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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): April 8, 1999
CONTINUCARE CORPORATION
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(Exact Name of Registrant as Specified in Charter)
FLORIDA
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(State or Other Jurisdiction of Incorporation)
0-21910 59-2716023
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(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 April 8, 1999, Continucare Corporation, a Florida
corporation (the "Registrant"), sold substantially all the assets of its
rehabilitation subsidiaries, Rehab Management Systems, Inc., a Florida
corporation, IntegraCare, Inc., a Florida corporation, J.R. Rehab Associates, a
North Carolina corporation, and Continucare Occmed Services, Inc., a Florida
corporation (such subsidiaries being collectively referred to as the "Rehab
Companies"), to Kessler Rehabilitation of Florida, Inc., a Florida corporation
("Kessler"). The following summary of the transaction is qualified in its
entirety by the more detailed information contained in the copy of the Asset
Purchase Agreement (the "Agreement') attached as Exhibit 2.1 to this Report.
The Rehab Companies are collectively engaged in the business of
providing outpatient rehabilitation and contract rehabilitation services (the
"Business"). The assets of the Rehab Companies sold pursuant to the terms of
the Agreement primarily include managed care contracts and leases for
facilities where the Business is conducted, together with certain accounts
receivable, inventory and equipment associated with the Business.
In consideration for the assets of the Rehab Companies, Registrant
received approximately $5.5 million in cash, of which $4.0 million was used to
reduce the $5.0 million principal amount outstanding under the Registrant's
term loan with First Union National Bank of Florida. The amount of
consideration paid by Kessler to the Registrant for the assets of the Rehab
Companies was determined through arms' length negotiations between
representatives of the Registrant and Kessler. The Registrant anticipates that
it will recognize a loss of approximately $5.5 - $6.5 million as a result of
this transaction.
J. Kenneth Looloian, a member of Registrant's Board of Directors, also
serves as a member of the Board of Trustees of the Henry H. Kessler Foundation,
an affiliate of Kessler. Mr. Looloian abstained from voting on the terms of the
Agreement as a member of Registrant's Board of Directors.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION.
The unaudited pro forma financial information of the Registrant as of
December 31, 1998, reflecting the sale of the Rehab Companies is attached hereto
as Exhibit 7(b) and is incorporated herein by reference.
(c) EXHIBITS
2.1 Asset Purchase Agreement, dated as of April 7, 1999, by and among
Continucare Corporation, Rehab Management Systems, Inc., IntegraCare, Inc.,
J.R. Rehab Associates, Inc., Continucare Occmed Services, Inc., and Kessler
Rehabilitation of Florida, Inc.
7(b) Unaudited pro forma financial information of the Registrant as of
December 31, 1998, reflecting the sale of the Rehab Companies.
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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: April 21, 1999 By: /s/ Charles M. Fernandez
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Charles M. Fernandez
Chairman, Chief Executive Officer and President
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EXHIBIT INDEX
2.1 Asset Purchase Agreement, dated as of April 7, 1999, by and among
Continucare Corporation, Rehab Management Systems, Inc., IntegraCare,
Inc., J.R. Rehab Associates, Inc., Continucare Occmed Services, Inc., and
Kessler Rehabilitation of Florida, Inc.
7(b) Unaudited pro forma financial information of the Registrant as of December
31, 1998, reflecting the sale of the Rehab Companies.
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Exhibit 2.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
KESSLER REHABILITATION OF FLORIDA, INC.,
REHAB MANAGEMENT SYSTEMS, INC.,
INTEGRACARE, INC.,
J. R. REHAB ASSOCIATES, INC.,
CONTINUCARE OCCMED SERVICES, INC.,
AND
CONTINUCARE CORPORATION
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TABLE OF CONTENTS
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ARTICLE I - DEFINITIONS...........................................................................................1
1.1 Certain Definitions........................................................................1
1.2 Additional Definitions.....................................................................4
ARTICLE II - PURCHASE AND SALE....................................................................................5
2.1 Purchase and Sale..........................................................................5
2.2 Excluded Assets............................................................................6
2.3 Assumption of Liabilities..................................................................7
2.4 Excluded Liabilities.......................................................................8
2.5 Nonassignable Contracts and Authorizations.................................................9
2.6 Purchase Price.............................................................................9
2.7 Payment of Purchase Price.................................................................10
2.8 Transfer Taxes and Fees...................................................................10
2.9 Allocation of Purchase Price..............................................................11
2.10 Closing...................................................................................11
ARTICLE III - REPRESENTATION AND WARRANTIES OF THE SELLERS AND PRINCIPAL.........................................11
3.1 Corporate Existence and Power.............................................................11
3.2 Corporate Authorization...................................................................11
3.3 Governmental Authorization................................................................12
3.4 Non-Contravention.........................................................................12
3.5 Consents..................................................................................12
3.6 Financial Statements......................................................................12
3.7 Absence of Undisclosed Liabilities........................................................14
3.8 Absence of Certain Changes................................................................14
3.9 Title and Condition of Assets.............................................................16
3.10 Litigation; Proceedings...................................................................17
3.11 Material Contracts........................................................................17
3.12 Licenses and Permits......................................................................19
3.13 Insurance Coverage........................................................................19
3.14 Compliance with Laws......................................................................20
3.15 Intellectual Property.....................................................................20
3.16 Employees and Agents......................................................................21
3.17 Finders'Fees..............................................................................21
3.18 Environmental Compliance..................................................................22
3.19 Tax Matters...............................................................................23
3.20 Assets of Principal.......................................................................23
3.21 Disposition of Equipment..................................................................23
3.22 Medicare and Medicaid Cost Reports........................................................23
3.23 Accuracy of Information...................................................................23
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ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER.............................................................23
4.1 Organization and Existence................................................................24
4.2 Corporate Authorization...................................................................24
4.3 Governmental Authorization................................................................24
4.4 Non-Contravention.........................................................................24
4.5 Finders'Fees..............................................................................24
ARTICLE V - COVENANTS OF ALL PARTIES.............................................................................24
5.1 Cooperation...............................................................................24
5.2 Other Required Information................................................................25
5.3 Miscellaneous Agreements and Consents.....................................................25
ARTICLE VI - COVENANTS OF THE SELLER.............................................................................25
6.1 Conduct of the Business...................................................................25
6.2 Discharge of Liabilities..................................................................26
6.3 Access....................................................................................26
6.4 Notices of Certain Events.................................................................26
6.5 Noncompetition............................................................................27
6.6 Publicity.................................................................................28
6.7 Trademarks; Tradenames....................................................................28
6.8 No Negotiation with Third Parties.........................................................28
6.9 Reimbursement Obligations.................................................................28
6.10 Medicare and Medicaid Reports.............................................................29
6.11 Payment to Buyer for Expense Adjustments After Closing....................................29
6.12 Consents..................................................................................29
6.13 Accuracy Representations and Warranties...................................................29
6.14 Confidentiality...........................................................................29
6.15 Collection of Accounts Receivable.........................................................30
6.16 Professional Liability Insurance..........................................................30
ARTICLE VII - COVENANTS OF BUYER.................................................................................30
7.1 Consents..................................................................................30
7.2 Access....................................................................................30
7.3 Confidentiality...........................................................................31
7.4 Publicity.................................................................................31
7.5 Payment to Principal for Failure to Satisfy Assumed Obligations...........................31
7.6 Accuracy of Representations and Warranties................................................31
ARTICLE VIII - EMPLOYEES AND EMPLOYEE BENEFITS...................................................................32
8.1 ERISA Representations.....................................................................32
8.2 Employees and Offers of Employment........................................................33
8.3 Sellers'Employee Benefit Plans............................................................33
8.4 Buyer Benefit Plans.......................................................................34
8.5 No Third Party Beneficiaries..............................................................34
8.6 COBRA.....................................................................................34
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ARTICLE IX - INDEMNIFICATION.....................................................................................35
9.1 Survival of Representations...............................................................35
9.2 Indemnification by Sellers and Principal..................................................35
9.3 Indemnification by Buyer..................................................................35
9.4 Process of Indemnification................................................................36
9.5 Limitations...............................................................................37
9.6 Certain Remedies Available................................................................37
ARTICLE X - MISCELLANEOUS........................................................................................37
10.1 Casualty, Risk of Loss....................................................................37
10.2 Specific Performance......................................................................37
10.3 Expenses..................................................................................38
10.4 Further Assurances........................................................................38
10.5 Parties in Interest.......................................................................38
10.6 Entire Agreement..........................................................................38
10.7 Amendment or Modification.................................................................38
10.8 Waiver....................................................................................38
10.9 Assignability.............................................................................39
10.10 Headings and Interpretation...............................................................39
10.11 Notices...................................................................................39
10.12 Law Governing.............................................................................40
10.13 Invalidity of Provisions..................................................................40
10.14 Counterparts..............................................................................40
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement dated April 7, 1999 (the "Agreement") by
and among KESSLER REHABILITATION OF FLORIDA, INC., a Florida corporation, (the
"Buyer"), and REHAB MANAGEMENT SYSTEMS, INC., a Florida corporation,
INTEGRACARE, INC., a Florida corporation, J. R. REHAB ASSOCIATES, INC., a North
Carolina corporation, CONTINUCARE OCCMED SERVICES, INC., a Florida corporation,
(individually each a "Seller" and collectively, the "Sellers"), and CONTINUCARE
CORPORATION, a Florida corporation ("Principal").
W I T N E S S E T H:
WHEREAS, Sellers own and operate a rehabilitation and physical therapy
business in Lakeland, Florida and other locations (the "BUSINESS");
WHEREAS, the Principal is the sole shareholder of Sellers; and
WHEREAS, Buyer desires to purchase substantially all of the assets used
in the Business from the Sellers, and the Sellers desire to sell substantially
all of the assets used in the Business to Buyer, upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of these premises and the
representations, warranties, agreements and indemnities set forth in this
Agreement, Buyer and the Sellers agree as follows:
ARTICLE I - DEFINITIONS
1.1 Certain Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
1.1.1 AFFILIATE. "Affiliate" means, with respect to a specified Person,
any Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with, the Person specified.
1.1.2 BALANCE SHEET. "Balance Sheet" means the unaudited balance sheet
of each Seller as of the Balance Sheet Date.
1.1.3 BALANCE SHEET DATE. "Balance Sheet Date" means February 28, 1999.
1.1.4 BENEFIT ARRANGEMENT. "Benefit Arrangement" means an employment,
severance or similar contract, arrangement or policy and each plan or
arrangement providing for severance benefits, insurance coverage
(including any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation
benefits, pension or retirement benefits or for deferred compensation,
profit-sharing, bonuses, stock options, stock appreciation rights or
other forms of incentive compensation or post-retirement insurance,
compensation or benefits that (i) is
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not an Employee Plan and (ii) is maintained or contributed to by Seller
or any of its ERISA Affiliates or Buyer or any of its ERISA Affiliates,
as the case may be.
1.1.5 CLOSING DATE. "Closing Date" means April 7, 1999, with the
effective time of the Closing being 12:01 a.m. on April 8, 1999.
1.1.6 CODE. "Code" means the Internal Revenue Code of 1986, as amended,
and the treasury regulations thereunder (including any amendments or
any substitute or successor provisions thereto).
1.1.7 CERCLA. "CERCLA" means the Comprehensive Environmental Responses,
Compensation and Liability Act of 1980, as amended.
1.1.8 EMPLOYEE PLAN. "Employee Plan" means each "employee benefit
plan", as such term is defined in Section 3(3) of ERISA, that (i) is
subject to any provision of ERISA and (ii) is maintained or contributed
to by Seller or any of its ERISA Affiliates or Buyer or any of its
ERISA Affiliates, as the case may be.
1.1.9 ENVIRONMENTAL LAWS. "Environmental Laws" means any and all
federal, state, local and foreign statutes, laws (including common or
case law), regulations, ordinances, rules, judgments, judicial
decisions, orders, decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements, or governmental
restrictions, relating to the environment or to emissions, discharges
or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic, radioactive or hazardous
substances or wastes into the environment including, without
limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, petroleum or petroleum products, chemicals or industrial,
toxic, radioactive or hazardous substances or wastes or the clean-up or
other remediation thereof.
1.1.10 ENVIRONMENTAL LIABILITIES. "Environmental Liabilities" means all
liabilities arising in connection with or in any way relating to the
Purchased Assets or the Business, or the use or ownership of the
Purchased Assets or Business by the Seller or any of its Affiliates,
whether vested or unvested, contingent or fixed, actual or potential,
which (i) arise under or relate to Environmental Laws or arise in
connection with or relate to any matter disclosed or required to be
disclosed in SCHEDULE 3.19 and (ii) arise from or relate in any way to
actions occurring or conditions existing before the Closing Date.
1.1.11 ERISA. "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
1.1.12 ERISA AFFILIATE. "ERISA Affiliate" of any entity means any other
entity that, together with such entity, would be treated as a single
employer under Section 414 of the Code.
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1.1.13 GAAP. "GAAP" means generally accepted accounting principles, as
in effect from time to time.
1.1.14 GOVERNMENTAL AUTHORITY. "Governmental Authority" means any
government, court, regulatory or administrative agency or commission,
or other governmental authority, agency or instrumentality, whether
federal, state or local (domestic or foreign).
1.1.15 HAZARDOUS SUBSTANCE. "Hazardous Substance" means any toxic,
caustic or otherwise hazardous substance, including petroleum, its
derivatives, by-products and other hydrocarbons, regulated under
Environmental Laws.
1.1.16 LIEN. "Lien" means, with respect to any asset, any mortgage,
lien, pledge, claim, charge, security interest, assessment, restriction
or encumbrance of any kind in respect of such asset.
1.1.17 MATERIAL ADVERSE CHANGE. "Material Adverse Change" means a
material adverse change in the business, assets, condition (financial
or otherwise) or result of operations of the Business.
1.1.18 MATERIAL ADVERSE EFFECT. "Material Adverse Effect" means a
material adverse effect on the business, assets, condition (financial
or otherwise) or result of operations of the Business.
1.1.19 MULTIEMPLOYER PLAN. "Multiemployer Plan" means each Employee
Plan that is a multiemployer plan, as defined in Section 3(37) of
ERISA.
1.1.20 PERMITTED LIENS. "Permitted Liens" means (a) Liens for Taxes
that are either (i) not yet due and payable, or (ii) are fully reserved
and are being contested in good faith by appropriate proceedings, (b)
with respect to real property, easements, covenants, conditions and
restrictions of record, (c) with respect to real property, any zoning
or other governmentally established restrictions or encumbrances, (d)
mechanic's, materialman's, supplier's, vendor's or similar Liens
arising in the ordinary course of business securing amounts which are
not delinquent, and (e) those Liens disclosed on SCHEDULE 1.1.20 which
relate exclusively to filings made with respect to leased equipment
included in the Purchased Assets.
1.1.21 PERSON. "Person" means an individual, corporation, partnership,
association, trust or other entity or organization, including a
Governmental Authority.
1.1.22 PROPRIETARY RIGHTS. "Proprietary Rights" means all (a) patents,
patent applications, patent disclosures and all related continuation,
continuation-in-part, divisional, reissue, re-examination, utility,
model, certificate of invention and design patents, patent
applications, registrations and applications for registrations, (b)
trademarks, service marks, trade dress, logos, tradenames, service
names and corporate names and registrations and applications for
registration thereof, (c) copyrights and registrations and applications
for registration thereof, (d) mask works and registrations
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and applications for registration thereof, (e) computer software, data
and documentation, (f) trade secrets and confidential business
information, whether patentable or nonpatentable and whether or not
reduced to practice, know-how, manufacturing and product processes and
techniques, research and development information, copyrightable works,
financial, marketing and business data, pricing and cost information,
business and marketing plans and customer and supplier lists and
information, (g) other proprietary rights relating to any of the
foregoing (including without limitation associated goodwill and
remedies against infringements thereof and rights of protection of
interest therein under the laws of all jurisdictions) and (h) copies
and tangible embodiments thereof.
1.1.23 RELEASE. "Release" has the meaning specified in 42 U.S.C.
Section 9601(22).
1.1.24 RETURN. "Return" means any return, declaration, report, claim
for refund or information return or statement relating to Taxes,
including any schedule or attachment thereto and any amendment thereof.
1.1.25 TAX. "Tax" means any federal, state, local or foreign income,
alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, franchise, capital, paid-up capital, profits,
greenmail, license, withholding, payroll, employment, unemployment,
excise, severance, stamp, occupation, premium, property, environmental
or windfall profit tax, custom, duty or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, together with
any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Authority responsible for the imposition of
any such tax.
1.2 Additional Definitions. Each of the following terms is defined in the
Section set forth opposite such term:
TERM SECTION
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Assumed Contracts 2.1.4
Assumed Leases 2.1.1
Assumed Liabilities 2.3
Business Recitals
Buyer Recitals
Closing 2.10
Consents 3.5
Excluded Assets 2.2
Excluded Liabilities 2.4
Financial Statements 3.6
Lockbox 2.1.13
Loss 11.2
Material Contracts 3.11
Permit 3.12
Permitted Liens 3.9
Purchased Assets 2.1
Purchase Price 2.6.1
Real Property 3.9.2
Seller Recitals
Transferred Employee 8.2
Unpaid Benefit Amount 2.6.3
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ARTICLE II - PURCHASE AND SALE
2.1 PURCHASE AND SALE. Upon the terms and subject to the conditions set forth in
this Agreement, Buyer shall purchase and acquire from the Sellers at the
Closing, and the Sellers shall sell, transfer, assign and deliver (or cause to
be sold, transferred, assigned and delivered) to Buyer at the Closing, all of
the assets, properties and business of every kind, nature and description,
wherever located, real, personal or mixed, tangible or intangible, which are
used or useable in the conduct of the Business by the Sellers other than the
Excluded Assets (collectively, the "PURCHASED ASSETS"), free and clear of all
Liens other than Permitted Liens, and including all right, title and interest of
the Sellers in, to and under the following:
2.1.1 all leases of real property and personal property currently used
in the operation of the Business and listed on SCHEDULE 2.1.1
(collectively, the "ASSUMED LEASES"), in each case together with all
buildings, fixtures and improvements erected thereon and easements and
other rights appurtenant thereto;
2.1.2 all personal property and interests therein, including machinery,
equipment, furniture, office equipment, communications equipment,
computer equipment, vehicles, storage tanks, spare and replacement
parts, fuel and other tangible property which are used or useable in
connection with the Business, wherever located (including such property
and interests owned by the Sellers in the possession of manufacturers,
suppliers, customers, distributors, sales representatives or others or
in transit), including the items listed on SCHEDULE 2.1.2;
2.1.3 certain inventories of supplies, drugs, disposable goods, labels,
containers, bags and other packaging supplies, and other materials of
the Business which are useable and saleable in connection with the
Business, wherever located (including such inventories owned by the
Sellers in the possession of manufacturers, suppliers, customers,
distributors, sales representatives or others or in transit);
2.1.4 all rights under those contracts, agreements, leases, licenses,
commitments, sales and purchase orders and other instruments listed on
SCHEDULE 2.1.4 (collectively, the "ASSUMED CONTRACTS");
2.1.5 all prepaid expenses and deposits that relate to the operation of
the Business, including ad valorem taxes, leases and rentals;
2.1.6 all accounts receivable and notes receivable of the Sellers
generated in connection with the operation of the Business prior to the
Closing Date and reflected in the Accounts Receivable, excluding only
Medicare and Medicaid receivables, which receivables shall
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be deposited into the Lockbox and distributed to Buyer but only to the
extent that such receivables have not been collected by Sellers prior
to 12:01 a.m. on April 5, 1999;
2.1.7 all of Seller's Medicare and Medicaid receipts for services
provided in connection with the operation of the Business prior to the
Closing Date and reflected in the Accounts Receivable, which receipts
shall be deposited into the Lockbox and distributed to Buyer but only
to the extent that such monies have not been received by Sellers prior
to 12:01 a.m. on April 5, 1999;
2.1.8 all rights, claims, credits, causes of action or rights of
set-off of the Sellers against third parties relating to the Business
or the Purchased Assets, including unliquidated rights under
manufacturers' and vendors' warranties and that certain indemnification
claim against Integrated Health Services involving a Medicare
overpayment refund made by Sellers in the amount of $528,000 to the
extent such claim is assignable by Sellers or Principal;
2.1.9 all Proprietary Rights owned, licensed, or used in the Business
by the Sellers, including, without limitation, use of the names "Rehab
Management Systems", "Integracare" and "J. R. Rehab Associates" and
other assumed names or trade names used by Sellers in connection with
the Business;
2.1.10 to the extent transferable, all licenses, certificates of need,
permits or other governmental authorizations affecting, or relating in
any way to, the Business or the Purchased Assets, including the items
listed on SCHEDULE 2.1.10;
2.1.11 all books, records, files and papers, whether in tangible or
intangible form, used in, or relating in any way to, the Business or
the Purchased Assets, including all medical and patient records,
patient consent or authorization forms, sales and promotional
literature, financial and billing records, sales and purchase
correspondence, lists of present and former suppliers, lists of present
and former patients, personnel and employment records, and any
information relating to Taxes imposed on the Purchased Assets;
2.1.12 all goodwill associated with the Business or the Purchased
Assets, together with the right to represent to third parties that
Buyer is the successor to the Business.
2.1.13 the lockboxes set forth on SCHEDULE 2.1.13 (the "Lockbox"); and
2.1.14 all of these Sellers' cash and cash equivalents on hand and in
banks, including the Lockbox, as of 12:01 a.m. on April 5, 1999 through
the Closing Date.
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2.2 EXCLUDED ASSETS. Notwithstanding anything to the contrary set forth in
Section 2.1, the Seller shall not sell, transfer, assign or deliver (or cause to
be sold, transferred, assigned or delivered) to Buyer, and Buyer shall not
purchase and acquire from the Sellers, any of the following assets and
properties, which shall remain the exclusive property of the Sellers
(collectively, the "EXCLUDED ASSETS"):
2.2.1 all of the Sellers' cash and cash equivalents on hand and in
banks, certificates of deposit and marketable securities as of 12:00
midnight on April 4, 1999;
2.2.2 all rights of the Sellers under any letter of credit;
2.2.3 all rights of the Sellers to Tax refunds and proceeds of property
and casualty insurance policies, but not including any managed care or
other third party payor contracts;
2.2.4 any assets used and located at the corporate headquarters or
other business locations of the Principal (other than the Business),
which are either (i) used exclusively in the businesses of the
Principal other than the Business or (ii) used in common in the
Business and in the other businesses of the Principal (other than the
computer servers included on SCHEDULE 2.1.2);
2.2.5 the corporate seals, charter documents, by-laws, minute books and
stock record books of each Seller, and such other records of each such
Seller that relate exclusively to the organization or capitalization of
Seller (provided that Seller shall provide Buyer access to such
documents after Closing);
2.2.6 any Purchased Assets sold or otherwise disposed of in the
ordinary course of the operation of the Business and not in violation
of this Agreement during the period from the date of this Agreement
through the Closing Date; and
2.2.7 the assets set forth on SCHEDULE 2.2.7.
2.3 ASSUMPTION OF LIABILITIES. As partial consideration for the sale, transfer,
assignment and delivery of the Business and the Purchased Assets and upon the
terms and subject to the conditions set forth in this Agreement, Buyer shall
assume, pay and perform only the following liabilities and obligations of the
Sellers (collectively, the "ASSUMED LIABILITIES"), and no others:
2.3.1 all liabilities and obligations of Sellers arising after the
Closing Date under the Assumed Contracts and Assumed Leases (other than
liabilities or obligations attributable to any failure by the Sellers
to comply with the terms thereof);
2.3.2 all accounts payable, utilities payable, phone payables, and
trade payables as listed on SCHEDULE 2.3.2 which are not past due as of
the Closing Date (including any grace period not in excess of ten days)
and which arise out of the operation of the Business in the ordinary
course consistent with past practice, and any accounts payable,
utilities payable, phone payables, and trade payables incurred in the
ordinary course of business consistent with past practice between the
Balance Sheet Date and the Closing Date which are not past due as of
the Closing Date (including any grace period not in excess of ten
days), other than intercompany payables between or among Sellers and
Principal and their Affiliates; and
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2.3.3 Sellers' obligation to provide accrued vacation time to the
Transferred Employees (as defined in Section 8.2 hereof) after the
Closing Date.
2.4 EXCLUDED LIABILITIES. Except for the Assumed Liabilities, Buyer shall not
assume, pay or perform any other liabilities or obligations of the Sellers, all
of which shall be retained by and shall remain the exclusive responsibility of
the Sellers (collectively, the "EXCLUDED LIABILITIES") including, without
limitation, the following;
2.4.1 all liabilities and obligations of the Sellers arising on or
before the Closing Date under the Assumed Leases and Assumed Contracts
which have been duly assigned by Sellers to Buyer;
2.4.2 except as expressly provided in Article VIII and Section 2.3.3,
any liabilities or obligations of the Sellers relating to any
employment contracts or agreements (whether written or oral) or any
employee benefits or compensation arrangements of any nature existing
as of the Closing Date, including any liabilities or obligations under
any of Sellers' Employee Plans or Benefit Arrangements;
2.4.3 any liability or obligation of the Sellers for breach of
contract, personal injury, property damage, or violation of any
statute, rule, regulation or ordinance (whether based on negligence,
breach of warranty, strict liability or any other theory) caused by or
arising out of or resulting from, directly or indirectly, any alleged
or actual acts or omissions occurring on or before the Closing Date;
2.4.4 any liability or obligation of the Sellers for money borrowed,
and any intercompany debt between or among the Sellers or their
Affiliates, whether such liabilities and obligations were incurred in
the operation of the Business or otherwise;
2.4.5 any amounts due or that may be claimed or become due to Medicare,
Medicaid or any other health care reimbursement or payment intermediary
as a result of any audit adjustments, disallowances, or other payment
adjustments attributable to any period (or partial period) ending on or
before the Closing Date;
2.4.6 any form of Medicare, Medicaid or other health care reimbursement
recapture, adjustment, overpayment, penalty assessment or charge
whatsoever with respect to any period (or partial period) ending on or
before the Closing Date;
2.4.7 any violation by Sellers or their Affiliates of state or federal
laws governing health care fraud and abuse or participation in the
Medicare, Medicaid, or any other state or federal health care
reimbursement program;
2.4.8 any liability or obligation relating to an Excluded Asset;
2.4.9 except as expressly provided in Article VIII and Section 2.3.3,
any liability or obligation of Sellers to any present or former
officer, director, stockholder, employee, patient, agent, or contractor
of any Seller in his capacity as such;
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2.4.10 any Environmental Liability;
2.4.11 any liability under any workers' compensation law or regulation
for any injury or exposure occurring on or prior to the Closing Date;
2.4.12 any liability or obligation of the Sellers with respect to Taxes
which are attributable to either (i) events occurring during any period
ending on or before the Closing Date, including ownership of the
Purchased Assets and operation of the Business, or (ii) the
consummation of the transactions contemplated by this Agreement; and
2.4.13 except as expressly provided in Article VIII and Section 2.3,
any and all other liabilities and obligations of every kind of the
Sellers incurred by the Sellers in connection with, or arising by
reason of, its ownership of the Purchased Assets or its conduct of the
Business on or before the Closing Date.
Buyer shall not assume, and no transferee or successor liability shall attach to
Buyer with respect to any of the Excluded Liabilities. The elimination of any
risk of such transferee liability attaching to Buyer is a primary inducement to
Buyer's entering into this transaction, in that Buyer would not have entered
into this transaction under circumstances where any such transferee liability
would or might attach to Buyer. The entire negotiations of the parties which
respect to this transaction, including the Purchase Price, were based upon the
assumption and agreement that Buyer would not succeed to any liability or
obligation of Seller, or related in any way to the Purchased Assets, except for
the Assumed Liabilities.
2.5 NONASSIGNABLE CONTRACTS AND AUTHORIZATIONS. To the extent that the
assignment of any Contract or Permit shall require the consent of any other
party thereto, or shall be subject to any option in any other person, this
Agreement shall not constitute a contract to assign the same to the extent that
an attempted assignment would either constitute a breach thereof or in any way
adversely affect the rights or obligations of Buyer or the Sellers thereunder.
The Sellers shall use all reasonable efforts to procure consent to any such
assignment other than the obligation to expend monies. If any such consent is
not obtained, the Sellers shall cooperate with Buyer in any reasonable
arrangement requested by Buyer designed to provide for Buyer the benefit,
monetary or otherwise, of any such Contract or Permit, including enforcement of
any and all rights of the Sellers against the other party thereto arising out of
breach or cancellation thereof by such party or otherwise. The Sellers shall
promptly pay to Buyer when received all monies received by the Sellers under any
Purchased Asset or any claim or right or any benefit arising thereunder, except
to the extent the same represents an Excluded Asset.
2.6 PURCHASE PRICE. Subject to the terms and conditions of this Agreement, in
reliance on the representations, warranties and agreements of the Sellers and
Principal set forth in this Agreement, and in consideration of the sale,
transfer, assignment and delivery by the Sellers of the Purchased Assets and the
Business, at the Closing Buyer shall (i) assume the Assumed Liabilities and (ii)
pay to Sellers an amount equal to Five Million Five Hundred Thousand Dollars
($5,500,000.00) (the "Purchase Price").
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2.7 PAYMENT OF PURCHASE PRICE.
2.7.1 PAYMENT. At the Closing, the Buyer shall deliver the Purchase
Price to Foley & Lardner, to be held in Foley & Lardner's attorney
trust account and disbursed in accordance with the Closing Statement
attached hereto as EXHIBIT A upon receipt of the payoff letter from
First Union National Bank ("First Union") authorizing the release of
those certain Liens against the Purchased Assets in favor of First
Union as set forth on SCHEDULE 3.9.
2.7.2 POST-CLOSING ADJUSTMENTS.
(a) No later than April 9, 1999, Sellers shall deliver to
Buyer a cashier's check in an amount equal to the sum of (i)
all cash and cash equivalents received by Sellers in
connection with the operation of the Business from and after
12:01 a.m. on April 5, 1999 through the Closing Date from any
source whatsoever (including, without limitation, payments
from third party payors, Medicare, Medicaid, hospitals,
patients (including co-payments), refunds and adjustments),
together with copies of all bank statements and cash receipt
logs documenting such cash receipts certified by the Chief
Executive Officer of Sellers which shall be provided as soon
as practicable but in no event later than April 20, 1999, and
(ii) $8,286.00, being the amount equal to one-half of the
annual rental payment due in connection with the leased real
property located at Southgate Boulevard, North Lauderdale,
Florida, included in the Assumed Leases.
(b) Within ten (10) days following the Closing Date, Sellers
shall prepare and deliver to Buyer a written statement which
shall set forth all prepaid expenses that were paid by the
Sellers prior to the Closing Date on account of certain
Assumed Leases and salary payments to certain Transferred
Employees (as defined in Section 8.2) that relate to a period
of time after the Closing Date (the "Prepayments"). All such
Prepayments shall be prorated between Sellers and Buyer as of
the Closing Date based on the number of days in the applicable
period and the number of days elapsed in the applicable period
on or before for Sellers, and after for Buyer, the Closing
Date. Buyer shall pay to Sellers an amount equal to Buyer's
pro rata share of such Prepayments within ten (10) days of
receipt of the Prepayment Statement from Sellers; provided,
however, that Buyer shall be entitled to withhold payment of
the Prepayments until Buyer receives written evidence that all
Liens disclosed on SCHEDULE 3.9 have been released and
terminated by the secured parties named therein.
2.8 TRANSFER TAXES AND FEES. The Buyer shall be liable for and pay any
applicable sales, documentary, recording, use, filing, transfer and other Taxes
and fees payable as a result of the consummation of the transactions
contemplated by this Agreement.
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2.9 ALLOCATION OF PURCHASE PRICE.
The Purchase Price shall be allocated by Buyer as set forth in SCHEDULE
2.9 and the parties shall use such allocation as the basis for reporting this
transaction for all Medicare, Medicaid, other third party payor and tax
purposes. No party shall take a position in any conference with representatives
of Medicare, Medicaid, any other third party payor or Governmental Authority
(including the Internal Revenue Service), on any Return, report or filing, or in
any proceeding with any Governmental Authority that is inconsistent with the
Purchase Price allocation made in accordance with this Section 2.9.
2.10 CLOSING. The closing of the purchase and sale of the Purchased Assets and
the assumption of the Assumed Liabilities (the "CLOSING") shall be held at the
offices of Foley & Lardner, 111 North Orange Avenue, Suite 1800, Orlando,
Florida, or such other place as the parties shall mutually agree, on the Closing
Date. Buyer and Sellers shall use all reasonable efforts, on or prior to the
Closing, to execute and deliver all such instruments, documents or certificates
as may be necessary or advisable for the consummation at the Closing of the
transactions contemplated by this Agreement, including all bills of sale,
instruments of assumption, endorsements, consents, assignments and other
agreements and instruments of conveyance and assignment reasonably necessary or
appropriate to vest in Buyer all right, title and interest in, to and under the
Purchased Assets.
ARTICLE III - REPRESENTATION AND WARRANTIES OF THE SELLERS AND PRINCIPAL
The Sellers and Principal hereby represent and warrant to Buyer as
follows:
3.1 CORPORATE EXISTENCE AND POWER. Each Seller is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Florida and has all corporate power and authority necessary to enable it to
own, lease or otherwise hold its properties and assets and to carry on its
business as now conducted and currently proposed to be conducted. With respect
to the operation of the Business, each Seller is duly qualified to do business
and is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect.
Each Seller has previously delivered to Buyer true and complete copies of the
articles of incorporation and by-laws of Seller, as amended to date and as
currently in effect.
3.2 CORPORATE AUTHORIZATION. The execution, delivery and performance by each
Seller and Principal of this Agreement and the consummation by each Seller and
Principal of the transactions contemplated hereby and thereby are within the
corporate power and authority of each Seller and Principal, respectively. This
Agreement has been duly authorized, executed and delivered by each Seller and
Principal and constitutes a valid and binding obligation of each such Seller and
Principal, enforceable against each such Seller and Principal in accordance with
its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or similar laws affecting rights of creditors
generally and to general principles of equity.
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3.3 GOVERNMENTAL AUTHORIZATION. Except as set forth on SCHEDULE 3.3 attached
hereto, the execution, delivery and performance of this Agreement by each Seller
and Principal, and the consummation of the transactions contemplated hereby and
thereby by each Seller and Principal, do not and will not require any consent,
approval or action by or in respect of, or any declaration, filing or
registration with, any Governmental Authority on behalf of Sellers.
3.4 NON-CONTRAVENTION. Except as set forth on SCHEDULE 3.4, the execution,
delivery and performance of this Agreement by each Seller and Principal, and the
consummation of the transactions contemplated hereby and thereby by each Seller
and Principal, do not and will not, with or without the giving of notice, the
lapse of time or both: (i) contravene or conflict with the respective articles
of incorporation or by-laws of each such Seller or Principal, (ii) contravene or
conflict with or constitute a violation of any law, rule, regulation, judgment,
injunction, order or decree binding upon or applicable to the Purchased Assets,
the Business or each such Seller or Principal, (iii) require any consent,
approval or other action by any Person, contravene or conflict with or
constitute a violation of or a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of any
Seller or Principal under (a) any agreement, contract, indenture, lease or other
instrument to which Seller or Principal is a party or by which any Seller or
Principal is bound or (b) any license, franchise, Permit or other similar
authorization held by any Seller or Principal, or (iv) result in the creation or
imposition of any Lien on any of the Purchased Assets.
3.5 CONSENTS. SCHEDULE 3.5 sets forth each of the Assumed Contracts and Assumed
Leases or any Permit requiring a consent as a result of the execution, delivery
or performance of this Agreement or the consummation of the transactions
contemplated hereby and thereby (the "CONSENTS").
3.6 FINANCIAL STATEMENTS.
3.6.1 Each Seller has previously delivered to Buyer the following
financial statements as set forth on SCHEDULE 3.6.1 (collectively, the
"FINANCIAL STATEMENTS"):
(a) the audited balance sheets and the related statements of
operations and cash flows of Sellers on a combined basis with
respect to the Business as of December 31, 1996, and 1997,
together with the notes thereto, in each case audited in
accordance with generally accepted accounting principles
applied on a consistent basis and accompanied by the report
thereon of C. W. Amos & Company, LLC; and
(b) the unaudited Balance Sheet of Sellers with respect to the
Business as of the Balance Sheet Date and the related
statements of operations for the period from the first day of
the current fiscal year through the Balance Sheet Date,
together with the notes thereto.
3.6.2 Each of the Financial Statements has been prepared in accordance
with GAAP applied on a consistent basis (except as may be indicated
therein or in the notes thereto), and fairly presents in all material
respects the financial position of the Business as of its
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date or the results of operations or changes in financial position, as
is appropriate, of the Business for the periods then ended (subject, in
the case of unaudited interim financial statements, to normal year-end
adjustments, which adjustments will not be material in amount or
effect). Except as may be set forth in the Financial Statements, all of
the revenues and expenses of the Business reflected in the Financial
Statements were derived or incurred in the ordinary course of business.
The account records underlying the Financial Statements accurately and
fairly reflect, in all material respects, the transactions of the
Business, and Seller's books of account relating to the Business have
been maintained in accordance with GAAP applied on a consistent basis.
3.6.3 RECEIVABLES.
(a) All of the Accounts Receivable reflected on the Balance
Sheet are, and all of the Accounts Receivable arising
subsequent to the Balance Sheet Date through the Closing Date
will be, (i) properly reflected on the Sellers' books and
records in accordance with GAAP, (ii) bona fide Accounts
Receivable of Sellers (regardless of the name in which such
Accounts Receivable were billed) incurred in the ordinary
course of business, and (iii) to the knowledge of Sellers and
Principal, not subject to any counterclaims, deduction, credit
or offset except to the extent of the allowance for doubtful
accounts.
(b) The amount of the allowance for doubtful accounts
reflected on the Balance Sheet is, and the allowance for
doubtful accounts on the balance sheet of the Business as of
the Closing Date will be, computed in conformity with GAAP and
the Company's historic practices and procedures.
(c) Except as set forth on SCHEDULE 3.6.3 attached hereto, as
of the date hereof, no Person has, and as of the Closing Date,
no Person will have, any Lien on any Accounts Receivable or
any part thereof, and no agreement by Sellers or Principal for
deduction, free services or goods, discount or other deferred
price or quantity adjustment will have been made with respect
to any such Accounts Receivable.
(d) As used herein, "Accounts Receivable" shall mean all
accounts and commissions receivable reflected on Balance Sheet
and arising in ordinary course of business after the Balance
Sheet Date (including without limitation, all trade accounts
receivable, vendor credits, and all other obligations from
customers with respect to sales of goods or services, whether
evidenced or not evidenced by a note), but only to the extent
that such Accounts Receivable have not been collected by
Sellers' prior to 12:01 a.m. on April 5, 1999.
(e) Since the date of the Balance Sheet, the Company has not
changed any principle or practice with respect to the
recordation of accounts receivable or the calculation of
reserves therefor or any material collection, discount or
write-off policy or procedure.
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3.6.4 INVENTORY. Sellers' inventory, net of the reserves applicable to
such inventory, consists of a quantity and quality which, except as
reflected in such reserve, is usable and saleable in the ordinary
course of business consistent with past practice, and the items of such
inventory are merchantable and fit for their particular use other than
ordinary wear and tear. Each Seller has good title to such inventory,
free and clear of all Liens (other than Permitted Liens).
3.6.5 PAYABLES. All of the accounts payable and trade payables
reflected on the Balance Sheet are, and all of the accounts payable and
trade payables to be reflected on the balance sheet of the Business as
of the Closing Date will be, (i) properly reflected on the Sellers'
books and records in accordance with GAAP, and (ii) incurred in the
ordinary course of business consistent with past practices.
3.6.6 Since the date of the Balance Sheet, no Seller has changed any
principle or practice with respect to the recordation of
incurred-but-not-reported ("IBNR") medical expenses or the calculation
of reserves therefor.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE 3.7, no
Seller has any liabilities or obligations with respect to the Business, and to
the knowledge of Sellers and Principal there is no basis for any assertion
against Seller of any such liability or obligation, except those liabilities or
obligations which are (a) fully reflected or adequately reserved against in the
Balance Sheet, (b) disclosed in this Agreement or in the Schedules hereto, or
(c) incurred in the ordinary course of business consistent with past practice
since the Balance Sheet Date, which in the aggregate will not result in a
Material Adverse Effect. For the purposes of this Agreement the phrase
"LIABILITIES OR OBLIGATIONS" shall include any direct or indirect indebtedness,
claim, loss, damage, deficiency (including deferred income tax and other net tax
deficiencies), cost, expense, obligation, guarantee, or responsibility, whether
accrued, absolute or contingent, known or unknown, fixed or unfixed, liquidated
or unliquidated, secured or unsecured.
3.8 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 3.8 attached
hereto, since the Balance Sheet Date, each Seller has conducted the Business in
the ordinary course consistent with past practice, and no Seller has:
3.8.1 suffered any Material Adverse Change or any event, occurrence,
development or state of circumstances or facts which has had or could
reasonably be expected to result in or have a Material Adverse Effect
on the Business;
3.8.2 incurred, assumed or guaranteed any indebtedness for money
borrowed, or incurred any liabilities or obligations other than in the
ordinary course of business consistent with past practice and in any
event not in excess of $50,000 in the aggregate;
3.8.3 paid, discharged or satisfied any claim, Lien or liability, other
than those (i) which were reflected or reserved against in the Balance
Sheet and which were paid, discharged or satisfied in the ordinary
course of business consistent with past practice or (ii) which were
incurred and paid, discharged or satisfied since the Balance Sheet Date
in the ordinary course of business consistent with past practice;
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3.8.4 permitted or allowed any of the Purchased Assets to be mortgaged,
pledged or subjected to any Lien;
3.8.5 written down the value of any inventory;
3.8.6 leased or acquired any capital asset other than in the ordinary
course of business and in any event not in excess of $50,000 in the
aggregate;
3.8.7 suffered any damage, destruction or other casualty loss (whether
or not covered by insurance) affecting the Business or the Purchased
Assets;
3.8.8 entered into any transaction with any of its Affiliates, other
than in the ordinary course of, and pursuant to the reasonable
requirements of, the Business and upon terms that are no less favorable
to it than it could obtain in a comparable transaction with a Person
who was not such an Affiliate;
3.8.9 made any change in any method of financial or tax accounting or
any financial or tax accounting practice or in its method of
maintaining books and records;
3.8.10 increased the rate of compensation of, or paid any bonus to, any
of its directors, officers or employees except in the ordinary course
of business consistent with past practices;
3.8.11 entered into or modified (except as may be required by
applicable law) any Employee Plan, or any trust agreement or insurance
contract related thereto, in respect of any of its present or former
directors, officers or employees;
3.8.12 experienced any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or
representative thereof to organize any of its employees, or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or
with respect to any of its employees;
3.8.13 entered into any transaction, contract or agreement relating to
the Purchased Assets or the Business (including the acquisition or
disposition of any of the Purchased Assets) or to the relinquishment by
any Seller of any contract or other right, other than transactions,
contracts, agreements and relinquishments entered into in the ordinary
course of business consistent with past practices and those
contemplated by this Agreement;
3.8.14 made any capital expenditure for additions or improvements to
property, plant and equipment, other than in the ordinary course of
business and in any event not in excess of $50,000 in the aggregate; or
3.8.15 agreed to, or made any commitment to, do any of the foregoing.
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3.9 TITLE AND CONDITION OF ASSETS.
3.9.1 The Purchased Assets and the Excluded Assets constitute, and on
the Closing Date will constitute, all of the assets and properties used
or held for use in the conduct of the Business, and the Purchased
Assets are, and on the Closing Date will be, in good repair and
adequate to conduct the Business as currently conducted (ordinary wear
and tear excepted). Seller has good, valid and marketable title to, or
a valid leasehold interest in, the Purchased Assets, whether real,
personal or mixed, tangible or intangible, free and clear of all Liens,
except (a) Liens disclosed on the Balance Sheet, (b) the Permitted
Liens, and (c) those Liens disclosed on SCHEDULE 3.9 which have
terminated or will be released at Closing. The Purchased Assets include
all of the assets and properties of the Business that are reflected on
the Balance Sheet, except for the Excluded Assets and any of the
Purchased Assets that may have been consumed or disposed of in the
ordinary course of the Business consistent with past practices since
the Balance Sheet Date or as permitted by this Agreement. At the
Closing, Seller shall have sold, conveyed, transferred and assigned to
Buyer, and Buyer shall have acquired, good and marketable title to, or
a valid leasehold interest in, the Purchased Assets free and clear of
all of Liens, other than Permitted Liens.
3.9.2 Except as set forth on ANNEX 3.11D, SCHEDULE 2.1.1 describes all
leases of real property (in each case together with all buildings,
fixtures and improvements erected thereon and easements and other
rights appurtenant thereto) currently used in the conduct of the
Business by the Seller (the "REAL PROPERTY"), specifying in the case of
leases or subleases, the name of the lessor or sublessor. The Real
Property includes all real property, and only such real property, as
currently used in connection with the conduct of the Business.
3.9.3 Except as set forth on SCHEDULE 2.2.7, SCHEDULE 2.1.2 describes
all personal property used or useable in connection with the conduct of
the Business, including all machinery, equipment, furniture, vehicles,
storage tanks, spare and replacement parts, fuel and other trade
fixtures and fixed assets (the "PERSONAL PROPERTY"), specifying in the
case of the Assumed Leases, the name of the lessor or sublessor. The
Personal Property includes all personal property, and only such
personal property, as is used or held for use in connection with the
conduct of the Business.
3.9.4 All leases of Real Property or Personal Property included in the
Assumed Leases are in good standing and are valid, binding and
enforceable against Sellers in accordance with their respective terms,
and there does not exist under any such lease of Real Property or
Personal Property any material default by Seller or any event that,
with notice or lapse of time or both, would constitute a material
default by Seller. To the knowledge of Sellers and Principal, no other
party to the Assumed Leases is in material default and no event has
occurred that, with notice or lapse of time or both, would constitute a
material default by such party.
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3.9.5 The buildings, structures and equipment included in the Purchased
Assets have no material defects, are in good operating condition and
repair and have been reasonably maintained consistent with standards
generally followed in the industry (giving due account to the age,
length of use, and ordinary wear and tear), are suitable for their
present uses and, in the case of buildings and other structures, such
buildings and other structures (including without limitation, the
roofs) are structurally sound.
3.9.6 No violation of any law, regulation or ordinance (including,
without limitation, laws, regulations or ordinances relating to zoning,
environmental, city planning or similar matters) relating to the
Business or any Purchased Asset currently exists. There are no
developments affecting any of the Purchased Assets pending or, to the
knowledge of Seller, threatened, which might materially detract from
the value of such Purchased Assets, materially interfere with any
present or intended use of any such Purchased Assets or materially
adversely affect the marketability of such Purchased Assets.
3.10 LITIGATION; PROCEEDINGS. Except as set forth on SCHEDULE 3.10, there is no
action, suit, investigation or proceeding pending or, to the knowledge of the
Seller, threatened against or affecting the Business or any Purchased Asset
before any Governmental Authority that, if determined or resolved adversely in
accordance with the plaintiff's demands, would reasonably be expected to have a
Material Adverse Effect or that in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated by this
Agreement. There is no action, suit or proceeding pending or, to the knowledge
of the Seller, threatened by any third party fiscal intermediary or carrier
administering any state Medicaid program or the Medicare program, by any
Governmental Authority (including the Department of Health and Human Services
and any state Medicaid agency) or by any third party payor against the Seller
relating to the Business or the Purchased Assets, affecting the Business or the
Purchased Assets or seeking to suspend payments to, or recoup or offset over
payments from, the Seller relating to the Business or the Purchased Assets.
3.11 MATERIAL CONTRACTS.
3.11.1 Except as set forth on SCHEDULE 3.11 (collectively, the
"MATERIAL CONTRACTS") with respect to the Business, Seller is not a
party to or subject to:
(a) any lease of real property (whether as lessor or lessee)
or any lease providing for annual rental of $50,000 or more
(whether payment or receipt);
(b) any contract with a health care provider for the lease of
real property or equipment or for the provision of items or
services;
(c) any contract for the purchase of materials, supplies,
goods, services, equipment or other assets providing for
payments by Seller of, or pursuant to which in the last year
Seller paid in the aggregate, $50,000 or more;
(d) any sales, distribution or other agreement providing for
the sale or provision by Seller of materials, supplies, goods,
services, equipment or other
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assets that provides for payments to Seller of, or pursuant to
which in the last year Seller received in the aggregate,
$50,000 or more;
(e) any partnership, joint venture or other similar contract
arrangement or agreement;
(f) any contract or guarantee (other than endorsements of
negotiable instruments in the ordinary course of business
consistent with past practice) relating to indebtedness for
borrowed money or the deferred purchase price of property
(whether incurred, assumed, guaranteed or secured by an
asset);
(g) any license agreement, franchise agreement or agreement in
respect of similar rights granted to or held by Seller;
(h) any agency, dealer, sales representative or other similar
agreement;
(i) any agreement, contract or commitment that substantially
limits the freedom of the Seller to compete in any line of
business or geographic area or with any Person, or to own,
operate, sell, transfer, pledge or otherwise dispose of or
encumber any Purchased Asset or that would so limit the
freedom of Buyer after the Closing Date;
(j) any agreement, contract or commitment which is or relates
to an agreement with or for the benefit of any Affiliate of
Seller;
(k) any contract or agreement with any Governmental Authority
or third party fiscal intermediary or carrier administering
any state Medicaid program or the Medicare program, any state
Medicaid program, the Medicare program, any hospital, nursing
facility or other inpatient health care facility, health
maintenance organization, preferred provider organization or
self-insured employer or other third party payor;
(l) any contract for personal services or employment
(including contracts with present or former directors,
officers, employees, agents, consultants, advisors, salesmen,
sales representatives, distributors or dealers) which provides
for a specific period of notice of termination of employment
or payment in lieu thereof, and any union contract, collective
bargaining agreement or other employee association agreements;
(m) any agreement or arrangement providing for the payment of
any commission based on sales or revenues;
(n) any contract or agreement, not elsewhere specifically
disclosed pursuant to this Agreement, involving the payment or
receipt by Seller of $50,000 or more; or
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(o) any other agreements, contracts, leases, licenses, and
commitments to which Seller is a party (or under which Seller
may be obligated or to which Seller or any of its rights,
properties or assets may be subject or bound) which are
material to the financial condition, results of operations,
business, property or prospects of the Business.
3.11.2 Sellers have delivered to Buyer a true, correct and complete
copy of each of the Assumed Contracts and Assumed Leases. Each of the
Assumed Contracts and the Material Contracts is a valid and binding
agreement of Sellers and is in full force and effect against Sellers.
Neither Sellers nor, to knowledge of any Seller, any other party
thereto, is in default or breach in any material respect under the
terms of any such agreement. There is no contract, agreement,
commitment or obligation to which Seller is a party or is bound that
requires or obligates Seller (i) to provide any services or goods to
any Person for less than the standard published prices or rates of
Seller, or (ii) to return or repay to any person any amounts received,
or to forego collection of accounts receivable or future payments, from
any Person in consideration of the performance of any services or the
sale of any goods.
3.12 LICENSES AND PERMITS. SCHEDULE 3.12 correctly describes (a) each license,
Medicaid and Medicare participation agreement, franchise, permit or other
similar authorization affecting, or relating in any way to, the Business (the
"PERMITS") and (b) each final certificate of need heretofore issued with respect
to the Business. Except as set forth on the SCHEDULE 3.12, such Permits are
valid and in full force and effect, and the Seller has not received any notice
of any claim, default, complaint, citation or other proceeding relating to any
such Permit. Assuming the related Consents have been obtained prior to the
Closing Date, the Permits (excluding the Medicare and Medicaid participation
agreements and related provider numbers which are Excluded Assets) are
transferable by Seller to the extent transferrable by law. Upon consummation of
such transactions, Buyer will, assuming the related Consents have been obtained
prior to the Closing Date, have all of the right, title and interest in all the
Permits.
3.13 INSURANCE COVERAGE. SCHEDULE 3.13 sets forth a complete and accurate list
of all insurance policies and fidelity bonds covering the Purchased Assets and
the operations and employees of the Business. There is no claim by any Seller
pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums payable under all such policies and bonds have been paid, and each
Seller is otherwise in material compliance with the terms and conditions of all
such policies and bonds. Such insurance is adequate to cover all reasonably
foreseeable risks associated with the Business and is in such amounts, with such
deductibles and with such other terms as is prudent for a business such as the
Business. No Seller knows of any threatened termination of, and has received no
written notice of, any premium increase with respect to, any of such policies or
bonds.
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3.14 COMPLIANCE WITH LAWS.
3.14.1 No Seller is in violation of, and has not during such Seller's
ownership of the Purchased Assets violated, and, to the knowledge of
Sellers and Principal, no Seller is under investigation with respect to
and has not been threatened to be charged with or given notice of any
violation of, any law, rule, ordinance or regulation, or judgment,
order or decree entered by any Governmental Authority, applicable to
the Purchased Assets or the Business.
3.14.2 No Seller has engaged in any activities which are prohibited
under, and each of the Assumed Contracts and Assumed Leases (to the
extent applicable) complies with, 42 U.S.C. Section 1320a-7a or Section
1320a-7b, or the regulations promulgated thereunder, or any other
related state or local statutes and regulations, including, but not
limited to, the following (i) knowingly and willfully making or causing
to be made a false statement or representation of a material fact in
any application for any benefit or payment; (ii) knowingly and
willfully making or causing to be made any false statement or
representation of a material fact for use in determining rights to any
benefit or payment; (iii) failing to disclose knowledge by a claimant
of the occurrence of any event affecting the initial or continued right
to any benefit or payment on its, his or her own behalf or on behalf of
another, with intent to fraudulently secure such benefit or payment;
and (iv) knowingly and willfully soliciting or receiving any
remuneration, kickback, bribe or rebate, directly or indirectly,
overtly or covertly, in cash or in kind, or offering to pay or receive
such remuneration in return for (A) illegally referring an individual
to a person for the furnishing or arranging for the furnishing of any
item or service for which payment may be made in whole or in part by a
federal or state health care payment program, or (B) illegally
purchasing, leasing or ordering, or arranging for or recommending
purchasing, leasing or ordering, any goods, facility, service or item
for which payment may be made in whole or in part by a federal or state
health care payment program. To Sellers' knowledge, no physician (or
his or her immediate family members) having a "financial relationship"
(as that term is defined in 42 U.S.C. Section 1395nn) with any Seller
or the Business is in a position, directly or indirectly, to refer
patients or services to such Seller or the Business, or any such
referral complies with the requirements of 42 U.S.C. Section 1395nn and
the regulations promulgated pursuant thereto.
3.15 INTELLECTUAL PROPERTY. SCHEDULE 3.15 sets forth a list of all Proprietary
Rights used or held for use in the conduct of the Business, specifying as to
each, as applicable: (i) the nature of such Proprietary Right; (ii) the owner of
such Proprietary Right; (iii) the jurisdictions by or in which such Proprietary
Right is recognized without regard to registration or has been issued or
registered or in which an application for such issuance of registration has been
filed, including the respective registration or application numbers; and (iv)
licenses, sublicenses and other agreements as to which Seller or any of its
Affiliates is a party and pursuant to which any Person is authorized to use such
Proprietary Right, including the identity of all parties thereto, a description
of the nature and subject matter thereof, the applicable royalty and the term
thereof. No Seller has been sued, charged in writing with, or been a defendant
in any claim, suit, action or proceeding relating to the Business that has not
been finally terminated prior to the date hereof
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and that involves a claim of infringement involving the Proprietary Rights.
Neither Sellers nor Principal has any knowledge of any other claim or
infringement by any Seller, or of any continuing infringement by any other
Person, of any Proprietary Rights. No Proprietary Right is subject to any
outstanding order, judgment, decree, stipulation or agreement restricting the
use thereof by any Seller or restricting the licensing thereof by any Seller to
any Person. No Seller has entered into any agreement to indemnify any other
Person against any charge of infringement involving the Proprietary Rights.
3.16 EMPLOYEES AND AGENTS.
3.16.1 SCHEDULE 3.16 sets forth a complete and accurate list of the
name, current rate of compensation and any vacation, holiday or sick
pay, and any other compensation arrangements or benefits of each
current employee of the Business (together with a description of any
specific arrangements or rights concerning such employees that are not
reflected in any agreement or document referred to in SCHEDULE 3.11).
Except as set forth on SCHEDULE 3.16, no Seller currently has any
pension, profit sharing, bonus, incentive, sick leave or sick pay or
other plan applicable to any of the employees of the Business. No such
employee has any vested or unvested retirement benefits or other
termination benefits, except as described on SCHEDULE 3.16.
3.16.2 Each Seller is in compliance in all material respects with all
federal and state laws respecting employment and employment practices,
terms and conditions of employment, wages and hours, unemployment
compensation and the like, and is not engaged in any unfair labor or
unlawful employment practice relating to the Business. Except as set
forth on SCHEDULE 3.16, there is no unlawful employment practice or
discrimination charge involving Seller pending before the Equal
Employment Opportunity Commission ("EEOC"), EEOC recognized state
"referral agency" or any other Governmental Authority with respect to
the Business. Except as set forth on SCHEDULE 3.16, there is no unfair
labor practice charge or complaint against Seller pending before the
National Labor Relations Board ("NLRB") with respect to the Business.
None of the employees of the Seller involved in the Business are
represented by any labor union. Except as set forth on SCHEDULE 3.16,
there is no labor strike, dispute, slow down or stoppage actually
pending or, to knowledge of the Seller or Principal, threatened against
or involving or affecting Seller and no NLRB representation question
exists respecting any of the employees of the Seller involved in the
Business. Except as set forth on SCHEDULE 3.16, no grievance or
arbitration proceeding relating to the employees of the Seller involved
in the Business is pending and no written claim therefor exists with
respect to the Seller.
3.17 FINDERS' FEES. The Sellers have not directly or indirectly dealt with
anyone acting in the capacity of a finder or broker and has not incurred any
obligation for any finder's or broker's fee or commission in connection with the
transactions contemplated by this Agreement.
3.18 ENVIRONMENTAL COMPLIANCE. Except as disclosed on SCHEDULE 3.18:
3.18.1 No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no
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investigation or review is pending, or to the knowledge of the Seller
or Principal, threatened by any Governmental Authority or other Person
(i) with respect to any actual or alleged violation by the Seller of
any Environmental Law in connection with the conduct of the Business or
the ownership of the Purchased Assets, (ii) with respect to any actual
or alleged failure by the Seller to have any environmental permit,
certificate, license, approval, registration or authorization required
in connection with the conduct of the Business or the ownership of the
Purchased Assets, or (iii) with respect to any generation, treatment,
storage, recycling, transportation or disposal or Release of any
hazardous substance generated by the Business or the Purchased Assets.
3.18.2 In connection with the operation of the Business or the
ownership of the Purchased Assets, (i) Seller has not handled any
Hazardous Substance, other than as a generator, on any property now or
previously owned or leased by Seller; (ii) no polychlorinated biphenyls
or urea formaldehyde is or has been present at any property now or
previously owned or leased by Seller; (iii) to Sellers' knowledge no
asbestos is or has been present at any property now or previously owned
or leased by Seller; (iv) to Sellers' knowledge there are not
underground storage tanks for Hazardous Substances, active or
abandoned, at any property now or previously owned or leased by Seller;
(v) to Sellers' knowledge no Hazardous Substance has been Released at,
on or under any property now or previously owned or leased by Seller
and (vi) to Sellers' knowledge no Hazardous Substance has been released
or is present, in a reportable or threshold planning quantity, where
such a quantity has been established by statute, ordinance, rule,
regulation or order, at, on or under any property now or previously
owned or leased by Seller.
3.18.3 In connection with the operation of the Business or the
ownership of the Purchased Assets, Seller has not transported or
arranged for the transportation (directly or indirectly) of any
Hazardous Substance to any location which is listed or proposed for
listing under CERCLA, or on any similar state list or which is the
subject of federal, state or local enforcement actions or other
investigations which may lead to claims against Buyer for clean-up
costs, remedial work, damages to natural resources or for personal
injury claims, including claims under CERCLA.
3.18.4 No oral or written notification of a Release of a Hazardous
Substance has been filed by or on behalf of Seller with respect to the
Business or the Purchased Assets and no property now or previously
owned or leased by Seller with respect to the Business or the Purchased
Assets is listed or, to the knowledge of Seller or Principal, proposed
for listing, on the National Priorities List promulgated pursuant to
CERCLA or on any similar state list of sites requiring investigation or
clean-up.
3.18.5 There are no environmental Liens on any of the Purchased Assets,
and no governmental actions have been taken or are in process that
could subject any of such Purchased Assets to such Liens. Seller would
not be required to place any notice or restriction relating to the
presence of Hazardous Substances at any property used in connection
with the operation of the Business in any deed to such property.
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3.18.6 There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or which are in
the possession of Seller in relation to any Purchased Assets which have
not been delivered to Buyer prior to the date hereof.
3.19 TAX MATTERS. Seller has filed when due in accordance with all applicable
laws (or properly and timely filed an extension therefor) all Returns required
under applicable statutes, rules or regulations to be filed by Seller with
respect to all Taxes. As of the time of filing, the Returns were accurate and
complete in all material respects. There are no Liens for Taxes (other than for
current Taxes not yet due and payable) upon any of the Purchased Assets. None of
the Purchased Assets (i) is property which is required to be treated as being
owned by any other person pursuant to the so-called "safe harbor lease"
provisions of former Section 168(f)(8) of the Code, (ii) directly or indirectly
secures any debt the interest on which is tax exempt under Section 103(a) of the
Code, or (iii) is "tax-exempt use property" within the meaning of Section 168(h)
of the Code.
3.20 ASSETS OF PRINCIPAL. There are no assets of Principal used in, or useful
to, the Business which are not being conveyed to Buyer pursuant to this
Agreement.
3.21 DISPOSITION OF EQUIPMENT. Except as set forth in Section 6.1.2, there has
been no disposition of the Purchased Assets by Seller or Principal since
January 1, 1999.
3.22 MEDICARE AND MEDICAID COST REPORTS. Sellers have delivered to Buyer
complete and accurate copies of all Medicare and Medicaid cost reports relating
to the Business filed by the Sellers within the past three (3) years. The
information contained in such reports is true and correct in all material
respects.
3.23 ACCURACY OF INFORMATION. The statements contained in the Exhibits and
Schedules hereto or any certificate to be delivered at the Closing by the Seller
or Principal to Buyer in connection with this Agreement or any of the
transactions contemplated hereby shall be deemed to constitute representations
and warranties under this Agreement to the same extent as if set forth in this
Agreement in full.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warranties to the Sellers and Principal as
follows:
4.1 ORGANIZATION AND EXISTENCE. Buyer is a corporation duly incorporated,
validly existing and in good standing under the laws of the State of Florida,
and has all corporate power and authority necessary to enable it to own, lease
or otherwise hold its properties and assets and to carry on its business as now
conducted.
4.2 CORPORATE AUTHORIZATION. The execution, delivery and performance by Buyer of
this Agreement and the consummation by Buyer of the transactions contemplated
hereby and thereby are within the corporate power and authority of Buyer. This
Agreement has been duly authorized, executed and delivered by Buyer and
constitutes a valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms, subject to applicable bankruptcy,
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insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting rights of creditors generally and to general principles of equity.
4.3 GOVERNMENTAL AUTHORIZATION. Except as set forth in SCHEDULE 3.3 attached
hereto, the execution, delivery and performance of this Agreement by Buyer, and
the consummation of the transactions contemplated hereby and thereby by Buyer,
do not and will not require any consent, approval or action by or in respect of,
or any declaration, filing or registration with, any Governmental Authority.
4.4 NON-CONTRAVENTION. The execution, delivery and performance of this Agreement
by Buyer, and the consummation of the transactions contemplated hereby and
thereby by Buyer, do not and will not, with or without the giving of notice, the
lapse of time or both: (i) contravene or conflict with the articles of
incorporation or by-laws of Buyer, or (ii) assuming compliance with the matters
referred to in Section 4.3, contravene or conflict with or constitute a
violation of any provision of any law, rule, regulation, judgment, injunction,
order or decree binding upon or applicable to Buyer.
4.5 FINDERS' FEES. The Buyer have not directly or indirectly dealt with anyone
acting in the capacity of a finder or broker and has not incurred any obligation
for any finder's or broker's fee or commission in connection with the
transactions contemplated by this Agreement.
ARTICLE V - COVENANTS OF ALL PARTIES
Each of the parties hereby covenants and agrees with the other parties
as follows:
5.1 COOPERATION. Each party shall cooperate fully with the other parties hereto
in furnishing any information or performing any action reasonably requested by
any such party, which information or action is necessary to the speedy and
successful consummation of the transactions contemplated by this Agreement or is
necessary, appropriate or desirable for the corporate purposes of Buyer. Subject
to its further rights under this Agreement, each party shall use all reasonable
efforts to cause the Closing to occur at the earliest practicable time.
5.2 OTHER REQUIRED INFORMATION. Each party shall furnish to the other parties
hereto any application or statement, and all information concerning itself and
its Affiliates as may be required to be set forth in any application or
statement, to be filed with any Governmental Authority in connection with the
transactions contemplated by this Agreement.
5.3 MISCELLANEOUS AGREEMENTS AND CONSENTS. Subject to the terms and conditions
provided in this Agreement, each party shall use all reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, appropriate or desirable to consummate the transactions contemplated
by this Agreement. Each party will use all reasonable efforts to obtain consents
of all third parties and Governmental Authorities necessary, appropriate or
desirable for the consummation of the transactions contemplated by this
Agreement. Prior to the Closing, Buyer shall have the right to meet, discuss,
and negotiate or re-negotiate contract terms with third parties who currently
have contracts with the Seller that will be included in the Assumed Leases or
Assumed Contracts.
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ARTICLE VI - COVENANTS OF THE SELLER
The Sellers and Principal hereby agree with Buyer as follows:
6.1 CONDUCT OF THE BUSINESS. From the date hereof through the Closing Date, the
Sellers shall conduct the Business in the ordinary course consistent with past
practice and use all reasonable efforts to preserve intact the business
organization, goodwill and relationships with third parties of the Business, and
to keep available the services of the present employees of the Business. From
the date hereof through the Closing, each Seller shall:
6.1.1 use all reasonable efforts to maintain the Purchased Assets in
substantially the state of repair, order and condition as on the date
hereof (reasonable wear and tear excepted);
6.1.2 not sell, lease, license or otherwise dispose of any Purchased
Asset except (i) pursuant to existing contracts or commitments and (ii)
in the ordinary course of business consistent with past practice;
6.1.3 not allow the inventory of supplies, drugs and other disposable
goods in the Business to be materially depleted from their levels as of
the date hereof;
6.1.4 not change any collection practices with respect to Accounts
Receivable or write off any Accounts Receivable disclosed on the
Balance Sheet, except as may be required in accordance with GAAP;
6.1.5 not increase the level of accounts payable or trade payables
beyond the level disclosed on the Balance Sheet, except in the ordinary
course of business consistent with the past practices;
6.1.6 use all reasonable efforts to maintain in full force and effect,
without qualification or limitation, all Permits currently in effect
with respect to the Business;
6.1.7 maintain in full force and effect the insurance policies and
binders currently in effect with respect to the Business;
6.1.8 cause to be paid when due, all accounts payable, trade payables,
Taxes, assessments and charges or levies imposed upon it with respect
to or on the Business or any of the Purchased Assets or which it is
required to withhold and pay over, other than any which it may contest
in good faith;
6.1.9 not take any action which would adversely affect their title to
any of the Purchased Assets; and
6.1.10 agree or commit to do any of the foregoing.
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6.2 DISCHARGE OF LIABILITIES. The Sellers shall pay all of the Excluded
Liabilities as and when the same shall become due and payable. The Buyer shall
pay all Assumed Liabilities as and when the same shall become due and payable.
6.3 ACCESS. The Sellers shall permit officers, employees, agents, attorneys and
accountants and other persons designated by Buyer full access after reasonable
notice during normal business hours to the properties, books, contracts,
commitments, tax returns, examination reports and surveys of Governmental
Authorities, and other records of the Sellers relating to the Purchased Assets
and the Business, and shall furnish (at no cost to Buyer) such financial and
operating data and other information relating to the Purchased Assets and the
Business as such Persons may reasonably request. Unless prohibited by law or
contract, such designees of Buyer shall be furnished (at no cost to Buyer) with
accurate and complete copies of such contracts, commitments and other records
and all other information relating to the Purchased Assets and the Business as
such designees may reasonably request. The Sellers shall cause their employees,
accountants, attorneys, financial advisors and other agents or representatives
to cooperate with Buyer in its investigation of the Business.
6.4 NOTICES OF CERTAIN EVENTS. The Sellers shall notify Buyer, as soon as
practicable but in no event less than one business day, of:
6.4.1 any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
6.4.2 any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement;
6.4.3 any actions, suits, claims, investigations or proceedings
commenced or, to their knowledge, threatened relating to or involving
or otherwise affecting any Seller, the Purchased Assets or the Business
that, if it had existed on the date of this Agreement, would have been
required to have been disclosed pursuant to Article III or that relate
to the consummation of the transactions contemplated by this Agreement;
and
6.4.4 any matter arising or discovered after the date hereof that, if
existing or known on the date of this Agreement, would have been
required to be disclosed pursuant to Article III, or that constitutes a
breach or prospective breach of this Agreement by any Seller. The
delivery of any such notice shall not affect Buyer's remedies
hereunder.
6.5 NONCOMPETITION.
6.5.1 Until the fifth anniversary of the Closing Date, the Sellers,
Principal and their respective Affiliates shall not directly or
indirectly, establish, acquire, operate, manage, own, control, or
finance any Competing Business of Buyer. For purposes hereof,
"COMPETING BUSINESS OF BUYER" shall mean any health care business or
other entity of any type, licensed or unlicensed, existing or to be
formed, that (i) provides any services that are similar to those
provided by the Business or Buyer (including, without limitation,
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rehabilitation, speech therapy, occupational therapy, or physical
therapy services), and, (ii) is located anywhere within a twenty-five
(25) mile radius of any office or location where the Business is
conducted. This provision shall not prohibit Principal from
subcontracting with any Competing Business of Buyer for purposes of
fulfilling Principal's contractual obligations under global capitation
agreements to which Principal is a party; provided, however, for a
period of eighteen (18) months after the Closing Date, that Principal
shall first offer the right to provide such services to Buyer, and
Buyer shall accept or reject such offer within five (5) business days
of receipt of the offer. If Buyer rejects the offer, or refuses to
respond within the five day period, Principal may contract for such
services with a Competing Business of Buyer on terms no more favorable
than the terms offered to Buyer.
6.5.2 If any provision contained in this Section shall for any reason
by held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions of this Section, but this Section shall be construed as if
such invalid, illegal or unenforceable provision had never been
contained herein. If any of the restrictions or covenants contained
herein is held to cover a geographic area or to be for a length of time
which is not permitted by applicable law, or in any way construed to be
too broad or to any extent invalid, such provision shall not be
construed to be null, void and of no effect, but to the extent such
provision would be valid or enforceable under applicable law, a court
of competent jurisdiction shall construe and interpret or reform this
Section to provide for a covenant having the maximum enforceable
geographic area, time period and other provisions (not greater than
those contained herein) as shall be valid and enforceable under such
applicable law. Each party acknowledges that the other party would be
irreparably harmed by any breach of this Section and that there would
be no adequate remedy at law or in damages to compensate such party for
any such breach. The parties agree that the injured party shall be
entitled to injunctive relief requiring specific performance by the
breaching party of this Section. This Section 6.5 shall survive the
Closing.
6.6 PUBLICITY. Except as otherwise required by applicable law or the disclosure
rules and regulations of the Securities Exchange Commission, neither Sellers nor
Principal shall issue any press release or make any other public statement
(including statements to employees of the Business) relating to this Agreement
or the transactions contemplated hereby without obtaining the prior approval of
Buyer to the contents and manner of presentation and publication thereof.
6.7 TRADEMARKS; TRADENAMES. As soon as practicable after the Closing Date, the
Sellers and Principal shall eliminate the use of all of the trademarks, trade
names, service marks and service names included in the Purchased Assets, in any
of their forms or spellings, on all advertising, stationery, business cards,
checks, purchase orders and acknowledgments, customer agreements and other
contracts and business documents.
6.8 NO NEGOTIATION WITH THIRD PARTIES. From the date hereof until the Closing
Date, the Sellers, Principal and their respective Affiliates, agents or
representatives shall not, directly or indirectly, encourage, solicit or engage
in any discussions or negotiations with, provide any
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information to, or approve any transaction with, any Person concerning the
possible purchase or sale of all or any part of the Business or the Purchased
Assets or the merger, consolidation, affiliation or other similar transaction
involving the Business, other than as permitted by this Agreement. The Sellers
or Principal shall promptly notify Buyer of any contact by any Person with
respect to any such possible transaction.
6.9 REIMBURSEMENT OBLIGATIONS. Before the Closing, the Sellers shall repay or
make arrangements to repay to all Governmental Authorities with jurisdiction
over the Business (including the Health Care Financing Administration) any
amounts owed (and not subject to any dispute) to such Governmental Authorities
by the Sellers with respect to the operation of the Business prior to the
Closing Date. The parties acknowledge that overpayments or underpayments to the
Sellers by the Medicaid or Medicare programs for periods ending prior to the
Closing Date may be discovered after the Closing, whether in connection with an
audit of the Business or otherwise. The Sellers shall remain liable for all such
overpayments received by the Sellers. Any appeals from any Medicare, Medicaid or
other third-party payor adjustments may be pursued by Sellers at Sellers' cost.
Sellers shall cause the proceeds of all Accounts Receivable and all Medicare and
Medicaid receipts which are paid to or otherwise received by Sellers after the
Closing Date to be deposited into the Lockbox to be established by the parties
for the purpose of collecting Accounts Receivable. Buyer shall have sole and
exclusive authority to withdraw funds from the Lockbox and Sellers shall have no
right to any monies deposited in the Lockbox. Sellers shall obtain any and all
authorizations or consents required under this Section 6.9.
6.10 MEDICARE AND MEDICAID REPORTS. The Sellers shall prepare, execute and file
on a timely basis all interim cost reports and all other reports and statements
required to be filed with all intermediaries and any other public or private
third party payor or Governmental Authority in connection with the transactions
contemplated by this Agreement. Sellers shall submit cost reports to Medicare
for fiscal year 1998 no later than May 31, 1999 and final cost reports to
Medicare no later than August 31, 1999. At the Closing, Sellers shall execute
and deliver to Buyer a written notice in the form attached hereto as EXHIBIT B
terminating the Medicare provider numbers and participation agreements of
Sellers which are not being assigned to Buyer. Sellers shall cooperate with
Buyer regarding the termination of Sellers' Medicare provider numbers and the
transfer of the assumed Medicare provider number to Buyer.
6.11 PAYMENT TO BUYER FOR EXPENSE ADJUSTMENTS AFTER CLOSING. If after the
Closing Date Buyer is required from time to time to pay any amounts that relate
to the operation of the Business before the Closing Date (other than the Assumed
Liabilities), Buyer shall promptly provide Sellers' written notice and details
of same. Sellers or Principal shall, within ten (10) days of such written notice
from Buyer, pay to Buyer the amount of such required payment. Any amounts not
paid by Sellers or Principal within such period and any amount not paid pursuant
to Section 2.7 shall accrue interest at the rate of 8% per annum.
6.12 CONSENTS. The Seller and Principal shall use all reasonable efforts to
obtain consents in writing to the transactions contemplated by this Agreement
(including the Consents) and such amendments, assignments or modifications of
such documents or instruments as may be required
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so that the transactions contemplated by this Agreement shall not result in any
default with respect to any law, rule, regulation, order, decree, license,
agreement, contract, commitment or instrument to which any Seller is a party or
by which any Seller or any of the Purchased Assets is bound.
6.13 ACCURACY REPRESENTATIONS AND WARRANTIES. The Sellers and Principal shall
not (i) take, or agree to commit to take, any action that would make any
representation and warranty of the Seller or Principal inaccurate in any respect
at, or as of any time prior to, the Closing Date or (ii) omit, or agree or
commit to omit, to take any action necessary to prevent any such representation
or warranty from being inaccurate in any respect at any such time.
6.14 CONFIDENTIALITY. Prior to the Closing Date and after any termination of
this Agreement, all information furnished by the Buyer or its Affiliates to
Sellers or Principal in connection with this Agreement and the transactions
contemplated hereby shall be kept confidential by (and shall be used by Sellers
and Principal only in connection with this Agreement and the transactions
contemplated by this Agreement or as is necessary, appropriate or desirable for
the corporate purposes of Sellers or Principal), except to the extent that such
information (i) is or becomes generally available to the public other than as a
result of disclosure by Sellers or Principal or any of their respective
directors, officers, employees, agents or advisors, (ii) was within the
possession of Sellers or Principal prior to its being furnished to Sellers or
Principal by or on behalf of the Buyer, (iii) becomes available to Sellers or
Principal on a non-confidential basis from a source other than Buyer or any of
its directors, officers, employees, agents or advisors, or (iv) is required to
be disclosed by any lawful statute, rule, regulation, order, or subpoena.
Sellers and Principal may disclose such information to their respective
directors, officers, employees, agents or advisors in connection with the
transactions contemplated by this Agreement so long as such Persons are informed
of the confidential nature of such information and are directed to treat such
information confidentially. If the transactions contemplated by this Agreement
shall fail to be consummated, Sellers and Principal shall promptly cause all
copies of documents or extracts thereof containing information and data as to
the Buyer to be returned or destroyed.
6.15 COLLECTION OF ACCOUNTS RECEIVABLE. Sellers and Principal shall cooperate
with, and use reasonable efforts (other than the obligation to expend monies) to
assist Buyer with, the collection of the Accounts Receivable after the Closing
Date, including causing all proceeds of the Accounts Receivable to be deposited
in the Lockbox and surrendering full control over the Lockbox to Buyer in
accordance with Section 6.9 hereof and, to the extent permitted by law,
providing Buyer and its agents and employees with access to Sellers or its
Affiliates computer systems, programs, data and other assets necessary for Buyer
to collect the Accounts Receivable. Sellers and Principal shall provide Buyer
with access to, or copies of, any documentation necessary or desirable for Buyer
to verify or pursue collection of any Accounts Receivable. Buyer shall have the
right to use any and all tradenames used by Sellers for purposes of collecting
the Accounts Receivable.
6.16 PROFESSIONAL LIABILITY INSURANCE. For a period of two (2) years following
the Closing Date, Principal shall, at its cost, maintain in full force and
effect the claims-made professional liability insurance policies in effect with
respect to Sellers as of the Closing Date, with the same
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minimum liability and coverage limits as in effect as of the Closing Date. Such
policies shall name Buyer as additional insured, provided that Buyer shall pay
any cost associated with being named as an additional insured. Within five (5)
days following the Closing Date, Principal shall provide Buyer with a
certificate of insurance from the insurer indicating that the policy will not be
cancelled, terminated or amended without at least thirty (30) days' written
notice to Buyer.
ARTICLE VII - COVENANTS OF BUYER
Buyer hereby covenants and agrees with the Sellers and Principal as
follows:
7.1 CONSENTS. Buyer shall use all reasonable efforts to obtain all consents and
approvals of Governmental Authorities and other Persons necessary for the
consummation of the transactions contemplated by this Agreement. Buyer shall
diligently file all requisite applications or notices with such Governmental
Authorities and shall diligently respond to any comments thereon from such
Governmental Authorities.
7.2 ACCESS. After the Closing, Buyer shall permit the Sellers and Principal and
their respective agents, attorneys and accountants and other persons designated
by the Sellers or Principal full access after reasonable notice during normal
business hours to the books and records which relate to the operation of the
Business prior to the Closing Date and to any computer equipment, servers, and
software programs containing data used by Principal in its operations other than
the Business, to the extent reasonably necessary to enable the Sellers or
Principal (i) to investigate any claim for indemnification or otherwise exercise
their rights under Article IX, (ii) to defend any claim, action, suit or other
legal proceeding involving the Sellers or Principal and related to the Business,
including, without limitation, Sellers' obligations pursuant to Sections 5.4,
6.9 and 6.14 hereof, or (iii) to prepare audits related to the operation of the
Business prior to the Closing Date.
7.3 CONFIDENTIALITY. Prior to the Closing Date and after any termination of this
Agreement, all information furnished by the Sellers or Principal or their
respective Affiliates to Buyer in connection with this Agreement and the
transactions contemplated hereby shall be kept confidential by (and shall be
used by Buyer only in connection with this Agreement and the transactions
contemplated by this Agreement or as is necessary, appropriate or desirable for
the corporate purposes of Buyer), except to the extent that such information (i)
is or becomes generally available to the public other than as a result of
disclosure by Buyer or any of its directors, officers, employees, agents or
advisors, (ii) was within the possession of Buyer prior to its being furnished
to Buyer by or on behalf of the Sellers, (iii) becomes available to Buyer on a
non-confidential basis from a source other than Sellers or any of its directors,
officers, employees, agents or advisors, or (iv) is required to be disclosed by
any lawful statute, rule, regulation, order, or subpoena. Buyer may disclose
such information to its directors, officers, employees, agents or advisors in
connection with the transactions contemplated by this Agreement so long as such
Persons are informed of the confidential nature of such information and are
directed to treat such information confidentially. If the transactions
contemplated by this Agreement shall fail to be consummated, Buyer shall
promptly cause all copies of documents or extracts thereof containing
information and data as to the Sellers to be returned or destroyed.
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7.4 PUBLICITY. Except as otherwise required by applicable law or the disclosure
rules and regulations of the Securities Exchange Commission, Buyer shall not
issue any press release or make any other public statement relating to this
Agreement or the transactions contemplated hereby prior to the Closing without
obtaining the prior approval of Seller and Principal to the contents and manner
of presentation and publication thereof.
7.5 PAYMENT TO PRINCIPAL FOR FAILURE TO SATISFY ASSUMED OBLIGATIONS. If after
the Closing Date, Sellers or Principal are required from time to time to pay any
amounts that relate to the Assumed Liabilities, Sellers or Principal shall
promptly provide Buyer written notice and details of same. Buyer shall, within
ten (10) days of such written notice, pay to Sellers or Principal (as
appropriate) the amount of such required payment. Any amounts not paid by Buyer
within such period shall accrue interest at the rate of 8% per annum.
7.6 ACCURACY OF REPRESENTATIONS AND WARRANTIES. Buyer shall not (i) take, or
agree to commit to take, any action that would make any representation and
warranty of the Buyer inaccurate in any respect at, or as of any time prior to,
the Closing Date or (ii) omit, or agree or commit to omit, to take any action
necessary to prevent any such representation or warranty from being inaccurate
in any respect at any such time.
ARTICLE VIII - EMPLOYEES AND EMPLOYEE BENEFITS
8.1 ERISA REPRESENTATIONS. Each Seller and Principal hereby represent and
warrant to Buyer as follows:
8.1.1 SCHEDULE 8.1.1 sets forth a complete and accurate list of each
Employee Plan and each Benefit Arrangement that covers any employee of
the Business, copies or descriptions of all of which have previously
been furnished to Buyer. With respect to each Employee Plan, Seller has
provided the most recently filed Form 5500 and an accurate summary
description of such plan. Seller has provided Buyer with, or has caused
to be provided to Buyer, complete age, salary, service and related data
as of the most recent practicable date for employees of the Business.
8.1.2 No Employee Plan is a Multiemployer Plan and no Employee Plan is
subject to Title IV of ERISA. Neither Seller nor any of Seller's
Affiliates has incurred any liability under Title IV or ERISA arising
in connection with the termination of any plan covered or previously
covered by Title IV of ERISA that could become, after the Closing Date,
an obligation of Buyer or any of its Affiliates.
8.1.3 Each Employee Plan which is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified
during the period from its adoption to date, and each trust forming a
part thereof is exempt from tax pursuant to Section 501(a) of the Code.
Seller has furnished to Buyer copies of the most recent Internal
Revenue Service determination letters with respect to each such
Employee Plan. Each Employee Plan is fully funded with no outstanding
accrued liabilities or payment obligations on the part of Seller and
has been maintained in compliance with its terms and with the
requirements
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prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code, which are applicable
to such Plan.
8.1.4 Each Benefit Arrangement has been maintained in substantial
compliance with its terms and with the requirements prescribed by any
and all statutes, orders, rules and regulations which are applicable to
such Benefit Arrangement.
8.1.5 With respect to the employees of the Business, there are no
employee post-retirement medical or health plans in effect, except as
required by Section 162(i) of the Code.
8.1.6 Except as disclosed in writing to Buyer prior to the date hereof,
there has been no amendment to, written interpretation of or
announcement (whether written or not written) by Seller or any of its
Affiliates relating to, or change in employee participation or coverage
under, any Employee Plan or Benefit Arrangement which would increase
materially the expense of maintaining such Employee Plan or Benefit
Arrangement above the level of the expense incurred in respect thereof
for the most recent fiscal year.
8.1.7 The Purchased Assets are not now nor will they with the passage
of time become subject to any Lien imposed under Code Section 412(n) by
reason of the failure of Seller or its Affiliates to make timely
installments or other payments required by Code Section 412.
8.1.8 No Transferred Employee will become entitled to any bonus,
retirement, severance or similar benefit or enhanced benefit solely as
a result of the transactions contemplated hereby.
8.2 EMPLOYEES AND OFFERS OF EMPLOYMENT. On or prior to the Closing Date, Buyer
may, but shall not be obligated to, offer employment to any or all employees of
the Business. Discussion of employment with any employee of the Business shall
not be deemed a violation of Buyer's obligation of confidentiality pursuant to
SECTION 7.3 hereof. Any such offers shall be at such salary or wage and benefit
levels and on such other terms and conditions as Buyer shall in its sole
discretion deem appropriate. The employees who accept and commence employment
with Buyer are hereinafter collectively referred to as the "TRANSFERRED
EMPLOYEES." Sellers shall not take any action that would impede, hinder,
interfere or otherwise compete with Buyer's effort to hire any Transferred
Employees. Buyer shall not assume responsibility for any Transferred Employee
until such employee commences employment with Buyer. Buyer shall comply with any
applicable notice or reporting requirements of the federal WARN Act of any
similar requirement under state law.
8.3 SELLERS' EMPLOYEE BENEFIT PLANS.
8.3.1 The Sellers shall retain all obligations and liabilities under
the Employee Plans and Benefit Arrangements including, without
limitation, liabilities or obligations under Sellers' 401(k) plan, in
respect of each employee or former employee of Sellers, including
Transferred Employees, or any of their Affiliates (including any
beneficiary
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thereof), and neither Buyer nor any of its Affiliates shall have any
liability with respect thereto. Except as expressly set forth herein or
unless included as an Assumed Contract, no assets of any Employee Plan
or Benefit Arrangement shall be transferred to Buyer or any of its
Affiliates or to any plan of Buyer or any of its Affiliates. Accrued
benefits or account balances of Transferred Employees under the
Employee Plans and Benefit Arrangements shall be fully vested as of the
Closing Date.
8.3.2 With respect to the Transferred Employees (including any
beneficiary or dependent thereof), Seller shall retain (i) all
liabilities and obligations arising under any group life, accident,
medical, dental or disability plan or similar arrangement (whether or
not insured) to the extent that such liability or obligation relates to
contributions or premiums accrued (whether or not payable), or to
claims incurred (whether or not reported), on or prior to the Closing
Date, (ii) all liabilities and obligations arising under any worker's
compensation arrangement to the extent such liability or obligation
relates to the period on or prior to the Closing Date, including
liability for any retroactive worker's compensation premiums
attributable to such period and (iii) all other liabilities and
obligations arising under the Employee Plans and the Benefit
Arrangements to the extent any such liability or obligation relates to
the period on or prior to the Closing Date; provided, however, that
Buyer shall assume the obligation to provide accrued vacation time to
the Transferred Employees.
8.3.3 With respect to any Transferred Employee (including any
beneficiary or dependent thereof) who enters a hospital or is on
short-term disability under any Benefit Arrangement on or prior to the
Closing Date and continues in a hospital or on short-term disability
after the Closing Date, Seller shall be responsible for claims and
expenses incurred both before and after the Closing Date in connection
with such Person, to the extent that such claims and expenses are
covered by a Benefit Arrangement, until such time (if any) that, in the
case of a Transferred Employee, such Person begins full-time employment
with Buyer or one of its Affiliates and, in the case of any beneficiary
or dependent of a Transferred Employee, such Person's hospitalization
has terminated. With respect to any Benefit Arrangements covering
medical expenses and other costs relating to pregnancies and maternity
leave, Seller shall be responsible for all claims (whether or not
reported) and expenses incurred during the period prior to and ending
on the Closing Date, and Buyer or one of its Affiliates shall be
responsible for such benefit arrangements covering such pregnancies and
maternity leave for the period subsequent to the Closing Date.
8.4 BUYER BENEFIT PLANS. Buyer or one of its Affiliates will recognize all
service of the Transferred Employees with Sellers or any of their Affiliates,
only for purposes of eligibility to participate in those employee benefit plans,
within the meaning of Section 3(3) of ERISA, in which the Transferred Employees
are enrolled by Buyer or one of its Affiliates immediately after the Closing
Date.
8.5 NO THIRD PARTY BENEFICIARIES. No provision of this Article VIII shall create
any third party beneficiary or other rights in any employee or former employee
(including any beneficiary
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or dependent thereof) of Sellers or of any of their Affiliates in respect of
continued employment (or resumed employment) with either Buyer or the Business
or any of their Affiliates, and no provision of this Article VIII shall create
any such rights in any such Persons in respect of any benefits that may be
provided, directly or indirectly, under any Employee Plan or Benefit Arrangement
or any plan or arrangement that may be established by Buyer or any of its
Affiliates. No provision of this Agreement shall constitute a limitation on
rights to amend, modify or terminate after the Closing Date any such plans or
arrangements of Buyer or any of its Affiliates.
8.6 COBRA. Sellers shall notify all employees of the Business in writing of
their rights with regard to any group health plan coverage, shall timely collect
and remit all premiums to the appropriate party, and perform all other actions
mandated by Title X of the Consolidated Omnibus Budget Reconciliation Act of
1985 ("COBRA") as codified in Section 4980B of the Code and that are required to
be given, collected, or otherwise performed as a result of the Closing under
this Agreement.
ARTICLE IX - INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS. The representations, warranties, covenants and
agreements made by the Buyer, Sellers, and Principal in this Agreement or any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing for a period of two (2) years following the Closing
Date. Any investigation or other examination that may have been made at any time
by or on behalf of the party to whom representations and warranties are made
shall not limit, diminish or in any way affect the representations and
warranties in this Agreement, and the parties may rely on the representations
and warranties in this Agreement irrespective of any information obtained by
them by any investigation, examination or otherwise.
9.2 INDEMNIFICATION BY SELLERS AND PRINCIPAL. The Sellers and Principal, jointly
and severally, shall indemnify, defend and hold harmless Buyer from and against
any damages, losses, liabilities, costs and expenses (including reasonable
expenses of investigation and reasonable attorneys' fees in connection with any
claim, action, suit or proceeding), net of any insurance recovery,
(collectively, "LOSSES") incurred or suffered by Buyer or any of its Affiliates
occasioned or caused by, resulting from or arising out of (i) any Excluded
Liability, (ii) any inaccuracy (or alleged inaccuracy) in or breach (or alleged
breach) of any representation or warranty of the Sellers or Principal set forth
in this Agreement or any certificate or other writing delivered pursuant hereto
or in connection herewith, (iii) any failure (or alleged failure) by the Sellers
or Principal to perform any of their obligations or covenants set forth in this
Agreement or any certificate or other writing delivered pursuant hereto or in
connection herewith, (iv) any violation by Sellers or Principal, or their
respective Affiliates, of state or federal laws governing health care fraud and
abuse or participation in the Medicare, Medicaid, or any other state or federal
health care reimbursement program including, without limitation, any
reimbursement recapture, adjustments, disallowances, overpayments, penalty
assessments, or charge whatsoever with respect to any period (or partial period)
ending on or before the Closing Date, and (v) any and all actions, suits,
litigation, arbitration, proceedings, investigations or claims arising out of
any of the foregoing or out of facts that have occurred on or before the Closing
Date even though
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such action, suit, litigation, arbitration, proceeding, investigation or claim
may not be filed or come to light until after the Closing Date.
9.3 INDEMNIFICATION BY BUYER. Buyer shall indemnify, defend and hold harmless
the Sellers and Principal from and against any Losses incurred or suffered by
the Sellers or Principal or any of their respective Affiliates occasioned or
caused by, resulting from or arising out of (i) any Assumed Liability, (ii) any
inaccuracy (or alleged inaccuracy) in or breach (or alleged breach) of any
representation or warranty of Buyer set forth in this Agreement or any
certificate or other writing delivered pursuant hereto or in connection
herewith, (iii) any failure (or alleged failure) by Buyer to perform any of its
obligations or covenants set forth in this Agreement or any certificate or other
writing delivered pursuant hereto or in connection herewith, and (iv) any and
all actions, suits, litigation, arbitration, proceedings, investigations or
claims arising out of any of the foregoing or out of facts that have occurred
after the Closing Date.
9.4 PROCESS OF INDEMNIFICATION. A party seeking indemnification ("the
"indemnified party") under this Article IX shall promptly notify the party
against whom indemnification is sought (the "indemnifying party") in writing of
the assertion of any claim by a third party or the discovery of any fact upon
which the indemnified party intends to base a claim hereunder. Such notice shall
set forth the amount of the claim and specify the alleged basis of the claim.
The delay or failure of any party to provide notice hereunder shall not in any
way limit indemnification rights hereunder except to the extent that by such
delay or failure shall have a Material Adverse Effect on the indemnifying party.
9.4.1 With respect to claims for indemnification that do not involve a
claim by a third party, the indemnifying party shall pay the full
amount of the claim to the indemnified party as soon as possible but in
no event later than sixty (60) days after written notice of the claim
is received by the indemnifying party (the "Payment Date"). In the
event the indemnifying party disputes the amount of the claim, the
indemnifying party shall give written notice of the dispute to the
indemnified party within ten (10) days of receipt of the claim and the
parties shall negotiate in good faith to resolve the dispute prior to
the Payment Date. In the event the parties fail to resolve the dispute
prior to the Payment Date, the parties shall appoint Ernst & Young, to
resolve the dispute regarding the amount of the claim. The independent
accountant shall render his or her decision as quickly as possible but
in no event more than thirty (30) days following his or her
appointment, and the decision of the independent accountant shall be
final and binding on the parties. The indemnifying party shall pay the
final amount of the claim, if any, to the indemnified party within ten
(10) days following the decision of the independent accountant. Any
amounts which are not paid within the periods set forth in this Section
9.4.1 shall accrue interest from and after the payment due date at a
rate of 8% per annum. The cost of the independent accountant shall be
shared by the parties in proportion to the percentage by which the
amount of the claim by each such party deviates from the amount of the
claim as determined by the independent accountant.
9.4.2 In the case of third party claims or assertions, each indemnified
party shall, at the expense of the indemnifying party, cooperate with
the indemnifying party in determining
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the validity of any such claim or assertion. In connection with any
third party claim to which the indemnified party is entitled to
indemnification hereunder, the indemnifying party shall select counsel
to direct the defense of such third party claim, which counsel shall be
reasonably satisfactory to the indemnified party. The indemnifying
party shall arrange for such counsel to inform the indemnified party on
a regular basis of the status of such case. The indemnified party may,
at its election and expense, participate in the defense of such third
party claim. The indemnifying party shall not settle any such claim
without the consent of the indemnified party if any relief, other than
the payment of money damages, would be granted by such settlement or if
the indemnified party would be liable to the third party for the amount
of such settlement.
9.5 LIMITATIONS. No party shall be entitled to bring any claim for
indemnification against any other party to this Agreement until the aggregate
amount of all Losses exceeds $250,000 ("Threshold"); provided, however, that the
party seeking indemnification shall be entitled to recover the full amount of
its Losses to the extent the aggregate of all losses exceeds the Threshold. In
no event shall any party be required to indemnify any other party hereunder for
Losses in excess of the amount of the Purchase Price No party shall be entitled
to assert a claim for indemnification for breach of a representation or warranty
by any other party to this Agreement after two (2) years following the Closing
Date. The limitations set forth in this SECTION 9.5 shall not apply to
indemnification by Sellers and Principal for Losses to Buyer arising out of (i)
a breach by Sellers or Principal of the representations and warranties set forth
in SECTION 3.1 (corporate existence and power), 3.2 (corporate authorization),
3.9.1(c) (Title to Assets), 3.19 (Taxes) or ARTICLE VIII (Employees and Employee
Benefits), or (ii) any claim for indemnification pursuant to SECTION 9.2(iv)
hereof, or (iii) any breach of Sellers' obligation for the post-Closing payments
described in SECTION 2.7.2(A) hereof.
9.6 CERTAIN REMEDIES AVAILABLE. Notwithstanding anything in this Agreement to
the contrary, this Article IX shall apply only with respect to post-Closing
indemnification obligations and shall not limit the rights of Buyer under
Article IX in the event the Closing does not occur or in respect of any breach
of any covenant set forth herein or in any related agreement to be performed at
or after the Closing.
ARTICLE X - MISCELLANEOUS
10.1 CASUALTY, RISK OF LOSS. The Sellers shall bear the risk of all loss or
damage to the Purchased Assets from all causes and all loss or damage arising
out of or related to the operation of the Business until the Closing. If at any
time prior to the Closing any material portion of the Purchased Assets is
damaged or destroyed as a result of fire, other casualty or for any reason
whatsoever, or in the event condemnation or eminent domain proceedings (or
private purchase in lieu thereof) shall be commenced by any public or
quasi-public authority having jurisdiction against all or any part of the
Purchased Assets, Sellers shall immediately give notice thereof to Buyer. Buyer
shall have the right, in its sole and absolute discretion, within ten (10) days
of receipt of such notice, to (i) elect not to proceed with the Closing and
terminate this Agreement, or (ii) proceed to Closing and consummate the
transactions contemplated hereby and receive any
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and all insurance proceeds received or receivable by Sellers on account of any
such casualty plus payment by Sellers to Buyer of all deductible amounts
required under the insurance policy.
10.2 SPECIFIC PERFORMANCE. Each of the parties to this Agreement hereby
acknowledges that the other parties will have no adequate remedy at law if it
fails to perform any of its obligations under this Agreement. In such event,
each of the parties agrees that the other parties shall have the right, in
addition to any other rights it may have (whether at law or in equity), to
specific performance of this Agreement.
10.3 EXPENSES. Except as otherwise expressly set forth herein, all fees and
expenses incurred by Buyer in connection with this Agreement and the
transactions contemplated hereby will be borne by Buyer and all fees and
expenses incurred by the Sellers and Principal in connection with this Agreement
and the transactions contemplated hereby will be borne by the Sellers and
Principal.
10.4 FURTHER ASSURANCES. If at any time after the Closing, Buyer shall consider
it advisable that any further conveyance, agreements, documents, instruments and
assurances of law or any other things are necessary or desirable to vest,
perfect, confirm or record in Buyer the title to any of the Purchased Assets,
the Sellers and Principal shall execute and deliver, upon Buyer's request, any
and all proper conveyances, agreements, documents, instruments and assurances of
law, and do all things reasonably necessary or proper to vest, perfect, confirm
or record title to the Purchased Assets in Buyer and otherwise to carry out the
provisions of this Agreement.
10.5 PARTIES IN INTEREST. All the terms and provisions of this Agreement shall
be binding upon, shall inure to the benefit of and shall be enforceable by the
respective successors and permitted assigns of the parties hereto. Nothing
expressed or implied in this Agreement is intended or shall be construed to
confer upon or give any Person other than the parties hereto and their permitted
successors or assigns any rights or remedies under or by reason of this
Agreement or any transaction contemplated hereby.
10.6 ENTIRE AGREEMENT. This Agreement, together with the Schedules and Exhibits
hereto, supersede any other agreement, whether written or oral, that may have
been made or entered into by the parties or any of their Affiliates relating to
the matters contemplated hereby. This Agreement, together with the Schedules and
Exhibits hereto, constitute the entire agreement by the parties, and there are
no agreements or commitments except as set forth herein and therein.
10.7 AMENDMENT OR MODIFICATION. This Agreement may be amended only with the
written consent of Buyer and the Sellers.
10.8 WAIVER. Any party to this Agreement may, by written notice to the other
parties to this Agreement, (a) extend the time for the performance of any of the
obligations or other actions of the other parties under this Agreement; (b)
waive compliance with any of the conditions or covenants of the other parties
contained in this Agreement; or (c) waive or modify performance of any of the
obligations of the other parties under this Agreement. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement, including
without limitation any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party
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taking such action of compliance with any representations, warranties,
covenants, conditions or agreements contained in this Agreement. The failure of
any party hereto to enforce at any time any of the provisions of this Agreement
shall in no way be construed to be a waiver of any such provision, nor in any
way to affect the validity of this Agreement or any part hereof or the right of
such party thereafter to enforce each and every such provision. No waiver of any
breach of or non-compliance with this Agreement shall be held to be a waiver of
any other or subsequent breach or non-compliance.
10.9 ASSIGNABILITY. Neither this Agreement nor any rights or obligations
hereunder may be assigned or delegated by any party without the prior written
consent of the other parties; PROVIDED, HOWEVER, that Buyer may, upon written
notice to Principal, assign this Agreement and any of its rights hereunder to
any Affiliate of Buyer without the prior written consent of any other party.
10.10 HEADINGS AND INTERPRETATION. The headings contained in this Agreement are
for reference purposes only and shall not affect the meaning or interpretation
of this Agreement. Terms such as "herein," "hereof" and "hereinafter" refer to
this Agreement as a whole and not to the particular sentence or paragraph where
they appear, unless the context otherwise requires. References in this Agreement
to Articles, Sections, Exhibits or Schedules shall be to Articles, Sections,
Exhibits or Schedules to this Agreement, unless otherwise indicated. Unless the
context otherwise requires, (i) terms used in the plural include the singular,
and vice versa, and (ii) words in the masculine gender include the feminine, and
vice versa.
10.11 NOTICES. All notices and other communications under this Agreement shall
be in writing and shall be delivered by hand or overnight courier service, by
certified mail, return receipt requested, or by facsimile, as follows:
If to Buyer:
Kessler Rehabilitation of Florida, Inc.
300 Executive Drive
West Orange, New Jersey 07052
Attention: Mary Anne McDonald, Esq.
with a copy to:
Foley & Lardner
100 North Tampa Street, Suite 2700
Tampa, Florida 33602-5804
Facsimile: (813) 221-4210
Attention: David L. Robbins, Esq.
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If to any Seller or Principal:
c/o ContinuCare Corporation
100 S.E. Second Street, Suite 3600
Miami, FL 33131
Facsimile: (305) 350-9778
Attention: Charles M. Fernandez, CEO
Susan B. Tarbe, Esq.
with a copy to:
Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, FL 33131
Facsimile: (305) 579-0717
Attention: Rebecca R. Orand, Esq.
or to such other address as any party may have furnished to the others in
writing in accordance herewith. Notices of change of address shall only be
effective upon receipt. All notices and other communications properly given to
any party hereto in accordance with the provisions of this Agreement shall be
deemed to have been given on the date of receipt if delivered by hand or
overnight courier service or sent by facsimile of the sender, or on the date
five business days after dispatch by certified or registered mail.
10.12 LAW GOVERNING. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida, without giving
effect to the principles of conflicts of law thereof.
10.13 INVALIDITY OF PROVISIONS. Each of the provisions contained in this
Agreement is distinct and severable and a declaration of invalidity or
unenforceability of any such provision or part thereof by a court of competent
jurisdiction shall not affect the validity or enforceability of any other
provision hereof.
10.14 COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the parties on the date first above written.
KESSLER REHABILITATION OF FLORIDA, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title
-------------------------------------
REHAB MANAGEMENT SYSTEMS, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title
-------------------------------------
INTEGRACARE, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title
-------------------------------------
J. R. REHAB ASSOCIATES
By:
----------------------------------------
Name:
--------------------------------------
Title
-------------------------------------
CONTINUCARE OCCMED SERVICES, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title
-------------------------------------
CONTINUCARE CORPORATION
By:
----------------------------------------
Name:
--------------------------------------
Title
-------------------------------------
40
<PAGE> 45
The undersigned hereby unconditionally guarantees the obligations of
Buyer pursuant to Section 2.7.1 hereof, subject to the terms and conditions of
this Agreement.
KESSLER REHABILITATION CORPORATION
By:
----------------------------------------
Name:
--------------------------------------
Title
-------------------------------------
41
<PAGE> 1
EXHIBIT 7(b)
REGISTRANT'S
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma financial statements give effect to the sale
by Registrant of the operating assets of the Rehab Companies for $5,500,000 in
cash. The unaudited pro forma balance sheet reflects the disposition of these
assets as of December 31, 1998. The unaudited pro forma statements of income
reflect the results of operations of Registrant after giving effect to the
operations which were generated by the assets sold for the six months ended
December 31, 1998 and the year ended June 30, 1998 as if the disposition had
occurred on July 1, 1998 and February 13, 1998, the date the Rehab Companies
were acquired by Registrant, respectively.
<PAGE> 2
CONTINUCARE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 1998
<TABLE>
<CAPTION>
(A)
Rehab
Companies
Assets Sold/
Liabilities Pro Forma
Continucare Assumed Adjustments Pro Forma
---------- --------- --------------- ----------
<S> <C> <C> <C> <C>
Current assets
Cash and cash equivalents $ 3,867,146 $ $ 1,450,000 (B) 4 5,317,146
Accounts receivable, net 9,660,111 5,881,590 -- 3,778,521
Other receivables 1,037,921 40,544 -- 997,377
Prepaid expenses and other assets 429,914 113,945 -- 315,969
Income taxes receivable -- -- -- --
---------- ----------- ----------- ----------
Total current assets 14,995,092 6,036,079 1,450,000 10,409,013
Notes receivable, net 1,584,069 -- -- 1,584,069
Equipment, furniture and leasehold improvements, net 3,760,672 1,946,886 -- 1,813,786
Cost in excess of net tangible assets aquired, net 37,289,038 5,834,126 -- 31,454,912
Other intangible assets, net 9,983,190 -- -- 9,983,190
Deferred financing costs 3,087,656 -- -- 3,087,656
Other assets, net 96,827 -- -- 96,827
---------- ----------- ----------- ----------
Total assets $70,796,544 $13,817,091 $ 1,450,000 $58,429,453
========== =========== =========== ==========
Current liabilities
Accounts payable 1,530,406 249,483 100,000 (C) 1,380,923
Accrued expenses 6,986,034 1,239,559 -- 5,746,475
Medical claims payable 2,512,417 -- -- 2,512,417
Current portion of long term debt 6,996,170 -- (4,000,000)(B) 2,996,170
Accrued interest payable 634,077 -- -- 634,077
Current portion of capital lease obligations 49,676 27,771 -- 21,905
---------- ----------- ----------- ----------
Total current liabilities 18,708,780 1,516,813 (3,900,000) 13,291,967
Long term debt 3,639,917 -- -- 3,639,917
Convertible subordinated notes payable 45,000,000 -- -- 45,000,000
Deferred tax liability 954,894 -- -- 954,894
Obligations under capital lease 364,715 -- -- 364,715
---------- ----------- ----------- ----------
Total liabilities 68,668,306 1,516,813 (3,900,000) 63,251,493
---------- ----------- ----------- ----------
Commitments and contingencies
Shareholders' equity
Common stock; $0.0001 par value;
100,000,000 shares authorized,
16,661,283 shares issued and
13,731,283 shares outstanding 1,462 -- -- 1,462
Additional paid in capital 32,910,465 -- -- 32,910,465
Deficit (25,541,009) -- (6,950,278)(D) (32,491,287)
Treasury stock (2,930,000 shares) (5,242,680) -- -- (5,242,680)
---------- ----------- ----------- ----------
Total shareholders' equity/(deficit) 2,128,238 -- (6,950,278) (4,822,040)
---------- ----------- ----------- ----------
Total liabilities and shareholders' equity $70,796,544 $ 1,516,813 $(10,850,278) $58,429,453
========== =========== =========== ==========
</TABLE>
<PAGE> 3
CONTINUCARE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Rehab Pro Forma
Continucare Companies Adjustments Pro Forma
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Operations continuing
Revenue
Medical services, net $ 99,236,792 $ 9,369,801 -- $ 89,866,991
Management fees 549,680 -- -- 549,680
------------- ------------- ------------ -------------
Subtotal 99,786,472 9,369,801 -- 90,416,671
Expenses
Medical services 86,639,284 5,660,408 -- 80,978,876
Payroll and employee benefits 7,249,389 1,631,137 -- 5,618,252
Provision for bad debt 1,730,592 632,112 -- 1,098,480
Professional fees 658,645 59,117 -- 599,528
General and administrative 5,454,699 1,818,101 -- 3,636,598
Depreciation and amortization 2,899,307 560,267 -- 2,339,040
------------- ------------- ------------ -------------
104,631,916 10,361,142 -- 94,270,774
Operations disposed of
Revenues 1,924,092 -- -- 1,924,092
Expenses 3,641,081 -- -- 3,641,081
------------- ------------- ------------ -------------
Subtotal (1,716,989) -- -- (1,716,989)
------------- ------------- ------------ -------------
Loss from operations (6,562,433) (991,341) -- (5,571,092)
Other income/(expenses)
Interest income 71,555 3,092 -- 68,463
Interest expense (2,397,207) (2,837) -- (2,394,370)
Loss on sale of subsidiary (4,152,250) -- -- (4,152,250)
------------- ------------- ------------ -------------
Loss before income taxes (13,040,335) (991,086) -- (12,049,249)
Provision/benefit for income taxes -- -- -- --
------------- ------------- ------------ -------------
Net loss before
extraordinary items $ (13,040,335) $ (991,086) $ -- $ (12,049,249)
============= ============= ============ =============
Net loss before extraordinary items
Basic $ (0.91) $ (0.84)
Diluted $ (0.91) $ (0.84)
Shares used in earnings per share
calculations
Basic 14,340,311 14,340,311
Diluted 14,340,311 14,340,311
</TABLE>
<PAGE> 4
CONTINUCARE CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Rehab Pro Forma
Continucare Companies Adjustments Pro Forma
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Operations continuing
Revenue
Medical services, net $ 63,088,911 $ 9,569,943 $ 53,518,968
Management fees 1,233,284 296,523 936,761
------------ ------------ ----------- ------------
Subtotal 64,322,195 9,866,466 -- 54,455,729
Expenses
Medical services 44,380,226 5,487,178 38,893,048
Payroll and employee benefits 13,681,854 2,132,307 11,549,547
Provision for bad debt 1,953,013 144,645 1,808,368
Professional fees 1,637,957 -- 1,637,957
General and administrative 8,435,001 1,546,940 6,888,061
Depreciation and amortization 3,247,717 380,154 2,867,563
------------ ------------ ----------- ------------
73,335,768 9,691,224 -- 63,644,544
Operations disposed of
Revenues 1,262,098 1,262,098
Expenses 2,348,019 2,348,019
------------ ------------ ----------- ------------
Subtotal (1,085,921) -- -- (1,085,921)
Provision for notes receivable 3,825,203 3,825,203
------------ ------------ ----------- ------------
Subtotal (4,911,124) -- -- (4,911,124)
------------ ------------ ----------- ------------
(Loss) / income from operations (13,924,697) 175,242 -- (14,099,939)
Other income / (expenses)
Interest income 932,397 12,705 919,692
Interest expense (3,007,331) (6,292) (3,001,039)
Other 107,696 107,696
------------ ------------ ----------- ------------
(Loss) / income before income taxes (15,891,935) 181,655 -- (16,073,590)
Benefit for income taxes (909,000) (909,000)
------------ ------------ ----------- ------------
Net (loss) / income $(14,982,935) $ 181,655 $ -- $(15,164,590)
============ ============ =========== ============
Net loss per share
Basic $ (1.20) $ (1.21)
Diluted $ (1.20) $ (1.21)
Shares used in earnings per share
calculations
Basic 12,517,503 12,517,503
Diluted 12,517,503 12,517,503
</TABLE>
<PAGE> 5
CONTINUCARE CORPORATION
FOOTNOTES TO PRO FORMA FINANCIAL STATEMENTS
(UNAUDITED)
(A) Represents the assets sold or liabilities assumed by Kessler, excludes
aproximately $1.4 million of liabilities not assumed by Kessler
(B) Represents the net cash proceeds from the disposition.
(C) Estimated cost related to the disposition.
(D) The loss on the disposition of the Rehab Companies which results
from the excess of the net book value of the assets sold and the
liabilities assumed over the sales price, plus any associated costs of
the transaction.
