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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 AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 13, 1998
CONTINUCARE CORPORATION
-----------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
FLORIDA
(STATE OR OTHER JURISDICTION OF INCORPORATION)
0-21910 59-2716023
(COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
CONTINUCARE CORPORATION
100 SOUTHEAST 2ND STREET, 36TH FLOOR
MIAMI, FLORIDA 33131
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 350-7515
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective February 13, 1998, Continucare Corporation, a Florida
corporation (the "Registrant"), through a wholly-owned subsidiary, Continucare
Rehabilitation Services, Inc. acquired all of the issued and outstanding capital
stock of Rehab Management Systems, Inc., a Florida corporation, IntegraCare,
Inc., a Florida corporation and J.R. Rehab Associates, Inc., a North Carolina
corporation, each a wholly-owned subsidiary of Integrated Health Services, Inc.,
a Delaware corporation such subsidiaries being collectively referred to as the
"Rehab Companies"). The Rehab Companies are engaged in the business of providing
outpatient rehabilitation and contract rehabilitation services. The aggregate
purchase was $10.5 million (including commissions). The source of the
consideration paid by the Registrant was as follows: (i) $9,940,000 from a
portion of the net proceeds from the sale of 8% Convertible Subordinated Notes
due 2002, sold on October 30, 1997 and (ii) $560,000 from the Registrant's
working capital.
The foregoing summary is qualified in its entirety by a copy of the
Agreement attached hereto as an exhibit.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) & (b) It is currently impractical to provide financial statements,
pro forma or otherwise, required pursuant to Regulation S-K in connection with
the acquisition identified in Item 2 above. This Report will be amended within
60 days from the date this Report is filed to include such financial statement
information.
(c) Exhibits
2.1 Stock Purchase Agreement, dated as of February 13, 1998, by and
among Continucare Corporation, Continucare Rehabilitation Services, Inc.,
Integrated Health Services, Inc., Rehab Management Systems, Inc., IntegraCare,
Inc. and J.R. Rehab Associates, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CONTINUCARE CORPORATION
Date: February 25, 1998 By: /s/ CHARLES M. FERNANDEZ
-----------------------------------------------
Charles M. Fernandez
Chairman, Chief Executive Officer and President
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EXHIBIT INDEX
2.1 Stock Purchase Agreement, dated as of August 13, 1997, by and among
Continucare Corporation, Continucare Rehabilitation Services, Inc., Integrated
Health Services, Inc., Rehab Management Systems, Inc., IntegraCare, Inc. and
J.R. Rehab Associates, Inc.
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Exhibit 2.1
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STOCK PURCHASE AGREEMENT
DATED AS OF FEBRUARY 13, 1998
AMONG
CONTINUCARE CORPORATION
CONTINUCARE REHABILITATION SERVICES, INC.
AND
INTEGRATED HEALTH SERVICES, INC.
AND
REHAB MANAGEMENT SYSTEMS, INC.,
INTEGRACARE, INC.,
J.R. REHAB ASSOCIATES, INC.
-----------------------------
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TABLE OF CONTENTS
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ARTICLE I: PURCHASE AND SALE; NON-ASSUMED OBLIGATIONS; PURCHASE PRICE ............................................1
1.1 Purchase and Sale...............................................................................1
1.2 Non-Assumed Obligations.........................................................................1
1.3 Closing.........................................................................................2
1.4 Deliveries at Closing...........................................................................2
1.5 Section 338(h)(10) Election.....................................................................2
ARTICLE II: REPRESENTATIONS AND WARRANTIES OF THE SELLER AND COMPANY .............................................2
2.1 Organization and Corporate Power................................................................2
2.2 Authorization...................................................................................2
2.3 Title to and Validity of Shares; Identification Numbers.........................................3
2.4 Title, Condition to Personal Property...........................................................3
2.5 Government Approvals............................................................................4
2.6 Financial Information; Indebtedness.............................................................4
2.7 Events Subsequent to the Date of the Financial Statements.......................................5
2.8 Litigation......................................................................................5
2.9 Compliance with Laws............................................................................6
2.10 Taxes...........................................................................................6
2.11 Real Property...................................................................................6
2.12 Assets Comprising the Business..................................................................7
2.13 Patents, Trademarks, Etc........................................................................7
2.14 Employee Matters................................................................................7
2.15 Licenses and Permits............................................................................8
2.16 Contracts and Commitments.......................................................................8
2.17 Bank Accounts...................................................................................9
2.18 Insurance Coverage..............................................................................9
2.19 ERISA...........................................................................................9
2.20 No Brokers or Finders..........................................................................10
2.21 Transactions with Affiliates...................................................................10
2.22 No Conflicts or Defaults.......................................................................10
2.23 Environmental Compliance.......................................................................11
2.24 Disclosures....................................................................................11
2.25 Accounts Receivable............................................................................
2.26 Medicare/Medicaid .............................................................................12
3.1 Organization and Corporate Power...............................................................12
3.2 Authorization..................................................................................12
3.3 Absence of Conflicting Agreements..............................................................12
3.4 No Brokers or Finders..........................................................................12
ARTICLE IV: TAX MATTERS..........................................................................................13
4.1 Termination of Tax Sharing Agreement...........................................................13
4.2 Seller's Returns and Taxes.....................................................................13
4.3 Purchaser's Returns and Taxes..................................................................13
4.4 Tax Cooperation................................................................................13
4.5 Indemnification................................................................................14
4.6 Notification of Proceedings; Control; Refunds..................................................14
4.7 Section 338 Matters............................................................................15
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4.8 Tax Effect of Payments.........................................................................15
ARTICLE V: OBLIGATIONS OF PARTIES AFTER CLOSING..................................................................15
5.1 Survival of Representations and Warranties.....................................................15
5.2 Indemnification................................................................................16
5.3 Restrictions...................................................................................17
5.4 Delivery of Records............................................................................18
5.5 Access to Records..............................................................................18
5.6 Cooperation - Further Assistance...............................................................18
5.7 Audited Financial Statements...................................................................18
5.8 Termination of Contracts.......................................................................18
5.9 Lockbox Collections............................................................................18
5.10 Employee Matters...............................................................................18
5.11 Consulting Agreement...........................................................................18
5.12 Insurance Matters..............................................................................19
ARTICLE VI: CERTAIN DEFINITIONS..................................................................................19
ARTICLE VII: MISCELLANEOUS.......................................................................................20
7.1 Amendments and Waivers.........................................................................21
7.2 Notices........................................................................................21
7.3 Expenses.......................................................................................21
7.4 Indemnification for Broker Fees................................................................21
7.5 Counterparts...................................................................................22
7.6 Effect of Headings.............................................................................22
7.7 Further Assurances.............................................................................22
7.8 Governing Law; Arbitration.....................................................................22
7.9 Attorneys' Fees................................................................................22
7.10 Entire Agreement...............................................................................22
7.11 Severability...................................................................................22
7.12 Binding Effect and Assignment..................................................................23
7.13 Publicity......................................................................................23
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, dated as of February 13, 1998
("Agreement"), is entered into by and among INTEGRATED HEALTH SERVICES, INC., a
Delaware corporation (the "Seller"), REHAB MANAGEMENT SYSTEMS, INC., a Florida
corporation, INTEGRACARE, INC., a Florida corporation, and J.R. REHAB
ASSOCIATES, INC., a North Carolina corporation (each a wholly-owned subsidiary
of the Seller such subsidiaries being collectively referred to as the
"Companies"), and CONTINUCARE CORPORATION, a Florida corporation
("Continucare"), and CONTINUCARE REHABILITATION SERVICES, INC., a Florida
corporation ("Purchaser").
R E C I T A L S:
A. The Companies are engaged in the business of providing outpatient
rehabilitation and contract rehabilitation services (such business, as conducted
by the Companies, is herein referred to as the "Business").
B. Purchaser desires, upon the terms and subject to the conditions set
forth herein, to purchase all of the issued and outstanding shares of capital
stock of the Companies (the "Shares").
C. The Seller owns, and desires to sell to Purchaser, all of the Shares
upon the terms and subject to the conditions set forth herein.
D. Continucare owns all of the issued and outstanding shares of stock
of Purchaser, and is entering into this Agreement as an inducement to Seller.
E. Certain capitalized terms used in this Agreement are defined in
Article V hereof.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties intending
to be legally bound agree as follows:
ARTICLE I: PURCHASE AND SALE; NON-ASSUMED OBLIGATIONS; PURCHASE PRICE
1.1 PURCHASE AND SALE. Upon the terms and subject to the
conditions of this Agreement, the Seller hereby sells to the Purchaser and the
Purchaser hereby purchases from the Seller, the Shares for a total purchase
price (the "Purchase Price") of Ten Million ($10,000,000.00) Dollars, payable in
cash at the Closing.
1.2 NON-ASSUMED OBLIGATIONS. The Seller expressly acknowledges
and agrees that the Seller shall retain, and that Purchaser shall not assume or
otherwise be obligated to pay, perform, defend, or discharge any liabilities or
obligations (collectively the "Non-Assumed Obligations") related to (i) any
intercompany payables due from the Company to the Seller, (ii) any Medicare or
Medicaid cost report adjustments with respect to services performed by
IntegraCare, Inc. at any time on or before December 31, 1996, or (iii) any claim
by Jim Hough pertaining to IHS's conduct in selling the Companies except to the
extent that any such claim seeks enforcement of a stated monetary obligation
(including severance and benefits) in Mr. Hough's employment agreement with IHS,
or (iv) any claim by Jim Hough for consequential damages resulting from any
alleged breach prior to the closing of Mr. Hough's employment agreement with
IHS.
1.3 CLOSING. The closing (the "Closing") of the transactions
contemplated by this Agreement is taking place simultaneously with the execution
of this Agreement.
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1.4 DELIVERIES AT CLOSING. Simultaneously herewith, the
parties are delivering the following:
(i) Purchaser is delivering to Seller the Purchase Price in
accordance with Section 1.1 hereof;
(ii) the Seller is delivering to Purchaser the certificates
for the Shares, duly endorsed or accompanied by stock powers duly
endorsed in blank;
(iii) Seller is delivering to Purchaser an assignment of all
of Seller's rights under (A) the employment agreements between the
Seller and Jim Hough, John Redrup, Roger Van Dyke, and Joseph Faulk
("Executive Employment Agreements") and (B) all indemnification
provisions of the Purchase Agreements; and
(iv) Purchaser is delivering to Seller an assumption of
certain obligations under the Employment Agreements.
1.5 SECTION 338(h)(10) ELECTION. Seller and Purchaser shall
jointly make or cause to be made the election under Section 338(h)(10) of the
Code (and any comparable election under state or local tax law) with respect to
each of the Companies specified by the Purchaser.
ARTICLE II: REPRESENTATIONS AND WARRANTIES OF THE SELLER AND COMPANY
In order to induce Continucare and the Purchaser to consummate the
transactions under this Agreement, the Seller and the Companies, jointly and
severally, make the following representations and warranties, which are true,
correct and complete in all respects on the date hereof:
2.1 ORGANIZATION AND CORPORATE POWER. Each Company (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, and (ii) has all requisite corporate
power and authority to own its properties and to carry on its business as
presently conducted. The Companies are duly licensed or qualified to do business
as foreign corporations in the respective jurisdictions set forth on SCHEDULE
2.1, and in the jurisdictions wherein the character of their respective
properties, or the nature of their respective activities presently conducted by
them, makes such qualification necessary, except where the failure to so qualify
would not have a Material Adverse Effect. Except as set forth on SCHEDULE 2.1,
no Company, nor Seller with respect to the Business, files franchise, income, or
other Tax returns in any jurisdiction based upon the ownership or use of its
property therein or its derivation of income therefrom, and no proceeding
relating to the dissolution or merger of the Companies or the amendment of their
respective certificates of incorporation is pending or has been commenced or is
contemplated. Neither the Seller nor any Company is in violation in any material
respect of its certificate or articles of incorporation or bylaws. A true and
correct copy of each of the certificates of incorporation and bylaws of the
Seller and each Company, as amended to date, has been furnished to the
Purchaser.
2.2 AUTHORIZATION. The Seller and each Company has all
necessary corporate power and authority, and has taken all necessary corporate
action, including shareholder consent, required for the due authorization,
execution, delivery and performance by them of this Agreement and the Related
Agreements to which they are a party, and the consummation of the transactions
contemplated herein or therein. This Agreement is, and upon execution and
delivery, the Related Agreements to which the Seller or any Company is a party
will be, valid and binding obligations of the Seller and such Company,
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enforceable in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws which affect creditors' rights generally.
2.3 TITLE TO AND VALIDITY OF SHARES; IDENTIFICATION NUMBERS.
Except as set forth on Schedule 2.3, the Seller has good and marketable title to
and unrestricted power to vote and sell the Shares designated as owned by the
Seller, free and clear of any Lien and, upon purchase and payment therefor by
Purchaser, in accordance with the terms of this Agreement, Purchaser will obtain
good and marketable title to all such Shares free and clear of any Lien. All
Shares owned by the Seller have been duly authorized and validly issued and are
fully paid and non-assessable. All Shares are registered in the name of the
Seller. Except as disclosed on Schedule 2.3, the Companies have no subsidiaries
nor any investment or other interest in any Person. SCHEDULE 2.3 sets forth the
employer identification numbers, and the Medicare or Medicaid numbers used by
the Companies in connection with the Business.
2.4 TITLE, CONDITION TO PERSONAL PROPERTY.
(a) Except as set forth on SCHEDULE 2.4(a) each Company owns,
or has good and valid leasehold interests or licenses in, all of the personal
property comprising such Company's assets held for use or used in connection
with such Company's Business (the "Assets"), and has good and valid title to all
such personal property (tangible and intangible) (or in the case of personal
property which is leased or licensed to it, such Company has the right to use
such personal property superior in right to all others), subject to no Liens
other than Permitted Liens (as defined below). Except to the extent it would not
have a Material Adverse Effect, all of such personal property comprising
equipment, improvements, furniture and other tangible personal property, whether
owned or leased, is functioning in the manner and for the purpose for which it
was intended, and is suitable to enable Purchaser to operate the Business in a
normal manner. Except as set forth on Schedule 2.4(a), neither Seller nor any
Company has granted any option or other right to acquire any portion of the
Shares, Assets or the Business other than pursuant to this Agreement, which
option or right is in effect on the date hereof. There are no pending or, to the
Knowledge of Seller, threatened condemnation proceedings relating to any of
leased properties used in connection with the Business.
(b) "Permitted Liens" means:
(i) each lien set forth on Schedule 2.4(b) hereto;
(ii) carriers', warehouseman's, mechanics,
materialmen's, repairmen's or other like liens arising in the
ordinary course of business which do not exceed $50,000 in the
aggregate;
(iii) deposits to secure the performance of bids,
trade contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds, performance
bonds and other obligations of like nature incurred in the
ordinary course of business, provided that each such deposit
shall be included in the Assets;
(iv) pledges or deposits in connection with worker's
compensation, unemployment insurance, and other social
security legislation;
(v) judgment liens which, in the aggregate, secure
amounts not in excess of $50,000 and which are in existence
less than thirty (30) days after the entry thereof and which
are being contested in good faith and with respect to which
adequate cash reserves have been established and with respect
to which execution has been stayed or the payment of which is
covered in full (subject to a reasonable and customary
deductible) by insurance; and
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(vi) liens for the payment of taxes accrued but not
yet payable.
2.5 GOVERNMENT APPROVALS. No consent, approval, license or
authorization of, or designation, declaration or filing with, any Governmental
Authority is or will be required on the part of the Seller or any Company in
connection with the execution, delivery and performance by the Seller or such
Company of this Agreement or any of the Related Agreements, except for those the
absence of which would not have a Material Adverse Effect.
2.6 FINANCIAL INFORMATION; INDEBTEDNESS.
(a) Attached as Schedule 2.6 are true and complete copies of
unaudited profit and loss statements (the "Income Statements") and balance
sheets (the "Balance Sheets") for the year ended December 31, 1997 with respect
to the Business as operated by the respective Companies (the Income Statements
and Balance Sheets are collectively referred to hereinafter as the "Financial
Statements"). Except as disclosed on SCHEDULE 2.6(a), the Financial Statements
(i) are in accordance with the books and records of the Business of the
applicable Company, which books and records are complete and accurate in all
material respects, (ii) present fairly and accurately, in all material respects
the financial condition of the Business of the applicable Company as of the
dates of the balance sheets, (iii) present fairly and accurately, in all
material respects in accordance with GAAP, the results of operations of the
Business of the applicable Company for the periods covered by such statements,
(iv) include all adjustments which are necessary for a fair presentation of the
financial condition of the Business of the applicable Company and of the results
of operations of such Company for the periods covered by such statements, and
(v) make full and adequate provisions for all liabilities or obligations of the
Business of the Company, whether accrued, absolute, contingent or otherwise in
accordance with GAAP. Except as set forth on SCHEDULE 2.6(a), the Income
Statements do not contain any material items of special or nonrecurring income
or expense or any other income not earned or expense not incurred in the
ordinary course of business except as expressly specified therein, and, except
as so set forth, the Financial Statements include all adjustments, which consist
only of normal recurring accruals, necessary for such presentation.
(b) Other than as set forth in the Financial Statements, or as
set forth on SCHEDULE 2.6(b) hereof, the Companies have no liabilities or
obligations, contingent or otherwise (including pursuant to any guaranty), which
are not adequately reflected in or reserved against in the Financial Statements,
except for liabilities incurred since December 31, 1997 in the ordinary course
of business, consistent with past practice and not materially adverse to
Company. Other than as set forth on SCHEDULE 2.6(b) or SCHEDULE 2.7 since
December 31, 1997, there has been no change in the business, assets,
liabilities, condition (financial) or operations of the Companies, except for
changes which, individually or in the aggregate, would not have a Material
Adverse Effect.
(c) SCHEDULE 2.6(c) attached hereto sets forth (i) a list of
all Indebtedness of the Companies outstanding, on a consolidated basis, on the
date hereof, (ii) other than as set forth on Schedule 2.4(b), any Lien with
respect to such Indebtedness, and (iii) a list of each instrument or agreement
governing such Indebtedness (true and correct copies of which have been provided
to the Purchaser). Except as set forth on SCHEDULE 2.6(c), no default exists
with respect to or under any such Indebtedness or any instrument or agreement
relating thereto, which has not been waived in writing by the holder thereof.
2.7 EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS.
Except as disclosed in SCHEDULE 2.7, or the Financial Statements, or as
contemplated by this Agreement, since December 31, 1997 neither Company, nor
Seller with respect to any Company, has (i) declared, set aside or paid any
dividends, or made any distributions or payments, in respect of its equity
securities, or repurchased,
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redeemed or otherwise acquired any equity or other securities or issued any
shares or other units of any equity or other securities; (ii) merged into or
with or consolidated with, any other corporation or acquired the business or
assets of any Person; (iii) purchased any securities of any Person; (iv) amended
its articles of incorporation or bylaws; (v) issued any securities relating to
its shares of capital stock, or granted, or entered into any agreement to grant,
any options, convertibility rights, other rights, warrants, calls or agreements
relating to its shares of capital stock, or redeemed, repurchased or otherwise
reacquired any of its shares; (vi) created, incurred, assumed, guaranteed or
otherwise became liable or obligated with respect to any indebtedness for
borrowed money, or made any loan or advance to, or any investment in, any
Person, except in each case in the ordinary course of business and consistent
with past practices; (vii) made any change in any existing election, or made any
new election, with respect to any tax law in any jurisdiction which change or
election could have a Material Adverse Effect on the tax treatment of the
Companies or their business operations before or after the date hereof; (viii)
entered into, amended or terminated any agreement, except to the extent such
action would not have a Material Adverse Effect; (ix) sold, transferred, leased,
mortgaged encumbered or otherwise disposed of, or agreed to sell, transfer,
lease, mortgage, encumber or otherwise dispose of, any properties or assets
except (a) in the ordinary course of business, (b) pursuant to any agreement
specified in SCHEDULE 2.16, or (c) where such sale, lease, transfer, mortgage,
encumbrance or other disposition would not have a Material Adverse Effect; (x)
settled any claim or litigation, or filed any material motions, orders, briefs
or settlement agreements in any proceeding before any Governmental Authority or
any arbitrator; (xi) incurred or approved, or entered into any agreement or
commitment to make, any expenditures in excess of $50,000 other than those
required pursuant to any agreement set forth in SCHEDULE 2.16 in the ordinary
course of business consistent with past practice with and on a basis consistent
with prior periods; (xiii) engaged in any one or more activities or transactions
outside the ordinary course of business; (xiv) made any increase in (a) the rate
of compensation payable or to become payable to its directors, officers,
physicians, agents, or employees, or (b) the payment of any bonus, payment or
arrangement made to, for or with any of its directors, officers or employees,
except, as required in an agreement set forth in SCHEDULE 2.16 or by any benefit
plans set forth in SCHEDULE 2.19(b) or otherwise in the ordinary course of
business consistent with past practice, (xv) sold, assigned, transferred or
granted any license with respect to any patent, trademark, trade name, service
mark, copyright, trade secret or other intangible asset, except pursuant to
license or other agreements set forth on SCHEDULE 2.13 or to the extent such
action would not have a Material Adverse Effect; (xvi) suffered any loss of
property or waived any right of substantial value whether or not in the ordinary
course of business that could have a Material Adverse Effect; (xvii) made any
change in the manner of business or operations of the Companies or made any
change in any of its accounting methods or practices which could have a Material
Adverse Effect; or (xviii) committed to do any of the foregoing.
2.8 LITIGATION. Except as disclosed on SCHEDULE 2.8, there are
no claims, actions, suits, investigations or proceedings against any Company (or
Seller with respect to the Business) in any court or before any Governmental
Authority, or before any arbitrator (whether covered by insurance or not)
pending or, to the Knowledge of the Seller, threatened, against any Company (or
Seller with respect to the Business) which (i) questions the validity of this
Agreement, or any other Related Documents or any action taken or to be taken
pursuant hereto or thereto, or (ii) could reasonably be expected to have a
Material Adverse Effect on the right, title or interest of the Purchaser to the
Shares, Assets or the Business. Neither Seller nor the Company is in default
with respect to any order, writ, injunction, decree, ruling or decision of any
court, commission, board or other governmental agency, which default could have
a Material Adverse Effect.
2.9 COMPLIANCE WITH LAWS. The Seller and each Company is and
has been in compliance with the Legal Requirements applicable to the Business,
other than failures to so comply that would not have a Material Adverse Effect.
Except as set forth on SCHEDULE 2.9, neither Seller (with respect to the
Business) nor any Company has received or entered into any citations,
complaints, consent orders,
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compliance schedules, or other similar enforcement orders or received any
written notice from any Governmental Authority or any other written notice that
would indicate that there is not currently compliance with such Legal
Requirements, including without limitation, those relating to the delivery of,
referrals for, and billing and payment for health care items and services,
investment interests in health care providers, and those relating to the
Medicare and Medicaid programs and (b) there are no adverse orders, judgments,
writs, injunctions, decrees or demands of any court or administrative body,
domestic or foreign, or of any other governmental agency or instrumentality,
domestic or foreign, outstanding against any Company, the Shares, Assets or
Seller with respect to the Business, other than those that would not have a
Material Adverse Effect. To the Knowledge of the Seller, no Company and no
employees, agents, contractors and shareholders of any Company, are engaged in
any activities which are prohibited under the federal anti-kickback statute or
the Stark Law, 42 U.S.C. sections 1320a-7b or 1395nn, or the regulations
promulgated thereunder, or related or similar state or local statutes or
regulations, and which could have a Material Adverse Effect.
2.10 TAXES. Each Company has filed all Tax Returns required to
be filed within the applicable periods for such filings and has timely paid all
Taxes (including any foreign, federal, state or local Taxes) required to be
paid. No deficiencies for any Tax have been proposed or assessed against any
Company (or Seller with respect to any Company). To the Knowledge of the Seller,
except as disclosed on Schedule 2.10, there is no audit of the Tax Returns of
any Company pending or contemplated. There is no lien for Taxes, whether imposed
by any federal, state, local or foreign taxing authority, outstanding against
the Assets, properties or the Business.
2.11 REAL PROPERTY.
(a) No Company owns any real property (other than leaseholds).
SCHEDULE 2.11 sets forth the addresses of all real property that any Company
leases or subleases, and any Lien, other than Permitted Liens, on any such
leasehold interest, specifying in the case of each such lease or sublease, the
name of the lessor or sublessor, as the case may be, and the lease term.
(b) To the Knowledge of Seller, there is no violation of any
material law, regulation or ordinance (including without limitation laws,
regulations or ordinances relating to zoning, environmental, city planning or
similar matters) relating to any real property leased or subleased by any
Company.
(c) All the leases listed on SCHEDULE 2.11 are valid and
enforceable and are in full force and effect, and except as disclosed on
SCHEDULE 2.11, there are no defaults by any Company under any of such leases or,
to the Knowledge of the Seller, by any other party thereto, which might have a
Material Adverse Effect on the present use by the applicable Company or the
Purchaser of the property listed on SCHEDULE 2.11. Except as set forth on
SCHEDULE 2.11, no consent or approval of the lessor or sublessor of any of the
leases listed on SCHEDULE 2.11 is required for the performance by the Seller of
this Agreement and the Related Agreements.
2.12 ASSETS COMPRISING THE BUSINESS. The Assets represent all
of the real and personal property, licenses, intellectual property, permits and
authorizations, contracts, leases and other agreements that are necessary to the
operation of the Business as now operated. Except as set forth in SCHEDULE 2.12
or as otherwise expressly set forth in this Agreement neither Seller (as opposed
to any Company) nor any other Person (i) owns any personal property, licenses,
intellectual property, permits or authorizations, or (ii) has entered into any
contracts, leases or other agreements that are necessary to the operation of the
Business as now operated.
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2.13 PATENTS, TRADEMARKS, ETC.
(a) Set forth on SCHEDULE 2.13 is a list and brief description
of all material patents, patent rights, patent applications, trademarks,
trademark applications, service marks, service mark applications, trade names
and copyrights, and all applications for such that are in the process of being
prepared, owned by or registered in the name of any Company (or Seller with
respect to the Business), or of which Seller is a licensor or licensee or in
which Seller has any right which relates and is material to the Business, and in
each case a brief description of the nature of such right. To the Knowledge of
the Seller, the Companies own or possess adequate licenses or other rights to
use all patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, trade names, copyrights, manufacturing
processes, formulae, trade secrets and know how (collectively, "Intellectual
Property") to conduct the Business as presently conducted, except to the extent
that any lack of ownership or possession would not have a Material Adverse
Effect. No claim is pending or, to the Knowledge of the Seller, threatened to
the effect that the operations of any Company infringe upon or conflict with the
asserted rights of any other person under any material Intellectual Property,
and Seller has no knowledge of any such claim (whether or not pending or
threatened). No claim is pending or, to the Knowledge of the Seller, threatened
to the effect that any such material Intellectual Property owned or licensed by
the Seller, or which the Seller otherwise has the right to use and is material
to the Business, is invalid or unenforceable by the Seller, and Seller has no
knowledge of any such claim (whether, or not pending or threatened).
(b) Each of the Companies owns or licenses all computer
software programs or other electronic data transmission, storage, or computation
programs utilized in the Business (collectively, the "Computer Software"). No
other Computer Software is required for Seller or the Companies to operate the
Business as presently conducted.
2.14 EMPLOYEE MATTERS. No employees of any Company (the
"Employees") are represented by any labor union or similar organization and
there are no pending or, to the Knowledge of the Seller, threatened activities
the purpose of which is to achieve such representation of all or some of such
Employees. To the Knowledge of the Seller, except as set forth on SCHEDULE 2.14,
(a) the Business is operating and has been operated in compliance in all
respects with all Legal Requirements covering employment and employment
practices, terms and conditions of employment and wages and hours, including the
Immigration Reform and Control Act, the Worker Adjustment and Retraining
Notification Act of 1988 (the "Warn Act"), any such Legal Requirements
respecting employment discrimination, equal opportunity, affirmative action,
employee privacy, wrongful or unlawful termination, workers' compensation,
occupational safety and health requirements, labor/management relations and
unemployment insurance" or related matters and there are no threatened or
pending claims relating thereto, in each case, except to the extent such
noncompliance or claims would not have a Material Adverse Effect, (b) there is
no labor strike, dispute, slowdown or stoppage pending or, to the knowledge of
Seller, threatened against or affecting the Business, and neither Seller nor any
Company has experienced any work stoppage or other labor difficulty affecting
the Business in the last year which would have had a Material Adverse Effect,
and (c) except as set forth on SCHEDULE 2.14 OR 2.19(b), in the event of
termination of the employment of any Employee, Purchaser will not, pursuant to
any agreement with Seller or any Company or by reason of any representation made
or plan adopted by Seller or any Company prior to the Closing, be liable to any
employee for so-called "severance pay" parachute payments or any other similar
payments or benefits, including, without limitation, post-employment healthcare
(other than pursuant to COBRA) or insurance benefits. Except as disclosed on
SCHEDULE 2.14, none of the officers or other key employees of any Company has
notified Seller or such Company of his or her present intention to terminate his
or her employment with such Company. To the Knowledge of the Seller, no
director, officer or employee of or consultant to any Company is in violation of
any material terms of any employment contract, non-competition agreement,
non-disclosure agreement, or other contract or agreement containing restrictive
covenants relating to the right of any such director, officer, employee or
consultant to be employed or engaged by such Company because of the nature of
the business conducted or proposed to be conducted by such Company, or relating
to the use of trade secrets or proprietary information of others.
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2.15 LICENSES AND PERMITS. Each Company has all the permits,
licenses, orders, certifications, franchises and other rights and privileges of
all federal, state, local or foreign governmental or regulatory bodies necessary
for such Company to conduct the Business as presently conducted (collectively,
the "Licenses and Permits") except to the extent the absence of which would not
have a Material Adverse Effect. All of such Licenses and Permits are listed on
SCHEDULE 2.15. With respect to the Licenses and Permits listed on SCHEDULE 2.15
(or that are required to be listed on SCHEDULE 2.15), except to the extent same
would not have a Material Adverse Effect, (a) such Licenses and Permits are in
full force and effect, (b) to the Knowledge of the Seller, no suspension or
cancellation of any of such Licenses and Permits is threatened, and, (c) to the
Knowledge of Seller none of such Licenses and Permits will be affected by the
consummation of the transactions contemplated in this Agreement and the Related
Agreements. No Company is in default under any of such Licenses and Permits.
2.16 CONTRACTS AND COMMITMENTS.
(a) Except as set forth on SCHEDULE 2.11 or SCHEDULE 2.16
attached hereto, no Company is a party (nor is Seller a party, with respect to
the Business) to any oral or written (i) contract relating to the provision of
or reimbursement for services performed at the facilities serviced by such
Company which accounted for the payment of at least $10,000 per month during the
preceding 12-month period (including, without limitation, each contract and
agreement with an insurance company, health maintenance organization, preferred
provider organization, independent practitioner association or other third party
payor for health care items and services or provider network or organization),
(ii) consulting agreement not terminable on 60 days or less notice involving the
payment of more than $50,000 per annum, (iii) joint venture agreement, (iv)
noncompetition or similar agreements that restrict such Company from engaging in
a line of business either in total or in a particular territory or for a
particular period, (v) agreement with any executive officer or other employee of
such Company, the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving such Company
of the nature contemplated by this Agreement and which provides for the payment
of in excess of $50,000, (vi) agreement with respect to any employee of such
Company providing any term of employment beyond one year or compensation
guaranty in excess of $50,000 per annum, (vii) agreement or plan, including any
stock option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement, (viii) contract or agreement that cannot by its
terms be terminated by such Company with 30 days or less notice without penalty
and involves annual payments in excess of $50,000, (ix) contract or agreement
for capital expenditures involving payments in excess of $50,000, (x) any
agreement for the sale of assets that have a net book value of $50,000 or more,
or (xi) contract or agreement that is material to such Company or the Business.
True and correct copies of such agreements have been provided to the Purchaser.
Except as noted in Schedule 2.7, neither Seller nor any Company has received
notice that any party to any agreement or any client of such Company intends to
terminate, limit or restrict its relationship with such Company, except to the
extent such termination, limitation or restriction would not have a Material
Adverse Effect.
(b) CHANGE IN THIRD-PARTY PAYORS. Neither Seller nor any
Company has received written notice that any health plan, insurance company,
employer or other third-party payor, which is currently doing business with any
Company, intends to terminate, limit or restrict its relationship with any
Company, except to the extent same would not have a Material Adverse Effect.
2.17 BANK ACCOUNTS. SCHEDULE 2.17 sets forth the names of each
bank or depository in which any Company (or Seller with respect to the Business)
maintains any bank account, trust account or safety deposit box, the account
numbers for each, and the names of all persons authorized to draw therein or
that have access thereto.
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2.18 INSURANCE COVERAGE. Each Company or Seller has in full
force and effect policies of insurance of the type and in amounts providing
protection for each Company consistent with sound business practices and prudent
risk management applicable to businesses of the size and nature of the
Companies. SCHEDULE 2.18 attached hereto constitutes a true and complete
description of (i) all of the policies in force and effect in respect of each
Company (the "Policies"); (ii) all current and open or known claims under any of
the Policies; and (iii) all written claims in excess of $10,000 individually, or
$50,000 in the aggregate, made against any Company, during the past three years
whether or not covered by insurance. Neither Seller nor any Company has received
any notice of cancellation in respect of insurance coverage under the Policies.
All premiums due and payable in respect of the Policies have been paid. There
are no pending or, to the Knowledge of the Seller, threatened terminations or
premium increases with respect to any of the Policies and each Company is in
compliance with all material conditions contained therein. Notwithstanding
anything herein to the contrary, it is understood that all insurance coverage
for the Companies has been maintained through policies owned by Seller and that
such policies will not be transferred to Purchaser or the Companies on or after
the Closing Date.
2.19 ERISA.
(a) Neither Seller (with respect to Employees) nor any Company
maintains, or makes contributions to, and neither Seller (with respect to
Employees) nor any Company has at any time in the past two years maintained or
made contributions to, any employee benefit plan which is subject to the minimum
funding standards of Employee Retirement Income Security Act of 1974, as amended
("ERISA") or subject to the terms of the Multi-employer Pension Plan Amendment
Act of 1980.
(b) Except for the employment agreements set forth in SCHEDULE
2.16 AND SCHEDULE 2.14, SCHEDULE 2.19(b) sets forth each severance agreement,
and each plan, agreement, bonus plan, deferred compensation agreement, employee
pension, profit sharing, savings or retirement plan, group life, health, or
accident insurance or other employee benefit plan, agreement, arrangement or
commitment by which any Company is bound. SCHEDULE 2.19(b), AND SCHEDULE 2.14
AND 2.16 also sets forth, any material commitment arising under severance,
holiday, vacation, Christmas or other bonus plans (including, but not limited
to, "employee benefit plans", as defined in Section 3(3) of ERISA) maintained by
Seller or any Company for any Employees or with respect to which Seller or any
Company have liability with respect to any Employees, or make or have an
obligation to make contributions on behalf of Employees (collectively the
"Plans").
(c) SCHEDULE 2.19(c) identifies all Employees on leave of
absence eligible to receive health benefits, as required by the continuation
health care coverage provisions of Section 4980B of the Code or Section 601
through 608 of ERISA ("COBRA"). Notice of the availability of COBRA coverage has
been provided to all Employees on leave of absence entitled thereto, and all
persons electing such coverage are being (or have been, if applicable) provided
such coverage.
(d) No Plan has engaged in any "prohibited transaction" as
defined in Section 4975 of the Code, or has incurred any "accumulated funding
deficiency" as defined in Section 302 of ERISA, nor has any reportable event as
defined in Section 4043(b) of ERISA occurred with respect to any such Plan.
(e) With respect to each Plan, all required filings, including
all filings required to be made with the United States Department of Labor and
Internal Revenue Service, have been timely filed, and the present value of all
accrued benefits under each such plan does not, as of the date hereof, exceed
the value of the respective net assets of each such plan applicable to such
benefits.
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(f) Each of the Plans intended to qualify under Section 401 of
the Code satisfies the requirements of such Section and has received a favorable
determination letter from the Internal Revenue Service.
2.20 NO BROKERS OR FINDERS. No Person has or will have, as a
result of the transactions contemplated by this Agreement, any right, interest
or claim against or upon the Seller or any Company for any commission, fee or
other compensation as a finder or broker as a result of the consummation of this
Agreement, except as disclosed on SCHEDULE 2.20.
2.21 TRANSACTIONS WITH AFFILIATES. Except as disclosed in
SCHEDULE 2.21, there are no loans, leases or other continuing transactions
between any Company or Seller with respect to the Business, on the one hand, and
any officer or director of Seller or any Company or any person owning five
percent (5%) or more of the common stock of Seller or any respective family
member or affiliate of such officers, directors or shareholders, on the other
hand.
2.22 NO CONFLICTS OR DEFAULTS. Except as set forth on SCHEDULE
2.22, the execution, delivery and performance by Seller and each Company of this
Agreement and the Related Documents to which it is or will be a party and any of
the transactions contemplated hereby or thereby does not and will not (i)
violate or conflict with, with or without the giving of notice or the passage of
time or both, any provision of (A) the respective certificates of incorporation
or bylaws of the Seller or such Company, (B) except to the extent same would not
have a Material Adverse Effect, any agreement, indenture or other instrument
applicable to the Seller or such Company or any of their respective properties,
or (C) any law, rule, regulation, order, judgment, writ, injunction or decree
applicable to the Seller or such Company or any of their respective properties,
(ii) result in the creation of any Lien, other than Permitted Liens, upon the
properties, assets or revenues, of the Seller or such Company, respectively,
(iii) require the consent, waiver, approval, order or authorization of, or
declaration, registration, qualification or filing with, any Person (except
where the failure to obtain same would not have a Material Adverse Effect), or
(v) to the Knowledge of the Seller, cause such Company to lose the benefit of
any right or privilege it presently enjoys or cause any Person who is expected
to normally do business with such Company to discontinue to do so on the same
basis, except where such loss of benefit or privilege or discontinuation of
business would not have a Material Effect. No Company (nor Seller with respect
to the Business) is in default under, and no condition exists (whether covered
by insurance or not) that with or without notice or lapse of time or both would
(i) constitute a default under, or breach or violation of, any Legal
Requirement, indenture, agreement or instrument applicable to such Company or
the Business, or (ii) accelerate or permit the acceleration of the performance
required under, or give any other party the right to terminate, any indenture,
agreement or instrument applicable to such Company or the Business, other than
defaults, breaches, violations or accelerations that would not have a Material
Adverse Effect. All the contracts listed on SCHEDULES 2.11 AND 2.16 are valid
and enforceable and are in full force and effect, and to the Seller's knowledge
there are no defaults by either Seller or any Company under any of such
contracts or, to the Knowledge of the Seller, by any other party thereto, except
to the extent same would not have a Material Adverse Effect. Except as disclosed
on SCHEDULE 2.22, the performance by the Seller of this Agreement and the
Related Agreements will not result in the termination of, or in any increase of
any amounts payable under, any contract listed on SCHEDULES 2.11 AND 2.16.
2.23 ENVIRONMENTAL COMPLIANCE. To the Knowledge of Seller,
Seller and each Company are in compliance in all material respects with all
environmental and related Legal Requirements applicable to the Business, the
Assets and the real property covered by the real property leases, including, but
not limited to, the Resource Conservation and Recovery Act of 1976, as amended,
the Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended, the Federal Water Pollution
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Control Act, as amended by the Clean Water Act, and subsequent amendments, the
Federal Toxic Substances Control Act, as amended, and the Clean Air Act, as
amended, with respect to environmental matters, public or workplace health or
safety, or hazardous, toxic or infectious wastes, materials or substances
(including medical wastes) or petroleum products, materials or wastes or
radioactive substances or wastes (collectively "Environmental Laws"), except to
the extent noncompliance would not have a Material Adverse Effect. The foregoing
representation and warranty applies to the operation of the Business and the use
of the Assets including, but not limited to, the use, handling, treatment,
storage, transportation and disposal of any hazardous, toxic or infectious
waste, material or substance (including medical waste) or petroleum products,
material or waste or radioactive substances or waste whether performed on any of
the properties covered by the real property leases or at any other location. To
the Knowledge of Seller, no investigation or review is pending or threatened by
any Governmental Authority or other party with respect to any alleged violation
by Seller or any Company with respect to the Business of any Environmental Law,
the need for any work, repairs, or demolition by any Seller or any Company, on
or in connection with any property in order to comply with any Environmental
Law, or any actual or threatened release (including, but not limited to, any
spill, discharge, leak, emission, ejection, escape or dumping) or inadequate
storage of, or contamination caused by any hazardous, toxic or infectious waste,
material or substance (including medical waste) or petroleum product, material
or waste or radioactive substance or waste, or any such constituent which would
have a Material Adverse Effect.
2.24 DISCLOSURES. No representation or warranty by the Seller
or the Companies contained in this Agreement or any schedule, exhibit or
certificate delivered in accordance therewith and no written statement or
document furnished by the Seller or the Companies, contains, as of the date on
which made or reaffirmed, any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein, in light of the circumstances under which such statements were made,
not misleading in any material respect.
2.25 ACCOUNTS RECEIVABLE. Each of the accounts receivable of
the Companies constitutes a valid claim in the full amount thereof against the
debtor charged therewith on the books of the Companies, and has been acquired in
the ordinary course of Companies' business.
2.26 MEDICARE/MEDICAID PARTICIPATION. The Companies are
certified for participation or enrollment in Medicare and Medicaid programs,
have a current and valid provider contract with the Medicare and Medicaid
programs or other third party reimbursement source (inclusive of managed care
organizations), are in compliance with the conditions of participation of such
programs, except for such certification, contracts, compliances, approvals, and
qualifications which, individually or in the aggregate, would not have a
Material Adverse Effect.
ARTICLE III: REPRESENTATIONS OF PURCHASER AND CONTINUCARE
Each of Purchaser and Continucare hereby represents and warrants to the
Seller as follows:
3.1 ORGANIZATION AND CORPORATE POWER. Each of Purchaser and
Continucare is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Florida, and has all requisite corporate
power and authority to own its properties and to carry on its business as
presently conducted. Each of Purchaser and Continucare is duly licensed or
qualified to do business as a foreign corporation in each jurisdiction wherein
the character of its property, or the nature of the activities presently
conducted by it, makes such qualification necessary, except where the failure to
so qualify would not have a Material Adverse Effect on Continucare. Neither
Continucare nor Purchaser is in violation in any material
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respect of its respective articles of incorporation or bylaws.
3.2 AUTHORIZATION. Each of Purchaser and Continucare has all
necessary corporate power and authority, and has taken all necessary corporate
action required for the due authorization, execution, delivery and performance
by the Purchaser and Continucare of this Agreement and the Related Agreements to
which the Purchaser is a party, and the consummation of the transactions
contemplated herein or therein. This Agreement is, and upon execution and
delivery, the Related Agreements to which the Purchaser and Continucare is a
party will be, valid and binding obligations of the Purchaser and Continucare,
enforceable in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy. insolvency, moratorium or
similar laws which affect creditors, rights generally.
3.3 ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution
or delivery of this Agreement or of any of the Related Agreements by Purchaser
and Continucare, nor the performance by Purchaser and Continucare of the
transactions contemplated hereby and thereby, conflicts with, or constitutes a
breach of or a default under (a) the respective articles of incorporation or
by-laws of Purchaser and Continucare; or (b) except to the extent same would not
have a Material Adverse Effect on Continucare, any agreement, indenture or other
instrument applicable to Continucare or Purchaser or any of their respective
properties; or (c) any law, rule, regulation, judgment, order, writ, injunction
or decree applicable to Continucare or the Purchaser.
3.4 NO BROKERS OR FINDERS. No person has or will have, as a
result of the transactions contemplated by this Agreement, any right, interest
or claim against or upon the Purchaser or Continucare for any commission, fee or
other compensation as a finder or broker because of any act or omission by the
Purchaser, except as disclosed on SCHEDULE 3.4.
ARTICLE IV: TAX MATTERS
4.1 TERMINATION OF TAX SHARING AGREEMENT. Except as otherwise
provided in this Article IV, all tax sharing agreements, arrangements, policies
and guidelines, formal or informal, express or implied, that may exist between
the Companies and Seller or its affiliates and all obligations thereunder shall
terminate as of the date hereof and no Company shall have any liability
thereunder for any and all amounts due in respect of periods prior to the date
hereof.
4.2 SELLER'S RETURNS AND TAXES.
(a) Each Company shall continue to be included for all taxable
periods ending on or before the date hereof in the consolidated federal income
Tax Return of which Seller is the common parent and any required state or local
consolidated, combined or unitary income or franchise Tax Returns that include
the Company (all such Tax Returns including taxable periods of the Company
ending on or before the date hereof are hereinafter referred to as "Pre-Closing
Consolidated Returns").
(b) Seller shall timely prepare and file (or cause to be
prepared and filed) all Pre-Closing Consolidated Returns, all other income Tax
Returns of the Companies for taxable periods that end on or before the date
hereof, and all other Tax Returns of the Companies required to be filed on or
before the date hereof ("Seller's Returns"). All Seller's Returns shall be
prepared in a manner consistent with prior practice. Seller shall timely pay (or
cause to be paid) all Taxes shown as due and payable on the Seller's Returns
including, without limitation, all Taxes payable as a result of the Elections
under Section 4.7 ("Seller's Taxes").
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(c) Purchaser and Seller agree that if a Company is permitted
under any applicable state or local income tax law to treat the date hereof as
the last day of a taxable period, Purchaser and Seller shall treat (and cause
their respective affiliates to treat) the date hereof as the last day of a
taxable period.
4.3 PURCHASER'S RETURNS AND TAXES. Purchaser shall timely
prepare and file (or cause to be prepared and filed) all Tax Returns required by
law of each Company that are not required to be prepared and filed by Seller
pursuant to Section 4.2 ("Purchaser's Returns"). Purchaser shall timely pay or
cause to be paid all Taxes relating to Purchaser's Returns ("Purchaser's
Taxes").
4.4 TAX COOPERATION. Purchaser and Seller shall reasonably
cooperate with the other in connection with the preparation of all Tax Returns
with respect to the Companies and with any tax investigation, audit or other
preceding related to the Companies. Purchaser and Seller and their subsidiaries
shall preserve all information, returns, books, records, and documents relating
to any liabilities for Taxes with respect to a taxable period until the later of
the expiration of all applicable statutes of limitation and extensions thereof,
or the conclusion of all litigation with respect to Taxes for such period.
4.5 INDEMNIFICATION.
(a) After the date hereof, Seller shall indemnify and hold
harmless Purchaser from and against (i) any Taxes related to Seller's Returns,
including any and all Taxes payable as a result of the Elections under Section
4.7; (ii) any Taxes related to Purchaser's Returns attributable to or
apportioned to any period on or before the date hereof and (iii) any increase in
Tax liability resulting from any Company being severally liable for any Taxes of
Seller's or any other consolidated group of which the Company was a member on or
before the date hereof pursuant to Treasury Regulations ss. 1.15026 or any
analogous state or local tax provision. Seller shall pay such amounts as it is
obligated to pay to Purchaser under the preceding sentence within 15 days after
payment of any applicable Tax liability by Purchaser or the applicable Company.
(b) After the Closing Date, Purchaser shall indemnify and hold
harmless Seller and its subsidiaries from and against any Tax liability with
respect to Purchaser's Taxes that are allocable to or apportioned to a period
after the date hereof. Purchaser shall pay such amounts within 15 days after
payment of any such Tax liability by Seller or its subsidiaries.
(c) If a period reflected in a Purchaser's Return includes a
period prior to the date hereof, the portion of Purchaser's Taxes attributable
to the period on or before the date hereof shall, in the case of real and
personal property Taxes, be determined on basis of a ratable daily apportionment
and, in the case of other Taxes, be apportioned based on the actual operations
of the Company.
4.6 NOTIFICATION OF PROCEEDINGS; CONTROL; REFUNDS.
(a) In the event that Purchaser or the Company receives
notice, whether orally or in writing, of any pending or threatened federal,
state, local, municipal or foreign tax examinations, claims settlements,
proposed adjustments, assessments or reassessments or related matters with
respect to Taxes that could affect Seller, or if Seller receives notice of
matters that could affect Purchaser or a Company, the party receiving notice
shall notify in writing the potentially affected party within 10 days thereof.
The failure of any party to give the notice required by this paragraph shall not
impair that party's rights under this Agreement except to the extent that the
other parties demonstrate that they have been damaged thereby.
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(b) Each of Seller and Purchaser (as applicable, the
"Controlling Party") shall have the right to control any audit or examination by
any taxing authority, initiate any claim for refund, file any amended return,
contest, resolve and defend against any assessment, notice of deficiency or
other adjustment or proposed adjustment relating to or with respect to those Tax
Returns that each is required to prepare and file pursuant to Sections 4.2 and
4.3; provided that, in the event that any such adjustment could have an adverse
effect on the Tax liability of the other party (or affect the Purchaser by
having an effect on the Tax liability of the Company) (the "Affected Party"),
the Controlling Party (i) shall give the Affected Party written notice of any
such adjustment, (ii) shall permit the Affected Party to participate in the
proceeding to the extent the adjustment may affect the Tax liability of the
Affected Party and (iii) shall not settle or otherwise compromise such
proceeding without the prior written consent of the Affected Party, which
consent shall not be unreasonably withheld. Seller and Purchaser shall each be
entitled to retain for its own account any refunds of Taxes attributable to
those Tax Returns that each is required to prepare and file pursuant to Sections
4.2 and 4.3 and shall pay to the other the amount of any refund to which the
other is entitled within 15 days after the receipt of such refund.
4.7 SECTION 338 MATTERS. Seller and Purchaser agree that they
shall jointly make or cause to be made the election under Section 338(h)(10) of
the Code and Treasury regulations section 1.338(h)(10)-1(d) and any
corresponding election under state, local, or foreign tax law (the "Elections")
with respect to the purchase and sale of the stock of each of the Companies. If
Seller is not the common parent of a "selling consolidated group" of which the
companies are members, as that term is defined under Treasury Regulations
section 1.338(h)(10)-1(c), Seller shall cause the person that is the common
parent with respect to the Companies to join in making the Elections with
Purchaser. (The person authorized to make the Elections with respect to the
Companies is referred to as the "Authorized Person" herein). Seller and
purchaser agree that MADSP (as such term is used in Treasury Regulations section
1.338(h)(10)-1(f)) for Purchaser's purchase of the Companies shall be allocated
among the assets in accordance with the provisions of that section. Such
allocation (the "Assets Allocation") shall be agreed to by Seller and Purchaser
as soon as practicable after the date hereof. If Seller and Purchaser are unable
to agree on the Asset Allocation, such allocation shall be determined on the
basis of an appraisal prepared by the Accounting Firm (as defined below).
Purchaser shall prepare IRS Form 8023 (and any required attachments) and any
similar state, local, or foreign tax forms (and any required attachments)
required to make the Elections (collectively, the "Election Forms" and each
singularly, the "Election Form") and shall submit the Election Forms to Seller
no later than 75 days prior to the date the Election Forms are required to be
filed. In the event of any dispute with regard to the content of any Election
Form (including any dispute concerning the Asset Allocation), the parties shall
diligently attempt to resolve such dispute. If they have not done so by the
thirtieth day prior to the date the election form in question is required to be
filed, the dispute shall be resolved by a nationally recognized firm of
independent auditors acceptable to both Seller and Purchaser (the "Accounting
Firm") at least 10 days prior to the time the Election Form is required to be
filed. Seller shall promptly cause the Election Forms to be duly executed by the
Authorized Person and shall return such Election Forms to Purchaser. Purchaser
shall duly and timely file the Election Forms in accordance with applicable tax
laws and the terms of this Agreement. Seller and Purchaser shall take or cause
to be taken any other actions that are necessary for making or perfecting the
Elections. Purchaser shall provide Seller with a copy of the Election Forms as
filed. Seller and Purchaser shall report all transactions pursuant to this
Agreement in a manner that is consistent with the Elections and shall take no
position contrary thereto unless required to do so pursuant to a "determination"
within the meaning of Section 1313 of the Code or an analogous provision under
state, local, or foreign tax law. Purchaser and Seller shall each pay one-half
of the cost of any fees and expenses of the Accounting Firm. The parties agree
that a violation of the provisions of this Section 4.7 is a proper subject of
injunctive relief.
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4.8 TAX EFFECT OF PAYMENTS. Purchaser and Seller agree that
any indemnification payments made pursuant to this Section 4.5 shall be treated
for tax purposes as an adjustment to the Purchase Price unless otherwise
required by applicable law.
ARTICLE V: OBLIGATIONS OF PARTIES AFTER CLOSING
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by each party in this Agreement and in each
Schedule or in any of the Related Agreements shall survive the date hereof and
for a period of nine (9) months after the date hereof notwithstanding any
investigation at any time made by or on behalf of the other party, provided that
no time limitation shall be applicable with respect to any claims relating to
the Non-Assumed Obligations or a claim of fraud against any party, or a claim
pursuant to Section 4.5 hereof. All representations and warranties related to
any claim asserted in writing prior to the expiration of the applicable survival
period shall survive (but only with respect to such claim) until such claim
shall be resolved and payment in respect thereof, if any is owing, shall be
made.
5.2 INDEMNIFICATION.
(a) The Seller shall indemnify and defend and hold harmless
Purchaser and Continucare, and its respective officers, directors, employees,
agents, representatives and affiliates against and with respect to any and all
damages, claims, losses, penalties, liabilities, actions, fines, costs and
expenses (including, without limitation, reasonable attorney's fees and
expenses) (all of the foregoing hereinafter collectively referred to as a
"Loss"), regardless of whether an action has been filed or asserted against
Purchaser or Continucare after the date hereof, arising from, in connection with
or with respect to the following items (i) any misrepresentation or breach of
warranty under this Agreement or any Related Agreements, or (ii) any failure to
fulfill any agreement or covenant on the part of any Seller or Company in this
Agreement; or (iii) any assertion or claim against Purchaser or Continucare of
any Non-Assumed Obligations (iv) any and all actions, suits, proceedings,
judgments, settlements (to the extent approved or entered into by Seller or
Company as hereinafter provided), costs, penalties and legal and other expenses
incident to any of the foregoing; provided that the Seller's maximum aggregate
liability under this Section 5.2(a) shall not exceed $2,500,000 (the "Indemnity
Cap"). It is expressly understood that Seller's liability, if any, resulting
from fraud and the Non-Assumed Obligations shall be excluded from the Indemnity
Cap.
(b) Each of Purchaser and Continucare shall indemnify and
defend and hold harmless Seller and its respective officers, directors,
employees, agents and affiliates against and with respect to any and all Losses,
regardless of whether an action has been filed or asserted against Seller after
the date hereof, arising from, in connection with or with respect to the
following items: (i) any misrepresentation, breach of any warranty, or failure
to fulfill any agreement or covenant on the part of Purchaser or Continucare
under this Agreement or any Related Agreements, (ii) any Loss arising out of the
operation or ownership of the Assets or the operation of the Business after the
date hereof, (iii) any Loss arising in respect of any stated monetary obligation
(including severance and benefits) contained in any of the Executive Employment
Agreements, whether accruing prior to or after the date hereof, other than
Non-Assumed Obligations, (iv) any obligations arising under the Executive
Employment Agreements after the date hereof, and (v) any and all actions, suits,
proceedings, judgments, settlements (to the extent approved or entered into by
Purchaser as hereinafter provided), costs, penalties and legal and other
expenses incident to any of the foregoing, PROVIDED that the maximum aggregate
liability of the Purchaser and Continucare shall not exceed $2,500,000 under
this Section 5.2(b). It is expressly understood that Purchaser's liability, if
any, resulting from fraud or from any Loss arising out of the ownership and
operation of the Assets or the
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operation of the Business after the date hereof shall be excluded from the
Indemnity Cap.
(c) Any claim for indemnification under this SECTION 5.2 must
be asserted by written notice by a date which is nine (9) months following the
date hereof, except that (i) any claim based upon a breach of any of Seller's
covenants herein may be asserted until the applicable period of limitations for
breach shall have expired, and (ii) any claim based upon a claim relating to the
Non-Assumed Obligations or fraud may be asserted with no such time limitation.
(d) If any action or proceeding be commenced, or if any claim,
demand or assessment be asserted, in respect of which any party ("Indemnitee")
proposes to hold any other party ("Indemnitor") liable under the indemnity
provisions of this SECTION 5.2 (a "Claim"), then if the Indemnitor shall, at its
option, acknowledge its indemnification obligation and notify indemnitee of its
election to contest or defend any such Claim, such Indemnitor shall be entitled,
at its sole cost and expense, to contest or defend the same with counsel of its
own choosing, and Indemnitee shall not admit any liability with respect thereto
or settle, compromise, pay or discharge the same without the prior written
consent of the Indemnitor so long as any Indemnitor is contesting or defending
the same in good faith, and Indemnitee (and its successors and assigns) shall
cooperate with the Indemnitor in the contest or defense thereof (and the
Indemnitor shall reimburse Indemnitee for the Indemnitee's reasonable actual
out-of-pocket expenses incurred in connection with such cooperation) and
Indemnitee shall enter into any settlement with respect thereto recommended by
Indemnitor so long as the amount of such settlement is paid by the Indemnitor
and no obligation to perform or refrain from performing any act shall be imposed
upon Indemnitee by reason thereof and such settlement otherwise is reasonable.
(e) Notwithstanding the foregoing, any Indemnitee shall be
entitled to conduct its own defense at the reasonable cost and expense of the
Indemnitor if not doing so would materially prejudice the Indemnitee due to the
nature of any claims or counterclaims presented or by virtue of a conflict
between the interest of the Indemnitee and the Indemnitor, and provided further
that in any event the Indemnitee may participate in such defense at its own
expense. If Indemnitee shall have given Indemnitor at least thirty (30) days
prior written notice that it intends to assume the defense of any Claim and if
the indemnitor fails to assume the defense of such Claim as provided above by
the end of such thirty (30) day period or such later reasonable time (which
shall be such period of time as will not result in prejudice to the rights of
the Indemnitee), then the Indemnitee shall have the right to prosecute and
conduct its own defense by counsel of its choice, and in connection therewith
shall have full right to conduct the defense thereof and to enter into any
compromise or settlement thereof with the consent of the Indemnitor (which shall
not unreasonably be withheld, conditioned or delayed). Such defense shall be at
the cost and expense of the Indemnitor if it is subsequently determined that the
Indemnitor was obligated to defend or indemnify the Indemnitee with respect to
such action, proceeding, claim, demand or assessment.
(f) Any claim of indemnification against Seller shall, once
such claim has been resolved by written agreement or has culminated in a final
nonappealable determination rendered either by binding arbitration or by a court
of competent jurisdiction, be satisfied by offsetting such amount against the
Note; provided that, if any amount under the Note is otherwise due and payable
to Seller while any such claim is outstanding, Purchaser and Continucare shall
pay into an interest bearing escrow account the amount of the indemnification
(subject to the Indemnification Cap) which Purchaser in good faith claims to be
owing from Seller, rather than paying such amount to Seller, until such claim is
resolved. If there remains unsatisfied claims after such offset, Continucare and
Purchaser shall have full recourse against the Seller for payment of such
balance (subject to the Indemnification Cap).
5.3 RESTRICTIONS.
(a) From and after the date hereof, Seller shall not disclose,
to any Person or
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entity, or make use of, without the authorization of Continucare, any non-public
pricing strategies or records of Seller which had been used exclusively in
connection with the Business, any proprietary data or trade secrets owned by
Seller and included in the Assets or any financial or other information about
Seller which related exclusively to the Business; provided that the foregoing
restrictions shall not apply to any information which: (i) is or becomes
publicly known through no negligent or wrongful act or omission on the part of
Seller; (ii) is or becomes available to the disclosing party on a
non-confidential basis from a third party without a similar restriction and
without breach of this Agreement; (iii) is approved for release by Purchaser;
(iv) is required to be disclosed in accordance with applicable law.
(b) During the period terminating on the second anniversary of
the date hereof, Seller shall not directly or indirectly through any entity
controlled directly or indirectly by it, solicit for purposes of employment, any
Employee; provided, however, that the foregoing shall not apply to general
advertisements or other appeals seeking employees generally made to the public.
(c) Seller acknowledges that the restrictions contained in
this Section 5.3 may be specifically enforced.
5.4 DELIVERY OF RECORDS. On the date hereof, Seller shall
deliver, cause to be delivered, or make available to Purchaser all records and
files then in Seller's possession relating to the operation of the Business.
5.5 ACCESS TO RECORDS. After the Closing, at reasonable times
and on reasonable notice, each party shall have access to the other party's
books and records pertaining to such party's operations which were delivered to
the other party (and shall be permitted to make copies of any portion thereof),
and each party shall retain such books and records for a period of six years
after the date hereof, except as hereinafter provided. During such six-year
period, each party shall notify the other party of its intention to dispose of
or destroy any of such books and records and, upon the other party's request,
shall deliver such books and records to such party.
5.6 COOPERATION - FURTHER ASSISTANCE. From time to time, as
and when reasonably requested by Purchaser or Seller, respectively, after the
Closing, the other of them will execute and deliver, or cause to be executed and
delivered, all such documents, instruments and consents and will use reasonable
efforts to take all such other action as may be reasonably necessary to carry
out the intent and purposes of this Agreement, and, with respect to a request by
Purchaser, to vest in Purchaser good title to, possession of and control of all
of the Assets.
5.7 AUDITED FINANCIAL STATEMENTS. Within seventy (75) days
following Closing, Seller will cause to be prepared by C.W. Amos & Co., LLC and
will deliver to Purchaser, audited financial statements of the Companies,
pertaining solely to the Business, as of and for the three (3) years ended
December 31, 1997. Seller will advise C.W. Amos & Co., L.L.C. that such audited
financial statements will be filed by Continucare with the Securities and
Exchange Commission as required under the Securities Exchange Act of 1934 and
that, accordingly, such financial statements must be prepared in accordance with
GAAP and Regulation S-X. Seller shall bear the expense of the audited financial
statement for the one-year period ended December 31, 1997, and Purchaser shall
bear the expense of the prior two years' audited statements.
5.8 TERMINATION OF CONTRACTS. As soon as is reasonably
practicable after the Closing, but in any event within sixty (60) days following
Closing, IHS will cause to be terminated the therapy contracts listed under the
heading "LTC Contracts" on Schedule 2.16, other than those identified as
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<PAGE> 21
Northside Health, and Purchaser, Continucare, and the Companies agree that IHS
shall have the right to so terminate.
5.9 LOCKBOX COLLECTIONS. Any proceeds of the Companies'
accounts receivable from the Business which are collected after the Closing into
Barnett lockbox account number 1611797593 (which lockbox is being retained by
Seller after the Closing), shall be promptly remitted to the Companies.
5.10 EMPLOYEE MATTERS. For a period of ninety (90) days
following the Closing, (i) Seller shall maintain, at the sole expense of the
Purchaser, the existing health insurance coverage for those persons who are now
and who continue to be employees of the Companies, and (ii) Purchaser shall be
entitled to utilize the Companies' Coral Springs office for billing and
collection functions to be performed on behalf of the Companies by substantially
the same employees as are currently employed at such office.
5.11 CONSULTING AGREEMENT. Upon termination of the contracts
referred to in Section 5.8, above, IHS shall enter into a consulting agreement
with the Purchaser pursuant to which the Purchaser shall advise and consult with
IHS with respect to the possible establishment of certified outpatient
rehabilitation facilities, which consulting agreement shall be for a term of
four (4) months at a rate of $100,000 per month payable to Purchaser on the
first day of each month in advance.
5.12 INSURANCE MATTERS. For a period of up to fourteen (14)
days following the Closing, IHS shall maintain in effect insurance coverages
with respect to the Companies for commercial general liability, workers
compensation, commercial property, umbrella liability, commercial automobile,
commercial crime and any medical professional liability, but only to the extent
that such coverages are in effect immediately prior to the Closing. Purchaser
shall, upon demand, promptly reimburse IHS for all costs associated with such
insurance coverage for the Business after the Closing, including all premiums,
retention amounts, deductibles, and non-covered claims and expenses. All
insurance coverages maintained by IHS during the aforementioned 14-day period
will be replaced by Purchaser with its policies of insurance which shall in all
cases be retroactive to the date of Closing. Purchaser expressly acknowledges
and agrees that the Companies (and not IHS) shall continue to be responsible for
all claims and litigation asserted against the Companies and arising out of
events pertaining to the Business prior to the Closing other than the
Non-Assumed Obligations. Purchaser promptly shall transfer all insurance claims
and litigation that are based upon Business related events prior to the Closing
to an account of the Purchaser at Gallagher Bassett Services, Inc. and,
thereafter, shall fund into such account all payments, and follow such other
procedures, as shall be reasonably necessary to maintain existing excess
insurance coverages with respect to such claims and litigation. Notwithstanding
the foregoing, all medical professional liability claims that arise out of
operation of the Business prior to the Closing but are reported after the
Closing shall be covered by Purchaser's insurance policies.
ARTICLE VI: CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Assets" shall mean all of the tangible and intangible assets of the
Companies as of the date hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations and interpretations thereunder.
"GAAP" means generally accepted accounting principles, consistently
applied.
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"Governmental Authority" means any nation or country (including but not
limited to the United States) and any state, commonwealth, territory or
possession thereof and any political subdivision of any of the foregoing,
including but not limited to courts, departments, commissions, boards, bureaus,
agencies, panels, ministries or other instrumentalities.
"Indebtedness" means all obligations, contingent or otherwise, whether
current or long-term, which in accordance with GAAP would be classified upon the
obligors, balance sheet as liabilities (other than deferred taxes) and shall
also include capitalized leases, guarantees, endorsements (other than for
collection in the ordinary course of business) or other arrangements whereby
responsibility is assumed for the oblig ations of others, including any
agreement to purchase or otherwise acquire the obligations of others or any
agreement, contingent or otherwise, to furnish funds for the purchase of goods,
supplies or services for the purpose of payment of the obligations of others,
other than accounts or trade payables in the ordinary course of business.
"Knowledge of the Seller" or "Seller's Knowledge" means the actual
knowledge of with respect to the matter in question of any of the following
persons: Jim Hough, Mary Catchur, Dave Kramp, Rob Stobo, Debbie Reardon, Joan
Miller, and Joseph Faulk.
"Legal Requirements" means, when described as being applicable to any
Person, any and all laws (statutory, judicial or otherwise) (including, but not
limited to, the federal Occupational Safety and Health Act of 1970, 42 U.S.C.
ss. 1320a-7b, the statutes recodified or enacted by the federal Medicare and
Medicaid Patient and Program Protection Act of 1987 and the Americans With
Disabilities Act of 1990) ordinances, regulations, judgments, orders,
directives, injunctions, writs, decrees or awards of, and any contracts,
agreements or undertakings with, any Governmental Authority, in each case as and
to the extent applicable to such Person or such Person's business, operations or
properties.
"Lien" shall mean any mortgage, deed of trust, pledge, security
interest, encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing, any conditional sale or other title retention
agreement, any lease in the nature thereof, and the filing of or agreement to
give any financing statement under the Uniform Commercial Code of any
jurisdiction).
"Material Adverse Change" or "Material Adverse Effect" means a material
adverse change in, or the occurrence of any event which will or would have a
material adverse change in the assets, properties, liabilities, business,
affairs, results of operations, financial condition of the Companies or
Continucare, as the case may be, taken as a whole.
"Person" means an individual, corporation, partnership, joint venture,
trust or unincorporated organization or a government or agency or political
subdivision thereof.
"Purchase Agreements" means the following agreements:
(i) Stock Purchase Agreement, dated as of August 1, 1996, among
Integrated Health Services, Inc. and Joseph Faulk and Roger
Van Dyke and J.R. Rehab Associates, Inc.;
(ii) Asset Purchase Agreement, dated as of April 7, 1997, among
Integrated Health Services, Inc. and Coastal Rehabilitation,
Inc. and Kim Rubel, John Redrup;
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(iii) Amended Restated Agreement of Merger, dated as of June 1,
1996, among Integrated Health Services, Inc., Integra
Acquisition Corp., IntegraCare, Inc. and Dana J. Pusateri,
B.J. Collister, Sally Hemlepp, Wayne M. Stillerman, Juan C.
Cocuy, Frank Chaviano, Martin Satiago.
"Related Agreements" mean any other agreements or instruments to be
executed in connection herewith or therewith.
"Taxes" means all federal, state, local, and foreign income, payroll,
withholding, excise, sales, use, real and personal property, use and occupancy,
business and occupation, mercantile, real estate, capital stock, franchise and
other taxes, including interest and penalties thereon and all estimated taxes.
"Tax Returns" means all returns or reports, including accompanying
schedules, with respect to Taxes.
ARTICLE VII: MISCELLANEOUS
7.1 AMENDMENTS AND WAIVERS. This Agreement may not be amended,
nor any provision hereof waived, unless such amendment or waiver is approved in
writing by Continucare and Seller. No delay in the exercise of any rights
hereunder shall operate as a waiver of any rights of Continucare.
7.2 NOTICES. All notices, requests, consents, reports and
demands shall be in writing and shall be hand delivered, sent by facsimile or
other electronic medium, or mailed, postage prepaid, to Continucare or to the
Seller at the address set forth below or to such other address as may be
furnished in writing to the other parties hereto. A notice shall be deemed
effective (i) upon delivery if by hand (ii) on the date faxed or electronically
transmitted, if confirmation of such transmission is obtained, and (iii) upon
the third day following mailing as set forth above.
If to any Seller: Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Marshall A. Elkins, General Counsel
and
Integrated Health Services, Inc.
10065 Red Run Boulevard
Owings Mills, MD 21117
Attn: Brian Davidson, Executive Vice President
With a copy to: Blass & Driggs, Esqs.
461 Fifth Avenue, 19th Fl.
New York, NY 10017
Attn: Michael S. Blass, Esq.
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Continucare or the Purchaser: Continucare Corporation
100 S.E. 2nd Street, 36th Floor
Miami, Florida 33131
Attention: Charles M. Fernandez, President
With copy to: Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quentel, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attention: Rebecca R. Orand, Esq.
7.3 EXPENSES. Each of the parties to this Agreement shall bear
its own expenses incurred in connection with the negotiation, preparation,
execution and closing of this Agreement and the transactions contemplated hereby
(it being understood that Seller shall bear all costs and expenses of the
Companies).
7.4 INDEMNIFICATION FOR BROKER FEES. The Seller agrees to
indemnify and save harmless Continucare, and the Purchaser and Continucare agree
to indemnify and save harmless the Seller, and its partners, officers,
directors, employees and agents, from and against any and all actions, causes of
action, suits, losses, liabilities and damages, and expenses (including, without
limitation, reasonable attorney's fees and disbursements in connection
therewith) for any brokers or finders fees arising with respect to brokers or
finders engaged by the non-indemnifying party.
7.5 COUNTERPARTS. This Agreement and any exhibit hereto may be
executed in multiple counterpart, each of which shall constitute an original but
all of which shall constitute but one and the same instrument. One or more
counterparts of this Agreement or any exhibit hereto may be delivered via
telecopier, with the intention that they shall have the same effect as an
original counterpart hereof.
7.6 EFFECT OF HEADINGS. The article and section headings
herein are for convenience only and shall not affect the construction hereof.
7.7 FURTHER ASSURANCES. Each of the parties shall execute and
deliver such documents, and take such other action, as shall be reasonably
requested by any other party hereto to carry out the transactions contemplated
by this Agreement.
7.8 GOVERNING LAW; ARBITRATION. This Agreement shall be deemed
a contract made under the laws of the State of Florida and together with the
rights and obligations of the parties hereunder, shall be construed under and
governed by the laws of such State. Other than with respect to injunctive
equitable relief sought by either party to this Agreement. All disputes arising
after the Closing in connection with this Agreement shall be finally settled
under the Rules of the American Arbitration Association (the "Rules") by three
(3) arbitrators appointed in accordance with said Rules. Any such arbitration
shall be held pursuant to the Laws of the State of Florida unless the parties
hereto mutually agree in writing upon some other location for arbitration. The
arbitrators shall not be empowered to award punitive, exemplary and/or
consequential damages to any party. There shall be no consolidation of this
arbitration with any other dispute or proceeding involving third parties. The
provisions of this Agreement shall prevail in case of inconsistency between the
Rules and this Agreement.
7.9 ATTORNEYS' FEES. In the event that a suit for the
collection of any damages resulting from, or for the injunction of any action
constituting, a breach of any of the terms or provisions of this Agreement, then
the prevailing party shall pay all reasonable costs, fees (including reasonable
attorneys' fees) and expenses of the non-prevailing party.
7.10 ENTIRE AGREEMENT. This Agreement (including exhibits and
schedules), constitutes the entire agreement among the parties hereto with
respect to the subject matter hereof and shall supersede all prior negotiations,
understandings, agreements, arrangements and understandings, both oral and
written, among the parties hereto with respect to such subject matter.
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7.11 SEVERABILITY. The invalidity of any one or more of the
words, phrases, sentences, clauses, sections or subsections contained in this
Agreement shall not affect the enforceability of the remaining portions of this
Agreement or any part hereof, all of which are inserted conditionally on their
being valid in law and, in the event that any one or more of the words, phrases,
sentences, clauses, sections or subsections contained in this Agreement shall be
declared invalid by a court of competent jurisdiction, this Agreement shall be
construed as if such invalid word or words, phrase or phrases, sentence or
sentences, clause or clauses, section or sections, or subsection or subsections
had not been inserted.
7.12 BINDING EFFECT AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
permitted successors and assigns; but neither this Agreement nor any of the
rights, benefits or obligations hereunder shall be assigned, by operation of law
or otherwise, by any party hereto without the prior written consent of the other
party.
7.13 PUBLICITY. Neither any Company nor the Seller shall issue
or make, or cause to have issued or made, any public release or announcement
concerning this Agreement or the transactions contemplated hereby, without the
advance approval in writing (which approval shall not be unreasonably withheld)
of the form and substance thereof by Continucare, except as required by law (in
which case, so far as possible, there shall be consultation between the parties
prior to such announcement).
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<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives as of the date set forth in the first paragraph.
INTEGRATED HEALTH
SERVICES, INC.
By: /s/ Elizabeth B. Kelly
--------------------------------
Name: Elizabeth B. Kelly
Title: Executive Vice President
CONTINUCARE
CORPORATION
By: /s/ Charles M. Fernandez
--------------------------------
Name: Charles M. Fernandez
Title: C.E.O.
CONTINUCARE REHABILITATION
SERVICES, INC.
By: /s/ Charles M. Fernandez
--------------------------------
Name: Charles M. Fernandez
Title: C.E.O.
REHAB MANAGEMENT SYSTEMS,
INC.
By: /s/ Elizabeth B. Kelly
--------------------------------
Name: Elizabeth B. Kelly
Title: Executive Vice President
INTEGRACARE, INC.
By: /s/ Elizabeth B. Kelly
--------------------------------
Name: Elizabeth B. Kelly
Title: Executive Vice President
J.R. REHAB ASSOCIATES, INC.
By: /s/ Elizabeth B. Kelly
--------------------------------
Name: Elizabeth B. Kelly
Title: Executive Vice President
23
