty, representation, covenant
or agreement made in this Agreement or in any Exhibit attached
hereto or and document executed in connection herewith.
5.3. Set-Off. In the event of any breach of warranty,
representation, covenant or agreement by any party giving rise to
indemnification of another party under this Agreement, the
indemnified party shall be entitled to off-set the amount of
damages incurred by it as a result of such breach against any
monies owed to the defaulting party, in addition to any other or
further remedies available at law or equity to the parties.
Section 6. Miscellaneous.
6.1. Notices. Any notice required or permitted hereunder or
any agreement or document executed and delivered in connection
with this Agreement shall be deemed to have been served properly
if hand delivered or delivered by overnight courier, charges
prepaid and properly addressed, to the respective party to whom
such notice relates at the following addresses:
If to HEALTHSOUTH:
HEALTHSOUTH Holdings, Inc.
One HEALTHSOUTH Parkway
Birmingham, Alabama 35243
Attention: P. Daryl Brown
With copies to:
Stacey S. Fleenor, Esq.
HEALTHSOUTH Corporation
One HEALTHSOUTH Parkway
Birmingham, Alabama 35243
If to the Seller and/or the Owner:
Physical Therapy Associates, Inc.
c/o Consolidated Health Care Associates, Inc.
38 Pond Street
Franklin, Massachusetts 02038
Attention: Robert M. Whitty, President
With copies to:
Blake J. Godbout, Esq.
DiMaria & Godbout
15 Broad Street, Suite 700 Boston, Massachusetts 02109
or such other address as shall be noticed in writing by any
party to the other parties. All such notices shall be deemed
received when hand delivered or one day after delivered to the
overnight courier.
6.2. Additional Acts. Each party hereto agrees to
perform any further acts and to execute and deliver any other
documents which may be reasonably necessary to carry out the
provisions of this Agreement.
6.3. Governing Law. This Agreement shall be interpreted,
construed and enforced in accordance with the laws
of the State of Pennsylvania.
6.4. Headings. The captions or headings in this
Agreement are made for convenience and general reference only
and shall not be construed to describe, define or limit the
scope or intent of the provisions of this Agreement.
6.5. Severability. The provisions of this Agreement
shall be severable and if any provisions shall be invalid or
void or unenforceable in whole or in part for any reason, the
remaining provisions shall remain in full force and effect.
6.6. Terminology. The word "including", when following
any general statement, term or matter, shall not be construed to
limit such statement, term or matter to the specific terms or
matters as provided immediately following the word "including"
or to similar items or matters, whether or not non-limiting
language (such as "without limitation", "but not limited to", or
words of similar import) is used with reference to the word
"including" or the similar items or matters, but rather shall be
deemed to refer to all other items or matters that could
reasonably fall within the broadest possible scope of the
general statement, term or matter. "To the knowledge", "to the
best knowledge, information and belief", or any similar phrase
shall be deemed to include the assurance that such knowledge is
based upon a reasonable investigation, unless otherwise
expressly provided, Unless otherwise expressly provided herein,
knowledge of the Seller shall be deemed to include facts known
to the Owner or any officer, director or employee of the Seller.
6.7. Entire Agreement. This Agreement and the other
agreements executed and delivered contemporaneously herewith
contain the entire agreement of the parties and supersede any and
all prior agreements between the parties, written or oral, with
respect to the purchase and sale contemplated hereby. This
Agreement may not be changed or terminated orally, but may only
be changed by an agreement in writing signed by the party or
parties against whom enforcement of any waiver, change,
modification, extension, discharge or termination is sought.
6.8. Counterparts. This Agreement may be executed in
several counterparts, each of which, when so executed, shall be
deemed to be an original, and such counterparts shall, together,
constitute and be one and the same instrument. The parties may
execute this Agreement, individually or in a representative
capacity, and forward an executed counterpart signature to one
or more other parties by telecopy, overnight express or other
means, and the party or parties receiving such executed
counterpart signature shall be authorized to attach it hereto as
the legal and valid signature of such executing party, The party
or parties receiving such executed counterpart signature,
together with their attorneys and counsel, shall be able to rely
on the validity of such executed counterpart signature as fully
as if the original of such signature was affixed hereon.
6.9. Binding Effect. This Agreement shall be binding
and shall inure to the benefit of the parties hereto, and their
respective heirs, legatees, executors, administrators,
successors and assigns.
6.10. No Rule of Construction. The parties acknowledge
that this Agreement was initially prepared by HEALTHSOUTH solely
as a convenience and that all parties hereto, and their counsel,
have read and fully negotiated all the language used in this
Agreement. The parties acknowledge that, because all parties
and their counsel participated in negotiating and drafting this
Agreement, no rule of construction shall apply to this Agreement
which construes ambiguous clear language in favor or against any
party because such party drafted this Agreement.
6.11, Reliance on Statements. All Exhibits and documents
referred to in or attached to this Agreement are integral parts
of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed and relied
upon for all purposes and not just in connection with the
specific representation to which they are explicitly referenced.
IN WITNESS WHEREOF, the undersigned parties have executed
this document as of the day and year first written above.
PHYSICAL THERAPY ASSOCIATES,
INC.
By: /s/ Robert M. Whitty
Robert M. Whitty
President
PTS REHAB PHILADELPHIA, INC.
By: /s/ Robert M. Whitty
Robert M. Whitty
President
CONSOLIDATED HEALTHCARE
ASSOCIATES, INC.
By: /s/ Robert M. Whitty
Robert M. Whitty
President
HEALTHSOUTH Holdings, Inc.
By: /s/ P. Daryl Brown
P. Daryl Brown
Vice President
RELEASE AGREEMENT
This RELEASE AGREEMENT ("Release Agreement") is made and
entered into this 5th day of January, 1998 by and between Sally
Hoover ("Hoover") and Consolidated Health Care Associates, Inc.
("Consolidated").
RECITALS
WHEREAS, Consolidated and Hoover heretofore entered into a
certain Stock given to Purchase Agreement dated September 30,
1993 (the "Purchase Agreement") pursuant to which Hoover
conveyed to Consolidated certain stock and assets of Physical
Therapy Associates, Inc., and Sally Hoover PT Professional
Fitness Programs, (the "Stock");
WHEREAS, pursuant to the Purchase Agreement, Consolidated
executed and delivered to Hoover a certain Promissory Note (the
"Note") in the original principle amount of $500,000 dated
September 30, 1997 and amended December 2, 1994 and further
amended on May 30, 1996 and a certain Convertible Promissory
Note (the "Convertible Note") in the original principle amount
of $500,000 and amended May 30, 1996 collectively (the
"Transaction Instruments");
WHEREAS, Consolidated has failed to make various payments
due to Hoover under the Note and the Convertible Note, and
Hoover has given notice of each such failure by timely notice,
properly to Consolidated under the covenants of the Transaction
Instruments;
WHEREAS, pursuant to the agreement herein described
Consolidated and Hoover have agreed that as consideration for
the (a) forgiveness of the Note and the Convertible Note and
assignment of the Office Lease Agreements (the "Lease
Agreements") Consolidated and Hoover will enter into this
Release Agreement.
NOW THEREFORE, in consideration of the foregoing recitals,
the sum of Ten Dollars ($10.00) and other good and valuable
consideration, receipt of which is hereby acknowledged, and
intending to be legally bound hereby, Consolidated and Hoover
agree as follows:
AGREEMENT
1. Incorporation of Recitals The foregoing Recitals are
true and correct and hereby incorporated into this Release
Agreement as if full set forth herein. Except as expressly
provided in this Release Agreement, the terms and conditions of
the Transaction Instruments, and each of the Transaction
Instruments, shall remain in full force and effect.
2. Effective. Date. The date of this Release Agreement
("Effective Date") shall be the date when Consolidated and
Hoover have executed this Release Agreement and Hoover has
received the consideration as defined hereinbelow.
A. Consideration: As consideration for the release
of the indebtedness of the Transaction Instruments as herein
described Hoover agrees to Release Agreement in consideration
of the following;
(I) The delivery of the sum of ONE HUNDRED AND
FIFTY
THOUSAND DOLLARS ($150,000) and the payment of all agreed upon
legal expenses incurred in the amount of $ 4,589.22.
(II) The acceptable assignment of the Lease
Agreement for the office at Unit 304 Kelway Plaza, Newark, DE.
to a qualified tenant known as Healthsouth Corporation or
nominee in a manner acceptable to Hoover and the agreement of 3
months under the existing lease for the Churchman's road
facility to terminate 90 days from the date of January 1,
1998..
3. Release
Consolidated and Hoover agree that Transaction Instruments
and the provision for
payments therein have been satisfied through the acceptance of
the consideration by Hoover. In furtherance (but not in
limitation) Consolidated and Hoover hereby waive, for
themselves, and their respective successors and assigns, any
and all claims, demands, rights, and causes of action of any
kind which they never had, now have, or which any personal
representative, successors, heir or assign of Consolidated or
Hoover hereafter can, shall or may have against each other,
for, upon or by reason of any matter, cause or thing
whatsoever, arising out of or in any manner connected with the
Transaction Instruments.
4. Governing Law Venue Consolidated and Hoover
acknowledge and agree that this Release Agreement and the
Transaction Instruments (and each of them, including without
limitation the Lease Agreements) shall be governed by the Laws
of the State of Delaware. Further the sole and exclusive venue
for any litigation arising out of this Release Agreement or the
Transaction Instruments shall be the State of Delaware.
5. Attorneys' Fees and Costs. Consolidated and Hoover
agree that, in connection with this agreement all prior agreed
attorney fees for Hoover shall be added to the total
consideration paid as provided for in section 2 herein, and that
any litigation arising out of this Release Agreement and the
Transactions Instruments, the prevailing party shall be entitled
to recover its taxable costs and reasonable attorney's fees
incurred therein.
6. Authority. The persons executing this Release
Agreement on behalf of each of the parties hereto that are not
individuals are, or have been, authorized to do so in accordance
with the governing document of their respective entity and in
accordance with applicable law.
7. Captions. The captions inserted in this Agreement are
for convenience only and in no way define, limit or otherwise
describe the scope or intent of this Agreement, or any provision
hereof, or in any way affect the interpretation of this Release
Agreement.
8. Binding Effect., The Terms of this Release Agreement
shall be binding upon the successors and assigns of the parties
hereto.
9. Counterparts, Execution and Delivery By Facsimile.
The parties agree that this document may be executed in any
number of counterparts, each of which shall be deemed an
original, all of which taken together shall constitute but one
and the same instrument.
10. Conflict Between Terms and Conditions for the Release
Agreement and the Transaction Instruments; No Construction
Against Drafter.
In the event any term or condition of the (a)
Transaction Instruments (b) Release Agreement, conflicts with
any term or condition of this Release Agreement, the terms and
conditions of this Release Agreement shall control. This
Release Agreement is the result of a negotiated transaction
between Consolidated and Hoover, each of which has had access to
legal counsel. Accordingly, it is further agreed that
interpretation and construction of this Agreement, shall not be
construed against the drafter.
IN TESTIMONY WHEREOF, witness our signatures effective as of the
Effective Date
HOOVER
/s/ Sally Hoover
Sally Hoover Witness:
Date:
Witness:
State of Delaware
County of
I HEREBY CERTIFY that, on this day before me, an officer
duly qualified to take acknowledgments, personally appeared
Sally Hoover an individual, who is personally known to me or who
has produced a Delaware Driver's License as identification and
who did not take any oath, and who executed the foregoing
instrument and who acknowledged before me that she executed the
same on behalf of said corporation for the purposes set forth
therein.
WITNESS my hand and seal in the County and State last
aforesaid this _ day of November, 1997
Notary Public
Commission No.:
My Commission expires:
CONSOLIDATED:
Robert M. Whitty, President Witness:
Date:
Witness:
State of Massachusetts
County of
I HEREBY CERTIFY that, on this day before me, an officer
duly qualified to take acknowledgments, personally appeared
Robert M. Whitty as President of Consolidated Health Care
Associates, Inc. and an individual, who is personally known to
me or who has produced a Massachusetts Driver's License as
identification and who did not take any oath, and who executed
the foregoing instrument and who acknowledged before me that she
executed the same on behalf of said corporation for the purposes
set forth therein.
WITNESS my hand and seal in the County and State last
aforesaid this _ day of November, 1997
Notary Public
Commission No.:
My Commission expires:
