<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: August 16, 1995
VIVRA INCORPORATED
(Exact name of registrant as specified in its charter)
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Delaware 1-10261 94-3096645
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification Number)
incorporation)
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400 Primrose, #200, Burlingame, CA 94010
Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code:
(415) 348-8200
Former name if changed since last report:
_________________________________________________________________
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Item 5. Other Events.
The Registrant recently completed the acquisition of Oakwood Kidney Center,
P.C. and Wyandotte Kidney Center, P.C. The Registrant includes herein pro
forma financial information giving effect to the Registrant's unrelated
acquisitions through July 1, 1995 for the fiscal year ended November 30, 1994
and the six months ended May 31, 1995.
The Registrant also includes herewith audited financial statements of a
substantial majority of the businesses acquired by the Registrant since
November 30, 1994.
Item 7. Financial Statements and Exhibits.
(a) Audited Financial Statements of Acquired Businesses.
99.1 Audited Financial Statements of the Demopolis Dialysis Clinic,
Inc. for the year ended December 31, 1994.
99.2 Audited Financial Statements of the Tuscaloosa County Dialysis
Facilities, Inc. for the year ended December 31, 1994.
99.3 Audited Financial Statements of Oak Valley Dialysis Clinic, Inc.
for the year ended December 31, 1994.
99.4 Audited Financial Statements of San Joaquin Artificial Kidney
Center, Inc. for the year ended December 31, 1994.
99.5 Combined Audited Financial Statements of Cape Coral Dialysis
Center, Inc. and Dialysis Services of Southwest Florida, Inc.
for the year ended December 31, 1994.
99.6 Combined Audited Financial Statements of Oakwood Kidney Center,
P.C. and Wyandotte Kidney Center, P.C. for the year ended
December 31, 1994.
(b) Pro forma financial information of the Registrant.
(c) Exhibits.
23.1 Consent of Harbin and West, P.C.
23.2 Consent of Iacopi, Lenz & Company.
23.3 Consent of Iacopi, Lenz & Company.
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23.4 Consent of Coopers & Lybrand, LLP.
23.5 Consent of Ernst & Young, LLP.
10.1 Agreement for Sale and Purchase of Assets, dated July 1,
1995, by and among CDC and Oakwood, Chilikapati Family Limited
Partnership and Thavarajah Family Limited Partnership, Vijay
Kumar Chilikapati Revocable Living Trust dated September 26,
1984 and the Krishnapilla Thavarajah Revocable Living Trust,
the sole shareholders of Oakwood and K. Thavarajah, M.D., an
individual, and C.V. Kumar, M.D., an individual.
10.2 Agreement for Sale and Purchase of Assets, dated as of
July 1, 1995, by and among CDC and Wyandotte and CTA Investment
Group, Vijay Kumar Chilikapati Revocable Living Trust dated
September 26, 1984, the Krishnapilla Thavarajah Revocable
Living Trust, and Syed Akbar, M.D., an individual, the sole
shareholders of Wyandotte and K. Thavarajah, M.D., an
individual, and C.V. Kumar, M.D., an individual.
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SIGNATURE
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.
Dated: August 15, 1995.
VIVRA INCORPORATED
By: /s/ LeAnne Zumwalt
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LeAnne Zumwalt
Vice President - Finance
and Secretary
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FINANCIAL STATEMENTS AND EXHIBITS
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Description
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(a) Audited Financial Statements of Acquired Businesses.
99.1 Audited Financial Statements of the Demopolis Dialysis Clinic,
Inc. for the year ended December 31, 1994.
99.2 Audited Financial Statements of the Tuscaloosa County Dialysis
Facilities, Inc. for the year ended December 31, 1994.
99.3 Audited Financial Statements of Oak Valley Dialysis Clinic, Inc.
for the year ended December 31, 1994.
99.4 Audited Financial Statements of San Joaquin Artificial Kidney
Center, Inc. for the year ended December 31, 1994.
99.5 Combined Audited Financial Statements of Cape Coral Dialysis
Center, Inc. and Dialysis Services of Southwest Florida, Inc.
for the year ended December 31, 1994.
99.6 Combined Audited Financial Statements of Oakwood Kidney Center,
P.C. and Wyandotte Kidney Center, P.C. for the year ended
December 31, 1994.
(b) Pro forma financial information of the Registrant.
(c) Exhibits.
23.1 Consent of Harbin and West, P.C.
23.2 Consent of Iacopi, Lenz & Company.
23.3 Consent of Iacopi, Lenz & Company.
23.4 Consent of Coopers & Lybrand, LLP.
23.5 Consent of Ernst & Young, LLP.
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10.1 Agreement for Sale and Purchase of Assets, dated July 1, 1995, by
and among CDC and Oakwood, Chilikapati Family Limited Partnership
and Thavarajah Family Limited Partnership, Vijay Kumar Chilikapati
Revocable Living Trust dated September 26, 1984 and the
Krishnapilla Thavarajah Revocable Living Trust, the sole
shareholders of Oakwood and K. Thavarajah, M.D., an individual,
and C.V. Kumar, M.D., an individual.
10.2 Agreement for Sale and Purchase of Assets, dated as of July 1,
1995, by and among CDC and Wyandotte and CTA Investment Group,
Vijay Kumar Chilikapati Revocable Living Trust dated September 26,
1984, the Krishnapilla Thavarajah Revocable Living Trust, and Syed
Akbar, M.D., an individual, the sole shareholders of Wyandotte and
K. Thavarajah, M.D., an individual, and C.V. Kumar, M.D., an
individual.
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VIVRA Incorporated and Subsidiaries
Pro Forma Financial Information
(In thousands, except per share amounts)
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For the Year Ended November 30, 1994
------------------------------------
Actual As Adjusted
------ -----------
Revenues, net $286,519 $317,239
Costs and expenses 236,109 263,905
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Pre-tax income 50,410 53,334
Income taxes(2) 20,668 21,867
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After-tax 29,742 31,467
Gain on Disc. Ops. 697 697
--- ---
Net Earnings $30,439 $32,164
======= =======
Earnings per share $1.45 $1.49
For the Six Months Ended May 31, 1995
-------------------------------------
Actual As Adjusted(1)
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Revenues, net $171,737 $181,286
Costs and expenses 141,630 150,302
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Pre-tax income 30,107 30,984
Income Taxes(3) 11,718 12,069
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Net Earnings $18,389 $18,915
======= =======
Earnings per share $0.82 $0.82
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(1) Adjusted to give effect to a number of unrelated acquisitions by the
Registrant and its subsidiaries, none of which individually was
material.
(2) Assumes a tax rate of 41.00%.
(3) Assumes a tax rate of 40.00%.
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AGREEMENT FOR SALE AND PURCHASE OF ASSETS
THIS Agreement for Sale and Purchase of Assets (the
"Agreement") is made as of July 1, 1995 by and among COMMUNITY
DIALYSIS CENTERS, INC., a Nevada corporation ("CDC" or the
"Buyer"), OAKWOOD KIDNEY CENTER, P.C., a Michigan professional
corporation ("Oakwood"), CHILAKAPATI FAMILY LIMITED PARTNERSHIP, a
Michigan limited partnership ("CFLP") and THAVARAJAH FAMILY LIMITED
PARTNERSHIP, a Michigan limited partnership ("TFLP") (collectively,
"Sellers") and VIJAY KUMAR CHILIKAPATI REVOCABLE LIVING TRUST DATED
SEPTEMBER 26, 1984, THE KRISHNAPILLA THAVARAJAH REVOCABLE LIVING
TRUST, the sole shareholders of Oakwood (collectively,
"Shareholders") and K. THAVARAJAH, M.D., an individual, and C.V.
KUMAR, M.D., an individual (collectively, "Physicians").
R E C I T A L S
A. Sellers own and operate a facility (the "Facility")
located at 1185 Monroe, Dearborn, Michigan 48124, with twenty five
(25) stations, which provides (i) continuous ambulatory peritoneal
dialysis and hemodialysis services, treatments, counselling and
instruction at the Facility, in the home and on an out-patient
basis to persons with kidney diseases or conditions and (ii) acute
care services to patients at hospital (collectively, the "Dialysis
Business");
B. Buyer desires to purchase from Sellers and Sellers
desire to sell to Buyer the Dialysis Business and substantially all
of the assets owned and used by Sellers in connection with the
Dialysis Business; and
C. K. Thavarajah, M.D. and C.V. Kumar, M.D. are the sole
beneficiaries under The Krishnapilla Thavarajah Revocable Living
Trust and the Vijay Kumar Chilikapati Revocable Living Trust dated
September 26, 1984, respectively, and therefore, are receiving
consideration hereunder.
NOW, THEREFORE, it is agreed:
1. Sale and Purchase of Assets. Subject to the terms and
conditions of this Agreement, Sellers agree to sell, transfer,
assign and deliver to buyer, and Buyer agrees to purchase from
Sellers, on the Closing Date (as defined in paragraph 9.1), all of
the assets listed in paragraph 1.1.1, but excluding the assets
described in paragraph 1.1.2 (the "Excluded Assets").
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1.1 The Assets. Subject to paragraph 1.1.2:
1.1.1 Assets to be Purchased. The "Assets" of Sellers
and Shareholders to be purchased by Buyer pursuant to this
Agreement are all of the assets, properties, rights and claims used
in or relating to, or arising from the conduct of the Dialysis
Business (other than the Excluded Assets) including the following:
(a) Personal Property. All furniture, furnishings,
equipment and all other tangible personal property of Sellers,
including the property listed and described in Schedule 1.1.1(a)
and the inventory of Sellers (the "Inventory") on the Closing Date
of housekeeping and operating items and materials, supplies,
consumables and disposables which would be classified as inventory
according to generally accepted accounting principles
(collectively, the "Personal Property"); and
(b) Leases and Contracts. All right, title and
interest of Sellers under all leases, contracts, agreements and
other similar commitments relating to the Dialysis Business,
including but not limited to the Material Contracts listed on
Schedule 3.18;
(c) Intangibles. All intangible property,
including without limitation:
(i) Licenses. All of the Licenses (as defined
in paragraph 3.8.1), except those which by law or by their terms
are not transferable;
(ii) Names and Goodwill. All trademarks,
tradenames and service marks, including but not limited to, all
rights to the use of the name "Oakwood Kidney Center" and the
business and goodwill associated with the Dialysis Business;
(iii) Prepaids and Deposits. All prepaid
expenses and deposits and patient deposits held by Sellers
(collectively, the "Deposits");
(iv) Proprietary Rights, Confidential
Information and other Intangibles. All formulas, know-how,
protocols, databases, studies, patents, patent rights, patent
applications, letters patent, trade secrets, inventions, models,
processes, designs, trademarks, service marks, copyrights, pricing
policies, cost and other financial information and data, referral
source lists, patient and provider lists and all other information
as to the identities or requirements of present, former or
potential patients, clients or providers, market information,
market analyses, marketing plans, operating or management policies,
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procedures and forms, and all other proprietary rights used or useful or
developed or acquired for use in connection with the Dialysis Business; and
(d) Books and Records. Original, or complete and correct
copies where Sellers are required to retain originals, of all patient lists,
patient cards, patient information, books, records and files maintained by
Sellers for or in connection with the Dialysis Business.
1.1.2 Excluded Assets. The Excluded Assets which Buyer is not
purchasing hereunder are: accounts and notes receivable, cash on hand,
bank accounts (other than the Deposits), rights to tax refunds, rights and
obligations under non-assumed contracts, medicare provider number,
non-assignable licenses and permits, and rights with respect to employee
benefit plans at the Closing Date and any claims and causes of action arising
before the Closing Date.
1.1.3 Transfer of Custody of Patient Records. Sellers agree
to turn over to CDC on the Closing Date custody of all existing records,
files, charts, x-ray files and similar data pertaining to each Patient, as
hereinafter defined, and in Sellers' possession as of the Closing Date
(collectively the "Patient Records"). "Patient" shall mean any past or
current patient treated at the Facility and for whom Sellers keep, maintain or
have custody of any records, files, charts, x-ray files or any similar data.
CDC agrees to accept custody of the Patient Records and to, hold, utilize and
deliver them pursuant to the instructions of the Patient to whom they pertain.
The parties agree to use their best efforts to comply with all laws and
regulations with respect to the handling and storage of Patient Records.
2. Consideration. The amount, payment and description of the
consideration to be given by Buyer to Sellers for the Assets is described in
Paragraphs 2.1 through 2.4. This consideration shall be allocated among the
Assets by Buyer after Closing on Internal Revenue Service Form 8594 and on
comparable state filings, and the parties shall memorialize their agreement to
such allocation on Schedule 2 attached hereto.
2.1 Purchase Price. The purchase price for the Assets and the
covenants contained in Section 2.4 (the "Purchase Price") to be delivered by
Buyer to Sellers shall be Eleven Million Dollars ($11,000,000), which shall be
payable by the delivery of Six Million Eight Hundred Seventy Five Thousand
Dollars ($6,875,000) in cash at Closing and Four Million One Hundred Twenty
Five Thousand Dollars ($4,125,000) in common stock of Vivra Incorporated on the
seventh day after Closing ("Vivrall) (the "Vivra Shares"). The
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Vivra Shares shall be that number of shares of common stock, $.Ol par value
per share of Vivra equal to (i) Four Million One Hundred Twenty Five Thousand
Dollars ($4,125,000) divided by (ii) the average closing price of the Vivra
Common Stock on the New York Stock Exchange on Thursday, June 29, 1995 (the
"Closing Price"). The Purchase Price shall be distributed to the Sellers in
accordance with Section 6.1 of the Escrow Agreement, as defined herein.
2.1.1 Stock Protection. For a period beginning on the
Closing Date and ending on the sixtieth (60th) day after the Closing Date,
Buyer will have the sole right to direct the sale of the Vivra Shares. On the
sixty-first day after the Closing Date, (i) for all of the Vivra Shares sold
pursuant to Buyer's direction, Buyer will make a cash payment in the amount of
the difference between the net proceeds and the Closing Price; and (ii) for
each unsold Vivra Share, Buyer will purchase such share at the Closing Price.
Any cash payment made pursuant to this paragraph shall constitute part of the
Purchase Price and shall be deposited with the Escrow Holder.
2.2 Assumption of Contracts. On the Closing Date, Buyer shall
assume and agree to satisfy the terms of the contracts listed on Schedule 2.2
(the "Assumed Contracts"), but only to the extent they accrue after Closing;
provided, however, Buyer does not assume, and shall not be responsible for, any
obligations arising as a result of a breach, violation or failure to perform
of or by Sellers prior to the Closing Date with respect to any of the Assumed
Contracts.
2.2.1 Exclusion of other Liabilities. It is expressly
agreed and understood that except as set forth in paragraphs 2.2 and 2.3, Buyer
shall not assume and shall not be liable for, nor shall any of the Assets be
secured by or subject to, any debts, liabilities or obligations of Sellers,
Shareholders, Physicians or the Dialysis Business, or any other claim against
any of the foregoing, of any kind, whether accrued, contingent or absolute, due
or to become due, known or unknown, asserted or unasserted, all of which are
retained by Sellers, Shareholders and Physicians (collectively, the "Excluded
Liabilities"). Sellers, Shareholders and Physicians, jointly and severally,
agree to pay and discharge all of the Excluded Liabilities as they become due
and to indemnify, defend, and hold Buyer harmless against such claims.
2.3 Facility Lease. Buyer, TFLP and CFLP shall enter into a
lease for the space occupied by the Facility (the "Facility Lease") in
substantially the form attached hereto as Exhibit A attached hereto.
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2.4 Noncompetition, Nonsolicitation and nondisclosure
Covenants.
2.4.1 Covenants.
(a) Noncompetition Covenant. For purposes of this
Agreement, the term "Restricted Area" shall mean the area within a
Forty (40) mile radius of the Facility. Sellers and Physicians
each agree that for a period beginning on the Closing Date and
ending on the tenth (10th) anniversary thereof (the "Restricted
Period") neither Sellers nor Physicians will, either jointly or
individually, directly or indirectly, whether as an employee,
officer, director, agent, consultant or otherwise:
(i) compete with CDC or the Facility within the
Restricted Area, or
(ii) own, manage, operate, join, control, advise, consult
with, provide services to, or be employed by or participate
in the ownership, operation, management or control (other
than as a shareholder owning less than 5%- of the capital
stock of a company whose stock is publicly traded on a
national exchange) of any business engaged in the provision
of services provided by the Dialysis Business or at the
Facility (individually and collectively, a "Competing Business")
within the Restricted Area, or
(iii) advise, assist, consult with, lease or sell real
property to (or permit their successors or assigns to do
so) or aid in the establishment or operation of a
Competing Business in the Restricted Area;
provided, however, that the practice of medicine which does not
include the ownership, operation, management or control of or the
provision of advisory or consulting services to a dialysis clinic
and which does not involve a violation of paragraphs 2.4.1(b) or
(c), shall not, by itself, constitute a violation of this paragraph
2.4.1(a).
(b) Nonsolicitation Covenant. Each of Sellers and
Physicians agree that during the Restricted Period, it or he will
not, either jointly or individually, directly or indirectly,
solicit any of CDC's patients or employees for or on behalf of any
Competing Business.
(c) Nondisclosure Covenant. In the operation and
development of CDC's existing businesses and the planning and
development of its proposed businesses, CDC generates information
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and data which is and will be proprietary and confidential (the
"Confidential Information") the disclosure of which would be
extremely detrimental to its business and of great assistance to
its competitors. The Confidential Information includes, but is not
limited to:
(i) Development. Data, plans and projections
regarding the location, development and expansion of existing and
proposed facilities;
(ii) Marketing. Market surveys, studies and
analyses;
(iii) Services. Information concerning the
identities, locations and qualifications of professionals and other
persons presently, or prospectively to be, retained or employed by
CDC;
(iv) Suppliers, etc. Information concerning:
the identities, locations, prices, costs and other terms of
dealings with referral and reimbursement sources, suppliers,
providers and supplier and provider organizations and entities;
administrative and accounting procedures and policies of the U.S.
Department of Health and Human Services and the Health Care Finance
Administration, the Medicare Program ("Medicare"), the End Stage
Renal Disease Program "ESRD"), the Medicaid Program ("Medicaid"),
comparable state offices and programs, insurers and other
third-party payors and information about contractual and other
arrangements, and affiliations with any of the foregoing;
(v) Regulatorv Matters. Information concerning
legislative, administrative, regulatory and zoning requirements, bodies
and officials;
(vi) Records. Medical, patient and personnel
records;
(vii) Data. Statistical, financial, cost and
accounting data;
(viii) Patients. Existing and prospective
patient lists, names and addresses; and
(ix) Manuals. Administrative, accounting,
operations and procedures manuals.
Sellers and physicians understand and agree that, due to the
highly competitive nature of the health care industry and the
Dialysis Business, disclosure of any of the Confidential
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Information would be extremely damaging to CDC. To the extent that
any such Confidential Information becomes available to Sellers or
Physicians in the course of the transactions contemplated by this
Agreement, each of Sellers and Physicians agree that, during the
Restricted Period, it or he will not use or divulge such
information without the prior written consent of CDC and that it or
he holds such information in a fiduciary capacity for the sole
benefit of CDC. Sellers and Physicians also agree that the
Confidential Information includes but is not limited to trade
secrets within the meaning of any and all applicable state and
federal statutes, rules and regulations, and that if it or he
breaches this covenant, CDC shall in addition to all other
remedies, have available the remedies provided by all such state
and federal statutes, rules and regulations as well as such
remedies as may otherwise be available. The restrictions set forth
in this paragraph 2.4.1(c) shall not apply to any part of the
Confidential Information which: (i) is or becomes generally
available to the public or publicly known other than as a result of
disclosure by Sellers or Physicians; (ii) becomes available to
Sellers or Physicians on a nonconfidential basis from a source
other than CDC or its agents or affiliates, which source, to the
knowledgeof Sellers and Physicians, is not bound by a
confidentiality obligation to CDC; or (iii) is disclosed pursuant
to the requirement of a governmental agency or court of competent
jurisdiction or as otherwise required under applicable law.
2.4.2 Transferability. Sellers and Physicians agree
that the covenants contained in paragraph 2.4.1 (the "Covenants")
shall be binding on Sellers'and Physicians' successors and assigns
and that they may be assigned by CDC to any person, firm or
business entity to whom the ownership and operation of the Facility
may be transferred, it being the intention of the parties that the
Covenants shall be binding on or inure to the benefit of, as the
case may be, any of their successors with the same force and effect
as if the Covenants had been made by and with such successors.
2.4.3 Severability. It is further understood and agreed
that the scope of the Covenants is reasonable in activities, time
and area, and the Covenants are fairly necessary to protect the
investment of CDC hereunder. Nevertheless, it is further agreed
that the Covenants shall be regarded as severable and shall be
operative as to activities, time and area to the extent that they
may be made so operative, and if any part of them is declared
invalid or unenforceable as to activities, time or area, the
validity and enforceability of the remainder shall not be affected.
2.4.4 Injunction. It is further understood and agreed
that CDC will suffer irreparable injury for which it will have no
adequate remedy at law as a result of the breach of these
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Covenants, and that CDC shall be entitled to appropriate remedies
of specific performance and injunctive relief in the event of such
breach.
3. Representations and Warranties of Sellers and Shareholders.
Each of Sellers, Shareholders and Physicians, jointly and
severally, represents and warrants to Buyer that:
3.1 Organization and Good Standing. Oakwood is, and on the
Closing Date will be, a Michigan professional corporation duly
organized, validly existing and in good standing under the laws of
the State of Michigan with full power and authority to carry on the
Dialysis Business. Shareholders own all of the outstanding capital
stock of Oakwood. CFLP is, and on the Closing Date will be, a
Michigan limited partnership duly organized, validly existing and
in good standing under the laws of Michigan. TFLP is, and on the
Closing Date will be, a Michigan limited partnership, validly
existing and in good standing under the laws of Michigan.
3.2 Authority. All corporate, partnership and other actions
required to be taken by Sellers, Shareholders and Physicians to
authorize and approve the execution, delivery and performance of
this Agreement and the other agreements to be delivered at Closing,
and the consummation of the transactions described in it have been
duly authorized and approved by all necessary action on their part.
The person or persons who execute this Agreement on behalf of
Sellers have been duly authorized to do so. Sellers and
Shareholders have the power and authority (without the consent of
any other person) to enter into, deliver, and perform this
Agreement and the other agreements to be delivered at Closing.
This Agreement, when executed and delivered by Sellers,
Shareholders and Physicians, as applicable, will be their valid and
binding obligation enforceable against them according to their
terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws, regulations and
authorities from time to time in effect affecting creditors' rights
generally and to general principles of equity, whether considered
in a proceeding in equity or at law.
3.3 Financial Statements.
3.3.1 Statements Delivered. Sellers have delivered to
Buyer the following financial statements:
(a) Balance Sheet and Income Statement. Audited
balance sheets and statements of profit and loss for the Dialysis
Business at and for the years ended December 31, 1993, 1994 and
1995 and at and for the five months ended May 31, 1995 (Schedule
3.3.1(a)) (the "Financials").
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(b) Treatment Report. A report showing treatments
provided by the Dialysis Business from January 1, 1993 through June
30, 1995 (Schedule 3.3.1(b)) (the "Treatment Report").
3.3.2 Representation. All of the Financials have been
prepared on the accrual basis of accounting in accordance with
generally accepted accounting principles consistently applied and
fairly present the financial position and results of operations of
the Dialysis Business as of the dates and for the periods
indicated. The Treatment Report accurately presents the number and
types of treatments provided at or by the Facility for the period
covered thereby.
3.4 Absence of Material Change. Except as set forth on
Schedule 3.4:
3.4.1 Since May 31, 1995, the Dialysis Business has
been conducted only in the ordinary course.
3.4.2 Since May 31, 1995, (i) there has been no
change in the condition (financial or otherwise), assets,
liabilities, operations or prospects of the Dialysis Business or in
the Assets, other than minor changes in the ordinary course of
business, none of which either individually or in the aggregate has
been materially adverse; and (ii) there has been no damage,
destruction, or loss (whether or not insured against), which either
individually or in the aggregate materially adversely affects (and
Sellers do not know of any threatened occurrence or development
which is reasonably expected to have (either singly or in the
aggregate) a materially adversely effect on) the assets,
liabilities, or operations of the Dialysis Business or the Assets.
3.4.3 Since May 31, 1995, Sellers have not (i)
created or incurred any liability, commitment or obligation
(absolute or contingent) with respect to the Dialysis Business,
except in the ordinary course of business or unsecured current
liabilities incurred for other than money borrowed in the ordinary
course of business; (ii) mortgaged, pledged or subjected to any
lien or otherwise encumbered any of the Assets; (iii) discharged
or satisfied any lien, security interest or encumbrance against the
Dialysis Business, or paid any obligation or liability (absolute or
contingent) of the Dialysis Business, other than in the ordinary
course of business; (iv) waived any rights of substantial value to
the Dialysis Business or cancelled any debts or claims of the
Dialysis Business of over $5,000; (v) except in the ordinary course
of business, terminated or amended, or suffered the termination or
amendment of, any contract, lease, agreement or license to which
Sellers, Shareholders or Physicians on behalf of the Dialysis
Business are or were a party; (vi) Except for maintenance and
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repairs in the ordinary course of business, made any capital
expenditures or any capital additions or betterments on behalf of
the Dialysis Business; (vii) sold or otherwise disposed of any of
the Assets, tangible or intangible, except in the ordinary course
of business; (viii) except in compliance with paragraph 3.14
herein, paid or agreed to pay, conditionally or otherwise, any
bonus, extra compensation, pension or severance pay to any of
Sellers' present or former officers, agents or employees except
under any existing pension or other plan or increased the
compensation (including salaries, fees, commissions, bonuses,
profit sharing, incentive, pension, retirement or other similar
payments) being paid as of May 31, 1995, to any of the Dialysis
Business' management or other employees, other than salary
increases not greater than 5.5% in connection with customary annual
reviews; (ix) renewed, amended, become bound by or entered into any
contract, commitment or transaction on behalf of the Dialysis
Business other than in the ordinary course of business; or (x)
changed any accounting practice followed or employed in preparing
the Financials.
3.4.4 Since May 31, 1995, Sellers have not made any
changes to the management of the Dialysis Business.
3.5 Assets. Schedule 1.1.1(a) contains a complete and
correct list of all material items of the personal property used in
connection with the Dialysis Business;
3.5.1 Extent. The Assets constitute all material items
of such property necessary for the operation of the Dialysis
Business as presently operated; and the Inventory on the Closing
Date will be of quality, quantity and variety customary for
facilities of size and utilization and with storage capacity
comparable to the Facility; and the Assets will Furnish Buyer with
all of the capacity and rights to operate the Dialysis Business in
the same manner as presently and historically operated by Sellers;
3.5.2 Title. Sellers now have, and at Closing will vest
in CDC, good and marketable title to all of the Assets, free and
clear of restrictions on or conditions to transfer or assignment
and free and clear of liens, encumbrances, security interests,
equities, claims, leases, conditions or restrictions.
3.6 Dialysis Business. Sellers conduct no other business
than the Dialysis Business.
3.7 Effect of Agreement. The execution and delivery of this
Agreement by Sellers, Shareholders and Physicians and the other
agreements to be delivered by Sellers at Closing or the
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consummation of the transactions described herein and therein, do
not and will not:
3.7.1 Articles of Incorporation and Limited Partnership
Agreements. Violate Sellers' Articles of Incorporation or Bylaws
or CFLP's and TFLP's Limited Partnership Agreements;
3.7.2 Breach of Agreements. Violate, constitute a
breach of, cause a default under, or permit the termination of any
agreement, license, permit, certificate of need, obligation,
liability, mortgage or deed of trust, security agreement or other
lien, charge or encumbrance to which Sellers, Shareholders or
Physicians are a party or by which any of the Assets are bound or
for which they or Buyer might become liable;
3.7.3 Acceleration of Indebtedness. Accelerate or
constitute an event entitling the holder of any indebtedness
secured by the Assets, to which they are subject or for which they
or Buyer might become liable, to accelerate the maturity of any
such indebtedness or to increase the rate of interest presently in
effect thereon except for obligations to be discharged by Sellers
at Closing; or
3.7.4 Judgments, etc. Violate, conflict with or result
in the breach of any judgment, order, writ, injunction, decree of
any court, governmental agency or instrumentality or any law,
ordinance, rule, or regulation affecting Sellers, Shareholders,
Physicians, the Dialysis Business or the Assets.
3.8 Compliance with Law. The Dialysis Business has been
conducted in conformity, and Sellers are in compliance with all
federal, state and local laws, regulations or orders, including
without limitation, employment, insurance, zoning, occupancy,
building, occupational and licensure laws, regulations and orders
which materially affect the Dialysis Business. No Seller or
Shareholder or Physicians has received any notice asserting a
failure to comply with any such law, regulation or order,which
notice has not prior hereto been fully and completely resolved to
the satisfaction of, or abandoned by, the noticing party. Without
limitation of paragraph 3.8:
3.8.1 Licenses, etc, Sellers hold all rights, permits,
authority, consents, licenses, certificates of need, exemptions,
accreditations and the like, including zoning approvals, variances
and use or occupancy permits necessary to enable it to (i) conduct
the Dialysis Business as heretofore and currently conducted and
(ii) obtain reimbursement under the Medicare, Medicaid and ESRD
Programs and under all contracts, programs and other arrangements
with third party payors, insurers or fiscal intermediaries
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<PAGE> 12
(collectively, the "Licenses"). Schedule 3.8.1 contains a complete
and correct list of the Licenses, showing their dates of expiration
where applicable. The Licenses are valid and in full force and
effect; no violations exist in respect thereof; and there are not
pending, or, to the knowledge of Sellers or Shareholders,
threatened, any investigations or proceedings with respect to the
Licenses. The Facility has an existing Medicare Provider Agreement
with the Health Care Finance Administration of the Department of
Health and Human Services and is certified for participation in the
Medicare, Medicaid and ESRD Programs, all of which licenses,
agreements, certifications, contracts and instruments are in full
force and effect. No defaults have occurred thereunder, and no
event has occurred which, with the giving of notice or passage of
time or both, would constitute a material default thereunder. The
Dialysis Business and the Assets, and Sellers' operation thereof,
conform and have conformed to all applicable statutes, codes,
ordinances, licensing requirements, laws, rules and regulations.
Sellers have complied with all statutes, codes, ordinances,
licensing requirements, laws, rules, regulations, decrees, awards
or orders applicable to the Dialysis Business or its operations,
including those relating to employment and environmental matters
and all laws relating to Medicare and/or Medicaid, including, but
not limited to, 42 U.S.C. Section 1320(a)-7(a) et seq., 42 U.S.C.
Section 1320(a)-7(b) et seq., 31 U.S.C. Section 3729, and any other
federal or state provision relating to the filing of false claims or
payments for referrals; and there is not and will not be any liability
arising from or related to any violations thereof and neither of
the Shareholders has any knowledge of any violations of such laws.
No Shareholder or Seller has received any notice from any
governmental body or other person alleging that any Physician,
Shareholder or Seller has failed to comply with any such law, rule
or regulation. To Sellers, knowledge, there is no anticipated
change in any such law, rule or regulation which would adversely
affect the Dialysis Business or the Assets.
3.8.2 Hazardous Materials. Except as disclosed in
Schedule 3.8.2, no hazardous or toxic material of any type has ever
been generated, treated, produced, stored, transported, released or
disposed of on, around or beneath the Facility. No written
notification has been received in the past with respect to the
Facility, and there are no proceedings or inquiries, pending or
threatened, before any court, agency, authority or tribunal,
involving, concerning, or affecting the Facility in which is in
issue the violation of any federal, state or local law or
regulation pertaining to hazardous or toxic materials. For
purposes of this section, the phrase "hazardous or toxic materials"
includes, substances defined as "hazardous substances," "hazardous
materials," "toxic substances," "hazardous waste," "extremely
hazardous waste," or "restricted hazardous wastes," under the
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Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. Section 9601, et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section
6901, et seq.; the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251, et seq.; and comparable provisions of state and local
county and city ordinances, or any substances so defined or stated
in any of the regulations adopted and publications promulgated
pursuant to those laws as they may have been amended from time to
time on or before the date hereof.
3.8.3 Filing of Reports. Other than claims or reports
pertaining to individual patients, Sellers will cause to be timely
filed, all cost reports of every kind whatsoever required by law or
by written or oral contract or otherwise to have been filed or made
on or prior to the Closing Date with respect to the purchase of
services by third-party purchasers, including, but not limited to,
Medicare and Medicaid, insurance carriers and other fiscal
intermediaries. Sellers have timely filed, in a complete and
correct manner, all requisite claims and other reports required to
be filed in connection with all state and federal Medicare and
Medicaid programs due on or before the date hereof. There are no
claims, actions, payment reviews, or appeals pending or threatened
before any commission, board or agency, including, without
limitation, any intermediary or carrier, the Administrator of the
Health Care Financing Administration, or the Michigan Department of
Health and Rehabilitative Services or any other state or federal
agency with respect to any Medicare or Medicaid claims filed by
Sellers on or before the date hereof or program compliance matters,
which would adversely affect Sellers, the Assets, the operation or
utility thereof, or the consummation of the transactions
contemplated hereby. No validation review or program integrity
review related to Sellers has been conducted by any commission,
board or agency in connection with the Medicare or Medicaid
program, and no such reviews are scheduled, pending nor threatened
against or affecting Sellers, any of the Assets or the consummation
of the transactions contemplated hereby.
3.8.4 Occupational Safety. Sellers have complied in all
material respects with all requirements of the Occupational Safety
and Health Act and its state equivalents and regulations
promulgated under any such legislation, the consequences of a
violation of which could have material adverse effect on the
Dialysis Business, and with all orders, judgments and decrees of
any tribunal under such legislation that apply to the Dialysis
Business or the Assets.
3.8.5 Zoning. The operation and current use of the
Facility are permitted under existing zoning and other land use
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<PAGE> 14
laws and regulations applicable to the Facility, and there are no
plans, studies or efforts of any governmental or nongovernmental
authority, association, agency, person or entity which would
materially affect Buyer's proposed use or operation of the
Facility.
3.9 Litigation.
3.9.1 Claims, Actions, etc. Except as set forth in
Schedule 3.9, there are no claims, actions, suits, arbitrations,
legal or other proceedings pending or threatened before any court
or governmental or administrative body or agency, or arbitration
tribunal, nor are there any outstanding orders, writs, judgments,
injunctions or decrees of any court, arbitrator or governmental
agency to which any Seller or Shareholder or Physicians is a party
related to the Dialysis Business;
3.9.2 Governmental Investigation. Except as shown on
Schedule 3.9, no investigations (for claims against (i) any Seller
or Shareholder or Physician, the Dialysis Business or the Facility
or, (ii) any of the medical staff members or employees) of the
Facility, are pending or threatened by any governmental agency or
instrumentality; and
3.9.3 Judgments. Except as shown on Schedule 3.9, no
Seller or Shareholder is a party to, nor is it the subject of, any
judgment, order, writ, injunction, or decree of any court or
governmental agency or instrumentality which relates to the Assets,
the Dialysis Business, the condition or operation of the Facility
or the consummation of any of the transactions described in this
Agreement.
3.10 Improper Payments. Neither Sellers, Shareholders,
Physicians, nor any of Sellers' affiliates, employees,
representatives or agents has, directly or indirectly, within the
past five (5) years, given or made or agreed to give or make any
illegal commission, payment, gratuity, gift, political contribution
or similar benefit to any customer, supplier, governmental employee
or other person who may be in a position to help or hinder the
Dialysis Business. Sellers have not filed any reports with any
governmental agency which disclose that Sellers have participated
in any of the foregoing practices or acts giving rise to such
practices.
3.11 Eminent Domain. There are no pending or, nor to the
knowledge of Sellers or Shareholders, threatened proceedings in
eminent domain or otherwise, affecting any of the Assets or the
Facility.
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3.12 Insurance. Schedule 3.12 sets forth a complete and
correct list and a brief description of all policies of fire,
extended coverage, liability (including, without limitation,
medical malpractice and professional liability) and all other kinds
of insurance held by Sellers covering the Assets, the Facility and
the Dialysis Business. These policies are and will be maintained,
in full force and effect, until the Closing Date. Schedule 3.12
also contains a list of all claims made on such policies in the
last three (3) years.
3.13 Labor Arrangements. Except as shown on Schedule 3.13,
Sellers are not a party to, bound by or obligated to contribute to,
any collective bargaining agreement or other similar contract with
any labor organization, nor are Sellers a member of or affiliated
with any organization, group or association as a result of which it
is bound as to the terms and conditions of employment or their
hiring or termination policies at the Facility with respect to any
of their employees. Except as disclosed in Schedule 3.13, Sellers
have experienced no, and there is no pending or, to the knowledge
of Sellers, threatened labor dispute, strike, work stoppage or
slowdown or labor disturbance affecting the Facility, nor has there
been any labor union organizing activity at the Facility within the
last three (3) years. There is no unfair labor practice or other
charge or complaint pending, or, to the knowledge of Sellers,
threatened against the Facility, before any court, the National
Labor Relations Board or any other governmental agency.
3.14 Personnel; Compensation. Schedule 3.14 is a complete
and correct list of the names and addresses of all employees of
Sellers at the Facility, showing the compensation payable to each
and all accrued vacation time, sick leave and holiday time through
June 30, 1995. Sellers have not increased the compensation payable
to any employee of the Facility since April 21, 1995, without the
prior written consent of CDC, provided, however that Sellers may
increase the compensation payable to Physicians so long as such
increase is payable in cash and does not reduce the net worth of
either Seller as reflected on the June 30, 1995 financial
statements of each Seller.
3.15 Employment Contracts and Employee Benefit Plans.
Schedule 3.15 contains a complete and correct list and description
of all employment contracts for employees at the Facility to which
Sellers is a party or by which it is bound and of all pension,
bonus, profit sharing, retirement, stock option, medical expense,
dental expense, hospitalization, life insurance or other death
benefit, severance, and other benefit plans, agreements,
arrangements or other programs providing remuneration or benefits
for employees at the Facility, including without limitation any
employee benefit plan defined in Section 3(3) of the Employee
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Retirement Income Security Act of 1974, as amended ("ERISA"),
whether or not funded and whether or not reflected in any plan
documents. There have been no material defaults, breaches,
omissions or other failings by Sellers or any fiduciary under any
of these contracts or programs.
3.16 Brokers. Sellers have not employed, contracted for the
services of, or authorized any broker or finder with respect to the
negotiations leading up to the execution of this Agreement
or the consummation of the transactions contemplated hereby.
3.17 Liabilities. Except as set forth in paragraphs 2.2 and
2.3, Buyer will not be obligated for, nor will the Assets secure or
be subject to any liabilities or obligations of Sellers,
Shareholders or Physicians of any kind or nature whether absolute,
accrued, contingent, known, unknown or otherwise, and whether
normally set forth or reflected in a financial statement in
connection with, as result of or following the consummation of the
transactions contemplated hereby.
3.18 Material Contracts. All material agreements,
commitments, instruments and leases related to the Dialysis
Business to which Sellers, Shareholders or Physicians are a party
or bound, or by which any of the Assets or the Dialysis Business
are subject or bound (the "Material Contracts"), are listed on
Schedule 3.18 hereto. Sellers have delivered accurate and complete
copies of each Material Contract to Buyer. All Material Contracts
are valid, binding and enforceable in accordance with their terms
and are in full force and effect. Neither Sellers nor to Sellers'
knowledge, any other party to any Material Contract is in breach of
any provision of, in violation of, or in default under, the terms
of any Material Contract. Except as indicated on Schedule 3.18,
each Material Contract is freely assignable to Buyer by Sellers
without the consent of any other party.
3.19 Intellectual Property. Schedule 3.19 sets forth a true
and complete identification and summary description of the trade
names, trademarks, service marks, copyrights, any pending or issued
registrations for any of the foregoing, patents and patent
applications, that are used solely or primarily by the Dialysis
Business, including a description of the nature of Sellers'
interests therein. Except as set forth on Schedule 3,19, all of
the intellectual property used by the Dialysis Business is free and
clear of all liens, security interests, charges, encumbrances,
equities and other adverse claims and Sellers are not a party to
any licenses, consents, settlements or other agreements involving
the intellectual property used by the Dialysis Business. There
have been no claims, actions or judicial or adversarial proceedings
involving the intellectual property used by the Dialysis Business
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<PAGE> 17
to which Sellers were a party. The Dialysis Business, use of
intellectual property has not infringed upon, constituted a
misappropriation of, or otherwise violated the rights of any other
person in, any intellectual property. Sellers do not know of any
past or present occurrences of any probable infringement or
misappropriation of, or violation of Sellers' rights in, any of the
intellectual property used by the Dialysis Business.
3.20 Receipt of Information. Sellers have received: (i) a
copy of Vivra's Prospectus dated February 9, 1995; (ii) a copy of
Vivra's 1994 Annual Report to Stockholders; (iii) a copy of Vivra's
Annual Report on Form 10-K for the fiscal year ended November 30,
1994; (iv) a copy of Vivra's Quarterly Reports on Form 10-Q for the
quarters ended February 28 and May 31, 1995; (v) a copy of Vivra's
Proxy Statement for Vivra's annual meeting held on May 9, 1995.
3.21 No Untrue Representation or Warranty. No representation
or warranty by Sellers, Shareholders and Physicians in this
Agreement, and no statement, schedule certificate furnished or to
be furnished to Buyer pursuant to this Agreement, or in connection
with the transactions described it, contains or will contain any
untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements contained therein
not misleading.
4. Representations and Warranties of Buyer. Buyer hereby
represents and warrants to Sellers, Shareholders and Physicians as
of the date hereof, and as of the Closing Date, as follows:
4.1 Organization and Good Standing. Buyer is, and on the
Closing Date, will be, a corporation duly organized, validly
existing and in good standing under the laws of the State of
Nevada.
4.2 Authority. The execution, delivery and performance by
Buyer of this Agreement and the other agreements to be delivered by
Buyer at Closing, and the consummation of the transactions
described herein and therein, have been duly authorized and
approved by Buyer's and Vivra's Board of Directors (either
specifically or by appropriate grant of general authority), and by
all other necessary corporate action on its part, and no
stockholder approval is required of such actions. The person who
has executed this Agreement on behalf of Buyer has been duly
authorized to do so by all necessary corporate action by Buyer.
Buyer has the corporate power and authority to enter into, deliver,
and perform this Agreement and the other agreements to be delivered
by Buyer at Closing. This Agreement is, and such other agreements
when executed and delivered by Buyer at Closing will be, valid and
binding obligations of Buyer enforceable against Buyer according to
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<PAGE> 18
their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws, regulations and
authorities from time to time in effect affecting creditors, rights
generally and to general principles of equity, whether considered
in a proceeding in equity or at law.
4.3 Brokers. Buyer has not employed, contracted for the
services of, or authorized any broker or finder with respect to the
negotiations, execution or performance of this Agreement or the
consummation of the transactions contemplated hereby.
4.4 Effect of Agreement. The execution and delivery of this
Agreement and the other agreements to be delivered by Buyer at
Closing, and the consummation of the transactions described herein
and therein will not:
4.4.1 Articles and Bylaws. Violate Buyer's Certificate
of Incorporation or Restated Bylaws;
4.4.2 Breach of Agreements. Violate, constitute a
breach of, cause a default under, or permit the termination of any
agreement, obligation, liability, mortgage or deed of trust,
security agreement or other lien, charge or encumbrance, to which
Buyer is subject or for which Sellers might become liable;
4.4.3 Acceleration of Indebtedness. Accelerate or
constitute an event entitling the holder of any indebtedness of
Buyer to accelerate the maturity of any such indebtedness or to
increase the rate of interest presently in effect thereon; or
4.4.4 Judgments, etc. Violate, conflict with or result
in the breach of any judgment, order, writ, injunction, decree, or,
to the best knowledge of Buyer, any rule or regulation of any
court, governmental agency or instrumentality affecting Buyer.
4.5 Litigation. There is no material litigation,
governmental investigation or other proceeding pending or, to the
best knowledge of Buyer, threatened to which Buyer is a party that
would adversely affect the ability of Buyer to consummate the
transactions described in this Agreement.
4.6 Vivra Shares. The Vivra Shares are registered under the
Securities Act of 1933 pursuant to a registration statement dated
March 21, 1995. The Vivra Shares will upon delivery at Closing be
validly issued, fully paid, non-assessable and free of preemptive
rights and will be free and clear of all Encumbrances except as may
arise under the securities laws and from any action taken by
Sellers. Vivrfa is authorized issue 80,000,000 shares of Common
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Stock, $.Ol par value. As of February 10, 1995, 22,611,000 shares
of Common Stock were issued and outstanding.
4.7 No Untrue Representation or Warranty. No representation
or warranty by Buyer in this Agreement contains or will contain any
untrue statement of a material fact, or omits or will omit to state
a material fact necessary to make the statements contained therein
not misleading.
5. Covenants of Sellers. Sellers covenant and agree that:
5.1 Conduct of Business Pending the Closing. From the date
of this Agreement to the Closing Date, Sellers will:
5.1.1 Conduct of Dialysis Business; Operation of
Facility. Conduct the Dialysis Business and operate the Facility
consistent with prior practice and only in the ordinary course and
comply in all material respects with all applicable legal and
contractual obligations;
5.1.2 Preservation of organization. Use best efforts to
preserve the Dialysis Business and the Facility intact and to
preserve the goodwill of all suppliers, customers, patients,
licenses, provider numbers, contracts, physicians, providers and
others with whom Sellers have business relationships;
5.1.3 Maintenance of Facility. Use best efforts to
preserve and maintain the Facility in good condition, ordinary wear
and tear excepted, and shall repair any damage to the Facility;
5.1.4 Employees. Take no action which would interfere
with CDC's relations with employees at the Facility, including
current employees of Sellers who will be rehired by CDC and not
increase the compensation payable to any of such employees;
5.1.5 Liabilities. Not incur any obligation or
liability which encumbers or is secured by any of the Assets, to
which any of the Assets is subject or for which the Assets or Buyer
may be liable;
5.1.6 Alienation of Assets. Not sell, transfer,
distribute or encumber any of the Assets, except for Inventory
expended or sold in the ordinary course of business; and
5.1.7 Material Contracts. Not enter into, amend or
terminate any Material Contracts.
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5.2 Cooperation; Consents; Nonassignable Contracts.
5.2.1 Sellers, Shareholders and Physicians shall use
their reasonable efforts to (i) procure prior to the Closing (or
immediately thereafter to the extent not obtained before the
Closing), upon reasonable terms and conditions, all consents,
approvals, authorizations, releases and orders, which are listed on
Schedule 5.2; (ii) complete prior to the Closing, all filings,
registrations and certificates; and (iii) satisfy prior to the
Closing all other requirements prescribed by law.
5.2.2 To the extent that the assigment by Sellers of
any contract to be assumed by Buyer at the Closing is not permitted
without (i) the consent of the other party to the contract; (ii)
the approval by the other party of Buyer as a source of the
services called for by such contract; or (iii) the approval by the
other party of Buyer as a lessee, then this Agreement shall not be
deemed to constitute an assignment or an attempted assignment of
the same, if such assignment or attempted assignment would
constitute a breach thereof. However, unless otherwise agreed as
to any particular contract, Sellers shall use their reasonable
efforts (which shall not include payment of any additional
consideration or economic concessions to any party) to obtain any
and all such consents, approvals and novations.
5.2.3 If any necessary consent, approval or novation
is not obtained, Sellers shall cooperate with Buyer in any
reasonable arrangement designed to provide Buyer with all of the
benefits under such contract as if such consent, approval or
novation had been obtained. Such cooperation shall include
subleases from Sellers and undertakings by Buyer of the work
necessary to complete contracts as the agent of Sellers, with the
understanding that Sellers shall then invoice the customer for
services rendered and promptly remit the amount of the receivable
to Buyer upon payment to Sellers.
5.3 Payment of Liabilities. Sellers shall promptly pay or
provide for the payment in full of all expenses, costs, liabilities
and obligations incurred prior to the Closing Date in respect of
the Dialysis Business and the Facility or which are secured by any
of the Assets.
5.4 Insurance.
5.4.1 Maintenance of Existing Insurance. Sellers shall
maintain in full force and effect to the Closing Date all policies
of insurance relating to the Assets and the Facility now in effect
and will give all notices and present all claims under such
policies of insurnace in a timely fashion up to the Closing Date.
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<PAGE> 21
5.4.2 Tail Coverage. Sellers shall, at Sellers'
expense, obtain liability insurance coverage for all occurrences
prior to the Closing Date for a period four (4) years.
5.5 Termination of Emoloyment; Payment of Accrued
Compensation. Effective immediately prior to the Closing Date,
Sellers shall terminate the employment of all employees employed at
the Facility and all employment or other contracts, employee
benefit plans or arrangements providing for payment of compensation
or emoluments in any form to such employees and shall pay all sums
due such employees to the Closing Date on account of their
employment by Sellers, including vacation and sick leave.
5.6 Termination Cost Reports. Sellers shall file all
Medicare termination cost reports required to be filed as a result
of the consummation of the transactions described in this
Agreement. Notwithstanding any other provision of this Agreement,
Sellers shall assume and be responsible for any liability shown on
or incurred as a result of such reports and shall be entitled to
receive any refund or other benefit which may result therefrom.
5.7 Audited Financial Statements. On and after Closing,
Sellers and Shareholders shall provide all information and records,
in their possession or under their control, requested by CDC in the
preparation of such audited financial statements in respect of the
Assets and results of operations of the Dialysis Business prior to
Closing as CDC reasonably deems appropriate for CDC's financial and
tax reporting purposes.
5.8 Satisfaction of Conditions Precedent. Sellers,
Shareholders and Physicians, in addition to specific obligations
set forth elsewhere in this paragraph 5, shall (i) upon
satisfaction of the conditions precedent set forth in paragraph 8,
execute and deliver the documents required to be delivered by
Sellers and Shareholders pursuant to paragraph 9.2.1 and 9.3 and
(ii) use their best efforts to consummate the transactions
contemplated by this Agreement and to satisfy or cause to be
satisfied all of the conditions precedent set forth in paragraph B.
5.9 Construction of Additional Facility. Sellers and
Shareholders hereby agree, at their sole expense, to construct a
second facility to conduct the Dialysis Business at the site on
Venoy Street in Westland, Michigan (the "Second Site") in
compliance with all federal, state and local laws, regulations or
orders, including without limitation, employment, insurance,
zoning, occupancy, building, occupational and licensure laws,
regulations and orders. TFLP and CFLP further agree to lease the
Third Site, upon completion of the construction and leasehold
improvements as approved by Buyer and a satisfactory inspection
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thereof by Buyer, to Buyer pursuant to a lease substantially in the
form of Exhibit B attached hereto.
5.10 Supplements. If any representation, warranty or
statement of Sellers, Shareholders or Physicians, or any schedule
delivered to Buyer, shall become incorrect, Sellers, Shareholders
or Physicians shall promptly deliver to Buyer a supplement in order
that said representation, warranty, statement, or schedule, as so
supplemented, shall be true and correct, provided, however, that no
such supplement or amendment shall be considered in determining the
satisfaction of the conditions set forth in paragraph 7.1 and no
such supplement or amendment shall affect Sellers', Shareholders,
and Physicians' obligations under paragraph 10.
6. Covenants of Buyer. Buyer covenants and agrees that:
6.1 Maintenance of Records; Access by Sellers. Subject to
the applicable laws of confidentiality and privacy, Buyer shall
maintain all business records of the Facility and make such records
available for use by Sellers as needed. Access to any such records
shall be during normal business hours, with prior notice to Buyer
of the time when such access shall be needed. Sellers' employees,
representatives and agents shall conduct themselves in such a
manner as not unnecessarily or unreasonably to disrupt Buyer's
normal business activities.
6.2 Audited Financial Statements. On and after the Closing
Date (and after Closing), Buyer shall cooperate with Sellers in the
preparation of such financial statements in respect of the Assets
and the results of operations of the Dialysis Business prior to
Closing as Sellers reasonably deem appropriate for Sellers'
financial and tax reporting purposes.
6.3 Satisfaction of Conditions Precedent. Buyer shall (i)
upon satisfaction of the conditions precedent set forth in
paragraph 7, execute and deliver the documents set forth in
paragraph 9, use its best efforts to consummate the transactions
contemplated by this Agreement and to satisfy or cause to be
satisfied all of the conditions precedent which are set forth in
paragraph 7 and to obtain the survey and provider number required
by paragraph 5.1 of the Escrow Agreement.
6.4 Employees. Buyer shall offer employment as of the
Closing Date to all employees listed on Schedule 3.14 at the salary
set forth for each of them on Schedule 3,14 and shall provide such
employees with CDC's standard employee benefits.
7. Buyer's Conditions Precedent to Closing. Buyer's obligations
to purchase the Assets, pay the Purchase Price to Escrow Holder and
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perform its other obligations under this Agreement are subject to
the occurrence of or compliance with each of the following
conditions, all of which are for the sole benefit of and may be
waived by Buyer:
7.1 Warranties True and Correct. Each of the representations
and warranties of Sellers, Shareholders and Physicians set forth in
this Agreement shall be true and correct in all material respects
at and as of the Closing Date, and the covenants, agreements and
conditions required by this Agreement to be performed and complied
with by Sellers by such date shall have been performed and complied
with.
7.2 Approval. The form and substance of all certificates,
instruments, opinions and other documents delivered to Buyer
pursuant to this Agreement shall be satisfactory in all reasonable
respects to CDC and its counsel.
7.3 Litigation. No litigation or governmental investigation,
proposed or pending, shall have been commenced or threatened by
persons other than Buyer or its affiliates with regard to the
transactions described in this Agreement, which if successful,
would have a material adverse effect on the operations or financial
condition of the Dialysis Business, the Facility or the Assets or
any party's ability to consummate the transactions contemplated by
this Agreement.
7.4 Due Diligence. CDC shall have investigated and examined
the ownership, conditions and nature of the Assets and the
financial condition and results of operations of the Facility and
its business, affairs, books and records in a "due diligence"
investigation, the results of which are satisfactory to CDC.
7.5 Closing Deliveries. Sellers, Shareholders and Physicians
shall have executed and delivered all of the documents required to
be delivered by Sellers, Shareholders or Physicians pursuant to
paragraphs 9.2.1 and 9.3.
7.6 Condition of Assets. The Dialysis Business and the
Assets shall not have been adversely affected in any way by any act
of God, fire, flood, accident, labor disturbance, legislation
(proposed or enacted) or other event or condition.
7.7 Registration of Vivra Shares. The registration statement
covering the sale of Vivra Shares to Sellers shall have remained
effective and shall not be the subject of any stop order or
proceeding seeking a stop order and the Vivra Shares shall have
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<PAGE> 24
been authorized for listing on the New York Stock Exchange upon
official notice of issuance.
8. Sellers' Conditions Precedent to Closing. Sellers' obligation
to sell the Assets is subject to the payment and delivery of the
Purchase Price to Escrow Holder at Closing and the occurrence of or
compliance with each of the following conditions, all of which are
for the sole benefit of Sellers and may be waived by Sellers:
8.1 Warranties True and Correct. Each of the representations
and warranties of Buyer set forth in this Agreement shall be true
and correct in all material respects at and as of the Closing Date
and the Closing Date, and the covenants, agreements, and conditions
required by this Agreement to be performed and complied with by
Buyer by such dates shall have been performed and complied with in
all material respects.
8.2 Approval. The form and substance of all certificates,
instruments, opinions and other documents delivered to Sellers
pursuant to this Agreement shall be satisfactory in all reasonable
respects to Sellers and its counsel.
8.3 Litigation. No litigation or governmental investigation,
proposed or pending, shall have been commenced or threatened by
persons other than Sellers or its affiliates which if successful,
would have a material adverse effect on any party's ability to
consummate the transactions contemplated by this Agreement.
8.4 Closing Deliveries. Buyer shall have executed and
delivered all of the documents required to be delivered by Buyer
pursuant to paragraphs 9.2.2 and 9.3.
8.5 Registration of Vivra Shares. The registration statement
delivered all of the documents required to be delivered by Buyer
covering the sale of Vivra Shares to Sellers shall have remained
effective and shall not be the subject of any stop order pursuant
to paragraphs 9.2.2 and 9.3 or proceeding seeking a stop order and
the Vivra Shares shall have been authorized for listing on the New
York Stock Exchange upon official notice of issuance.
9. Operations Pending Closing; Closing. The Closing of the
transactions hereunder shall be effected as set forth in
paragraph 9.
9.1 Closing. "Closing" means the transfer of all of the
Assets from Sellers to Buyer. The closing shall occur on the later
of July 1, 1995 or the first business day after the Conditions
Precedent to Closing set forth in paragraphs 7 and 8 have been
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<PAGE> 25
satisfied (the "Closing Date") and at the offices of McDermott,
Will & Emery, Chicago, Illinois.
9.2 Deliveries. On the Closing Date, deliveries shall be
made by Sellers, Shareholders and Physicians as set forth in
paragraph 9.2.1 and by Buyer as set forth in paragraph 9.2.2.
9.2.1 Deliveries by Sellers. Shareholders and
Physicians. Sellers, Shareholders or Physicians, as applicable,
shall execute and deliver to Buyer the following documents and
instruments, in form and substance reasonably satisfactory to Buyer
and its counsel, against delivery by Buyer of the items specified
in paragraph 9.2.2:
(a) Bill of Sale. A Bill of Sale in substantially
the form of Exhibit C, together with such other documents, duly
executed as may be necessary to effect transfer of the Assets at
Closing;
(b) Consents. The Consents;
(c) Resolutions. A copy of resolutions of the
Board of Directors and shareholders of Oakwood, duly certified by
its Secretary, authorizing the execution, delivery and performance
of this Agreement and the other documents to be delivered by
Oakwood hereunder and all actions to be taken by Sellers hereunder
and thereunder;
(d) Sellers, Certificate. Certificates ("Sellers'
Certificate") signed by an authorized signatory, dated the Closing
Date, to the effect that each of the representations and warranties
made by Sellers in this Agreement are true and correct at and as of
the Closing Date and that each of the covenants, conditions and
agreements to be performed or complied with by Sellers by such date
have been so performed or complied with in all material respects,
and that, to the best knowledge of such signatory, there is no fact
or condition which would cause Sellers, Shareholders or Physicians
to be in breach of any of the covenants or representations and
warranties hereunder as of the Closing Date. The execution and
delivery of the Sellers' Certificate by Sellers shall not limit
their liability and obligations following the Closing Date.
(e) Other. At the Closing, Sellers, Shareholders
and Physicians shall take such other steps as may be necessary or
appropriate to place the Buyer in actual possession and operating
control of the Dialysis Business and the Assets.
9.2.2 Deliveries by Buyer. Buyer shall deliver to
Sellers the following items against delivery by Sellers,
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Shareholders and Physicians of the items specified in paragraph
9.2.1:
(a) Purchase Price. Ten Million Dollars and
certificates evidencing the Vivra Shares;
(b) Resolutions. Copies of resolutions of the
Board of Directors of CDC and Vivra Incorporated, CDC's parent
corporation, duly certified by their Secretaries, authorizing and
approving the execution, delivery and performance of this Agreement
and the other documents to be delivered by CDC hereunder and all
actions to be taken by CDC hereunder and thereunder.
(c) Buyer's Certificate. A certificate ("Buyer's
Certificate") signed by an authorized officer of Buyer, dated the
Closing Date to the effect that each of the representations and
warranties made by buyer in this Agreement are true and correct at
and as of the Closing Date and that each of the covenants,
conditions and agreements to be performed or complied with by CDC
by such date have been so performed or complied with in all
material respects, and that, to the best knowledge of such
signatory, there is no fact or condition which would cause Buyer to
be in breach of any of its representations and warranties hereunder
as of the Closing Date. The execution and delivery of the Buyer's
Certificate by Buyer shall not serve to limit any of Buyer's
liabilities and obligations following the Closing Date.
9.3 Closing Agreements. At the Closing, the parties
shall execute, acknowledge and deliver the following:
(a) Assumiption Agreement. An Assignment and
Assumption Agreement between Buyer and Sellers, substantially in
the form attached hereto as Exhibit D.
(b) Medical Director Contract. A Medical Director
Contract between CDC and Physicians, with a term of no less than
ten (10) years, substantially in the form attached hereto as
Exhibit E.
(c) Facility Lease. A lease for the premises
currently occupied by the Facility between Buyer and CFLP and TFLP,
substantially in the form attached hereto as Exhibit A.
9.4 Escrow Agreement. CDC and Sellers shall execute and
deliver an escrow agreement substantially in the form of Exhibit F
(the "Escrow Agreement") and shall deliver to the Escrow Holder
therein identified ("Escrow Holder") the Purchase Price and all
documents and instruments described in paragraphs 9.2.1, 9.2.2 and
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9.3, for retention and distribution by Escrow Holder in an escrow
account (the "Escrow") in accordance with the Escrow Agreement.
9.5 Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual consent to Sellers and Buyer;
(b) by either Sellers or Buyer if there has been a
material misrepresentation or material breach of warranty on the
part of the other party in the representations and warranties set
forth in this Agreement, or if events have occurred which have made
it impossible to satisfy a condition precedent to the terminating
party's obligations to consummate the transactions contemplated
hereby;
(c) by Buyer if the Closing has not occurred by
August 1, 1995;
(d) by Sellers if (i) Sellers have satisfied the
Conditions Precedent to Closing set forth in paragraph 7 by July 1,
1995, and (ii) Closing has not occurred by August 1, 1995; or
(e) by Sellers if the Closing has not occurred by
October 1, 1995.
Termination of this Agreement shall not serve to relieve any
party of any responsibility or obligation for any breach of this
Agreement occurring prior to such termination.
10. Indemnification.
10.1 Indemnification.
10.1.1 By Sellers, Shareholders and Physicians.
Sellers, Shareholders and Physicians shall, on demand, jointly and
severally, indemnify, defend and hold Buyer and its employees,
agents, representatives, successors and assigns, harmless from,
against and in respect of any and all claims, losses, costs,
expenses, liabilities and damages, including interest, penalties
and reasonable attorneys' fees (collectively, "Claims"), that any
of them shall incur or suffer in connection with (i) the claims of
any third party, including but not limited to Sellers, employees,
against any of them for alleged obligations or liabilities of
Sellers arising out of Sellers, operation of the Dialysis Business
prior to the Closing Date, and for liabilities and/or obligations
of Sellers not expressly assumed by Buyer under the Assumption
Agreement; (ii) the termination by Sellers of employment and of
employment benefit plans pursuant to paragraph 5.7 or (iii) the
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<PAGE> 28
breach by Sellers of any covenant or agreement or the untruth of
any representation or warranty made by it herein.
10.1.2 By Buyer. CDC shall, on demand, indemnify,
defend and hold Sellers and its successors and assigns and
Shareholders and Physicians harmless from, against and in respect
of any Claims, that any of them shall incur or suffer in connection
with the Claims of any third party for alleged liabilities or
obligations of Sellers arising out of Buyer's operation of the
Dialysis Business after the Closing Date, the breach by Buyer of
any covenant or agreement or the untruth of any representation or
warranty made by CDC herein, or failure to perform its obligations
under the Assumed Contracts after the Closing.
10.2 No Limitation. The indemnities in paragraphs 10.1.1 and
10.1.2 shall not foreclose any other rights or remedies the parties
may have to enforce the provisions of this Agreement.
10.3 Notice and Right to Defend. If any Claim arises after
the Closing Date for which Buyer or Sellers may be liable under
paragraiph 10.1.1 or 10.1.2, the indemnitee shall notify the
inde=itor within a reasonable time after the indemnitee receives
written notice of any Claim, and shall give the indemnitor a
reasonable opportunity to settle or defend any such Claim;
provided, however, that the indemnitee's failure to give such
notice or opportunity shall not impair or otherwise affect the
indemnitor's obligation to indemnify against such Claim except to
the extent that the indemnitor demonstrates actual damage caused by
such failure; and, provided further, that the indemnitee may
commence to settle or defend the Claim as circumstances warrant,
but any settlement shall require the prior written consent of the
indemnitor. The expenses of all proceedings, contests or lawsuits
with respect to Claims shall be borne by the indemnitor. If an
indemnitor wishes to assume the defense of a Claim, it shall give
written notice to the indemnitee within ten (10) days after notice
from the indemnitee of such Claim, and the indemnitor shall
thereafter defend the Claim, employing counsel reasonably
satisfactory to the indemnitee, provided that the indemnitee may
participate in the defense at its own expense.
If the indemnitor does not assume the defense of, or if after
so assuming it fails to defend, any such claim, the indemnitee may
defend it in such manner as it may reasonably deem appropriate, and
the indemnitee may settle such Claim on such terms as it may
reasonably deem appropriate. The indemnitor shall promptly
reimburse the indemnitee for all reasonable expenses, legal and
otherwise, as incurred by the indemnitee in connection with the
defense, appeal and settlement of such Claim. If no settlement of
such Claim is made, the indemnitor shall satisfy any judgment
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<PAGE> 29
rendered with respect to it before the indemnitee is required to do
so.
If a judgment is rendered against the indemnitee on any Claim,
or any lien attaches to any of the assets of any indemnitee, the
indemnitor shall immediately upon such entry or attachment pay such
judgment in full or discharge such lien unless, at the expense and
direction of the indemnitor, an appeal is taken under which the
execution of the judgment or satisfaction of the lien is stayed.
If and when a final judgment is rendered in any such action, the
indemnitor shall forthwith pay such judgment or discharge such lien
before any indemnitee is compelled to do so.
11. Miscellaneous.
11.1 Notices. Any notice provided for in this Agreement and
any other notice, demand or communication required or permitted to
be given hereunder or which any party may wish to send to another
("Notice" or "Notices") shall be in writing and shall be deemed to
have been properly given if served by (i) personal delivery or (ii)
registered or certified U.S. mail, or by comparable private
carrier, First Class, return receipt requested in a sealed
envelope, postage or other charges prepaid, or (iii) telegram,
telecopy, facsimile, telex or other similar form of communication,
if followed by other physical delivery in writing, addressed to the
party for whom the Notice is intended as follows:
If to Buyer:
David P. Barry, Executive Vice President
Community Dialysis Centers
2 Mareblu
Laguna Hills, California 92654
FAX: (714) 831-6538
with a copy to:
Helen R. Friedli, P.C.
McDermott, Will & Emery
227 W. Monroe Street, Suite 3100
Chicago, Illinois 60606
FAX: (312) 984-3669
If to Sellers, Shareholders and Physicians:
K. Thavarajah, M.D.
C.V. Kumar, M.D.
15 Pinegate
Bloomfield Hills, Michigan 48304
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<PAGE> 30
with a copy to:
Schwartz Law Firm
Burton H. Schwartz
37887 West Twelve Mile Suite A
Farmington Hills, Michigan 78331
Fax: (810) 553-9400
or such other address as any person may request by notice given as
aforesaid.
11.1.1 Change of Address. Any party to this Agreement
may change its address for Notice from time to time by notice given
in accordance with the foregoing provisions.
11.1.2 Effective Time. All notice given pursuant to
this paragraph shall be deemed given and effective when received if
personally delivered or sent by telegram, telecopy, telex or
similar form of communication or, if mailed on the date shown on
the return receipt or if a receipt has not then been received, five
(5) days after mailing.
11.2 Payment of Expenses. Except as specifically provided
for herein, Sellers, Buyer, Shareholders and Physicians shall each
pay its or his own expenses, including without limitation, the
disbursements and fees of all their respective attorneys,
accountants, advisors, agents and other representatives, incidental
to the preparation and carrying out of this Agreement, whether or
not the transactions contemplated hereby are consummated.
11.3 Sales Tax. Sellers shall pay any and all sales or use
taxes arising as a result of the transactions hereunder.
11.4 Confidentiality. The parties recognize and agree that
all information, instruments, documents and details concerning the
business of Buyer and Sellers are strictly confidential, and
Sellers and Buyer expressly covenant and agree with each other that
they will use their best efforts to prevent any of their respective
officers, directors, employees or agents from disclosing any
matters relating to the business of the other or to this Agreement,
its negotiation, terms, provisions or conditions, including the
Purchase Price except as may be reasonably necessary to effectuate
the transactions contemplated hereby; provided, however, neither
party shall be prohibited from making any legally required public
announcement or other disclosure of the sale and purchase of the
Assets, including such details as to price, terms, rental payments,
and the like as may be required. Sellers and Buyer shall consult
with each other prior to any public announcement to discuss the
content of any such announcement.
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<PAGE> 31
11.5 Termination. If the transactions contemplated hereby
are not consummated, Buyer will return to Sellers, and Sellers will
return to Buyer, upon request, the respective materials,
information, documents, instruments and records supplied by the
other party in respect to such party's business operations and
shall keep confidential all information which that party has
gathered with respect to the business of the other.
11.6 Risk of Loss. Risk of loss or damage by fire or other
casualty to the Assets or their taking by eminent domain before
Closing is assumed by Sellers. In the event of a material loss,
damage to or taking of the Facility, Buyer shall have the option of
either (i) terminating this Agreement or (ii) continuing this
Agreement, in which event Sellers shall assign to Buyer all of
Sellers' rights against third persons and under any applicable
insurance policy and any condemnation awards and pay over to Buyer
any sums received as a result of such loss, damage or taking.
Buyer must exercise its option to terminate this Agreement under
this paragraph 11.6 by notifying Sellers in writing within thirty
(30) days after written notification from Sellers to Buyer of any
such loss.
11.7 Waiver. The failure of any party to insist, in any one
or more instances, on performances of any of the terms and
conditions of this Agreement shall not be construed as a waiver or
relinquishment of any rights granted hereunder or of the future
performance of any such term, covenant (or condition, but the
obligations of the parties with respect thereto shall continue in
full force and effect.
11.8 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
11.9 Entire Agreement. This Agreement (including the
Schedules hereto) and all other agreements and documents executed
in connection herewith constitute the entire agreement between the
parties hereto with respect to the subject hereof and supersede all
prior agreements, understandings, negotiations and discussions of
the parties, whether oral or written, and there are no warranties,
representations or other agreements between the parties in
connection with the subject matter hereof, except as specifically
set forth herein or therein. No amendment, alteration or
modification of this Agreement shall be valid unless in each
instance such amendment, alteration or modification is expressed in
a written instrument duly executed by the parties.
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<PAGE> 32
11.10 Successors and Assigns. All the terms and provisions
of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the respective successors and assigns of the
parties hereto.
11.11 Further Assurances. Both before and after the Closing
Date, the parties will exercise good faith with the others and will
take all appropriate action and execute any documents, instruments
or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the transactions contemplated
hereunder.
11.12 Survival. All of the representations, warranties,
covenants and agreements contained in this Agreement and in any
document or certificate delivered pursuant hereto shall survive the
Closing and shall continue to be fully effective and enforceable.
The representations and warranties contained in this Agreement
shall not be affected by any investigation, verification or
examination by any party hereto or by anyone on behalf of any such
party.
11.13 Intepretation. Unless the context requires otherwise,
all words used in this Agreement in the singular number shall
extend to and include the plural, all words in the plural number
shall extend to and include the singular and all words in any
gender shall extend to and include all genders. "Including" and
"include" as used herein shall mean without limitation.
11.14 Severability. If any provision, clause or part of this
Agreement, or the application thereof under certain circumstances,
is held invalid, the remainder of this Agreement, or the
application of such provision, clause or part under other
circumstances, shall not be affected thereby.
11.15 Governing Law. This Agreement is to be governed by,
and interpreted under, the laws of the State of Michigan.
* * *
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<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed as of the date first above written.
COMMUNITY DIALYSIS CENTERS, a
Nevada corporation
By: /s/ DAVID P. BARRY
David P. Barry,
Executive Vice President
OAKWOOD KIDNEY CENTER, P.C., a
Michigan professional
corporation
By: ___________________________
Name: _________________________
Title: ________________________
THAVARAJAH FAMILY LIMITED
PARTNERSHIP, a Michigan limited
partnership
By: ___________________________
K. Thavarajah, M.D.,
General Partner
CHILAKAPATI FAMILY LIMITED
PARTNERSHIP, a Michigan limited
partnership
By: ___________________________
Vijay Kumar Chilakapati,
M.D., General Partner
_______________________________
K. THAVARAJAH, M.D.
By: ___________________________
C.V. KUMAR, M.D.
VIJAY KUMAR CHILIKAPATI
REVOCABLE LIVING TRUST DATED
SEPTEMBER 26, 1984
By: ___________________________
C.V. KUMAR, M.D.,
Trustee
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed as of the date first above written.
COMMUNITY DIALYSIS CENTERS, a
Nevada corporation
By: __________________________
David P. Barry,
Executive Vice President
OAKWOOD KIDNEY CENTER, P.C., a
Michigan professional
corporation
By: /s/ C.V. KUMAR, M.D.,
Name: C.V. Kumar, M.D.
Title: President
THAVARAJAH FAMILY LIMITED
PARTNERSHIP, a Michigan Limited
partnership
By: /s/ K. THAVARAJAH M.D.
K. Thavarajah, M.D.
General Partner
CHILAKAPATI FAMILY LIMITED
PARTNERSHIP, a Michigan limited
partnership
By: /s/ VIJAY KUMAR CHILAKAPATI
Vijay Kumar Chilakapati
M.D., General Partner
/s/ K. THAVARAJAH M.D.
K. THAVARAJAH, M.D.
/s/ C.V. KUMAR M.D.
C.V. KUMAR, M.D.
VIJAY KUMAR CHILIKAPATI
REVOCABLE LIVING TRUST DATED
SEPTEMBER 26, 1984
By: /s/ C.V. KUMAR M.D.
C.V. Kumar, M.D.,
Trustee
<PAGE> 35
THE KRISHNAPILLA THAVARAJAH
REVOCABLE LIVING TRUST
By: /s/ K. THAVARAJAH
K. Thavarajah, M.D.,
Trustee
<PAGE> 1
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
THIS Agreement for Sale and Purchase of Assets (the "Agreement") is
made as of July 1, 1995 by and among COMMUNITY DIALYSIS CENTERS, INC., a Nevada
corporation ("CDC" or the "Buyer"), WYANDOTTE KIDNEY CENTER P.C., a Michigan
professional corporation ("Wyandotte"), and CTA Investment Group, a general
partnership ("CTA") (collectively, "Sellers") and VIJAY KUMAR CHILIKAPATI
REVOCABLE LIVING TRUST DATED SEPTEMBER 26, 1984, THE KRISHNAPILLA THAVARAJAH
REVOCABLE LIVING TRUST, and SYED AKBAR, M.D., an individual, the sole
shareholders of Wyandotte (collectively, "Shareholders") and K. THAVARAJAH,
M.D., an individual, and C.V. KUMAR, M.D., an individual (collectively, with
Syed Akbar, M.D., "Physicians").
R E C I T A L S
A. Sellers own and operate a facility (the "Facility") located at
14752 Northline Road, Southgate, Michigan 48195, with twenty five (25) stations,
which provides (i) continuous ambulatory peritoneal dialysis and hemodialysis
services, treatments, counselling and instruction at the Facility, in the home
and on an out-patient basis to persons with kidney diseases or conditions and
(ii) acute care services to patients at hospital (collectively, the "Dialysis
Business");
B. Buyer desires to purchase from Sellers and Sellers desire to
sell to Buyer the Dialysis Business and substantially all of the assets owned
and used by Sellers in connection with the Dialysis Business; and
C. K. Thavarajah, M.D. and C.V. Kumar, M.D. are the sole
beneficiaries under The Krishnapilla Thavarajah Revocable Living Trust and the
Vijay Kumar Chilikapati Revocable Living Trust dated September 26, 1984,
respectively, and therefore, are receiving consideration hereunder.
NOW, THEREFORE, it is agreed:
1. Sale and Purchase of Assets. Subject to the terms and conditions of
this Agreement, Sellers agree to sell, transfer, assign and deliver to Buyer,
and Buyer agrees to purchase from Sellers, on the Closing Date (as defined in
Paragraph 9.1), all of the assets listed in paragraph 1.1.1, but excluding the
assets described in paragraph 1.1.2 (the "Excluded Assets").
1.1 The Assets. Subject to paragraph 1.1.2:
<PAGE> 2
1.1.1 Assets to be Purchased. The "Assets" of Sellers
to be purchased by Buyer pursuant to this Agreement are all of the
assets, properties, rights and claims used in or relating to, or
arising from the conduct of the Dialysis Business (other than the
Excluded Assets) including the following:
(a) Personal Property. All furniture, furnishings,
equipment and all other tangible personal property of Sellers, including the
property listed and described in Schedule 1.1.1(a) and the inventory of Sellers
(the "Inventory") on the Closing Date of housekeeping and operating items and
materials, supplies, consumables and disposables which would be classified as
inventory according to generally accepted accounting principles (collectively,
the "Personal Property"); and
(b) Leases and Contracts. All right, title and interest of
Sellers under all leases, contracts, agreements and other similar commitments
relating to the Dialysis Business, including but not limited to the Material
Contracts listed on Schedule 3.18;
(c) Intangibles. All intangible property, including
without limitation:
(i) Licenses. All of the Licenses (as defined
in paragraph 3.8.1), except those which by law or by their terms
are not transferable;
(ii) Names and Goodwill. All trademarks, tradenames
and service marks, including but not limited to, all rights to the use of the
name "Wyandotte Kidney Center" and the business and goodwill associated with the
Dialysis Business;
(iii) Prepaids and Deposits. All prepaid expenses and
deposits and patient deposits held by Sellers (collectively, the "Deposits");
(iv) Proprietary Rights, Confidential Information and
other Intangibles. All formulas, know-how, protocols, databases, studies,
patents, patent rights, patent applications, letters patent, trade secrets,
inventions, models, processes, designs, trademarks, service marks, copyrights,
pricing policies, cost and other financial information and data, referral source
lists, patient and provider lists and all other information as to the
identities or requirements of present, former or potential patients, clients or
providers, market information, market analyses, marketing plans, operating or
management policies, procedures and forms, and all other proprietary rights
used or
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<PAGE> 3
useful or developed or acquired for use in connection with the Dialysis
Business; and
(d) Books and Records. Original, or complete and correct
copies where Sellers are required to retain originals, of all patient lists,
patient cards, patient information, books, records and files maintained by
Sellers for or in connection with the Dialysis Business.
1.1.2 Excluded Assets. The Excluded Assets which Buyer is not
purchasing hereunder are: accounts and notes receivable, cash on hand, bank
accounts (other than the Deposits), rights to tax refunds, rights and
obligations under non-assumed contracts, medicare provider number,
non-assignable licenses and permits, and rights with respect to employee benefit
plans at the Closing Date and any claims and causes of action arising before the
Closing Date.
1.1.3 Transfer of Custody of Patient Records. Sellers agree to
turn over to CDC on the Closing Date custody of all existing records, files,
charts, x-ray files and similar data pertaining to each Patient, as hereinafter
defined, and in Sellers' possession as of the Closing Date (collectively the
"Patient Records"). "Patient" shall mean any past or current patient treated at
the Facility and for whom Sellers keep, maintain or have custody of any
records, files, charts, x-ray files or any similar data. CDC agrees to
accept custody of the Patient Records and to hold, utilize and deliver them
pursuant to the instructions of the Patient to whom they pertain. The parties
agree to use their best efforts to comply with all laws and regulations with
respect to the handling and storage of Patient Records.
2. Consideration. The amount, payment and description of the consideration
to be given by Buyer to Sellers for the Assets is described in paragraphs 2.1
through 2.4. This consideration shall be allocated among the Assets by Buyer
after Closing on Internal Revenue Service Form 8594 and on comparable state
filings, and the parties shall memorialize their agreement to such allocation on
Schedule 2 attached hereto.
2.1 Purchase Price. The purchase price for the Assets and the
covenants contained in Section 2.4 (the "Purchase Price") to be delivered by
Buyer to Sellers shall be Five Million Dollars ($5,000,000), which shall be
payable by the delivery of Three Million One Hundred Twenty Five Thousand
Dollars ($3,125,000) in cash at Closing and One Million Eight Hundred Seventy
Five Thousand Dollars ($1,875,000) in common stock of Vivra Incorporated on the
seventh day after Closing ("Vivra") (the "Vivra Shares"). The Vivra Shares
shall be that number of shares of common stock, $.Ol
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par value per share of Vivra equal to (i) One Million Eight Hundred Seventy Five
Thousand Dollars ($1,875,000) divided by (ii) the average closing price of the
Vivra Common Stock on the New York Stock Exchange on Thursday, June 29, 1995
(the "Closing Price"). The Purchase Price shall be distributed to the Sellers in
accordance with Section 6.1 of the Escrow Agreement, as defined herein.
2.1.1 Stock Protection. For a period beginning on the Closing
Date and ending on the sixtieth (60th) day after the Closing Date, Buyer will
have the sole right to direct the sale of the Vivra Shares. On the sixty-first
day after the Closing Date, (i) for all of the Vivra Shares sold pursuant to
Buyer's direction, Buyer will make a cash payment in the amount of the
difference between the net proceeds and the Closing Price; and (ii) for each
unsold Vivra Share, Buyer will purchase such share at the Closing Price. Any
cash payment made pursuant to this paragraph shall constitute part of the
Purchase Price and shall be deposited with the Escrow Holder.
2.2 Assumption of Contracts. On the Closing Date, Buyer shall assume
and agree to satisfy the terms of the contracts listed on Schedule 2.2 (the
"Assumed Contracts"), but only to the extent they accrue after Closing;
provided, however, Buyer does not assume, and shall not be responsible for, any
obligations arising as a result of a breach, violation or failure to perform of
or by Sellers prior to the Closing Date with respect to any of the Assumed
Contracts.
2.2.1 Exclusion of other Liabilities. It is expressly agreed
and understood that except as set forth in paragraphs 2.2 and 2.3, Buyer
shall not assume and shall not be liable for, nor shall any of the Assets be
secured by or subject to, any debts, liabilities or obligations of Sellers,
Shareholders, Physicians or the Dialysis Business, or any other claim against
any of the foregoing, of any kind, whether accrued, contingent or absolute, due
or to become due, known or unknown, asserted or unasserted, all of which are
retained by Sellers, Shareholders and Physicians (collectively, the "Excluded
Liabilities"). Sellers, Shareholders and Physicians, jointly and severally,
agree to pay and discharge all of the Excluded Liabilities as they become due
and to indemnify, defend, and hold Buyer harmless against such claims.
2.3 Facility Lease. Buyer and CTA shall enter into a lease for the
space occupied by the Facility (the "Facility Lease") in substantially the form
attached hereto as Exhibit A.
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2.4 Noncompetition, Nonsolicitation and Nondisclosure Covenants.
2.4.1 Covenants.
(a) Noncompetition Covenant. For purposes of this
Agreement, the term "Restricted Area" shall mean the area within a Forty (40)
mile radius of the Facility. Sellers and Physicians each agree that for a
period beginning on the Closing Date and ending on the tenth (10th) anniversary
thereof (the "Restricted Period") neither Sellers nor Physicians will, either
jointly or individually, directly or indirectly, whether as an employee,
officer, director, agent, consultant or otherwise:
(i) compete with CDC or the Facility within the Restricted Area, or
(ii) own, manage, operate, join, control, advise, consult with,
provide services to, or be employed by or participate in the
ownership, operation, management or control (other than as a
shareholder owning less than 5% of the capital stock of a company
whose stock is publicly traded on a national exchange) of any
business engaged in the provision of services provided by the
Dialysis Business or at the Facility (individually and collectively, a
"Competing Business") within the Restricted Area, or
(iii) advise, assist, consult with, lease or sell real property to (or
permit their successors or assigns to do so) or aid in the
establishment or operation of a Competing Business in the Restricted
Area;
provided, however, that the practice of medicine which does not include the
ownership, operation, management or control of or the provision of advisory or
consulting services to a dialysis clinic and which does not involve a violation
of paragraphs 2.4.1(b) or (c), shall not, by itself, constitute a violation of
this paragraph 2.4.1(a).
(b) Nonsolicitation Covenant. Each of Sellers and
Physicians agree that during the Restricted Period, it or he will not, either
jointly or individually, directly or indirectly, solicit any of CDC's patients
or employees for or on behalf of any Competing Business.
(c) Nondisclosure Covenant. In the operation and
development of CDC's existing businesses and the planning and development of its
proposed businesses, CDC generates information
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and data which is and will be proprietary and confidential (the "Confidential
Information") the disclosure of which would be extremely detrimental to its
business and of great assistance to its competitors. The Confidential
Information includes, but is not limited to:
(i) Development. Data, plans and projections regarding
the location, development and expansion of existing and proposed facilities;
(ii) Marketing. Market surveys, studies and analyses;
(iii) Services. Information concerning the identities,
locations and qualifications of professionals and other persons presently, or
prospectively to be, retained or employed by CDC;
(iv) Suppliers, etc. Information concerning: the
identities, locations, prices, costs and other terms of dealings with referral
and reimbursement sources, suppliers, providers and supplier and provider
organizations and entities; administrative and accounting procedures and
policies of the U.S. Department of Health and Human Services and the Health Care
Finance Administration, the Medicare Program ("Medicare"), the End Stage Renal
Disease Program "ESRD"), the Medicaid Program ("Medicaid"), comparable state
offices and programs, insurers and other third-party payors and information
about contractual and other arrangements, and affiliations with any of the
foregoing;
(v) Regulatory Matters. Information concerning
legislative, administrative, regulatory and zoning requirements, bodies and
officials;
(vi) Records. Medical, patient and personnel records;
(vii) Data. Statistical, financial, cost and accounting
data;
(viii) Patients. Existing and prospective patient
lists, names and addresses; and
(ix) Manuals. Administrative, accounting, operations
and procedures manuals.
Sellers and Physicians understand and agree that, due to the highly
competitive nature of the health care industry and the Dialysis Business,
disclosure of any of the Confidential
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Information would be extremely damaging to CDC. To the extent that any such
Confidential Information becomes available to Sellers or Physicians in the
course of the transactions contemplated by this Agreement, each of Sellers and
Physicians agree that, during the Restricted Period, it or he will not use or
divulge such information without the prior written consent of CDC and that it or
he holds such information in a fiduciary capacity for the sole benefit of CDC.
Sellers and Physicians also agree that the Confidential Information includes but
is not limited to trade secrets within the meaning of any and all applicable
state and federal statutes, rules and regulations, and that if it or he
breaches this covenant, CDC shall in addition to all other remedies, have
available the remedies provided by all such state and federal statutes, rules
and regulations as well as such remedies as may otherwise be available. The
restrictions set forth in this paragraph 2.4.1(c) shall not apply to any part
of the Confidential Information which: (i) is or becomes generally available to
the public or publicly known other than as a result of disclosure by Sellers or
Physicians; (ii) becomes available to Sellers or Physicians on a
nonconfidential basis from a source other than CDC or its agents or affiliates,
which source, to the knowledge of Sellers and Physicians, is not bound by a
confidentiality obligation to CDC; or (iii) is disclosed pursuant to the
requirement of a governmental agency or court of competent jurisdiction or as
otherwise required under applicable law.
2.4.2 Transferability. Sellers and Physicians agree that the
covenants contained in paragraph 2.4.1 (the "Covenants") shall be binding on
Sellers' and Physicians' successors and assigns and that they may be assigned
by CDC to any person, firm or business entity to whom the ownership and
operation of the Facility may be transferred, it being the intention of the
parties that the Covenants shall be binding on or inure to the benefit of, as
the case may be, any of their successors with the same force and effect as if
the Covenants had been made by and with such successors.
2.4.3 Severability. It is further understood and agreed that
the scope of the Covenants is reasonable in activities, time and area, and the
Covenants are fairly necessary to protect the investment of CDC hereunder.
Nevertheless, it is further agreed that the Covenants shall be regarded as
severable and shall be operative as to activities, time and area to the extent
that they may be made so operative, and if any part of them is declared invalid
or unenforceable as to activities, time or area, the validity and enforceability
of the remainder shall not be affected.
2.4.4 Injunction. It is further understood and agreed that CDC
will suffer irreparable injury for which it will have no adequate remedy at law
as a result of the breach of these
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Covenants, and that CDC shall be entitled to appropriate remedies of specific
performance and injunctive relief in the event of such breach.
3. Representations and Warranties of Sellers, Shareholders and Physicians.
Each of Sellers, Shareholders and Physicians, jointly and severally, represents
and warrants to Buyer that:
3.1 Organization and Good Standing. Wyandotte is, and on the Closing
Date will be, a Michigan professional corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan with full
power and authority to carry on the Dialysis Business. Shareholders own all of
the outstanding capital stock of Wyandotte. CTA is, and on the Closing Date
will be, a general partnership duly organized, validly existing and in good
standing under the laws of the State of Michigan.
3.2 Authority. All corporate, partnership and other actions required
to be taken by Sellers, Shareholders and Physicians to authorize and approve the
execution, delivery and performance of this Agreement and the other agreements
to be delivered at Closing, and the consummation of the transactions described
in it have been duly authorized and approved by all necessary action on their
part. The person or persons who execute this Agreement on behalf of Sellers have
been duly authorized to do so. Sellers and Shareholders have the power and
authority (without the consent of any other person) to enter into, deliver, and
perform this Agreement and the other agreements to be delivered at Closing. This
Agreement, when executed and delivered by Sellers, Shareholders and Physicians,
as applicable, will be their valid and binding obligation enforceable against
them according to their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws, regulations and authorities
from time to time in effect affecting creditors' rights generally and to general
principles of equity, whether considered in a proceeding in equity or at law.
3.3 Financial Statements.
3.3.1 Statements Delivered. Sellers have delivered to Buyer the
following financial statements:
(a) Balance Sheet and Income Statement. Audited balance
sheets and statements of profit and loss for the Dialysis Business at and for
the years ended December 31, 1994 and 1995 and at and for the five months ended
May 31, 1995 (Schedule 3.3.1(a)) (the "Financials").
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(b) Treatment Report. A report showing treatments provided
by the Dialysis Business from January 1, 1993 through June 30, 1995
(Schedule 3.3.1(b),) (the "Treatment Report").
3.3.2 Representation. All of the Financials have been prepared
on the accrual basis of accounting in accordance with generally accepted
accounting principles consistently applied and fairly present the financial
position and results of operations of the Dialysis Business as of the dates and
for the periods indicated. The Treatment Report accurately presents the
number and types of treatments provided at or by the Facility for the period
covered thereby.
3.4 Absence of Material Change. Except as set forth on Schedule 3.4:
3.4.1 Since May 31, 1995, the Dialysis Business has been conducted
only in the ordinary course.
3.4.2 Since May 31, 1995, (i) there has been no change in the
condition (financial or otherwise), assets, liabilities, operations or prospects
of the Dialysis Business or in the Assets, other than minor changes in the
ordinary course of business, none of which either individually or in the
aggregate has been materially adverse; and (ii) there has been no damage,
destruction, or loss (whether or not insured against), which either
individually or in the aggregate materially adversely affects (and Sellers do
not know of any threatened occurrence or development which is reasonably
expected to have (either singly or in the aggregate) a materially adversely
effect on) the assets, liabilities, or operations of the Dialysis Business or
the Assets.
3.4.3 Since May 31, 1995, Sellers have not (i) created or incurred
any liability, commitment or obligation (absolute or contingent) with respect to
the Dialysis Business, except in the ordinary course of business or unsecured
current liabilities incurred for other than money borrowed in the ordinary
course of business; (ii) mortgaged, pledged or subjected to any lien or
otherwise encumbered any of the Assets; (iii) discharged or satisfied any lien,
security interest or encumbrance against the Dialysis Business, or paid any
obligation or liability (absolute or contingent) of the Dialysis Business,
other than in the ordinary course of business; (iv) waived any rights of
substantial value to the Dialysis Business or cancelled any debts or claims of
the Dialysis Business of over $5,000; (v) except in the ordinary course of
business, terminated or amended, or suffered the termination or amendment of,
any contract, lease, agreement or license to which Sellers, Shareholders or
Physicians on behalf of the Dialysis Business are or were a party; (vi) except
for maintenance and
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repairs in the ordinary course of business, made any capital expenditures or
any capital additions or betterments on behalf of the Dialysis Business;
(vii) sold or otherwise disposed of any of the Assets, tangible or
intangible, except in the ordinary course of business; (viii) except in
compliance with paragraph 3.14 herein, paid or agreed to pay, conditionally
or otherwise, any bonus, extra compensation, pension or severance pay to any of
Sellers' present or former officers, agents or employees except under any
existing pension or other plan or increased the compensation (including
salaries, fees, commissions, bonuses, profit sharing, incentive, pension,
retirement or other similar payments) being paid as of May 31, 1995, to any of
the Dialysis Business' management or other employees, other than salary
increases not greater than 5.5% in connection with customary annual reviews;
(ix) renewed, amended, become bound by or entered into any contract, commitment
or transaction on behalf of the Dialysis Business other than in the ordinary
course of business; or (x) changed any accounting practice followed or
employed in preparing the Financials.
3.4.4 Since May 31, 1995, Sellers have not made any changes to
the management of the Dialysis Business.
3.5 Assets. Schedule 1.1.1(a) contains a complete and correct
list of all material items of the personal property used in connection with the
Dialysis Business;
3.5.1 Extent. The Assets constitute all material items of
such property necessary for the operation of the Dialysis Business as presently
operated; and the Inventory on the Closing Date will be of quality, quantity
and variety customary for facilities of size and utilization and with storage
capacity comparable to the Facility; and the Assets will Furnish Buyer with
all of the capacity and rights to operate the Dialysis Business in the same
manner as presently and historically operated by Sellers;
3.5.2 Title. Sellers now have, and at Closing will vest in CDC,
good and marketable title to all of the Assets, free and clear of restrictions
on or conditions to transfer or assignment and free and clear of liens,
encumbrances, security interests, equities, claims, leases, conditions or
restrictions.
3.6 Dialysis Business. Sellers conduct no other business than the
Dialysis Business.
3.7 Effect of Agreement. The execution and delivery of this
Agreement by Sellers, Shareholders and Physicians and the other agreements to be
delivered by Sellers at Closing or the
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consummation of the transactions described herein and therein, do not and will
not:
3.7.1 Articles of Incorporation and Partnership Agreement.
Violate Wyandotte's Articles of Incorporation or Bylaws or CTA's Partnership
Agreement;
3.7.2 Breach of Agreements. Violate, constitute a breach of,
cause a default under, or permit the termination of any agreement, license,
permit, certificate of need, obligation, liability, mortgage or deed of trust,
security agreement or other lien, charge or encumbrance to which Sellers,
Shareholders or Physicians are a party or by which any of the Assets are bound
or for which they or Buyer might become liable;
3.7.3 Acceleration of Indebtedness. Accelerate or constitute an
event entitling the holder of any indebtedness secured by the Assets, to which
they are subject or for which they or Buyer might become liable, to accelerate
the maturity of any such indebtedness or to increase the rate of interest
presently in effect thereon except for obligations to be discharged by Sellers
at Closing; or
3.7.4 Judgments, etc. Violate, conflict with or result in the
breach of any judgment, order, writ, injunction, decree of any court,
govermental agency or instrumentality or any law, ordinance, rule, or regulation
affecting Sellers, Shareholders, Physicians, the Dialysis Business or the
Assets.
3.8 Compliance with Law. The Dialysis Business has been conducted in
conformity, and Sellers are in compliance with all federal, state and local
laws, regulations or orders, including without limitation, employment,
insurance, zoning, occupancy, building, occupational and licensure laws,
regulations and orders which materially affect the Dialysis Business. No Seller
or Shareholder or Physician has received any notice asserting a failure to
comply with any such law, regulation or order which notice has not prior hereto
been fully and completely resolved to the satisfaction of, or abandoned by, the
noticing party. Without limitation of paragraph 3.8:
3.8.1 Licenses, etc. Sellers hold all rights, permits,
authority, consents, licenses, certificates of need, exemptions, accreditations
and the like, including zoning approvals, variances and use or occupancy permits
necessary to enable it to (i) conduct the Dialysis Business as heretofore and
currently conducted and (ii) obtain reimbursement under the Medicare, Medicaid
and ESRD Programs and under all contracts, programs and other arrangements with
third party payors, insurers or fiscal intermediaries
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(collectively, the "Licenses"). Schedule 3.8.1 contains a complete and correct
list of the Licenses, showing their dates of expiration where applicable. The
Licenses are valid and in full force and effect; no violations exist in respect
thereof; and there are not pending, or, to the knowledge of Sellers or
Shareholders, threatened, any investigations or proceedings with respect to the
Licenses. The Facility has an existing Medicare Provider Agreement with the
Health Care Finance Administration of the Department of Health and Human
Services and is certified for participation in the Medicare, Medicaid and ESRD
Programs, all of which licenses, agreements, certifications, contracts and
instruments are in full force and effect. No defaults have occurred thereunder,
and no event has occurred which, with the giving of notice or passage of time or
both, would constitute a material default thereunder. The Dialysis Business and
the Assets, and Sellers' operation thereof, conform and have conformed to all
applicable statutes, codes, ordinances, licensing requirements, laws, rules and
regulations. Sellers have complied with all statutes, codes, ordinances,
licensing requirements, laws, rules, regulations, decrees, awards or orders
applicable to the Dialysis Business or its operations, including those relating
to employment and environmental matters and all laws relating to Medicare
and/or Medicaid, including, but not limited to, 42 U.S.C. Section 1320(a)-7(a)
et seq., 42 U.S.C. Section 1320(a)-7(b) et seq., 31 U.S.C. Section 3729, and
any other federal or state provision relating to the filing of false claims or
payments for referrals; and there is not and will not be any liability arising
from or related to any violations thereof and neither of the Shareholders has
any knowledge of any violations of such laws. No Shareholder or Seller has
received any notice from any governmental body or other person alleging that
any Physician, Shareholder or Seller has failed to comply with any such law,
rule or regulation. To Sellers' knowledge, there is no anticipated change in
any such law, rule or regulation which would adversely affect the Dialysis
Business or the Assets.
3.8.2 Hazardous Materials. Except as disclosed in Schedule
3.8.2, no hazardous or toxic material of any type has ever been generated,
treated, produced, stored, transported, released or disposed of on, around or
beneath the Facility. No written notification has been received in the past
with respect to the Facility, and there are no proceedings or inquiries,
pending or threatened, before any court, agency, authority or tribunal,
involving, concerning, or affecting the Facility in which is in issue the
violation of any federal, state or local law or regulation pertaining to
hazardous or toxic materials. For purposes of this section, the phrase
"hazardous or toxic materials" includes, substances defined as "hazardous
substances," "hazardous materials," "toxic substances," "hazardous waste,"
"extremely hazardous waste," or "restricted hazardous wastes," under the
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Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq.; the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq.; the Federal Water Pollution Control Act,
33 U.S.C. Section 1251, et seq.; and comparable provisions of state and local
county and city ordinances, or any substances so defined or stated in any of the
regulations adopted and publications promulgated pursuant to those laws as
they may have been amended from time to time on or before the date hereof.
3.8.3 Filing of Reports. Other than claims or reports
pertaining to individual patients, Sellers will cause to be timely filed, all
cost reports of every kind whatsoever required by law or by written or oral
contract or otherwise to have been filed or made on or prior to the Closing Date
with respect to the purchase of services by third-party purchasers, including,
but not limited to, Medicare and Medicaid, insurance carriers and other fiscal
intermediaries. Sellers have timely filed, in a complete and correct manner, all
requisite claims and other reports required to be filed in connection with all
state and federal Medicare and Medicaid programs due on or before the date
hereof. There are no claims, actions, payment reviews, or appeals pending or
threatened before any commission, board or agency, including, without
limitation, any intermediary or carrier, the Administrator of the Health Care
Financing Administration, or the Michigan Department of Health and
Rehabilitative Services or any other state or federal agency with respect to any
Medicare or Medicaid claims filed by Sellers on or before the date hereof or
program compliance matters, which would adversely affect Sellers, the Assets,
the operation or utility thereof, or the consummation of the transactions
contemplated hereby. No validation review or program integrity review related
to Sellers has been conducted by any commission, board or agency in connection
with the Medicare or Medicaid program, and no such reviews are scheduled,
pending nor threatened against or affecting Sellers, any of the Assets or the
consummation of the transactions contemplated hereby.
3.8.4 Occupational Safety. Sellers have complied in all material
respects with all requirements of the Occupational Safety and Health Act and its
state equivalents and regulations promulgated under any such legislation, the
consequences of a violation of which could have material adverse effect on the
Dialysis Business, and with all orders, judgments and decrees of any tribunal
under such legislation that apply to the Dialysis Business or the Assets.
3.8.5 Zoning. The operation and current use of the Facility are
permitted under existing zoning and other land use
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laws and regulations applicable to the Facility, and there are no plans,
studies or efforts of any governmental or nongovernmental authority,
association, agency, person or entity which would materially affect Buyer's
proposed use or operation of the Facility.
3.9 Litigation.
3.9.1 Claims, Actions, etc. Except as set forth in Schedule 3.9,
there are no claims, actions, suits, arbitrations, legal or other proceedings
pending or threatened before any court or governmental or administrative body
or agency, or arbitration tribunal, nor are there any outstanding orders,
writs, judgments, injunctions or decrees of any court, arbitrator or
governmental agency to which any Seller or Shareholder or Physician is a party
related to the Dialysis Business;
3.9.2 Governmental Investigation. Except as shown on Schedule
3.9, no investigations (for claims against (i) any Seller, Shareholder or
Physician, the Dialysis Business or the Facility or, (ii) any of the medical
staff members or employees) of the Facility, are pending or threatened by any
govermental agency or instrumentality; and
3.9.3 Judgments. Except as shown on Schedule 3.9, no Seller or
Shareholder is a party to, nor is it the subject of, any judgment, order, writ,
injunction, or decree of any court or govermental agency or instrumentality
which relates to the Assets, the Dialysis Business, the condition or operation
of the Facility or the consummation of any of the transactions described in
this Agreement.
3.10 Improper Payments. Neither Sellers, Shareholders, Physicians,
nor any of Sellers' affiliates, employees, representatives or agents has,
directly or indirectly, within the past five (5) years, given or made or agreed
to give or make any illegal commission, payment, gratuity, gift, political
contribution or similar benefit to any customer, supplier, govermental employee
or other person who may be in a position to help or hinder the Dialysis
Business. Sellers have not filed any reports with any govermental agency which
disclose that Sellers have participated in any of the foregoing practices or
acts giving rise to such practices.
3.11 Eminent Domain. There are no pending or, nor to the knowledge
of Sellers or Shareholders, threatened proceedings in eminent domain or
otherwise, affecting any of the Assets or the Facility.
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3.12 Insurance. Schedule 3.12 sets forth a complete and correct list
and a brief description of all policies of fire, extended coverage, liability
(including, without limitation, medical malpractice and professional liability)
and all other kinds of insurance held by Sellers covering the Assets, the
Facility and the Dialysis Business. These policies are and will be maintained,
in full force and offect, until the Closing Date. Schedule 3.12 also contains a
list of all claims made on such policies in the last three (3) years.
3.13 Labor Arrangements. Except as shown on Schedule 3.13, Sellers
are not a party to, bound by or obligated to contribute to, any collective
bargaining agreement or other similar contract with any labor organization, nor
are Sellers a member of or affiliated with any organization, group or
association as a result of which it is bound as to the terms and conditions of
employment or their hiring or termination policies at the Facility with respect
to any of their employees. Except as disclosed in Schedule 3.13, Sellers have
experienced no, and there is no pending or, to the knowledge of Sellers,
threatened labor dispute, strike, work stoppage or slowdown or labor
disturbance affecting the Facility, nor has there been any labor union
organizing activity at the Facility within the last three (3) years. There is
no unfair labor practice or other charge or complaint pending, or, to the
knowledge of Sellers, threatened against the Facility, before any court, the
National Labor Relations Board or any other governmental agency.
3.14 Personnel; Compensation. Schedule 3.14 is a complete and correct
list of the names and addresses of all employees of Sellers at the Facility,
showing the compensation payable to each and all accrued vacation time, sick
leave and holiday time through June 30, 1995. Sellers have not increased the
compensation payable to any employee of the Facility since April 21, 1995,
without the prior written consent of CDC, provided, however that Sellers may
increase the compensation payable to Physicians so long as such increase is
payable in cash and does not reduce the net worth of either Seller as reflected
on the June 30, 1995 financial statements of each Seller.
3.15 Employment Contracts and Employee Benefit Plans. Schedule 3.15
contains a complete and correct list and description of all employment
contracts for employees at the Facility to which Sellers is a party or by which
it is bound and of all pension, bonus, profit sharing, retirement, stock option,
medical expense, dental expense, hospitalization, life insurance or other death
benefit, severance, and other benefit plans, agreements, arrangements or other
programs providing remuneration or benefits for employees at the Facility,
including without limitation any employee benefit plan defined in Section 3(3)
of the Employee
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Retirement Income Security Act of 1974, as amended ("ERISA"), whether or not
funded and whether or not reflected in any plan documents. There have been no
material defaults, breaches, omissions or other failings by Sellers or any
fiduciary under any of these contracts or programs.
3.16 Brokers. Sellers have not employed, contracted for the services
of, or authorized any broker or finder with respect to the negotiations leading
up to the execution of this Agreement or the consummation of the transactions
contemplated hereby.
3.17 Liabilities. Except as set forth in paragraphs 2.2 and 2.3,
Buyer will not be obligated for, nor will the Assets secure or be subject to
any liabilities or obligations of Sellers, Shareholders or Physicians of any
kind or nature whether absolute, accrued, contingent, known, unknown or
otherwise, and whether normally set forth or reflected in a financial statement
in connection with, as result of or following the consummation of the
transactions contemplated hereby.
3.18 Material Contracts. All material agreements, commitments,
instruments and leases related to the Dialysis Business to which Sellers,
Shareholders or Physicians are a party or bound, or by which any of the Assets
or the Dialysis Business are subject or bound (the "Material Contracts"), are
listed on Schedule 3.18 hereto. Sellers have delivered accurate and complete
copies of each Material Contract to Buyer. All Material Contracts are valid,
binding and enforceable in accordance with their terms and are in full force and
effect. Neither Sellers nor to Sellers' knowledge, any other party to any
Material Contract is in breach of any provision of, in violation of, or in
default under, the terms of any Material Contract. Except as indicated on
Schedule 3.18, each Material Contract is freely assignable to Buyer by Sellers
without the consent of any other party.
3.19 Intellectual Property. Schedule 3.19 sets forth a true and
complete identification and summary description of the trade names, trademarks,
service marks, copyrights, any pending or issued registrations for any of the
foregoing, patents and patent applications, that are used solely or primarily by
the Dialysis Business, including a description of the nature of Sellers'
interests therein. Except as set forth on Schedule 3.19, all of the
intellectual property used by the Dialysis Business is free and clear of all
liens, security interests, charges, encumbrances, equities and other adverse
claims and Sellers are not a party to any licenses, consents, settlements or
other agreements involving the intellectual property used by the Dialysis
Business. There have been no claims, actions or judicial or adversarial
proceedings involving the intellectual property used by the Dialysis Business
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<PAGE> 17
to which Sellers were a party. The Dialysis Business' use of intellectual
property has not infringed upon, constituted a misappropriation of, or otherwise
violated the rights of any other person in, any intellectual property. Sellers
do not know of any past or present occurrences of any probable infringement or
misappropriation of, or violation of Sellers' rights in, any of the intellectual
property used by the Dialysis Business.
3.20 Receipt of Information. Sellers have received: (i) a copy of
Vivra's Prospectus dated February 9, 1995; (ii) a copy of Vivra's 1994 Annual
Report to Stockholders; (iii) a copy of Vivra's Annual Report on Form 10-K for
the fiscal year ended November 30, 1994; (iv) a copy of Vivra's Quarterly
Reports on Form 10-Q for the quarters ended February 28 and May 31, 1995; (v) a
copy of Vivra's Proxy Statement for Vivra's annual meeting held on May 9, 1995.
3.21 No Untrue Representation or Warranty. No representation or
warranty by Sellers, Shareholders and Physicians in this Agreement, and no
statement, schedule certificate furnished or to be furnished to Buyer pursuant
to this Agreement, or in connection with the transactions described it, contains
or will contain any untrue statement of a material fact, or omits or will omit
to state a material fact necessary to make the statements contained therein not
misleading.
4. Representations and Warranties of Buyer. Buyer hereby represents and
warrants to Sellers, Shareholders and Physicians as of the date hereof, and as
of the Closing Date, as follows:
4.1 Organization and Good Standing. Buyer is, and on the Closing
Date, will be, a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada.
4.2 Authority. The execution, delivery and performance by Buyer of
this Agreement and the other agreements to be delivered by Buyer at Closing, and
the consummation of the transactions described herein and therein, have been
duly authorized and approved by Buyer's and Vivra's Board of Directors (either
specifically or by appropriate grant of general authority), and by all other
necessary corporate action on its part, and no stockholder approval is required
of such actions. The person who has executed this Agreement on behalf of Buyer
has been duly authorized to do so by all necessary corporate action by Buyer.
Buyer has the corporate power and authority to enter into, deliver, and perform
this Agreement and the other agreements to be delivered by Buyer at Closing.
This Agreement is, and such other agreements when executed and delivered by
Buyer at Closing will be, valid and binding obligations of Buyer enforceable
against Buyer according to
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their terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws, regulations and authorities from time to time
in effect affecting creditors' rights generally and to general principles of
equity, whether considered in a proceeding in equity or at law.
4.3 Brokers. Buyer has not employed, contracted for the services of,
or authorized any broker or finder with respect to the negotiations, execution
or performance of this Agreement or the consummation of the transactions
contemplated hereby.
4.4 Effect of Agreement. The execution and delivery of this Agreement
and the other agreements to be delivered by Buyer at Closing, and the
consummation of the transactions described herein and therein will not:
4.4.1 Articles and Bylaws. Violate Buyer's Certificate of
Incorporation or Restated Bylaws;
4.4.2 Breach of Agreements. Violate, constitute a breach of,
cause a default under, or permit the termination of any agreement,
obligation, liability, mortgage or deed of trust, security agreement or other
lien, charge or encumbrance, to which Buyer is subject or for which Sellers
might become liable;
4.4.3 Acceleration of Indebtedness. Accelerate or constitute
an event entitling the holder of any indebtedness of Buyer to accelerate the
maturity of any such indebtedness or to increase the rate of interest presently
in effect thereon; or
4.4.4 Judgments, etc. Violate, conflict with or result in the
breach of any judgment, order, writ, injunction, decree, or, to the best
knowledge of Buyer, any rule or regulation of any court, govermental agency
or instrumentality affecting Buyer.
4.5 Litigation. There is no material litigation, govermental
investigation or other proceeding pending or, to the best knowledge of Buyer,
threatened to which Buyer is a party that would adversely affect the ability of
Buyer to consummate the transactions described in this Agreement.
4.6 Vivra Shares. The Vivra Shares are registered under the
Securities Act of 1933 pursuant to a registration statement dated March 21,
1995. The Vivra Shares will upon delivery at Closing be validly issued, fully
paid, non-assessable and free of preemptive rights and will be free and clear of
all Encumbrances except as may arise under the securities laws and from any
action taken by Sellers. Vivra is authorized to issue 80,000,000 shares of
Common
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<PAGE> 19
Stock, $.O1 par value. As of February 10, 1995, 22,611,000 shares of Common
Stock were issued and outstanding.
4.7 No Untrue Representation or Warranty. No representation or
warranty by Buyer in this Agreement contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact
necessary to make the statements contained therein not misleading.
5. Covenants of Sellers. Sellers covenant and agree that:
5.1 Conduct of Business Pending the Closing. From the date of this
Agreement to the Closing Date, Sellers will:
5.1.1 Conduct of Dialysis Business; Operation of Facility.
Conduct the Dialysis Business and operate the Facility consistent with prior
practice and only in the ordinary course and comply in all material respects
with all applicable legal and contractual obligations;
5.1.2 Preservation of Organization. Use best efforts to preserve
the Dialysis Business and the Facility intact and to preserve the goodwill of
all suppliers, customers, patients, licenses, provider numbers, contracts,
physicians, providers and others with whom Sellers have business relationships;
5.1.3 Maintenance of Facility. Use best efforts to preserve and
maintain the Facility in good condition, ordinary wear and tear excepted, and
shall repair any damage to the Facility;
5.1.4 Employees. Take no action which would interfere with
CDC's relations with employees at the Facility, including current employees of
Sellers who will be rehired by CDC and not increase the compensation payable to
any of such employees;
5.1.5 Liabilities. Not incur any obligation or liability which
encumbers or is secured by any of the Assets, to which any of the Assets is
subject or for which the Assets or Buyer may be liable;
5.1.6 Alienation of Assets. Not sell, transfer, distribute or
encumber any of the Assets, except for Inventory expended or sold in the
ordinary course of business; and
5.1.7 Material Contracts. Not enter into, amend or terminate any
Material Contracts.
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<PAGE> 20
5.2 Cooperation; Consents; Nonassignable Contracts.
5.2.1 Sellers, Shareholders and Physicians shall use their
reasonable efforts to (i) procure prior to the Closing (or immediately
thereafter to the extent not obtained before the Closing), upon reasonable terms
and conditions, all consents, approvals, authorizations, releases and orders,
which are listed on Schedule 5.2; (ii) complete prior to the Closing, all
filings, registrations and certificates; and (iii) satisfy prior to the Closing
all other requirements prescribed by law.
5.2.2 To the extent that the assignment by Sellers of any contract
to be assumed by Buyer at the Closing is not permitted without (i) the consent
of the other party to the contract; (ii) the approval by the other party of
Buyer as a source of the services called for by such contract; or (iii) the
approval by the other party of Buyer as a lessee, then this Agreement shall not
be deemed to constitute an assignment or an attempted assignment of the same, if
such assignment or attempted assignment would constitute a breach thereof.
However, unless otherwise agreed as to any particular contract, Sellers shall
use their reasonable efforts (which shall not include payment of any additional
consideration or economic concessions to any party) to obtain any and all such
consents, approvals and novations.
5.2.3 If any necessary consent, approval or novation is not
obtained, Sellers shall cooperate with Buyer in any reasonable arrangement
designed to provide Buyer with all of the benefits under such contract as if
such consent, approval or novation had been obtained. Such cooperation shall
include subleases from Sellers and undertakings by Buyer of the work necessary
to complete contracts as the agent of Sellers, with the understanding that
Sellers shall then invoice the customer for services rendered and promptly remit
the amount of the receivable to Buyer upon payment to Sellers.
5.3 Payment of Liabilities. Sellers shall promptly pay or provide for
the payment in full of all expenses, costs, liabilities and obligations incurred
prior to the Closing Date in respect of the Dialysis Business and the Facility
or which are secured by any of the Assets.
5.4 Insurance.
5.4.1 Maintenance of Existing Insurance. Sellers shall maintain
in full force and effect to the Closing Date all policies of insurance relating
to the Assets and the Facility now in effect and will give all notices and
present all claims under such policies of insurance in a timely fashion up to
the Closing Date.
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<PAGE> 21
5.4.2 Tail Coverage. Sellers shall, at Sellers' expense, obtain
liability insurance coverage for all occurrences prior to the Closing Date for a
period four (4) years.
5.5 Termination of Employment; Payment of Accrued Compensation.
Effective immediately prior to the Closing Date, Sellers shall terminate the
employment of all employees employed at the Facility and all employment or other
contracts, employee benefit plans or arrangements providing for payment of
compensation or emoluments in any form to such employees and shall pay all sums
due such employees to the Closing Date on account of their employment by
Sellers, including vacation and sick leave.
5.6 Termination Cost Reports. Sellers shall file all Medicare
termination cost reports required to be filed as a result of the consummation of
the transactions described in this Agreement. Notwithstanding any other
provision of this Agreement, Sellers shall assume and be responsible for any
liability shown on or incurred as a result of such reports and shall be entitled
to receive any refund or other benefit which may result therefrom.
5.7 Audited Financial Statements. On and after Closing, Sellers and
Shareholders shall provide all information and records, in their possession or
under their control, requested by CDC in the preparation of such audited
financial statements in respect of the Assets and results of operations of the
Dialysis Business prior to Closing as CDC reasonably deems appropriate for CDC's
financial and tax reporting purposes.
5.8 Satisfaction of Conditions Precedent. Sellers, Shareholders and
Physicians, in addition to specific obligations set forth elsewhere in this
Paragraph 5, shall (i) upon satisfaction of the conditions precedent set forth
in paragraph 8, execute and deliver the documents required to be delivered by
Sellers and Shareholders pursuant to paragraph 9.2.1 and 9.3 (ii) use their
best efforts to consummate the transactions contemplated by this Agreement and
to satisfy or cause to be satisfied all of the conditions precedent set forth in
paragraph 8.
5.9 Supplements. If any representation, warranty or statement of
Sellers, Shareholders or Physicians, or any schedule delivered to Buyer, shall
become incorrect, Sellers, Shareholders or Physicians shall promptly deliver to
Buyer a supplement in order that said representation, warranty, statement, or
schedule, as so supplemented, shall be true and correct, provided, however, that
no such supplement or amendment shall be considered in determining the
satisfaction of the conditions set forth in paragraph 7.1 and no such
supplement or amendment shall affect Sellers', Shareholders' and Physicians'
obligations under paragraph 10.
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<PAGE> 22
6. Covenants of Buyer. Buyer covenants and agrees that:
6.1 Maintenance of Records; Access by Sellers. Subject to the
applicable laws of confidentiality and privacy, Buyer shall maintain all
business records of the Facility and make such records available for use by
Sellers as needed. Access to any Such records shall be during normal business
hours, with prior notice to Buyer of the time when such access shall be needed.
Sellers' employees, representatives and agents shall conduct themselves in such
a manner as not unnecessarily or unreasonably to disrupt Buyer's normal business
activities.
6.2 Audited Financial Statements. On and after the Closing Date (and
after Closing), Buyer shall cooperate with Sellers in the preparation of such
financial statements in respect of the Assets and the results of operations of
the Dialysis Business prior to Closing as Sellers reasonably deem appropriate
for Sellers' financial and tax reporting purposes.
6.3 Satisfaction of Conditions Precedent. Buyer shall (i) upon
satisfaction of the conditions precedent set forth in paragraph 7, execute and
deliver the documents set forth in paragraph 9, use its best efforts to
consummate the transactions contemplated by this Agreement and to satisfy or
cause to be satisfied all of the conditions precedent which are set forth in
paragraph 7 and to obtain the survey and provider number required by paragraph
5.1 of the Escrow Agreement.
6.4 Employees. Buyer shall offer employment as of the Closing Date
to all employees listed on Schedule 3.14 at the salary set forth for each of
them on Schedule 3.14 and shall provide such employees with CDC's standard
employee benefits.
7. Buyer's Conditions Precedent to Closing. Buyer's obligations to
purchase the Assets, pay the Purchase Price to Escrow Holder and perform its
other obligations under this Agreement are subject to the occurrence of or
compliance with each of the following conditions, all of which are for the sole
benefit of and may be waived by Buyer:
7.1 Warranties True and Correct. Each of the representations and
warranties of Sellers, Shareholders and Physicians set forth in this Agreement
shall be true and correct in all material respects at and as of the Closing
Date, and the covenants, agreements and conditions required by this Agreement to
be performed and complied with by Sellers by such date shall have been performed
and complied with.
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<PAGE> 23
7.2 Approval. The form and substance of all certificates,
instruments, opinions and other documents delivered to Buyer pursuant to this
Agreement shall be satisfactory in all reasonable respects to CDC and its
counsel.
7.3 Litigation. No litigation or govermental investigation, proposed
or pending, shall have been commenced or threatened by persons other than Buyer
or its affiliates with regard to the transactions described in this Agreement,
which if successful, would have a material adverse effect on the operations or
financial condition of the Dialysis Business, the Facility or the Assets or any
party's ability to consummate the transactions contemplated by this Agreement.
7.4 Due Diligence. CDC shall have investigated and examined the
ownership, conditions and nature of the Assets and the financial condition and
results of operations of the Facility and its business, affairs, books and
records in a "due diligence" investigation, the results of which are
satisfactory to CDC.
7.5 Closing Deliveries. Sellers, Shareholders and Physicians shall
have executed and delivered all of the documents required to be delivered by
Sellers, Shareholders or Physicians pursuant to paragraphs 9.2.1 and 9.3.
7.6 Condition of Assets. The Dialysis Business and the Assets shall
not have been adversely affected in any way by any act of God, fire, flood,
accident, labor disturbance, legislation (proposed or enacted) or other event or
condition.
7.7 Registration of Vivra Shares. The registration statement covering
the sale of Vivra Shares to Sellers shall have remained effective and shall not
be the subject of any stop order or proceeding seeking a stop order and the
Vivra Shares shall have been authorized for listing on the New York Stock
Exchange upon official notice of issuance.
8. Sellers' Conditions Precedent to Closing. Sellers' obligation to sell
the Assets is subject to the payment and delivery of the Purchase Price to
Escrow Holder at Closing and the occurrence of or compliance with each of the
following conditions, all of which are for the sole benefit of Sellers and may
be waived by Sellers:
8.1 Warranties True and Correct. Each of the representations and
warranties of Buyer set forth in this Agreement shall be true and correct in all
material respects at and as of the Closing Date and the Closing Date, and the
covenants, agreements, and conditions required by this Agreement to be performed
and complied with by
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<PAGE> 24
Buyer by such dates shall have been performed and complied with in all material
respects.
8.2 Approval. The form and substance of all certificates,
instruments, opinions and other documents delivered to Sellers pursuant to this
Agreement shall be satisfactory in all reasonable respects to Sellers and its
counsel.
8.3 Litigation. No litigation or governmental investigation, proposed
or pending, shall have been commenced or threatened by persons other than
Sellers or its affiliates which if successful, would have a material adverse
effect on any party's ability to consummate the transactions contemplated by
this Agreement.
8.4 Closing Deliveries. Buyer shall have executed and delivered all
of the documents required to be delivered by Buyer pursuant to paragraphs 9.2.2
and 9.3.
8.5 Registration of Vivra Shares. The registration statement
delivered all of the documents required to be delivered by Buyer covering the
sale of Vivra Shares to Sellers shall have remained effective and shall not be
the subject of any stop order pursuant to paragraphs 9.2.2 and 9.3 or proceeding
seeking a stop order and the Vivra Shares shall have been authorized for
listing on the New York Stock Exchange upon official notice of issuance.
9. Operations Pending Closing; Closing. The Closing of the transactions
hereunder shall be effected as set forth in paragraph 9.
9.1 Closing. "Closing" means the transfer of all of the Assets from
Sellers to Buyer. The closing shall occur on the later of July 1, 1995 or the
first business day after the Conditions Precedent to Closing set forth in
Paragraphs 7 and 8 have been satisfied (the "Closing Date") and at the offices
of McDermott, Will & Emery, Chicago, Illinois.
9.2 Deliveries. On the Closing Date, deliveries shall be made by
Sellers, Shareholders and Physicians as set forth in Paragraph 9.2.1 and by
Buyer as set forth in paragraph 9.2.2.
9.2.1 Deliveries by Sellers, Shareholders and Physicians.
Sellers, Shareholders and Physicians, as applicable, shall execute and deliver
to Buyer the following documents and instruments, in form and substance
reasonably satisfactory to Buyer and its counsel, against delivery by Buyer of
the items specified in paragraph 9.2.2:
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<PAGE> 25
(a) Bill of Sale. A Bill of Sale in substantially the form
of Exhibit B, together with such other documents, duly executed as may be
necessary to effect transfer of the Assets at Closing;
(b) Consents. The Consents;
(c) Resolutions. A copy of resolutions of the Board of
Directors and shareholders of Wyandotte, duly certified by its Secretary,
authorizing the execution, delivery and performance of this Agreement and the
other documents to be delivered by Wyandotte hereunder and all actions to be
taken by Wyandotte hereunder and thereunder;
(d) Sellers, Certificate. Certificates ("Sellers'
Certificate") signed by an authorized signatory, dated the Closing Date, to the
effect that each of the representations and warranties made by Sellers in this
Agreement are true and correct at and as of the Closing Date and that each of
the covenants, conditions and agreements to be performed or complied with by
Sellers by such date have been so performed or complied with in all material
respects, and that, to the best knowledge of such signatory, there is no fact
or condition which would cause Sellers, Shareholders or Physicians to be in
breach of any of the covenants or representations and warranties hereunder as of
the Closing Date. The execution and delivery of the Sellers' Certificate by
Sellers shall not limit their liability and obligations following the Closing
Date.
(e) Other. At the Closing, Sellers, Shareholders and
Physicians shall take such other steps as may be necessary or appropriate to
place the Buyer in actual possession and operating control of the Dialysis
Business and the Assets.
9.2.2 Deliveries by Buyer. Buyer shall deliver to Sellers the
following items against delivery by Sellers, Shareholders and Physicians of the
items specified in paragraph 9.2.1:
(a) Purchase Price. Ten Million Dollars and certificates
evidencing the Vivra Shares;
(b) Resolutions. Copies of resolutions of the Board of
Directors of CDC and Vivra Incorporated, CDC's parent corporation, duly
certified by their Secretaries, authorizing and approving the execution,
delivery and performance of this Agreement and the other documents to be
delivered by CDC hereunder and all actions to be taken by CDC hereunder and
thereunder.
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<PAGE> 26
(c) Buyer's Certificate. A certificate ("Buyer's
Certificate") signed by an authorized officer of Buyer, dated the Closing Date
to the effect that each of the representations and warranties made by buyer in
this Agreement are true and correct at and as of the Closing Date and that each
of the covenants, conditions and agreements to be performed or complied with by
CDC by such date have been so performed or complied with in all material
respects, and that, to the best knowledge of such signatory, there is no fact or
condition which would cause Buyer to be in breach of any of its representations
and warranties hereunder as of the Closing Date. The execution and delivery of
the Buyer's Certificate by Buyer shall not serve to limit any of Buyer's
liabilities and obligations following the Closing Date.
9.3 Closing Agreements. At the Closing, the parties shall
execute, acknowledge and deliver the following:
(a) Assumption Agreement. An Assignment and Assumption
Agreement between Buyer and Sellers, substantially in the form attached hereto
as Exhibit C.
(b) Medical Director Contract. A Medical Director Contract
between CDC and Physicians, with a term of no less than ten (10) years,
substantially in the form attached hereto as Exhibit D.
(c) Facility Lease. A lease for the premises currently
occupied by the Facility between Buyer and CTA, substantially in the form
attached hereto as Exhibit A.
9.4 Escrow Agreement. CDC and Sellers shall execute and deliver an
escrow agreement substantially in the form of Exhibit E (the "Escrow Agreement")
and shall deliver to the Escrow Holder therein identified ("Escrow Holder") the
Purchase Price and all documents and instruments described in paragraphs 9.2.1,
9.2.2 and 9.3, for retention and distribution by Escrow Holder in an escrow
account (the "Escrow") in accordance with the Escrow Agreement.
9.5 Termination. This Agreement may be terminated at any time prior
to the Closing:
(a) by mutual consent to Sellers and Buyer;
(b) by either Sellers or Buyer if there has been a material
misrepresentation or material breach of warranty on the part of the other party
in the representations and warranties set forth in this Agreement, or if events
have occurred which have made it impossible to satisfy a condition precedent to
the terminating
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<PAGE> 27
party's obligations to consummate the transactions contemplated hereby;
(c) by Buyer if the Closing has not occurred by August 1, 1995;
(d) by Sellers if (i) Sellers have satisfied the Conditions
Precedent to Closing set forth in paragraph 7 by July 1, 1995, and (ii) Closing
has not occurred by August 1, 1995; or
(e) by Sellers if the Closing has not occurred by October 1,
1995.
Termination of this Agreement shall not serve to relieve any party of any
responsibility or obligation for any breach of this Agreement occurring prior to
such termination.
10. Indemnification.
10.1 Indemnification.
10.1.1 By Sellers, Shareholders and Physicians. Sellers,
Shareholders and Physicians shall, on demand, jointly and severally, indemnify,
defend and hold Buyer and its employees, agents, representatives, successors and
assigns, harmless from, against and in respect of any and all claims, losses,
costs, expenses, liabilities and damages, including interest, penalties and
reasonable attorneys' fees (collectively, "Claims"), that any of them shall
incur or suffer in connection with (i) the claims of any third party, including
but not limited to Sellers' employees, against any of them for alleged
obligations or liabilities of Sellers arising out of Sellers' operation of the
Dialysis Business prior to the Closing Date, and for liabilities and/or
obligations of Sellers not expressly assumed by Buyer under the Assumption
Agreement; (ii) the termination by Sellers of employment and of employment
benefit plans pursuant to paragraph 5.7 or (iii) the breach by Sellers of any
covenant or agreement or the untruth of any representation or warranty made by
it herein.
10.1.2 By Buyer. CDC shall, on demand, indemnify, defend and
hold Sellers and its successors and assigns and Shareholders and Physicians
harmless from, against and in respect of any Claims, that any of them shall
incur or suffer in connection with the Claims of any third party for alleged
liabilities or obligations of Sellers arising out of Buyer's operation of the
Dialysis Business after the Closing Date, the breach by Buyer of any covenant or
agreement or the untruth of any representation or warranty made by CDC herein,
or failure to perform its obligations under the Assumed Contracts after the
Closing.
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<PAGE> 28
10.2 No Limitation. The indemnities in paragraphs 10.1.1 and 10.1.2
shall not foreclose any other rights or remedies the parties may have to enforce
the provisions of this Agreement.
10.3 Notice and Right to Defend. If any Claim arises after the
Closing Date for which Buyer or Sellers may be liable under paragraph 10.1.1 or
10.1.2, the indemnitee shall notify the indemnitor within a reasonable time
after the indemnitee receives written notice of any Claim, and shall give the
indemnitor a reasonable opportunity to settle or defend any such Claim;
provided, however, that the indemnitee's failure to give such notice or
opportunity shall not impair or otherwise affect the indemnitor's obligation to
indemnify against such Claim except to the extent that the indemnitor
demonstrates actual damage caused by such failure; and, provided further, that
the indemnitee may commence to settle or defend the Claim as circumstances
warrant, but any settlement shall require the prior written consent of the
indemnitor. The expenses of all proceedings, contests or lawsuits with respect
to Claims shall be borne by the indemnitor. If an indemnitor wishes to assume
the defense of a Claim, it shall give written notice to the indemnitee within
ten (10) days after notice from the indemnitee of such Claim, and the indemnitor
shall thereafter defend the Claim, employing counsel reasonably satisfactory to
the indemnitee, provided that the indemnitee may participate in the defense at
its own expense.
If the indemnitor does not assume the defense of, or if after so assuming
it fails to defend, any such claim, the indemnitee may defend it in such manner
as it may reasonably deem appropriate, and the indemnitee may settle such Claim
on such terms as it may reasonably deem appropriate. The indemnitor shall
promptly reimburse the indemnitee for all reasonable expenses, legal and
otherwise, as incurred by the indemnitee in connection with the defense, appeal
and settlement of such Claim. If no settlement of such a Claim is made, the
indemnitor shall satisfy any judgment rendered with respect to it before the
indemnitee is required to do so.
If a judgment is rendered against the indemnitee on any Claim, or any lien
attaches to any of the assets of any indemnitee, the indemnitor shall
immediately upon such entry or attachment pay such judgment in full or discharge
such lien unless, at the expense and direction of the indemnitor, an appeal is
taken under which the execution of the judgment or satisfaction of the lien is
stayed. If and when a final judgment is rendered in any such action, the
indemnitor shall forthwith pay such judgment or discharge such lien before any
indemnitee is compelled to do so.
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<PAGE> 29
11. Miscellaneous.
11.1 Notices. Any notice provided for in this Agreement and any other
notice, demand or communication required or permitted to be given hereunder or
which any party may wish to send to another ("Notice" or "Notices") shall be in
writing and shall be deemed to have been properly given if served by (i)
personal delivery or (ii) registered or certified U.S. mail, or by comparable
private carrier, First Class, return receipt requested in a sealed envelope,
postage or other charges prepaid, or (iii) telegram, telecopy, facsimile, telex
or other similar form of communication, if followed by other physical delivery
in writing, addressed to the party for whom the Notice is intended as follows:
If to Buyer:
David P. Barry, Executive Vice President
Community Dialysis Centers
2 Mareblu
Laguna Hills, California 92654
FAX: (714) 831-6538
with a copy to:
Helen R. Friedli, P.C.
McDermott, Will & Emery
227 W. Monroe Street, Suite 3100
Chicago, Illinois 60606
FAX: (312) 984-3669
If to Sellers, Shareholders and Physicians:
K. Thavarajah, M.D.
C.V. Kumar, M.D.
15 Pinegate
Bloomfield Hills, Michigan 48304
with a copy to:
Schwartz Law Firm
Burton H. Schwartz
37887 West Twelve Mile Suite A
Farmington Hills, Michigan 78331
Fax: (810) 553-9400
or such other address as any person may request by notice given as aforesaid.
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11.1.1 Change of Address. Any party to this Agreement may
change its address for Notice from time to time by notice given in accordance
with the foregoing provisions.
11.1.2 Effective Time. All notice given pursuant to this
paragraph shall be deemed given and effective when received if personally
delivered or sent by telegram, telecopy, telex or similar form of communication
or, if mailed on the date shown on the return receipt or if a receipt has not
then been received, five (5) days after mailing.
11.2 Payment of Expenses. Except as specifically provided for herein,
Sellers, Buyer, Shareholders and Physicians shall each pay its or his own
expenses, including without limitation, the disbursements and fees of all their
respective attorneys, accountants, advisors, agents and other representatives,
incidental to the preparation and carrying out of this Agreement, whether or not
the transactions contemplated hereby are consummated.
11.3 Sales Tax. Sellers shall pay any and all sales or use taxes
arising as a result of the transactions hereunder.
11.4 Confidentiality. The parties recognize and agree that all
information, instruments, documents and details concerning the business of Buyer
and Sellers are strictly confidential, and Sellers and Buyer expressly covenant
and agree with each other that they will use their best efforts to prevent any
of their respective officers, directors, employees or agents from disclosing
any matters relating to the business of the other or to this Agreement, its
negotiation, terms, provisions or conditions, including the Purchase Price
except as may be reasonably necessary to effectuate the transactions
contemplated hereby; provided, however, neither party shall be prohibited from
making any legally required public announcement or other disclosure of the sale
and purchase of the Assets, including such details as to price, terms, rental
payments, and the like as may be required. Sellers and Buyer shall consult with
each other prior to any public announcement to discuss the content of any such
announcement.
11.5 Termination. If the transactions contemplated hereby are not
consummated, Buyer will return to Sellers, and Sellers will return to Buyer,
upon request, the respective materials, information, documents, instruments and
records supplied by the other party in respect to such party's business
operations and shall keep confidential all information which that party has
gathered with respect to the business of the other.
11.6 Risk of Loss. Risk of loss or damage by fire or other casualty
to the Assets or their taking by eminent domain before
- 30 -
<PAGE> 31
Closing is assumed by Sellers. In the event of a material loss, damage to or
taking of the Facility, Buyer shall have the option of either (i) terminating
this Agreement or (ii) continuing this Agreement, in which event Sellers shall
assign to Buyer all of Sellers' rights against third persons and under any
applicable insurance policy and any condemnation awards and pay over to Buyer
any sums received as a result of such loss, damage or taking. Buyer must
exercise its option to terminate this Agreement under this paragraph 11.6 by
notifying Sellers in writing within thirty (30) days after written notification
from Sellers to Buyer of any such loss.
11.7 Waiver. The failure of any party to insist, in any one or more
instances, on performances of any of the terms and conditions of this Agreement
shall not be construed as a waiver or relinquishment of any rights granted
hereunder or of the future performance of any such term, covenant (or condition,
but the obligations of the parties with respect thereto shall continue in full
force and effect.
11.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.9 Entire Agreement. This Agreement (including the Schedules
hereto) and all other agreements and documents executed in connection herewith
constitute the entire agreement between the parties hereto with respect to the
subject hereof and supersede all prior agreements, understandings, negotiations
and discussions of the parties, whether oral or written, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter hereof, except as specifically set forth
herein or therein. No amendment, alteration or modification of this Agreement
shall be valid unless in each instance such amendment, alteration or
modification is expressed in a written instrument duly executed by the parties.
11.10 Successors and Assigns. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto.
11.11 Further Assurances. Both before and after the Closing Date, the
parties will exercise good faith with the others and will take all appropriate
action and execute any documents, instruments or conveyances of any kind which
may be reasonably necessary or advisable to carry out any of the transactions
contemplated hereunder.
- 31 -
<PAGE> 32
11.12 Survival. All of the representations, warranties, covenants and
agreements contained in this Agreement and in any document or certificate
delivered pursuant hereto shall survive the Closing and shall continue to be
fully effective and enforceable. The representations and warranties contained in
this Agreement shall not be affected by any investigation, verification or
examination by any party hereto or by anyone on behalf of any such party.
11.13 Interpretation. Unless the context requires otherwise, all
words used in this Agreement in the singular number shall extend to and include
the plural, all words in the plural number shall extend to and include the
singular and all words in any gender shall extend to and include all genders.
"Including" and "include" as used herein shall mean without limitation.
11.14 Severability. If any provision, clause or part of this
Agreement, or the application thereof under certain circumstances, is held
invalid, the remainder of this Agreement, or the application of such provision,
clause or part under other circumstances, shall not.be affected thereby.
11.15 Governing Law. This Agreement is to be governed by, and
interpreted under, the laws of the State of Michigan.
* * *
- 32 -
<PAGE> 33
IN WITNESS WHEROF, the parties hereto have caused this Agreement to be
signed as of the date first above written.
COMMUNITY DIALYSIS CENTERS, a
Nevada corporation
By: David P. Barry
----------------------------------------
David P. Barry,
Executive Vice President
WYANDOTTE KIDNEY CENTER, P.C., a
Michigan professional
corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
CTA INVESTMENT GROUP, a
general partnership
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
--------------------------------------------
K. THAVARAJAH, M.D.
--------------------------------------------
C.V. KUMAR, M.D.
--------------------------------------------
SYED AKBAR, M.D.
VIJAY KUMAR CHILIKAPATI
REVOCABLE LIVING TRUST DATED
SEPTEMBER 26, 1984
By:
-----------------------------------------
C. V. Kumar, M.D.,
Trustee
THE KRISHNAPILLA THAVARAJAH
REVOCABLE LIVING TRUST
By:
-----------------------------------------
K. Thavarajah, M.D.,
Trustee
<PAGE> 34
IN WITNESS WHEREOF, the parties hereto have caused this Aqreement to be
signed as of the date first above written.
COMMUNITY DIALYSIS CENTERS, a
Nevada corporation
By:
-----------------------------------------
David P. Barry,
Executive Vice President
WYANDOTTE KIDNEY CENTER, P.C., a
Michigan professional
corporation
By: K. Thavarajah, M.D.
-----------------------------------------
Name: K. THAVARAJAH
---------------------------------------
Title: President
--------------------------------------
CTA INVESTMENT GROUP, a
general partnership
By: K. Thavarajah
-----------------------------------------
Name: K. THAVARAJAH
---------------------------------------
Title: President
--------------------------------------
K. Thavarajah
--------------------------------------------
K. THAVARAJAH, M.D.
C.V. Kumar, M.D.
--------------------------------------------
C.V. KUMAR, M.D.
SYED Akbar
--------------------------------------------
SYED AKBAR, M.D.
VIJAY KUMAR CHILIKAPATI
REVOCABLE LIVING TRUST DATED
SEPTEMBER 26, 1984
By: C.V. Kumar, M.D.
-----------------------------------------
C.V. Kumar, M.D.,
Trustee
THE KRISHNAPILLA THAVARAJAH
REVOCABLE LIVING TRUST
By: K. Thavarajah, M.D.
-----------------------------------------
K. Thavarajah, M.D.,
Trustee
<PAGE> 1
Consent of Independent Auditors
We consent to the incorporation by reference in Registration Statement
No. 33-85736 on Form S-4 dated March 21, 1995, No. 33-60513 on Form S-8
dated June 23, 1995, No. 33-98246 on Form S-8 dated August 17, 1994 and
No. 33-80030 on Form S-3 dated June 20, 1994, of our report dated July 12,
1995 on the financial statements of The Demopolis Dialysis Clinic, Inc.
and The Tuscaloosa County Dialysis Facilities, Inc. for the year ended
December 31, 1994 included in the Form 8-K of Vivra Incorporated filed
with the Securities and Exchange Commission.
/s/ Harbin & West, P.C.
Harbin and West, P.C.
Tuscaloosa, Alabama
July 31, 1995
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No.
33-85736 on Form S-4 dated March 21, 1995, No. 33-60513 on Form S-8 dated June
23, 1995, No. 33-98246 on Form S-8 dated August 17, 1994, and No. 33-80030 on
Form S-3 dated June 20, 1994, of our report dated June 9, 1995, on the
financial statements of San Joaquin Artificial Kidney Center, Inc. for the year
ended December 31, 1994 included in the Form 8-K of Vivra Incorporated filed
with the Securities and Exchange Commission.
/s/ Iacopi, Lenz & Company
IACOPI, LENZ & COMPANY
Accountancy Corporation
Stockton, California
August 1, 1995
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No.
33-85736 on Form S-4 dated March 21, 1995, No. 33-60513 on Form S-8 dated June
23, 1995, No. 33-98246 on Form S-8 dated August 17, 1994, and No. 33-80030 on
Form S-3 dated June 20, 1994, of our report dated June 9, 1995, on the
financial statements of Oak Valley Dialysis Clinic, Inc. for the year ended
December 31, 1994 included in the Form 8-K of Vivra Incorporated filed with the
Securities and Exchange Commission.
/s/ Iacopi, Lenz & Company
IACOPI, LENZ & COMPANY
Accountancy Corporation
Stockton, California
August 1, 1995
<PAGE> 1
Coopers Coopers & Lybrand L.L.P
& Lybrand
a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
Vivra Incorporated on Post-Effective Amendment No. 1 to Form S-4 (File
No. 33-85736) dated March 21, 1995, Form S-8 (File No. 33-60513) dated June 23,
1995, Form S-8 (File No. 33-82946) dated August 17, 1994, and Amendment No.
1 to Form S-3 (File No. 33-80030) dated June 20, 1994, of our report dated May
24, 1995, on our audit of the combined financial statements of Dialysis
Services of Southwest Florida, Inc. and Cape Coral Dialysis Center, Inc. as of
and for the year ended December 31, 1994 included in the Form 8-K of Vivra
Incorporated filed with the Securities and Exchange Commission.
/s/ Coopers & Lybrand
COOPERS & LYBRAND L.L.P.
Fort Myers, Florida
August 14, 1995
<PAGE> 1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement
No. 33-85736 on Form S-4 dated March 21, 1995, No. 33-60513 on Form S-8
dated July 23, 1995, No. 33-98246 on Form S-8 dated August 17, 1994, and
No. 33-80030 on Form S-3 dated June 20, 1994, of our report dated July 14,
1995, on the combined financial statements of Oakwood Kidney Center P.C. and
Wyandotte Kidney Center P.C. for the year ended December 31, 1994 included in
Form 8-K of Vivra, Incorporated, dated August 16, 1995 and filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Orange County, California
August 11, 1995
<PAGE> 1
DEMOPOLIS DIALYSIS CLINIC, INC.
FINANCIAL STATEMENTS AND
SUPPLEMENTARY INFORMATION
Year Ended December 31, 1994<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . 1
FINANCIAL STATEMENTS
Balance Sheet . . . . . . . . . . . . . . . . . . . . . 2-3
Statement of Income and Retained Earnings . . . . . . . 4
Statement of Cash Flows . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . 6-11
SUPPLEMENTARY INFORMATION
Schedule of General and Administrative Expenses . . . . 12
</TABLE>
<PAGE> 3
[HARBIN & WEST, P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To The Board of Directors
and Stockholders of Demopolis
Dialysis Clinic, Inc.
We have audited the accompanying balance sheet of Demopolis Dialysis Clinic,
Inc. as of December 31, 1994, and the related statements of income and
retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, financial statement referred to in the first paragraph presents
fairly, in all material respects, the financial position of Demopolis Dialysis
Clinic, Inc. as of December 31, 1994, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule of general and administrative
expenses on page 12 is presented for the purposes of additional analysis and is
not a required part of the basic financial statements. Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/ Harbin and West, P.C.
-------------------------
Harbin and West, P.C.
Tuscaloosa, Alabama
July 12, 1995
<PAGE> 4
DEMOPOLIS DIALYSIS CLINIC, INC.
BALANCE SHEET
December 31, 1994
ASSETS
CURRENT ASSETS
Accounts receivable, net $ 74,664
Unbilled service revenues, net 121,692
Inventory 2,680
---------
TOTAL CURRENT ASSETS 199,036
EQUIPMENT, FURNITURE AND LEASEHOLD IMPROVEMENTS
Furniture 6,325
Leasehold improvements 220,028
Medical equipment 250,183
Office equipment 5,886
---------
482,422
Accumulated depreciation 151,862
---------
330,560
---------
$ 529,596
=========
The accompanying notes are an integral part of these financial
statements.
-2-
<PAGE> 5
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Cash overdrafts $ 8,207
Current obligations under capital lease 46,277
Current portion of long-term debt 73,057
Accounts payable 5,216
Accrued and withheld payroll taxes 1,315
Accrued expenses 127,044
Advances from related companies 45,000
--------
TOTAL CURRENT LIABILITIES 306,116
LONG-TERM DEBT, less current portion
Obligations under capital lease 90,470
Long-term debt 110,177
--------
200,647
STOCKHOLDER'S EQUITY
Common stock, $1.00 par value, 1,000 shares
authorized, issued and outstanding 1,000
Retained earnings 21,833
--------
22,833
--------
$529,596
========
</TABLE>
-3-
<PAGE> 6
DEMOPOLIS DIALYSIS CLINIC, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
Year Ended December 31, 1994
<TABLE>
<S> <C>
REVENUES
Dialysis services $ 945,876
Drugs and supplies 760,485
Support services 83,377
----------
1,789,738
COST OF OPERATIONS
Depreciation 57,340
Drugs and supplies 629,827
Employee benefits 31,725
Laboratory fees 3,499
Other direct costs 3,450
Patient insurance 65,838
Patient transportation 25,150
Payroll taxes 23,524
Salaries 252,426
----------
1,092,779
----------
GROSS MARGIN 696,959
GENERAL AND ADMINISTRATIVE EXPENSES 530,435
----------
INCOME FROM OPERATIONS 166,524
OTHER EXPENSE
Interest expense 38,498
Management fee 121,692
----------
160,190
----------
NET INCOME 6,334
BEGINNING RETAINED EARNINGS
As previously reported 333,564
Prior period adjustment (128,065)
----------
BEGINNING ACCUMULATED DEFICIT, as restated 205,499
----------
211,833
Distribution to stockholder (190,000)
----------
ENDING RETAINED EARNINGS $ 21,833
==========
</TABLE>
The accompany notes are an integral part of these financial statements.
-4-<PAGE> 7
DEMOPOLIS DIALYSIS CLINIC, INC.
STATEMENT OF CASH FLOWS
For The Year Ended December 31, 1994
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 6,334
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 59,975
Decrease in accounts receivable 53,804
Decrease in inventories 1,820
Increase in cash overdraft 8,207
Decrease in accounts payable (20,499)
Increase in accrued liabilities 171,320
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 280,961
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (121,913)
Dividends paid (190,000)
---------
NET CASH USED BY FINANCING ACTIVITIES (311,913)
---------
NET DECREASE IN CASH (30,952)
CASH AT BEGINNING OF YEAR 30,952
---------
CASH AT END OF YEAR $ 0
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE> 8
DEMOPOLIS DIALYSIS CLINIC, INC
NOTES TO FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Demopolis Dialysis Clinic, Inc. is an Alabama corporation organized and
incorporated on November 12, 1991 for the purpose of operating an outpatient
hemodialysis clinic located in Demopolis, Alabama. The Clinic operates twelve
dialysis stations and in addition to providing dialysis services also offers
counselling and other support services in the home and on an outpatient basis
to persons with chronic kidney disease.
Medicare and Medicaid Revenues
The Clinic receives revenues under a cost reimbursement formula which is
subject to audit and retroactive adjustments by the Medicare intermediary for
Medicare patients and the Alabama Medicaid Agency for Medicaid patients. Final
determinations have been issued through December 31, 1994 for Medicare and
Medicaid patients and there were no amounts due retroactively. Contractual
adjustments to revenues were specifically identified at December 31, 1994 and
were netted against service revenues.
Allowance for Doubtful Accounts
Doubtful accounts are provided for by reviewing patient accounts and
specifically identifying accounts that are likely to become uncollectible in
the subsequent period.
Inventory
Medical supplies utilized by the clinic are valued at the lower of cost or
market. Cost is based on specific identification method.
Equipment, Furniture and Leasehold Improvements
Equipment, furniture and leasehold improvements are recorded at cost. Minor
additions and renewals are expensed in the year incurred. Major additions and
renewals are capitalized and depreciated over their estimated useful lives
using the straight-line depreciation method.
Continued
-6-
<PAGE> 9
DEMOPOLIS DIALYSIS CLINIC, INC
NOTES TO FINANCIAL STATEMENTS
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Clinic has elected to be taxed under the provisions of Subchapter S of the
Internal Revenue Code and under U.S.C. Section 1362 for the State of Alabama.
Under those provisions, the Clinic does not pay federal or state income taxes
on its taxable income. Instead, the stockholders are liable for individual
federal or state income taxes based on their respective shares of the Clinic's
taxable income.
NOTE B -- ACCOUNTS RECEIVABLE AND UNBILLED SERVICE REVENUES
The following is an analysis of accounts receivable at December 31, 1994:
<TABLE>
<S> <C>
Accounts receivable, gross $ 234,664
Less allowance for
doubtful accounts 160,000
---------
Accounts receivable, net $ 74,664
=========
</TABLE>
Per a management agreement executed November 30, 1994 between Community
Dialysis Center (CDC) and the Clinic, CDC will maintain billing records for
services provided and supplies used for the month of December 1994, but
billings for these services and supply revenues will not be prepared and
submitted until the acquisition of the clinic by CDC is closed (see Note F).
The following schedule summarizes revenue producing activities for the month of
December 1994.
<TABLE>
<S> <C>
Gross revenues $ 310,645
Contractual adjustment (188,953)
---------
Unbilled service revenues, net $ 121,692
=========
</TABLE>
Continued
-7-
<PAGE> 10
DEMOPOLIS DIALYSIS CLINIC, INC
NOTES TO FINANCIAL STATEMENTS
NOTE C -- DEBT
Obligations Under Capital Lease
On June 11, 1992 the Clinic entered into a capital lease agreement with First
Alabama Leasing. The equipment under lease is used in performing dialysis
services provided by the Clinic and is capitalized at cost of $222,583 and is
included in medical equipment in the accompanying financial statements.
Interest is fixed at 11.57% and the lease is payable in sixty monthly payments
of $5,052.62 each with the first payment due June 11, 1992 and final payment
due June 11, 1997. The lease is secured by individual guaranty of corporate
officers. Depreciation expense for this equipment for the year ended December
31, 1994 is $31,798 and accumulated depreciation is $79,495 and is included in
accumulated depreciation in the accompanying financial statements.
Long-term Debt
On August 25, 1993 the Clinic entered into a long-term debt agreement with
Robertson Bank in the amount of $300,000. Interest accrues at prime plus 1%.
The note is due in forty-seven monthly installments of $7,183.87 each and
remaining principal and interest is due August 25, 1997. The note is secured by
all assets of the corporation and the continuing personal guarantee of the
shareholder and assignment of a life insurance policy.
Maturities of Lease Payments and Long-Term Debt
The net present value of future minimum lease payments and installments of
long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING FIRST ALABAMA ROBERTSON
DECEMBER 31 LEASING BANK TOTAL
----------- ------------- --------- ---------
<S> <C> <C> <C>
1997 $ 90,470 $110,177 $200,647
======== ======== ========
</TABLE>
Continued
-8-
<PAGE> 11
DEMOPOLIS DIALYSIS CLINIC, INC
NOTES TO FINANCIAL STATEMENTS
NOTE D -- RELATED PARTY TRANSACTIONS
The Clinic had the following transactions in the form of non-interest bearing,
due on demand, unsecured advances from related companies for the year ended
December 31, 1994:
<TABLE>
<CAPTION>
BALANCE BALANCE
12/31/93 ADVANCES REDUCTIONS 12/31/94
-------- -------- ---------- --------
<S> <C> <C> <C> <C>
Tuscaloosa
County
Dialysis
Facilities $ -0- $ 85,000 $ 40,000 $ 45,000
Crimson
Medical
Supply -0- 25,000 25,000 -0-
-------- --------- -------- --------
$ -0- $ 110,000 $ 65,000 $ 45,000
======== ========= ======== ========
</TABLE>
The Clinic collected $3,600 during the year ended December 31, 1994 to satisfy
an outstanding advance from Tuscaloosa County Dialysis Facilities, Inc. made
in 1993.
Corporate officers and shareholders are also guarantors on obligations under
capital lease and long-term debt as described in Note B, above.
NOTE E -- OPERATING LEASES
The Clinic operates from a leased facility under a five-year operating lease
commencing January 1, 1992. The agreement calls for annual rents of $12,000
payable in installments of $1,000 each month in advance. Provided the Clinic is
not in default under any terms and conditions of the lease agreement there is a
renewal option for two additional periods of five years at a minimum annual
rental of $15,000 and $18,750, respectively.
Net future minimum lease payments under the operating lease for clinic facility
as of December 31, 1994 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-----------
<S> <C>
1996 $ 12,000
1997 12,000
--------
$ 24,000
========
</TABLE>
Continued
-9-
<PAGE> 12
DEMOPOLIS DIALYSIS CLINIC, INC
NOTES TO FINANCIAL STATEMENTS
NOTE E -- OPERATING LEASES (CONTINUED)
The rental expense charged to operations for facility lease is $12,000 for the
year ended December 31, 1994.
NOTE F -- SUBSEQUENT EVENTS
Sale of Business
An agreement for sale and purchase of assets was entered into as of November
30, 1994 by and among Community Dialysis Centers, Inc. and VIVRA, Inc., on one
hand, and the Demopolis Dialysis Clinic, Inc. and related company, Tuscaloosa
County Dialysis Facilities, Inc., on the other hand. A general listing of the
assets to be sold by the clinic's are listed below and specifically exclude
accounts receivable, notes receivable, cash and securities:
1. All furniture, furnishings, equipment and other tangible personal property.
2. Inventories of housekeeping and operating items and materials and other
supplies, consumables and disposables.
3. All intangible property, including licenses, rights, permits, authority
consents, certificate of need, accreditations except those which are not
transferrable and also includes:
a. The business or trade names and business goodwill.
b. All usable prepaid items and deposits held by third parties.
c. All volume rebates from certain suppliers.
d. All proprietary rights including patents, patent rights, referral
lists, patient and provider lists, etc.
4. All patient records for patients who consent to transfer.
The sales price to be paid for the assets of both clinics is to be $6,000,000.
Closing occurred on January 5, 1995.
A management agreement was included as a condition of the terms of the sale and
purchase agreement. The terms of the agreement are, basically that the proposed
buyers take full authority to manage the day-to-day operations of the clinics
on December 1, 1994. Their fee for those services is all gross revenues earned
from December 1, 1994 through closing at January 5, 1995.
-10-
<PAGE> 13
DEMOPOLIS DIALYSIS CLINIC, INC
NOTES TO FINANCIAL STATEMENTS
NOTE G -- PRIOR PERIOD ADJUSTMENT
Management subsequently discovered that accounts receivable was overstated by
$128,065 for the year ended December 31, 1993. Correction of this error resulted
in a reduction of previously reported net income of $128,065.
NOTE H -- CONTINGENCY
The Clinic is engaged in the practice of paying C-Plus premiums on behalf of
patients for whom they also provide services and are eligible for reimbursement
under their provider agreement. This practice is explicitly prohibited by the
insurance company. Investigation of this practice by the insurance company
could have material negative effects on these financial statements. At this
time, the quantitative and qualitative effects cannot be readily determined.
-11-
<PAGE> 14
SUPPLEMENTAL INFORMATION
<PAGE> 15
DEMOPOLIS DIALYSIS CLINIC, INC.
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
Year Ended December 31, 1994
<TABLE>
<S> <C>
Accounting $ 42,475
Advertising 1,804
Bad debt 160,000
Consulting 14,172
Contracted services 270
Contributions 1,017
Depreciation 1,745
Dues and subscriptions 624
Employee reimbursements 10,921
Equipment rental 6,436
Insurance
General 7,428
Employee health and life 9,483
Legal 5,253
Miscellaneous 930
Office supplies 6,992
Postage 269
Payroll taxes 10,418
Rent 12,000
Repairs and maintenance 4,731
Salaries
Medical director 68,750
Support 106,945
Supplies 7,307
Taxes and licenses 23,249
Telephone 10,154
Utilities 17,062
--------
$530,435
========
</TABLE>
-12-
<PAGE> 1
TUSCALOOSA COUNTY DIALYSIS FACILITIES, INC.
FINANCIAL STATEMENTS AND
SUPPLEMENTARY INFORMATION
Year Ended December 31, 1994<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
INDEPENDENT AUDITORS' REPORT................................. 1
FINANCIAL STATEMENTS
Balance Sheet........................................ 2 - 3
Statement of Income and Retained Earnings............ 4
Statement of Cash Flows.............................. 5
Notes to Financial Statements........................ 6 - 11
SUPPLEMENTARY INFORMATION
Schedule of General and Administrative Expenses...... 12
</TABLE>
<PAGE> 3
[HARBIN & WEST, P.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To The Board of Directors
and Stockholders of Tuscaloosa County
Dialysis Facilities, Inc.
We have audited the accompanying balance sheet of Tuscaloosa County Dialysis
Facilities, Inc. as of December 31, 1994, and the related statements of income
and retained earnings, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, financial statements referred to in the first paragraph
presents fairly, in all material respects, the financial position of Tuscaloosa
County Dialysis Facilities, Inc. as of December 31, 1994, and the results of
its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule of general and administrative
expenses on page 12 is presented for the purposes of additional analysis and is
not a required part of the basic financial statements. Such information has
been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
HARBIN & WEST, P.C.
---------------------
Harbin and West, P.C.
Tuscaloosa, Alabama
July 12, 1995
<PAGE> 4
TUSCALOOSA COUNTY DIALYSIS FACILITIES, INC.
BALANCE SHEET
December 31, 1994
ASSETS
CURRENT ASSETS
Cash $ 102,489
Accounts receivable, net 100,072
Unbilled service revenues, net 264,965
Advances to related companies 45,000
Inventory 19,000
---------
TOTAL CURRENT ASSETS 531,526
EQUIPMENT, FURNITURE AND LEASEHOLD IMPROVEMENTS
Furniture 13,649
Leasehold improvements 71,077
Medical equipment 295,915
Office equipment 11,468
Automotive equipment 7,500
---------
399,609
Accumulated depreciation 133,184
---------
266,425
---------
$ 797,951
=========
The accompanying notes are an integral part of these financial
statements.
-2-
<PAGE> 5
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current obligations under capital lease $ 46,706
Current portion of long-term debt 26,340
Accounts payable 9,207
Accrued expenses 279,305
Accrued and withheld payroll taxes 3,316
Advances from shareholders 75,000
--------
TOTAL CURRENT LIABILITIES 439,874
LONG-TERM DEBT, less current portion
Obligations under capital lease 104,619
Long-term debt 95,943
--------
200,562
STOCKHOLDER'S EQUITY
Common stock, $1.00 par value, 10,000 shares
authorized, issued and outstanding 10,000
Retained earnings 147,515
--------
157,515
--------
$797,951
========
</TABLE>
-3-
<PAGE> 6
TUSCALOOSA COUNTY DIALYSIS FACILITIES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
Year Ended December 31, 1994
<TABLE>
<S> <C>
REVENUES
Dialysis services $1,381,745
Drugs and supplies 798,210
Support services 118,047
----------
2,298,002
COST OF OPERATIONS
Depreciation 52,874
Drugs and supplies 565,770
Employee benefits 33,703
Laboratory fees 4,397
Other direct costs 6,346
Patient insurance 42,854
Patient transportation 6,380
Payroll taxes 38,839
Salaries 382,167
----------
1,133,330
----------
GROSS MARGIN 1,164,672
GENERAL AND ADMINISTRATIVE EXPENSES 629,692
----------
INCOME FROM OPERATIONS 534,980
----------
OTHER EXPENSES
Interest expense 30,834
Management fee 264,965
----------
295,799
----------
NET INCOME 239,181
BEGINNING ACCUMULATED DEFICIT
As previously reported (43,069)
Prior period adjustment (48,597)
----------
BEGINNING ACCUMULATED DEFICIT, as restated (91,666)
----------
ENDING RETAINED EARNINGS $ 147,515
==========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
- 4 -
<PAGE> 7
TUSCALOOSA COUNTY DIALYSIS FACILITIES, INC.
STATEMENT OF CASH FLOWS
For The Year Ended December 31, 1994
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 239,181
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 56,462
Increase in accounts receivable (221,204)
Increase in inventories (14,000)
Decrease in accounts payable (53,641)
Increase in accrued liabilities 276,548
Decrease in advances from shareholders (59,000)
---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 224,346
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (70,000)
---------
NET CASH USED BY INVESTING ACTIVITIES (70,000)
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt (52,005)
---------
NET CASH USED BY FINANCING ACTIVITIES (52,005)
---------
NET INCREASE IN CASH 102,341
CASH AT BEGINNING OF YEAR 148
---------
CASH AT END OF YEAR $ 102,489
=========
</TABLE>
The accompanying notes are an integral part of these financial statements
- 5 -
<PAGE> 8
TUSCALOOSA COUNTY DIALYSIS FACILITIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Business
Tuscaloosa County Dialysis Facilities, Inc. is an Alabama corporation organized
and incorporated on March 31, 1992 for the purpose of operating an outpatient
hemodialysis clinic located in Tuscaloosa, Alabama. The Clinic operates
nineteen dialysis stations and in addition to providing dialysis services also
offers counselling and other support services in the home and on an outpatient
basis to persons with chronic kidney disease.
Medicare and Medicaid Revenues
The Clinic receives revenues under a cost reimbursement formula which is
subject to audit and retroactive adjustments by the Medicare intermediary for
Medicare patients and the Alabama Medicaid Agency for Medicaid patients. Final
determinations have been issued through December 31, 1994 for Medicare and
Medicaid patients and there were no amounts due retroactively. Contractual
adjustments to revenues were specifically identified at December 31, 1994 and
were netted against service revenues.
Allowance for Doubtful Accounts
Doubtful accounts are provided for by reviewing patient accounts and
specifically identifying accounts that are likely to become uncollectible in
the subsequent period.
Inventory
Medical supplies utilized by the clinic are valued at the lower of cost or
market. Cost is based on specific identification method.
Equipment, Furniture and Leasehold Improvements
Equipment, furniture and leasehold improvements are recorded at cost. Minor
additions and renewals are expensed in the year incurred. Major additions and
renewals are capitalized and depreciated over their estimated useful lives
using the straight-line depreciation method.
(Continued)
- 6 -
<PAGE> 9
TUSCALOOSA COUNTY DIALYSIS FACILITIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Clinic has elected to be taxed under the provisions of Subchapter S of the
Internal Revenue Code and under U.S.C. Section 1362 for the State of Alabama.
Under those provisions, the Clinic does not pay federal or state income taxes
on its taxable income. Instead, the stockholders are liable for individual
federal or state income taxes based on their respective shares of the Clinic's
taxable income.
NOTE B - ACCOUNTS RECEIVABLE AND UNBILLED SERVICE REVENUES
The following is an analysis of accounts receivable at December 31, 1994:
<TABLE>
<S> <C>
Accounts receivable, gross $180,072
Less allowance for
doubtful accounts 80,000
--------
Accounts receivable, net $100,072
========
</TABLE>
Per a management agreement executed November 30, 1994 between Community
Dialysis Center (CDC) and the Clinic, CDC will maintain billing records for
services provided and supplies used for the month of December 1994, but
billings for these services and supply revenues will not be prepared and
submitted until the acquisition of the clinic by CDC is closed (see Note E).
The following schedule summarizes revenue producing activities for the month of
December 1994.
<TABLE>
<S> <C>
Gross revenues $ 591,704
Contractual adjustment (326,739)
---------
Unbilled service revenues, net $ 264,965
=========
</TABLE>
Continued
- 7 -
<PAGE> 10
TUSCALOOSA COUNTY DIALYSIS FACILITIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE C -- DEBT
Obligations Under Capital Lease
On August 31, 1992 the Clinic entered into a capital lease agreement with First
Alabama Leasing. The equipment under lease is used in performing dialysis
services provided by the clinic and is capitalized at cost of $224,141 and is
included in medical equipment in the accompanying financial statements.
Interest is fixed at 11.57% and the lease is payable in sixty monthly payments
of $5,299.21 each with the first payment due August 31, 1992 and final payment
due August 31, 1997. The lease is secured by individual guaranty of corporate
officers. Depreciation expense for this equipment for the year ended December
31, 1994 is $32,020 and accumulated depreciation is $80,050 and is included in
accumulated depreciation in the accompanying financial statements.
Long-term Debt
On February 1, 1993 the Clinic entered into a long-term debt agreement with
First Alabama Bank in the amount of $170,025. Interest accrues at prime plus
1%. The note is due in fifty-nine monthly installments of $3,000 each and
remaining principal and interest is due January 24, 1998. The note is secured
by all assets of the corporation and the continuing personal guarantee of the
shareholders.
Maturities of Lease Payments and Long-Term Debt
The net present value of future minimum lease payments and installments of
long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING FIRST ALABAMA ROBERTSON
DECEMBER 31 LEASING BANK TOTAL
----------- ------------- --------- -----
<S> <C> <C> <C>
1997 $104,619 $28,739 $133,358
1998 -0- 67,204 67,204
-------- ------- --------
$104,619 $95,943 $200,562
======== ======= ========
</TABLE>
Continued
- 8 -
<PAGE> 11
TUSCALOOSA COUNTY DIALYSIS FACILITIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE D - RELATED PARTY TRANSACTIONS
The Clinic had the following transactions in the form of non-interest bearing,
due on demand, unsecured advances to related companies for the year ended
December 31, 1994:
<TABLE>
<CAPTION>
BALANCE BALANCE
12/31/93 ADVANCES REDUCTIONS 12/31/94
-------- -------- ---------- --------
<S> <C> <C> <C> <C>
Demopolis
Dialysis
Clinic $ -0- $ 85,000 $ 40,000 $ 45,000
======== ======== ========== ========
</TABLE>
The clinic had the following transactions in the form of non-interest bearing,
due on demand, unsecured advances from related companies for the year ended
December 31, 1994:
<TABLE>
<CAPTION>
BALANCE BALANCE
12/31/93 ADVANCES REDUCTIONS 12/31/94
-------- -------- ---------- --------
<S> <C> <C> <C> <C>
Crimson
Medical
Supply $ -0- $ 25,000 $ 25,000 $ -0-
======== ======== ========== ========
</TABLE>
The Clinic also repaid $34,000 on an accumulated advance from a shareholder of
$109,000 leaving a balance due of $75,000 at December 31, 1994.
The Clinic operates from a leased facility under a fifteen year operating lease
commencing September 15, 1992. This leased property is owned by a shareholder
of the Clinic. The lease agreement calls for monthly lease payments of $6,975.
<TABLE>
<S> <C>
1996 $ 83,700
1997 83,700
--------
$167,400
========
</TABLE>
The rental expense charged to operation for facility lease is $83,700 for the
year ended December 31, 1994.
Corporate officers and shareholders are also guarantors on obligations under
capital lease and long-term debt as described in Note B, above.
Continued
-9-
<PAGE> 12
TUSCALOOSA COUNTY DIALYSIS FACILITIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE E - SUBSEQUENT EVENTS
Sale of Business
An agreement for sale and purchase of assets was entered into as of November
30, 1994 by and among Community Dialysis Centers, Inc. and VIVRA, Inc., on one
hand the Demopolis Dialysis Clinic, Inc. and related company, Tuscaloosa County
Dialysis Facilities, Inc., on the other hand. A general listing of the assets
to be sold by the clinics are listed below and specifically exclude accounts
receivable, notes receivable, cash and securities:
1. All furniture, furnishings, equipment and other tangible personal
property.
2. Inventories of housekeeping and operating items and materials and other
supplies, consumables and disposables.
3. All intangible property, including licenses, rights, permits, authority
consents, certificate of need, accreditations except those which are not
transferrable and also includes:
a. The business or trade names and business goodwill.
b. All usable prepaid items and deposits held by third parties.
c. All volume rebates from certain suppliers.
d. All proprietary rights including patents, patent rights, referral
lists, patient and provider lists, etc.
4. All patient records for patients who consent to transfer.
The sales price for to be paid for the assets of both clinics is to be
$6,000,000. Closing occurred on January 5, 1995.
A management agreement was included as a condition of the terms of the sale and
purchase agreement. The terms of the agreement are, basically that the
proposed buyers take full authority to manage the day-to-day operations of the
clinics on December 1, 1994. Their fee for those services is all gross
revenues earned from December 1, 1994 through closing at January 5, 1995.
- 10 -
<PAGE> 13
TUSCALOOSA COUNTY DIALYSIS FACILITIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE F - PRIOR PERIOD ADJUSTMENT
Management subsequently discovered that accounts receivable was overstated by
$48,597 for the year ended December 31, 1993. Correction of this error
resulted in a reduction of previously reported net income of $48,597.
NOTE G - CONTINGENCY
The Clinic is engaged in the practice of paying C-Plus premiums on behalf of
patients for whom they also provide services and are eligible for reimbursement
under their provider agreement. This practice is explicitly prohibited by the
insurance company. Investigation of this practice by the insurance company
could have material negative effects on these financial statements. At this
time, the quantitative and qualitative effects cannot be readily determined.
- 11 -
<PAGE> 14
SUPPLEMENTAL INFORMATION
<PAGE> 15
TUSCALOOSA COUNTY DIALYSIS FACILITIES, INC.
SCHEDULE OF GENERAL AND ADMINISTRATIVE EXPENSES
Year Ended December 31, 1994
<TABLE>
<S> <C>
Accounting $ 42,475
Advertising 858
Bad debt 80,000
Consulting 13,492
Contracted services 7,771
Contributions 1,060
Depreciation 3,588
Dues and subscriptions 873
Employee reimbursements 13,189
Equipment rental 1,735
Insurance
General 4,090
Employee health and life 19,195
Legal 12,500
Miscellaneous 1,723
Office supplies 24,129
Payroll taxes 15,520
Postage 888
Rent 83,700
Repairs and maintenance 3,552
Salaries
Medical director 68,750
Support 157,549
Supplies 6,309
Taxes and licenses 32,129
Telephone 12,335
Utilities 22,282
--------
$629,692
========
</TABLE>
-12-
<PAGE> 1
OAK VALLEY DIALYSIS CLINIC, INC.
(A CALIFORNIA S CORPORATION)
--------------------------------
INDEPENDENT AUDITORS' REPORT,
FINANCIAL STATEMENTS,
AND
SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1994
------------------------------------
<PAGE> 2
OAK VALLEY DIALYSIS CLINIC, INC.
(A CALIFORNIA S CORPORATION)
TABLE OF CONTENTS
<TABLE>
PAGE
------
<S> <C>
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . . 3-4
FINANCIAL STATEMENTS:
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . 5-6
Statement of Income . . . . . . . . . . . . . . . . . . . . 7
Statement of Retained Earnings . . . . . . . . . . . . . . 8
Statement of Cash Flows . . . . . . . . . . . . . . . . . . 9
NOTES TO FINANCIAL STATEMENT . . . . . . . . . . . . . . . . . 10-17
SUPPLEMENTARY INFORMATION:
Schedule of Operating Expenses . . . . . . . . . . . . . . . 19
</TABLE>
<PAGE> 3
[IACOPI, LENZ & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
OAK VALLEY DIALYSIS CLINIC,INC.
Stockton, California
We have audited the accompanying balance sheet of Oak Valley Dialysis
Clinic, Inc. (a California S corporation) as of December 31, 1994, and the
related statements of income, retained earnings, and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Oak Valley Dialysis
Clinic, Inc. as of December 31, 1994, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
-3-
<PAGE> 4
Oak Valley Dialysis Clinic, Inc.
(A California S Corporation)
Page 2
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information on page 19
is presented for the purposes of additional analysis and is not a required part
of the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
IACOPI, LENZ & COMPANY
Accountancy Corporation
Stockton, California
June 9, 1995
-4-
<PAGE> 5
OAK VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Balance Sheet
December 31, 1994
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $220,370
Patient accounts receivable, net of allowance
for adjustments/write-offs of $32,980 186,888
Medical supplies and medications on hand 16,000
--------
Total Current Assets 423,258
EQUIPMENT AND IMPROVEMENTS -- At cost, less
accumulated depreciation 302,956
OTHER ASSETS:
Lease deposits 5,660
Organization costs, less accumulated
amortization of $970 803
Loan fees, less accumulated amortization of $782 818
--------
Total Other Assets 7,281
--------
TOTAL ASSETS $733,495
========
</TABLE>
See accompanying notes and independent auditors' report.
-5-
<PAGE> 6
OAK VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Balance Sheet -- Continued
December 31, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Accounts payable -- Trade $ 5,051
Payable -- Related party 18,162
Accrued payroll and employee benefits 30,592
Current portion of long-term debt 84,867
Deferred income taxes 2,000
--------
Total Current Liabilities 140,672
DEFERRED INCOME TAXES 1,000
LONG-TERM DEBT, Less current portion 158,408
--------
Total Liabilities 300,080
STOCKHOLDERS' EQUITY:
Common stock -- Authorized 100,000 shares of no
par value; issued and outstanding 2,500 shares 25,000
Retained earnings 408,415
--------
Total Stockholders' Equity 433,415
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $733,495
========
</TABLE>
See accompanying notes and independent auditors' report.
-6-
<PAGE> 7
OAK VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Statement of Income
For the Year Ended December 31, 1994
<TABLE>
<S> <C>
INCOME:
In Center hemodialysis $1,120,245
Less: Patient refunds, write-offs, and
billing/contractual adjustments (medicare,
insurance, etc.) (12,622)
----------
Total Income 1,107,623
OPERATING EXPENSES 678,159
----------
INCOME FROM OPERATIONS 429,464
----------
OTHER INCOME (EXPENSE):
Interest income 2,388
Rent income 1,375
Miscellaneous income/rebates from suppliers 22,572
Employee profit sharing contribution (18,716)
Interest expense (28,789)
Depreciation (39,530)
Amortization (584)
Key man insurance premiums (4,817)
----------
Total Other Income (Expense) (66,101)
----------
INCOME BEFORE INCOME TAXES 363,363
PROVISION FOR INCOME TAXES:
Current 4,800
Deferred 800
----------
Total Provision for Income Taxes 5,600
----------
NET INCOME $ 357,763
==========
</TABLE>
See accompanying notes and independent auditors' report.
-7-
<PAGE> 8
OAK VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Statement of Retained Earnings
For the Year Ended December 31, 1994
<TABLE>
<S> <C>
BEGINNING, January 1, 1994 $ 160,652
Net income 357,763
Stockholder distributions (110,000)
----------
ENDING, December 31, 1994 $ 408,415
==========
</TABLE>
See accompanying notes and independent auditors' report.
-8-
<PAGE> 9
OAK VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Statement of Cash Flows
For the Year Ended December 31, 1994
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 357,763
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 40,114
(Increase) decrease:
Patient accounts receivable (42,310)
Medical supplies and medications
on hand (2,800)
Increase (decrease):
Accounts payable -- Trade (5,783)
Payable -- Related party 2,210
Accrued payroll and employee benefits 15,008
Deferred income tax payable 800
--------
Net Cash Provided by Operating Activities 365,002
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions to stockholders (110,000)
--------
Net Cash Used in Investing Activities (110,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (127,033)
--------
Net Cash Used in Financing Activities (127,033)
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS 127,969
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 92,401
--------
CASH AND CASH EQUIVALENTS AT END OF YEAR $220,370
========
</TABLE>
See accompanying notes and independent auditors' report.
-9-
<PAGE> 10
OAK VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Notes to Financial Statements
December 31, 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
The summary of significant accounting policies of Oak Valley Dialysis
Clinic, Inc. ("OVDC") is presented to assist in understanding the Company's
financial statements. The financial statements and notes are representations of
the Company's management who is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation of the
financial statements.
Business Activity
The Company is in the business of providing kidney dialysis
treatments to patients.
Accounting Methods
The Company's accounting policy is to prepare its financial
statements using the accrual basis of accounting and prepare its
corporate tax returns using the cash basis of accounting. Cash basis
net income for 1994 was $302,496.
Patient Accounts Receivable
The Company grants credit to its patients. An allowance for
adjustments/write offs is provided based on historical collection/
adjustment experience. The allowance for 1994 was 15% of the accounts
receivable balance at the end of the year.
Equipment, Improvements and Depreciation
The Company's fixed assets are recorded at cost, and are reflected
in the financial statements less appropriate allowances for accumulated
depreciation. Depreciation of equipment and improvements is provided
for in amounts sufficient to relate the cost of depreciable property
to operations over their estimated service lives of 5-20 years, using
the straight-line method.
Major improvements/betterments are capitalized to the asset
accounts, while recurring, standard-type repairs are charged to
operations in the year incurred.
-10-<PAGE> 11
Oak VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Notes to Financial Statements - Continued
December 31, 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued --
Upon disposal or retirement of depreciable property, the cost and
accumulated depreciation are removed from the property accounts and the
resulting gain or loss is reflected in the statement of income.
Organization Costs and Loan Fees
Organization costs and loan fees are being amortized over a period of
sixty (60) months and eighty-four (84) months, respectively. Amortization
of organization costs and loan fees in the amount of $584 has been charged
to current operations.
Income Taxes
The Company, with the consent of its stockholders, has elected under
the Internal Revenue Code to be an S corporation. In lieu of corporation
income taxes, the stockholders of an S corporation are taxed on their
proportionate share of the Company's taxable income. Accordingly, no
provision or liability for federal income taxes has been included in these
financial statements. The Company continues to pay state taxes based upon
1.5% of the Company's state taxable income, subject to a minimum franchise
tax of $800.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes," which is an
asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences of those
events that have been recognized in the Company's financial statement or
tax returns. The measurement of deferred tax assets and liabilities is
based on provisions of the enacted tax law; the effects of future changes
in tax laws or rates are not considered.
The cumulative effect resulting from the adoption of Financial
Accounting Standards No. 109 was not material to the determination of net
income in prior years.
-11-<PAGE> 12
OAK VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Notes to Financial Statements -- Continued
December 31, 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued --
Compensated Absences
Employees of the Company are entitled to paid vacations, sick
days, and other time off depending on type of employment, length of
service, and other factors. It is impracticable to estimate the amount
of compensation for future absences and, accordingly, no liability has
been recorded in the accompanying financial statements. The Company's
policy is to recognize the costs of compensated absences when paid to
employees.
Medical Supplies and Medications on Hand
Medical supplies and medications on hand are stated at lower of
cost or market value.
NOTE 2: CASH AND CASH FLOW INFORMATION --
Uninsured Bank Balances
The Company maintains bank accounts at two banks. The balances in the
operating account are insured by the Federal Deposit Insurance Corporation
("FDIC") up to $100,000. The balance in the brokerage account is insured by the
FDIC for $100,000, and the Securities Investor Protection Corporation for
$400,000. The amount in excess of the insured limits in the operating accounts
was $36,666, as of December 31, 1994.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less from the balance sheet date to be cash and cash
equivalents.
Cash and cash equivalents as of December 31, 1994, consisted of the
following:
<TABLE>
<S> <C>
Cash in operating accounts $159,258
Cash in brokerage account 61,112
--------
$220,370
========
</TABLE>
-12-<PAGE> 13
OAK VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Notes to Financial Statements -- Continued
December 31, 1994
NOTE 3: EQUIPMENT AND IMPROVEMENTS --
Other Cash Flow Information
<TABLE>
<S> <C>
Cash paid for interest expense $ 28,789
Cash paid for state income taxes $ 4,800
</TABLE>
As of December 31, 1994, equipment and improvements consisted of the
following:
<TABLE>
<S> <C>
Medical equipment $ 180,335
Office furniture and equipment 50,738
Leasehold improvements 184,753
---------
415,826
Less: Accumulated depreciation (112,870)
---------
$ 302,956
=========
</TABLE>
Depreciation expense was $39,530 for the year ended December 31, 1994.
NOTE 4: LONG-TERM DEBT --
As of December 31, 1994, long-term debt consisted of the following:
<TABLE>
<CAPTION>
TOTAL CURRENT
NOTES PAYABLE -- STOCKHOLDERS AMOUNT DUE PORTION
---------------------------- ---------- -------
<S> <C> <C>
Note payable to stockholder Dr. George Herron,
payable in monthly installments of $316.67,
interest only at 9.5% per annum, unsecured,
principal and interest due January 1, 1997. $40,000 $ --
Note payable to stockholder Dr. George Herron,
payable in monthly installments of $79.17,
interest only at 9.5% per annum, unsecured,
principal and interest due December 15, 1996. 10,000 --
Note payable to stockholder Dr. George Herron,
payable in monthly installments of $56.25,
interest only at 9% per annum, unsecured,
principal and interest due December 30, 1996. 7,500 --
</TABLE>
-13-
<PAGE> 14
OAK VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Notes to Financial Statements -- Continued
December 31, 1994
NOTE 4: LONG-TERM DEBT -- Continued --
<TABLE>
<CAPTION>
TOTAL CURRENT
AMOUNT DUE PORTION
---------- -------
<S> <C> <C>
Note payable to stockholder Dr. Lian Soung,
payable in monthly installments of $316.67,
interest only at 9.5% per annum, unsecured,
principal and interest due January 1, 1997. 40,000 --
Note payable to stockholder Dr. Lian Soung,
payable in monthly installments of $79.17,
interest only at 9.5% per annum, unsecured,
principal and interest due December 15, 1996. 10,000 --
Note payable to stockholder Dr. Lian Soung,
payable in monthly installments of $56.25,
interest only at 9% per annum, unsecured,
principal and interest due December 30, 1996. 7,500 --
------- ------
Sub-Total Notes Payable -- Stockholders 115,000 --
Contract Payable -- COBE
Contract payable -- COBE, payable in monthly
installments of $3,248.60, including interest
at 9% per annum, secured by dialysis equipment,
due in April 1996. 48,808 36,054
Note Payable -- Bank of Agriculture & Commerce
Note payable -- Bank of Agriculture & Commerce,
payable in monthly installments of $4,571.02,
including interest at 10.5% per annum, secured
by accounts, equipment, general intangibles,
and fixtures, due July 1996. 79,467 48,813
-------- -------
Totals 243,275 $84,867
=======
Less: Current maturities (84,867)
--------
Total Long-Term Debt $158,408
========
</TABLE>
-14-
<PAGE> 15
OAK VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Notes to Financial Statements -- Continued
December 31, 1994
NOTE 4: LONG-TERM DEBT -- CONTINUED --
Principal maturities of long-term debt over the next two years are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ------
<S> <C>
1995 $ 84,867
1996 158,408
--------
Total $243,275
========
</TABLE>
NOTE 5: PROFIT SHARING PLAN --
The Company maintains a profit sharing plan for all full-time employees
with at least one year of service and over the age of 21. The Company's plan
contribution is based on the employees' annual compensation. Contributions to
the profit sharing plan are at the discretion of the Board of Directors. Total
contributions to the plan were $18,716 for the year ended December 31, 1994,
and are included in accrued payable and employee benefits.
NOTE 6: OPERATING LEASES --
The Company entered into a leasing agreement in August 1991, for an
office building, effective January 1, 1992. The lease called for varying
minimum monthly rental payments over the sixty-four (64) month term of the
lease.
As of December 31, 1994, the minimum monthly rent is $2,953. The
agreement calls for an increase to $3,071 during 1995, and $3,194 during 1996,
the final year of the lease.
Upon expiration of the lease term, the Company has the option to renew
the lease for an additional five (5) years.
Future minimum rental payments required under the operating leases in
excess of one year are as follows:
<TABLE>
<S> <C>
1995 $36,380
1996 $37,836
</TABLE>
-15-<PAGE> 16
OAK VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Notes to Financial Statements -- Continued
December 31, 1994
NOTE 6: OPERATING LEASES -- Continued --
Total rent expense for the year ended December 31, 1994, was $41,334.
NOTE 7: INCOME TAXES --
The provision for income taxes, as of December 31, 1994, consisted of
the following:
<TABLE>
<S> <C>
Income tax benefit (expense):
Current $(4,800)
Deferred (800)
-------
$(5,600)
=======
</TABLE>
The components of the deferred income tax liabilities (amounts not
recognized in the financial statement which will result in future taxable
income) were the following at December 31, 1994:
<TABLE>
<CAPTION>
CURRENT NON-CURRENT
DEFERRED TAX DEFERRED TAX
LIABILITY LIABILITY
------------ ------------
<S> <C> <C>
Accounts receivable -- Net of allowance
for adjustments/write-offs $(2,800) $ --
Medical supplies and medications
on hand 200 --
Depreciation -- (1,000)
Accounts payable 100 --
Accounts payable -- Related party 300 --
Accrued expenses 200 --
------- -------
$(2,000) $(1,000)
======= =======
</TABLE>
NOTE 8: SUBSEQUENT EVENT --
On January 26, 1995, the Company sold its assets to Community Dialysis
Centers, a Nevada corporation, and VIVRA Incorporated, a Delaware corporation,
for $1,290,000. The last day of operations for the Company was February 18,
1995. Since that date, all outstanding liabilities have been paid by the
Company.
-16-<PAGE> 17
OAK VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Notes to Financial Statements -- Continued
December 31, 1994
NOTE 9: RELATED PARTY TRANSACTIONS --
San Joaquin Artificial Kidney Center, Inc. is an S-Corporation owned by
certain stockholders who are also stockholders in Oak Valley Dialysis Clinic,
Inc. ("OVDC").
San Joaquin Artificial Kidney Center, Inc. pays for certain expenses
for Oak Valley Dialysis Clinic, Inc. and is reimbursed on a monthly basis by
OVDC. Oak Valley Dialysis Clinic, Inc. also pays for use of a Re-Use kidney
machine and the dialysis billing service. The net payable due to San Joaquin
Artificial Kidney Center, Inc. as of December 31, 1994 was $18,162.
Oak Valley Dialysis Clinic, Inc. has a verbal agreement with San
Joaquin Artificial Kidney Center, Inc. for the use of office space for $125 per
month. Rent income was $1,375 for 1994.
-17-<PAGE> 18
SUPPLEMENTARY INFORMATION
<PAGE> 19
OAK VALLEY DIALYSIS CLINIC, INC.
(A California S Corporation)
Schedule of Operating Expenses
For the Year Ended December 31, 1994
<TABLE>
<S> <C>
OPERATING EXPENSES:
Salaries -- General $217,320
Salaries -- Chief Executive Officer 20,858
Salaries -- Administrator 20,858
Payroll taxes 22,833
Employee education 163
Employee benefits 5,360
Workers' compensation insurance 3,388
Accounting and tax preparation fees 7,410
Consulting fees and temporary help 10,578
Lab fees 1,675
Rent on facility 41,334
Equipment rent 10,507
Laundry and cleaning 220
Repairs and maintenance -- Equipment 4,986
Repairs and maintenance -- General 292
Auto infect waste 3,320
Dialysis billing service 659
ADP payroll processing fee 1,134
Medical supplies 95,088
Medications 33,605
Medications -- EPO 133,350
Business meals and entertainment 655
Office expense and supplies 3,054
Janitorial 10,234
Telephone 4,008
Utilities 10,736
Security service 2,448
Insurance 7,023
Property tax 3,818
License 733
Auto expense 218
Legal fees 262
Miscellaneous 32
--------
Total Operating Expenses $678,159
========
</TABLE>
See accompanying notes and independent auditors' report.
-19-
<PAGE> 1
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A CALIFORNIA S CORPORATION)
------------------------------------------
INDEPENDENT AUDITORS' REPORT,
FINANCIAL STATEMENTS,
AND
SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1994
---------------------------------------
<PAGE> 2
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A CALIFORNIA S CORPORATION)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
------
<S> <C>
INDEPENDENT AUDITORS' REPORT........................................... 3-4
FINANCIAL STATEMENTS:
Balance Sheet...................................................... 5-6
Statement of Income................................................ 7
Statement of Retained Earnings..................................... 8
Statement of Cash Flows............................................ 9
NOTES TO FINANCIAL STATEMENT......................................... 10-17
SUPPLEMENTARY INFORMATION:
Schedule of Operating Expenses..................................... 19
/TABLE
<PAGE> 3
[IACOPI, LENZ & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
Stockton, California
We have audited the accompanying balance sheet of San Joaquin
Artificial Kidney Center, Inc. (a California S corporation) as of December 31,
1994, and the related statements of income, retained earnings, and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of San Joaquin
Artificial Kidney Center, Inc. as of December 31, 1994, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
-3-<PAGE> 4
San Joaquin Artificial
Kidney Center, Inc.
Page 2
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information on page 19
is presented for the purposes of additional analysis and is not a required part
of the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.
IACOPI, LENZ & COMPANY
Accountancy Corporation
/s/ Iacopi, Lenz & Company
--------------------------------------
Stockton, California
June 9, 1995
-4-<PAGE> 5
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A California S Corporation)
Balance Sheet
December 31, 1994
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 572,693
Patient accounts receivable, net of allowance
for adjustments/write-offs of $89,013 504,405
Receivable - Related party 18,162
Medical supplies and medications on hand 45,000
Prepaid state tax 8,439
----------
Total Current Assets 1,148,699
EQUIPMENT AND IMPROVEMENTS -- At cost, less
accumulated depreciation 553,073
ORGANIZATION COST -- Less accumulated
amortization of $14,969 1,363
----------
TOTAL ASSETS $1,703,135
==========
</TABLE>
See accompanying notes and independent auditors' report.
-5-
<PAGE> 6
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC
(A California S Corporation)
Balance Sheet -- Continued
December 31, 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Accounts payable -- Trade $ 20,960
Accrued payroll and employee benefits 94,152
Accrued bonuses 16,996
Payroll tax payable 6,710
Current portion of long-term debt 249,013
Capital lease obligation 1,507
Deferred income taxes 6,100
----------
Total Current Liabilities 395,438
DEFERRED INCOME TAXES 3,700
LONG-TERM DEBT, Less current portion 13,503
----------
Total Liabilities 412,641
STOCKHOLDERS' EQUITY:
Common stock -- Authorized 100,000 shares of no par value;
issued and outstanding 2,500 shares 25,000
Retained earnings 1,265,494
----------
Total Stockholders' Equity 1,290,494
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,703,135
==========
</TABLE>
See accompanying notes and independent auditors' report.
-6-<PAGE> 7
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A California S Corporation)
Statement of Income
For The Year Ended December 31, 1994
<TABLE>
<S> <C>
INCOME:
In center hemodialysis patient income $4,263,980
CAP dialysis patient income 205,864
Doctors' billing service 172,224
Less: Patient refunds, write-offs, and billing/contractual
adjustments (medicare, insurance, etc.) (931,587)
----------
Total Income 3,710,481
----------
OPERATING EXPENSES 2,720,999
----------
INCOME FROM OPERATIONS 989,482
----------
OTHER INCOME/(EXPENSE):
Interest income 20,762
Equipment rent income 10,509
Miscellaneous income/expense recoveries 89,025
Employee profit sharing contribution (125,056)
Contributions (45)
Interest expense (37,937)
Depreciation (109,870)
Amortization (3,266)
Key man insurance premiums (14,770)
----------
Total Other Income/(Expense) (170,648)
----------
INCOME BEFORE INCOME TAXES 818,834
BENEFIT (PROVISION) FOR INCOME TAXES:
Current (11,637)
Deferred 200
----------
Total Benefit (Provision) for Income Taxes (11,437)
----------
NET INCOME $ 807,397
==========
</TABLE>
See accompanying notes and independent auditors' report.
-7-<PAGE> 8
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A California S Corporation)
Statement of Retained Earnings
For the Year Ended December 31, 1994
<TABLE>
<S> <C>
BEGINNING, January 1, 1994 $ 783,097
Net income 807,397
Stockholder distributions (325,000)
----------
ENDING, December 31, 1994 $1,265,494
==========
</TABLE>
See accompanying notes and independent auditors' report.
-8-<PAGE> 9
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A California S Corporation)
Statement of Cash Flows
For the Year Ended December 31, 1994
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: $ 807,397
Net income
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 113,136
(Increase) decrease:
Patient accounts receivable 126,284
Receivable - Related party (2,210)
Medical supplies and medications on hand 34,438
Prepaid state tax (8,439)
Cash in bank - Trust 35,041
Increase (decrease):
Accounts payable - Trade (93,624)
Accrued payroll and employee benefits (19,274)
Clearing account - Trust (35,041)
Payroll tax payable 6,710
Accrued bonuses 16,996
Accrued state tax payable (7,257)
Deferred income taxes (200)
---------
Net Cash Provided by Operating Activities 973,957
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment (17,062)
Distributions to stockholders (625,000)
---------
Net Cash Used in Investing Activities (642,062)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligation (2,306)
Payments on long-term debt (305,077)
---------
Net Cash Used in Financing Activities (307,383)
---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 24,512
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 548,181
---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 572,693
=========
</TABLE>
See accompanying notes and independent auditors' report.
-9-<PAGE> 10
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A California S Corporation)
Notes to Financial Statements
December 31, 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
The summary of significant accounting policies of San Joaquin
Artificial Kidney Center, Inc. is presented to assist in understanding the
Company's financial statements. The financial statements and notes are
representations of the Company's management who is responsible for their
integrity and objectivity. These accounting policies conform to generally
accepted accounting principles and have been consistently applied in the
preparation of the financial statements.
Business Activity
The Company is in the business of providing kidney dialysis
treatments to patients and a billing service for two doctors' medical
practices.
Accounting Methods
The Company's accounting policy is to prepare its financial
statements using the accrual basis of accounting and prepare its
corporate tax returns using the cash basis of accounting. Cash basis
net income for 1994 was $728,851.
Patient Accounts Receivable
The Company grants credit to its patients. An allowance for
adjustments/write offs is provided based on historical collection/
adjustment experience. The allowance for 1994 was 15% of the accounts
receivable balance at the end of the year.
Equipment, Improvements, and Depreciation
The Company's fixed assets are recorded at cost, and are reflected
in the financial statements less appropriate allowances for accumulated
depreciation. Depreciation of equipment and improvements is provided
for in amounts sufficient to relate the cost of depreciable property
to operations over their estimated service lives of 5-20 years, using
the straight-line method.
Upon disposal or retirement of depreciable property, the cost and
accumulated depreciation are removed from the property accounts and the
resulting gain or loss is reflected in the statement of income.
-10-
<PAGE> 11
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A CALIFORNIA S CORPORATION)
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 31, 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- CONTINUED --
Medical Supplies and Medications on Hand
Medical supplies and medications on hand are stated at lower of
cost or market value.
Organization Costs
Organization costs are being amortized over a period of sixty
(60) months. Amortization of organization costs in the amount of $3,266
has been charged to current operations.
Income Taxes
The Company, with the consent of its stockholders, has elected
under the Internal Revenue Code to be an S corporation. In lieu of
corporation income taxes, the stockholders of an S corporation are taxed
on their proportionate share of the Company's taxable income.
Accordingly, no provision or liability for federal income taxes has been
included in these financial statements. The Company continues to pay
state taxes based upon 1.5% of the Company's state taxable income,
subject to a minimum franchise tax of $800.
Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
which is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax
consequences of those events that have been recognized in the Company's
financial statement or tax returns. The measurement of deferred tax
assets and liabilities is based on provisions of the enacted tax law;
the effects of future changes in tax laws or rates are not considered.
The cumulative effect resulting from the adoption of Financial
Accounting Standards No. 109 was not material to the determination of
net income in prior years.
-11-<PAGE> 12
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A California S Corporation)
Notes to Financial Statements -- Continued
December 31, 1994
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- Continued --
Compensated Absences
Employees of the Company are entitled to paid vacations, sick days and
other time off depending on type of employment, length of service and
other factors. It is impracticable to estimate the amount of
compensation for future absences and, accordingly, no liability has
been recorded in the accompanying financial statements. The Company's
policy is to recognize the costs of compensated absences when paid to
employees.
NOTE 2: CASH AND CASH FLOW INFORMATION --
Uninsured Bank Balances
The Company maintains bank accounts at two banks. The balances in the
operating account are insured by the Federal Deposit Insurance Corporation
("FDIC") up to $100,000. The balance in the brokerage account is insured by
the FDIC for $100,000, and the Securities Investor Protection Corporation for
$400,000. The amount in excess of the insured limits in the operating accounts
was $265,916, as of December 31, 1994.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less from the balance sheet date to be cash and cash
equivalents.
Cash and cash equivalents as of December 31, 1994, consisted of the
following:
Cash in operating accounts $ 84,177
Cash in brokerage account 488,516
--------
$572,693
========
Other Cash Flow Information
Cash paid for interest expense $ 37,937
Cash paid for state income taxes $ 20,076
-12-
<PAGE> 13
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A California S Corporation)
Notes to Financial Statements -- Continued
December 31, 1994
NOTE 3: EQUIPMENT AND IMPROVEMENTS --
As of December 31, 1994, equipment and improvements consisted of the
following:
<TABLE>
<S> <C>
Medical equipment $500,872
Office furniture and equipment 195,061
Leasehold improvements 279,778
--------
975,711
Less: Accumulated depreciation (422,638)
--------
$553,073
========
</TABLE>
Depreciation expense was $109,870 for the year ended December 31, 1994.
NOTE 4: LONG-TERM DEBT --
As of December 31, 1994, long-term debt consisted of the following:
<TABLE>
<CAPTION>
TOTAL CURRENT
NOTES PAYABLE -- STOCKHOLDERS AMOUNT DUE PORTION
---------------------------- ---------- -------
<S> <C> <C>
Note payable to stockholder Dr. George
Herron, payable in monthly installments
of $345.46, interest only at 10% per
annum, unsecured, due September 1, 1995. $41,456 $41,456
Note payable to stockholder Dr. George
Herron, payable in monthly installments
of $352.91, interest only at 10% per
annum, unsecured, due September 1, 1995. 42,349 42,349
Note payable to stockholder Dr. George
Herron, payable in monthly installments
of $180.14, interest only at 10% per
annum, unsecured, due September 1, 1995. 21,616 21,616
Note payable to stockholder Dr. Lian
Soung, payable in monthly installments
of $345.46, interest only at 10% per
annum, unsecured, due September 1, 1995. 41,456 41,456
</TABLE>
-13-
<PAGE> 14
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A California S Corporation)
Notes to Financial Statements -- Continued
December 31, 1994
NOTE 4: LONG-TERM DEBT -- Continued --
<TABLE>
<CAPTION>
TOTAL CURRENT
Notes Payable -- Stockholders AMOUNT DUE PORTION
----------------------------- ---------- -------
<S> <C> <C>
Note payable to stockholder Dr. Lian
Soung, payable in monthly installments
of $352.91, interest only at 10% per
annum, unsecured, due September 1, 1995. 42,349 42,349
Note payable to stockholder Dr. Lian
Soung, payable in monthly installments
of $180.14, interest only at 10% per
annum, unsecured, due September 1, 1995. 21,616 21,616
------- -------
Sub-Total Notes Payable -- Stockholders 210,842 210,842
Contract Payable -- COBE
------------------------
Contract payable - COBE, payable in monthly
installments of $3,439.34, including interest
at 9% per annum, secured by dialysis equipment
due in April 1996. 51,674 38,171
--------- --------
Totals 262,516 $249,013
========
Less: Current maturities (249,013)
---------
Total Long-Term Debt $ 13,503
=========
</TABLE>
Principal maturities of long-term debt over the next two years are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ --------
<S> <C>
1995 $249,013
1996 13,503
--------
Total $262,516
========
</TABLE>
-14-
<PAGE> 15
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A California S Corporation)
Notes to Financial Statements -- Continued
December 31, 1994
NOTE 5: CAPITAL LEASE OBLIGATION --
The Company acquired its copy machine under the provisions of a
long-term lease with Drs. George Herron and Lian Soung (stockholders of the
Company). The economic substance of the lease is that the Company is financing
the acquisition of the copier through the lease. As of December 31, 1994, the
capitalized cost of the copier was $8,190 and accumulated depreciation was
$5,733. Current year depreciation of $1,638 is included in depreciation
expense.
Future minimum lease payments under the capital lease and the net
present value of the future minimum lease payments as of December 31, 1994,
consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ------
<S> <C>
1995 $1,580
------
Total minimum lease payments 1,580
Less: Amount representing interest 73
------
Present value of minimum lease payments $1,507
======
</TABLE>
NOTE 6: ACCRUED BONUSES --
The corporation entered into an employment contract with Drs. George
Herron and Lian Soung wherein the Company pays these key employees a base
amount of compensation for serving the Company in the capacities of Chief
Financial Officer and Administrator/Medical Director, respectively. In
addition to base compensation, the Company compensates its two key executives
via an incentive program which provides for compensation based on 20% of the
Company's pre-tax accrual basis income. The total incentive compensation
earned by the executives for 1994 was $547,996.
-15-<PAGE> 16
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A California S Corporation)
Notes to Financial Statements -- Continued
December 31, 1994
NOTE 7: PROFIT SHARING PLAN --
The Company maintains a profit sharing plan for all full-time employees
with at least one year of service and over the age of 21. The Company's plan
contribution is based on the employees' annual compensation. Contributions to
the profit sharing plan are at the discretion of the Board of Directors. Total
contributions to the plan were $125,056 for the year ended December 31, 1994.
At the end of the year, $60,056 was unpaid and is included in accrued payroll
and employee benefits.
NOTE 8: OPERATING LEASE --
The Company entered into a leasing agreement in September 1990, for an
office building. The lease calls for minimum monthly rental payments of $6,944
per month over the 5 year term of the lease. In addition, the Company agreed to
pay $1,500 per month for utilities, separate from rent.
Upon expiration of the lease term, August 1995, the Company has the option
to renew the lease for an additional five (5) years. Prior to the end of the
additional five (5) year period, the Company has two more successive five (5)
year options to renew for additional two five (5) year terms.
Future minimum rental payments required under the operating lease in
excess of one year are as follows:
<TABLE>
<S> <C>
1995 $ 54,000
</TABLE>
Total rent expense for the year ended December 31, 1994, was $83,328.
NOTE 9: INCOME TAXES --
The provision for income taxes, as of December 31, 1994, consisted of the
following:
<TABLE>
<S> <C>
Income tax benefit (expense):
Current $(11,637)
Deferred 200
--------
$(11,437)
========
</TABLE>
-16-<PAGE> 17
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A California S Corporation)
Notes to Financial Statements -- Continued
December 31, 1994
NOTE 9: INCOME TAXES -- Continued --
The components of the deferred income tax liabilities (amounts not
recognized in the financial statement which will result in future taxable
income) were the following at December 31, 1994:
<TABLE>
<CAPTION>
CURRENT NON-CURRENT
DEFERRED TAX DEFERRED TAX
LIABILITY LIABILITY
------------ ------------
<S> <C> <C>
Accounts receivable -- Net of allowance
for adjustments/write-offs $(7,500) $ --
Accounts receivable -- Related party (300) --
Medical supplies and medications
on hand 700 --
Depreciation -- (3,700)
Accounts payable 400 --
Accrued expenses 600 --
------- -------
$(6,100) $(3,700)
======= =======
</TABLE>
NOTE 10: SUBSEQUENT EVENT --
On January 26, 1995, the Company sold its assets to Community Dialysis
Centers, a Nevada corporation, and VIVRA Incorporated, a Delaware corporation,
for $3,740,000. The last day of dialysis operations for the Company was February
18, 1995. Since that date, all outstanding liabilities have been paid by the
Company.
NOTE 11: RELATED PARTY TRANSACTIONS --
Oak Valley Dialysis Clinic, Inc. ("OVDC") is an S-Corporation owned by
certain stockholders who are also stockholders in San Joaquin Artificial Kidney
Center, Inc.
The Company pays for certain expenses for Oak Valley Dialysis Clinic, Inc.
and is reimbursed on a monthly basis by OVDC. Oak Valley Dialysis Clinic, Inc.
also pays for use of a Re-Use kidney machine and the dialysis billing service.
The net receivable due from OVDC as of December 31, 1994 was $18,162.
The Company has a verbal agreement with OVDC for the use of office space
for $125 per month. Rent expense was $1,375 for 1994.
-17-
<PAGE> 18
SUPPLEMENTARY INFORMATION
<PAGE> 19
SAN JOAQUIN ARTIFICIAL KIDNEY CENTER, INC.
(A California S Corporation)
Schedule of Operating Expenses
For the Year Ended December 31, 1994
<TABLE>
<S> <C>
OPERATING EXPENSES:
Salaries, general $ 750,434
Chief Financial Officer base compensation 44,464
Administrator/medical director base compensation 44,744
Incentive compensation 547,997
Payroll taxes 81,511
Employee education 2,020
Employee benefits 47,356
Worker's compensation insurance 3,727
Accounting and tax preparation fees 16,211
Consulting fees and temporary help 32,913
Lab fees 4,170
Rent on facility 84,703
Equipment rent 650
Laundry and cleaning 3,616
Repairs and maintenance -- Equipment 28,721
Repairs and maintenance -- General 6,021
Auto infect waste 17,197
Supplies and medications -- Doctor's medical 6,879
Medical supplies 411,284
Medications 109,781
Medications -- EPO 354,003
Business meals and entertainment 11,283
Travel 9,016
Office expense and supplies 32,881
Telephone 10,296
Utilities 16,794
Security service 2,782
Insurance 14,516
Property tax 6,236
Licenses 9,521
Dues and publications 682
Auto expense 1,065
Legal fees 4,182
Payroll processing fee 2,878
Patient gifts 398
Miscellaneous expense 67
----------
Total Operating Expenses $2,720,999
==========
</TABLE>
See accompanying notes and independent auditors' report.
-19-
<PAGE> 1
DIALYSIS SERVICES OF SOUTHWEST FLORIDA, INC. AND
CAPE CORAL DIALYSIS CENTER, INC.
COMBINED FINANCIAL STATEMENTS,
TOGETHER WITH REPORT OF INDEPENDENT ACCOUNTANTS
AT AND FOR THE YEAR ENDED DECEMBER 31, 1994
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Pages
Report of Independent Accountants....................................... 1
Combined Financial Statements:
Combined Balance Sheet................................................ 2
Combined Statement of Operations...................................... 3
Combined Statement of Stockholders' Equity............................ 4
Combined Statement of Cash Flows...................................... 5
Notes to Combined Financial Statements................................ 6-9
</TABLE>
<PAGE> 3
[Coopers & Lybrand Letterhead]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Dialysis Services of Southwest Florida, Inc. and
Cape Coral Dialysis Center, Inc.
Fort Myers and Cape Coral, Florida
We have audited the accompanying combined balance sheet of Dialysis Services of
Southwest Florida, Inc. and Cape Coral Dialysis Center, Inc. as of December 31,
1994, and the related combined statements of operations, stockholders' equity
and cash flows for the year then ended. These financial statements are the
responsibility of the Companies' management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Dialysis Services of
Southwest Florida, Inc. and Cape Coral Dialysis Center, Inc. as of December 31,
1994 and the results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND LLP
Fort Myers, Florida
May 24, 1995
1
Coopers & Lybrand L.L.P., a registered limited liability partnership, is a
member firm of Coopers & Lybrand International.
<PAGE> 4
DIALYSIS SERVICES OF SOUTHWEST FLORIDA, INC. AND
CAPE CORAL DIALYSIS CENTER, INC.
COMBINED BALANCE SHEET
December 31, 1994
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS
Cash $ 46,672
Accounts receivable, trade 686,760
Inventories 86,716
Prepaid expenses 6,246
---------
Total current assets 826,394
EQUIPMENT, FURNITURE AND FIXTURES, net 135,840
NONCOMPETE AGREEMENT, net of accumulated
amortization of $136,833 113,167
OTHER ASSETS 9,643
---------
Total assets $1,085,044
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of notes payable $ 266,659
Accounts payable 169,226
Accrued expenses 121,563
---------
Total current liabilities 557,448
NOTES PAYABLE, less current maturities 157,657
---------
Total liabilities 715,105
---------
CONTINGENCIES AND COMMITMENTS (Note 7)
STOCKHOLDERS' EQUITY
Common stock, $1 par value, 15,000 shares
authorized, issued and outstanding 550 shares 550
Additional paid-in capital 38,750
Retained earnings 330,639
---------
Total Stockholders' equity 369,939
---------
Total liabilities and stockholders' equity $1,085,044
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
DIALYSIS SERVICES OF SOUTHWEST FLORIDA, INC. AND
CAPE CORAL DIALYSIS CENTER, INC.
COMBINED STATEMENT OF OPERATIONS
year ended December 31, 1994
<TABLE>
<S> <C>
Revenues
Net patient service revenue $4,626,455
Other 889
----------
Total revenues 4,627,344
----------
Costs and expenses
Professional care of patients 3,144,728
General and administrative 906,778
Depreciation and amortization 253,787
Interest 37,612
----------
Total costs and expenses 4,342,905
----------
Net income from operations 284,439
Loss on disposition of assets 8,504
----------
Net income $ 275,935
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
DIALYSIS SERVICES OF SOUTHWEST FLORIDA, INC. AND
CAPE CORAL DIALYSIS CENTER, INC.
COMBINED STATEMENT OF STOCKHOLDERS' EQUITY
year ended December 31, 1994
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- -----
<S> <C> <C> <C> <C>
Balance, January 1, 1994 $550 $38,750 $ 284,067 $ 323,367
Stockholders' distributions 0 0 (229,363) (229,363)
Net income 0 0 275,935 275,935
---- ------- --------- ---------
Balance, December 31, 1994 $550 $38,750 $ 330,639 $ 369,939
==== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
DIALYSIS SERVICES OF SOUTHWEST FLORIDA, INC. AND
CAPE CORAL DIALYSIS CENTER, INC.
COMBINED STATEMENT OF CASH FLOWS
year ended December 31, 1994
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 275,935
---------
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 253,787
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable, trade (137,466)
Inventories 5,077
Prepaid expenses 3,554
Other assets (25)
Increase (decrease) in:
Accounts payable 16,004
Accrued expenses 68,928
---------
Total adjustments 209,859
---------
Net cash provided by operating activities 485,794
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (55,741)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 50,350
Principal payments on debt (317,009)
Distributions to stockholders (229,363)
---------
Net cash used in financing activities (496,022)
---------
Net decrease in cash (65,969)
Cash, beginning of year 112,641
---------
Cash, end of year $ 46,672
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 37,612
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 8
DIALYSIS SERVICES OF SOUTHWEST FLORIDA, INC. AND
CAPE CORAL DIALYSIS CENTER, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS
Dialysis Services of Southwest Florida, Inc. and Cape Coral Dialysis
Center, Inc. are Florida corporations under common control. The Companies
operate out-patient dialysis centers in Southwest Florida, providing
hemodialysis and ambulatory peritoneal dialysis for patients with kidney
disease.
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION: The combined financial statements include the
accounts of Dialysis Services of Southwest Florida, Inc. and Cape Coral
Dialysis Center, Inc. (collectively referred to as "the Companies"). The
common stock of each Company is owned by common stockholders. Intercompany
accounts and transactions have been eliminated.
NONCOMPETE AGREEMENT: A noncompete agreement resulting from the Companies'
acquisition of a dialysis treatment center is being amortized on a
straight-line basis over the term of the agreement.
INVENTORIES: Inventories consisting of medical drugs and supplies are
stated at the lower of cost or market with cost determined by the first-in,
first-out method, by use of the specific identification method.
EQUIPMENT, FURNITURE AND FIXTURES: Equipment, furniture and fixtures are
stated at cost, less accumulated depreciation. Depreciation is provided
over the estimated useful lives of the assets using the straight-line
method. Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized. When equipment, furniture and
fixtures are sold or otherwise disposed of, the asset account and related
accumulated depreciation account are relieved, and any gain or loss is
included in operations.
NET PATIENT SERVICE REVENUE: Net patient service revenue is reported using
the accrual basis of accounting at the estimated net realizable amounts
from patients, third party payors and others for services rendered. Net
patient service revenue includes amounts estimated by management to have
been earned under the terms of the Medicare Prospective Payment System and
those amounts estimated by management to be reimbursable by Medicare,
Medicaid and other third-party payors under provisions of cost
reimbursement and other formulas in effect.
INCOME TAXES: The Companies, with the consent of its stockholders, have
elected to have its income taxed under Section 1362 of the Internal Revenue
Code and a similar section of the Florida Income Tax Law (S Corporation
election). These laws provide that, in lieu of corporate income taxes, the
Companies' taxable income will be passed through to the stockholders of the
Companies and taxed at the individual level.
6<PAGE> 9
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INCOME TAXES, CONTINUED: Under current Internal Revenue Code
regulations, S Corporations are subject to a built-in gains tax.
Built-in gains tax is computed based on profits realized on sales
of assets that were held at the date of the S Corporation status
election.
2. EQUIPMENT, FURNITURE AND FIXTURES:
Equipment, furniture and fixtures is comprised of the following at
December 31, 1994:
<TABLE>
<S> <C>
Equipment $ 626,675
Furniture and fixtures 40,842
---------
667,517
Less accumulated depreciation (531,677)
----------
$ 135,840
=========
</TABLE>
Depreciation expense related to equipment, furniture and fixtures for
the year ended December 31, 1994 was $171,687.
3. NOTES PAYABLE:
Notes payable are comprised of the following at December 31, 1994:
<TABLE>
<S> <C>
Installment note payable to financial institution, collateralized by the
equipment, furniture, fixtures and accounts receivable of the Companies,
interest at prime plus 1%, monthly payments of $10,416 including
interest, due September 22, 1996 $ 218,761
Installment note payable to financial institution, collateralized by the
equipment, furniture, fixtures and accounts receivable of the Companies,
interest at prime plus 1%, monthly payments of $3,472 including interest,
due April 29, 1996 55,555
Installment note payable, collateralized by the personal property,
furnishings, fixtures and equipment of the Companies, interest at prime,
minimum and maximum interest rate of 6% and 8%, respectively, quarterly
installments of $25,000 plus accrued interest, due May 1, 1996 150,000
---------
424,316
Less current maturities (266,659)
---------
$ 157,657
=========
</TABLE>
7<PAGE> 10
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
3. NOTES PAYABLE, CONTINUED:
Notes payable are scheduled to mature approximately as follows:
<TABLE>
<CAPTION>
Year Ending
December 31
-----------
<S> <C>
1995 $266,659
1996 $157,657
--------
$424,316
========
</TABLE>
4. COMMITMENTS:
LEASE COMMITMENTS
The Companies are obligated under various operating leases for office
space. Total lease expense incurred under these leases during 1994 was
$140,626.
Future minimum lease payments under non-cancelable operating leases
having remaining terms in excess of one year as of December 31, 1994 are:
<TABLE>
<CAPTION>
<S> <C>
1995 $ 87,278
1996 40,645
1997 17,590
1998 18,117
1999 1,513
--------
$165,143
========
</TABLE>
5. RELATED PARTY TRANSACTIONS:
The Companies entered into the following transactions with affiliated
companies:
- Included in general and administrative expenses are educational directors
fees of $130,000 and medical directors fees of $206,000 for services
provided by an affiliated company.
- Rent expense under operating leases with an affiliated entity for
treatment center space was $27,984.
8<PAGE> 11
NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED
6. BENEFIT PLANS:
The Companies entered into agreements with Associates in Nephrology,
Butcher, Caanthan and Delans, M.D., P.A., an affiliated company, allowing
eligible employees to participate in the affiliate's noncontributory,
trusteed Pension and Profit Sharing Plans ("Plans"). Contributions to
both Plans are discretionary and are determined annually by the
stockholders.
Included in professional care of patient expenses are contributions to
the Pension Plan and the Profit Sharing Plan of $62,234 and $28,400,
respectively, for 1994. On December 31, 1994, the Companies recorded
$62,234 and $28,400 as a payable, relating to the contributions due to
the Pension Plan and the Profit Sharing Plan, respectively.
7. CONTINGENCIES:
The Companies are contingently liable with respect to litigation
incidental to the ordinary course of its operations. In the opinion of
management, based on advice of legal counsel, the ultimate disposition
of lawsuits will not have a material adverse effect on the Companies
combined financial position or results of operations.
8. SUBSEQUENT EVENTS:
In a stock purchase agreement effective March 31, 1995, the stockholders
agreed to sell the Companies to Vivra Incorporated, the second largest
provider of dialysis treatment in the United States. The sale price was
approximately $11,300,000. The stockholders received stock of the
acquiring company with a fair market value as of April 1, 1995, equal
to the sale price. The stockholders are restricted by the agreement with
respect to their disposition of the acquiring company's stock.
9
<PAGE> 1
Combined Financial Statements
Oakwood Kidney Center P.C. and
Wyandotte Kidney Center P.C.
Year ended December 31, 1994
with Report of Independent Auditors
<PAGE> 2
OAKWOOD KIDNEY CENTER P.C. AND
WYANDOTTE KIDNEY CENTER P.C.
COMBINED FINANCIAL STATEMENTS
Year ended December 31, 1994
CONTENTS
Report of Independent Auditors..............................................1
Financial Statements
Combined Balance Sheet......................................................2
Combined Statement of Operations............................................3
Combined Statement of Stockholders' Equity..................................4
Combined Statement of Cash Flows............................................5
Notes to Combined Financial Statements......................................6
<PAGE> 3
[ERNST & YOUNG LETTERHEAD]
Report of Independent Auditors
The Board of Directors
Oakwood Kidney Center P.C. and
Wyandotte Kidney Center P.C.
We have audited the accompanying combined balance sheet of Oakwood Kidney
Center P.C. and Wyandotte Kidney Center P.C. as of December 31, 1994, and
the related combined statements of operations, stockholders' equity and
cash flows for the year then ended. These financial statements are the
responsibility of the Companies' management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Oakwood
Kidney Center P.C. and Wyandotte Kidney Center P.C. at December 31, 1994,
and the combined results of their operations and their cash flows for the
year then ended in conformity with generally accepted accounting principles.
ERNEST & YOUNG, LLP
July 14, 1995<PAGE> 4
Oakwood Kidney Center P.C. and
Wyandotte Kidney Center P.C.
Combined Balance Sheet
December 31, 1994
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash $ 28,314
Trade accounts receivable, net of allowance for doubtful accounts
of $95,222 1,523,579
Receivables from shareholder and affiliates 95,496
Inventories 74,300
Prepaid expenses 52,698
Other receivables 2,218
----------
Total current assets 1,776,605
Property under capital leases with affiliates, less accumulated
amortization of $512,343 744,483
----------
Total assets $2,521,088
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 93,267
Accrued expenses 125,778
Current obligations under capital leases with affiliates 247,144
Note payable to affiliate 100,000
Lines of credit 415,059
----------
Total current liabilities 981,248
Noncurrent obligations under capital leases with affiliates 548,224
----------
Total liabilities 1,529,472
Contingencies and Commitments (Note 6)
Stockholders' equity:
Common stock, at stated value 10,000
Retained earnings 981,616
----------
Total stockholders' equity 991,616
----------
Total liabilities and stockholders' equity $2,521,088
==========
</TABLE>
See accompanying notes.
2
<PAGE> 5
Oakwood Kidney Center P.C. and
Wyandotte Kidney Center P.C.
Combined Statement of Operations
Year ended December 31, 1994
<TABLE>
<S> <C>
Revenues:
Net patient service revenue $6,709,367
Other 17,648
----------
Total revenue 6,727,015
Costs and expenses:
Professional care of patients 4,296,380
General and administrative 1,482,359
Provision for uncollectible amounts 464,541
Depreciation and amortization 231,158
Interest 111,291
----------
Total costs and expenses 6,585,729
----------
Net income $ 141,286
==========
</TABLE>
See accompanying notes.
3
<PAGE> 6
Oakwood Kidney Center P.C. and
Wyandotte Kidney Center P.C.
Combined Statement of Stockholders' Equity
<TABLE>
<CAPTION>
COMMON RETAINED
STOCK EARNINGS TOTAL
------ -------- -----
<S> <C> <C> <C>
Balance at January 1, 1994 $10,000 $920,330 $930,330
Distributions to stockholders -- (80,000) (80,000)
Net income -- 141,286 141,286
------- -------- --------
Balance at December 31, 1994 $10,000 $981,616 $991,616
======= ======== ========
</TABLE>
See accompanying notes.
4
<PAGE> 7
Oakwood Kidney Center P.C. and
Wyandotte Kidney Center P.C.
Combined Statement of Cash Flows
Year ended December 31, 1994
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $141,286
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 231,158
Changes in assets and liabilities:
Increase in accounts receivable, trade (499,829)
Decrease in other receivables and receivables from affiliates 82,935
Increase in inventories (29,968)
Increase in prepaid expenses (15,450)
Decrease in accounts payable & accrued expenses (6,951)
Increase in accrued wages 89,972
--------
Net cash provided by operating activities (6,847)
FINANCING ACTIVITIES
Payments under capital lease arrangements (208,853)
Proceeds from line of credit 165,059
Proceeds from note payable 100,000
Distributions to partners (80,000)
--------
Net cash provided by financing activities (23,794)
--------
Decrease in cash (30,641)
Cash at beginning of year 58,955
--------
Cash at end of year $ 28,314
========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for interest $111,291
========
NONCASH TRANSACTIONS
Assets acquired under capital lease arrangements with affiliates $557,045
========
</TABLE>
See accompanying notes.
5
<PAGE> 8
Oakwood Kidney Center P.C. and
Wyandotte Kidney Center P.C.
Notes to Combined Financial Statements
December 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Oakwood Kidney Center P.C. and Wyandotte Kidney Center P.C. are Michigan
professional corporations under common control. Each company operates an
out-patient dialysis center in Michigan, providing hemodialysis and ambulatory
peritoneal dialysis for patients with kidney disease.
PRINCIPLES OF COMBINATION
The combined financial statements include the accounts of Oakwood Kidney Center
P.C. and Wyandotte Kidney Center P.C. (collectively referred to as the
Companies). The common stock of each Company is controlled by common
stockholders. Intercompany accounts and transactions have been eliminated.
Common stock (all $1 par) information is as follows:
<TABLE>
<CAPTION>
SHARES
OUTSTANDING AT STATED VALUE AT
SHARES DECEMBER 31, DECEMBER 31,
COMPANY AUTHORIZED 1994 1994
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Oakwood Kidney Center 60,000 10,000 $10,000
Wyandotte Kidney Center 60,000 -- --
</TABLE>
Wyandotte Kidney Center has issued 15,000 shares of common stock under
subscription arrangements with the shareholders. None of the receivables have
been collected as of December 31, 1994.
INVENTORIES
Inventories consisting of medical drugs and supplies are stated at the lower of
cost or market with cost determined by use of the specific identification
method.
6
<PAGE> 9
OAKWOOD KIDNEY CENTER P.C. AND
WYANDOTTE KIDNEY CENTER P.C.
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY UNDER CAPITAL LEASES
Leased equipment, consisting primarily of dialysis and related equipment,
is stated at the lesser of the fair value of the leased property or the present
value of the minimum lease payments, less accumulated depreciation.
Depreciation is provided over the term of the lease using the straight-line
method. Maintenance and repairs are charged to operations as incurred.
NET PATIENT SERVICE REVENUE
Net patient service revenue is reported using the accrual basis of accounting
at the estimated net realizable amounts from patients, third party payors
and others for services rendered. Approximately 80% of net patient service
revenues have been earned under the terms of the Medicare Prospective Payment
System. Remaining net revenues are reimbursable by commercial payors,
Medicaid and other third-party payors.
INCOME TAXES
The Companies, with the consent their stockholders, have elected to have
their income taxed under Section 1362 of the Internal Revenue Code provisions.
These rules provide that, in lieu of corporate income tax, the Companies'
taxable income is passed through to the stockholders of the Companies and
taxed at the individual level. Accordingly, no provision or liability
for federal income tax has been reflected in the combined financial statements.
2. NOTE PAYABLE
Note payable consists of the following at December 31, 1994:
Unsecured note payable to CTA Investment Group, a related
party, interest at 7.5%, no minimum monthly payment. All
unpaid interest and principal due by December 31, 1995 $100,000
========
7
<PAGE> 10
Oakwood Kidney Center P.C. and
Wyandotte Kidney Center P.C.
Notes to Combined Financial Statements
December 31, 1994
3. LINES OF CREDIT
Lines of credit comprise the following at December 31, 1994:
<TABLE>
<S> <C>
Line of credit with National Bank of Detroit, ("NBD")
maximum amount of $500,000, renewable annually,
collateralized by accounts receivable and all other
assets of Oakwood Kidney Center, interest rate at 1/2%
over prime (9.0% at December 31, 1994), interest only
payments due on the 15th of each month. $130,059
Line of credit with NBD, maximum amount of $500,000,
renewable annually, collateralized by accounts re-
ceivable and all other assets of Wyandotte Kidney
Center, interest rate at 3/4% over prime (9.25% at
December 31, 1994), interest only payments due on
the 30th of each month. 285,000
--------
$415,059
========
</TABLE>
Certain restrictions and covenants exist with respect to these lines of
credit. The companies are in compliance with these restrictions and covenants
at December 31, 1994.
4. OBLIGATIONS UNDER CAPITAL LEASES
The Companies have acquired dialysis and related equipment under lease
arrangements accounted for as capital leases in accordance with Statement
of Financial Accounting Standards No. 13. The lessors are the Chilakapati
Family Limited Partnership, Thavarajah Family Limited Partnership and CTA
Investment Group, all of whom are
8
<PAGE> 11
Oakwood Kidney Center P.C. and
Wyandotte Kidney Center P.C.
Notes to Combined Financial Statements
December 31, 1994
4. OBLIGATIONS UNDER CAPITAL LEASES (CONTINUED)
controlled by the stockholders'. The aggregated cost of the equipment is
$976,950 and the related accumulated depreciation is $512,343 at December 31,
1994. Future minimum lease payments and the present value of the net minimum
lease payments as of December 31, 1994 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Fiscal year
1995 $329,400
1996 314,750
1997 153,600
1998 153,600
1999 25,600
--------
Total 976,950
Less amount representing interest 181,582
--------
Present value of net minimum lease payments $795,368
========
</TABLE>
Depreciation expense related to leased equipment for the year ended December 31,
1994 was $231,158.
5. COMMITMENTS
OPERATING LEASE COMMITMENTS
The Companies are obligated under various operating leases for office space. The
office space is leased from the Chilakapati Family Limited Partnership,
Thavarajah Family Limited Partnership and CTA Investment Group, all of whom are
controlled by the stockholders'. Total lease expense incurred under these leases
during 1994 was $419,745.
Future minimum lease payments under noncancelable operating leases having
remaining terms in excess of one year as of December 31, 1994 are:
<TABLE>
<S> <C>
1995 $ 505,640
1996 426,673
1997 267,540
1998 267,540
1999 22,295
----------
$1,489,688
==========
</TABLE>
9
<PAGE> 12
Oakwood Kidney Center P.C. and
Wyandotte Kidney Center P.C.
Notes To Combined Financial Statements
December 31, 1994
6. RELATED PARTY TRANSACTIONS
In addition to the related party transactions involving capital and operating
leases and note payable, the Companies entered into the following transactions
with affiliated entities:
- Receivables from shareholder and affiliated entities are
comprised of the following at December 31, 1994:
<TABLE>
<CAPTION>
<S> <C>
K. Thavarajah -- working capital loan, interest
only at 7.5%, due within one year $69,257
Thavarajah Family Limited Partnership 11,115
Chilikapati Family Limited Partnership 11,115
CTA Investment Group 4,010
-------
$95,497
</TABLE> =======
- Included in professional care of patients expense is $64,344
of patient transportation expenses paid to a corporation
controlled by a relative of a stockholder.
7. MALPRACTICE INSURANCE
The Companies' practicing physicians/board members carry occurance basis
malpractice insurance which provides coverage for all malpractice claims arising
in either Oakwood Kidney Center or Wyandotte Kidney Center. This coverage is
limited to $1,000,000 per incident an $3,000,000 in the aggregate.
8. SUBSEQUENT EVENT
In a sale and purchase of assets agreement effective July 1, 1995, the
stockholders agreed to sell certain assets, excluding accounts and notes
receivable and cash on hand, to Vivra Incorporated ("Vivra"), the second largest
provider of dialysis treatment in the United States. Vivra will assume certain
contracts in place and only the obligation under the facilities lease. The sale
price was $16,000,000 consisting of $10,000,000 in cash and $6,000,000 in common
stock of Vivra. The terms of a "stock protection" clause dictate that Vivra will
purchase the shares for $6,000,000 should the value of the shares decrease below
$5,820,000 or increase above $6,180,000 within 30 days of the effective date.
10
<PAGE> 13
Oakwood Kidney Center P.C. and
Wyandotte Kidney Center P.C.
Schedule II--Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING COSTS AND DEDUCTIONS BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DESCRIBE END OF PERIOD
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1994
Allowance for uncollectible
accounts $30,638 $464,541 $399,957(1) $95,222
</TABLE>
(1) Accounts written off, net of recoveries.
11
