SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): March 31, 1997
MEADOWBROOK REHABILITATION GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-19726 94-3022377
--------------- --------------- ---------------
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification Number)
incorporation)
2200 Powell Street, Suite 800, Emeryville, CA 94608
------------------------------------------------ ----------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code:
(510) 420-0900
<PAGE>
Item 2. Acquisition or Disposition of Assets
On March 31, 1997, Meadowbrook Rehabilitation Group, Inc., a Delaware
Corporation (the "Company"), sold the business and assets of Meadowbrook
Rehabilitation Group of Georgia, Inc. (the "Subsidiary"), a wholly owned
subsidiary of the Company, to Restore Rehabilitation Group, Inc. The Company
also sold all of the outstanding stock of the Subsidiary in a separate
transaction with the same purchaser. The Subsidiary operated a neurobehavioral
program in leased space within a 294 bed acute care hospital in Atlanta,
Georgia. The Subsidiary also operated a subacute rehabilitation program in a
dedicated hospital based unit in Lithia Springs, Georgia, under a management
agreement. Finally, the Subsidiary operated a post-acute rehabilitation program
located in a facility owned by the Subsidiary in Decatur, Georgia.
The Company received $1,250,000 for the sale of the business and assets of
the Subsidiary. The Company received $50,000 for the sale of all of the
outstanding stock of the Subsidiary. The selling price for the stock, business
and assets of the Subsidiary was determined based on arms-length negotiations
between the parties. There was no material relationship between the purchaser
and the Company or any of the Company's affiliates, any director or officer of
the Company or any associate of any such director or officer, although the
Company notes that a minority shareholder in the purchaser was formerly the
principal day-to-day manager of the Subsidiary's operations for the Company.
<PAGE>
Item 7. Financial Statements and Exhibits.
(b) Pro Forma financial information required pursuant to Article 11 of
Regulation S-X.
The following Pro Forma financial statements are included
following the signature page to this Form 8-K:
Introduction to the Pro Forma Condensed Consolidated financial
information.
Pro Forma Condensed Consolidated Balance Sheet as of December
31, 1996, (unaudited).
Pro Forma Condensed Consolidated Statements of Income for the
twelve months ended June 30, 1996 and for the six months ended
December 31, 1996, (unaudited).
Notes to Pro Forma Condensed Consolidated financial information
(unaudited).
(c) Exhibits:
Exhibit 2.0 Agreement of Purchase and Sale, dated March 17,
1997, between Restore Rehabilitation Group, Inc.,
Meadowbrook Rehabilitation Group, Inc., and
Meadowbrook Rehabilitation Group of Georgia, Inc.
The Agreement references all exhibits attached to
such Agreement of Purchase and Sale, but omits
copies of such exhibits. Upon request, the
Registrant agrees to furnish supplementally to the
Commission a copy of any omitted exhibit.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: April 14, 1997.
MEADOWBROOK REHABILITATION
GROUP, INC.
By: /s/ Harvey Wm. Glasser, M.D.
_____________________________________
Harvey Wm. Glasser, M.D.
President and Chief Executive Officer
<PAGE>
Item 7(b) Meadowbrook Rehabilitation Group, Inc. reflecting the sale of
Meadowbrook Rehabilitation Group of Georgia, Inc.
Introduction to unaudited Pro Forma Consolidated Financial
information.
The following pages present the unaudited Pro Forma Condensed
Consolidated Balance Sheet of the Company as of December 31,
1996, and the unaudited Pro Forma Condensed Consolidated
Statements of Income of the Company for the twelve months
ended June 30, 1996 and the six months ended December 31,
1996. The Pro Forma Condensed Consolidated Balance Sheet was
prepared assuming that the Company's disposition of
Meadowbrook Rehabilitation Group of Georgia, Inc. took place
on the last day of each period, and the Pro Forma Condensed
Consolidated Statements of Income were prepared assuming that
the disposition took place as of the beginning of the twelve
months ended June 30, 1996 and at the beginning of the six
months ended December 31, 1996, respectively.
The unaudited financial information furnished herein reflects
all adjustments for the twelve months ended June 30, 1996 and
the six months ended December 31, 1996, respectively,
consisting only of normal recurring adjustments which, in the
opinion of management, are necessary to fairly state the
Company's financial position and the results of its operations
for the periods presented.
The unaudited pro forma financial information does not purport
to present the consolidated financial position and
consolidated results of operations of the Company had the
Company's disposition of Meadowbrook Rehabilitation Group of
Georgia, Inc. actually occurred on the dates indicated; nor
does it purport to be indicative of results that will be
attained in the future.
The pro forma financial information should be read in
conjunction with the Company's historical Consolidated
Financial Statements and Notes thereto contained in the
Company's Form 10-K for the fiscal year ended June 30, 1996.
<PAGE>
<TABLE>
<CAPTION>
MEADOWBROOK REHABILITATION GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31,
--------------------------------------------------------------------------
Pro Forma
Pre-Disposition Adjustments Post-Disposition
Meadowbrook (Note 2) Meadowbrook
---------------------------------
1996 Debit Credit Ref 1996
------------- ------------- ------------- ---- -------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,979,105 1,300,000 (A) $ 4,279,105
Net Patient accounts receivable 5,023,483 5,023,483
Due from intermediaries 222,844 222,844
Prepaid expenses and other assets 1,228,868 2,416 (A) 1,226,452
------------- -------------
Total current assets 9,454,300 10,751,884
------------- -------------
PROPERTY AND EQUIPMENT, (net) 2,130,047 746,392 (A) 1,383,655
GOODWILL AND INTANGIBLE ASSETS 1,837,029 1,837,029
------------- -------------
TOTAL ASSETS $ 13,421,376 $ 13,972,568
============= =============
CURRENT LIABILITIES: 3,981,163 21,150 50,000 (A) 4,010,013
LONG-TERM LIABILITIES 481,305 9,377 (A) 471,928
------------- -------------
Total Liabilities 4,462,468 4,481,941
------------- -------------
MINORITY INTEREST 0 0
STOCKHOLDERS' EQUITY
Common Stock 19,302 19,302
Paid-in capital 17,908,122 17,908,122
Retained earnings (deficit) (8,968,516) 531,719 (A) (8,436,797)
------------- -------------
Total stockholders' equity 8,958,908 9,490,627
------------- ------------- ------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,421,376 $ 1,330,527 $ 1,330,527 $ 13,972,568
============== ============= ============= ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEADOWBROOK REHABILITATION GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Year Ended June 30
----------------------------------------------------------------------
Pro Forma
Pre-Disposition Adjustments Post-Acquisition
Meadowbrook (Note 2) Meadowbrook
1996 Debit Credit Ref 1996
--------------- ---------- ----------- ---- -------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Net patient revenues $23,622,560 $6,068,071 $184,000 (A,B) $17,738,489
--------------- -------------
Net operating revenues 23,622,560 17,738,489
OPERATING EXPENSES:
Salaries and employee benefits 15,189,173 4,204,456 (A,C) 10,984,717
Other operating expenses 9,108,509 1,847,827 (A,C) 7,260,682
-------------- --------------
Total operating expenses 24,297,682 18,245,399
-------------- --------------
Income (loss) from operations (675,122) (506,910)
-------------- --------------
OTHER (INCOME) EXPENSE:
Gain on sale of assets 0 0
Interest (income) expense (113,834) 65,000 (D) (178,834)
-------------- --------------
Net other (income) expense (113,834) (178,834)
Income (loss) before income taxes (561,288) (328,076)
INCOME TAX PROVISION (BENEFIT) 0 0
-------------- --------------
NET INCOME (LOSS) BEFORE MINORITY INTEREST (561,288) (328,076)
MINORITY INTEREST 29,016 29,016
-------------- ---------- ----------- -------------
NET INCOME (LOSS) (590,304) 6,068,071 6,301,283 (357,092)
============== ========== ============ =============
NET INCOME (LOSS) PER SHARE (primary and fully diluted) ($0.31) ($0.18)
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 1,930,349 1,930,349
============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MEADOWBROOK REHABILITATION GROUP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended December 31
-----------------------------------------------------------------------
Pro Forma
Pre-Acquisition Adjustments Post-Acquisition
Meadowbrook (Note 2) Combined
1996 Debit Credit Ref 1996
--------------- ---------- ----------- --- --------------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Net patient revenues $11,504,711 $3,213,452 $92,000 (A,B) $8,383,259
-------------- --------------
Net operating revenues 11,504,711 8,383,259
OPERATING EXPENSES:
Salaries and employee benefits 8,101,472 2,227,233 (A,C) 5,874,239
Other operating expenses 4,589,414 867,101 (A,C) 3,722,313
-------------- --------------
Total operating expenses 12,690,886 9,596,552
-------------- --------------
Income (loss) from operations (1,186,175) (1,213,293)
-------------- --------------
OTHER (INCOME) EXPENSE:
Gain on sale of assets (45,857) (45,857)
Interest (income) expense (29,588) 32,500 (D) (62,088)
-------------- --------------
Net other (income) expense (75,445) (107,945)
Income (loss) before income taxes (1,110,730) (1,105,348)
INCOME TAX PROVISION (BENEFIT) 0 0
-------------- --------------
NET INCOME (LOSS) BEFORE MINORITY INTEREST (1,110,730) (1,105,348)
MINORITY INTEREST 0 0
-------------- ---------- ----------- ---------------
NET INCOME (LOSS) (1,110,730) 3,213,452 3,218,834 (1,105,348)
============== ========== =========== ===============
NET INCOME (LOSS) PER SHARE (primary and fully diluted) ($0.58) ($0.57)
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 1,930,244 1,930,244
============== ===============
<PAGE>
<FN>
Meadowbrook Rehabilitation Group, Inc.
Reflecting the Sale of Meadowbrook Rehabilitation Group of Georgia, Inc.
Notes to Pro Forma Condensed Consolidated Financial Information
1. The amounts reflected in these notes are based on estimates
which are subject to change. The following pro forma
adjustments were made to the December 31, 1996 Condensed
Consolidated Balance Sheet to reflect the sale of Meadowbrook
Rehabilitation Group of Georgia, Inc. for cash.
(A) To record the sale of certain assets and the stock of
Meadowbrook Rehabilitation Group of Georgia, Inc.
2. The following pro forma adjustments were made to the Condensed
Consolidated Statements of Income for the twelve months ended
June 30, 1996 and the six months ended December 31, 1996.
(A) Elimination of all operating revenue and expenses for
Meadowbrook Rehabilitation Group of Georgia, Inc.
(B) Increased revenue due to increased Medicare reimbursement
based on higher overall Medicare utilization.
(C) Reduction of Corporate office salaries and wages and operating
expenses.
(D) Increase in Meadowbrook Rehabilitation Group, Inc.'s interest
income due to higher cash balances.
</FN>
</TABLE>
AGREEMENT OF PURCHASE AND SALE
This agreement is made as of March 17, 1997, between RESTORE REHABILITATION
GROUP, INC., a Georgia corporation ("Buyer"), party of the first part, and
MEADOWBROOK REHABILITATION GROUP, INC., a Delaware corporation with principal
offices in Emeryville, California ("Meadowbrook/CA") and MEADOWBROOK
REHABILITATION GROUP OF GEORGIA, INC., a Georgia corporation ("Meadowbrook/GA"),
parties of the second part. Meadowbrook/CA and Meadowbrook/GA are referred to
hereinafter jointly as the "Selling Parties".
RECITALS
A. Meadowbrook/GA (i) manages the operation of a neurobehavioral
rehabilitation program at Columbia West Paces Medical Center in Fulton County,
Georgia (such program being formerly operated at Decatur Hospital in Decatur,
Georgia); (ii) manages the operation of a subacute rehabilitation program at
Columbia Parkway Medical Center in Douglas County, Georgia (such program being
formerly operated at Newtonhouse, a unit of Georgia Baptist Medical Center in
Atlanta, Georgia); and (iii) operates a post-acute rehabilitation program at its
Transitional Living Center in DeKalb County, Georgia (the foregoing activities
being hereinafter referred to as the "Business").
B. Meadowbrook/CA owns all of the issued and outstanding stock of
Meadowbrook/GA.
C. Buyer desires to purchase from Meadowbrook/GA and Meadowbrook/GA desires
to sell to Buyer, on the terms and subject to the conditions of this agreement,
the Business and the Assets (as herein defined) of Meadowbrook/GA in exchange
for the cash to be paid by Buyer.
D. Buyer desires to purchase from Meadowbrook/CA (after the consummation of
the aforesaid purchase of the Business and Assets of Meadowbrook/GA by Buyer)
all of the issued and outstanding stock of Meadowbrook/GA.
In consideration of the mutual covenants, agreements, representations, and
warranties contained in this agreement, the parties agree as follows:
ARTICLE ONE: PURCHASE AND SALE
1.1 Purchase and Sale of Assets. Subject to the terms and conditions set forth
in this agreement, Selling Parties agree to sell, convey, transfer, assign, and
deliver to Buyer, and Buyer agrees to purchase from the Selling Parties the
Business and the assets of the Business.
1.1.1 Description of Assets. The assets of the Business (the "Assets")
include the following:
(a) The real property commonly known as 1942 Clairmont Road, DeKalb County,
Georgia (the "Real Property");
(b) All of Meadowbrook/GA's equipment, furniture, and fixtures located in
the State of Georgia (the "Equipment");
(c) The transitional in-patient and out-patient clinics conducted at the
Real Property and the Leased Property (as hereinafter defined), including all of
Meadowbrook/GA's rights therein;
(d) The assets of the in-patient neurobehavioral unit at Columbia West
Paces Ferry Medical Center, but not the management agreement with West Paces
Hospital, Inc., which shall be retained by Meadowbrook/GA;
(e) The contract with Medical Center West, Inc. d/b/a Parkway Medical
Center to provide subacute rehabilitation services at Columbia Parkway Medical
Center, including all of Meadowbrook/GA's rights therein;
(f) Any other licenses, contracts or leases related to the Business which
Buyer wishes to acquire, and which the Selling Parties are able to sell or
assign;
(g) All goodwill associated with the Business or the Assets, together with
the right to represent to third parties that the Buyer is the successor to the
Business;
(h) All medical and financial records for patients treated by
Meadowbrook/GA within the State of Georgia, provided the Buyer agrees to retain
all such records for the period required by law and to make them available to
the Selling Parties and governmental authorities as required;
(i) All of Meadowbrook/GA's right, title and interest in that certain lease
dated March 1, 1993 between J & S Properties and Meadowbrook/GA of real property
known as 1946 Clairmont Road, DeKalb County, Georgia (the "Leased Property");
(j) All motor vehicles used in the operation of the Business (the "Motor
Vehicles");
(k) All inventories of supplies, drugs, disposable goods, labels,
containers, bags and other packing materials, and other materials of the
Business, wherever located (the "Inventory");
(l) To the extent transferrable, all licenses, permits or other
governmental authorizations affecting, or relating in any way to, the Business
or the Assets; and
(m) All books, records, files and papers, whether intangible or intangible
form, used in, or relating in any way to, the Business or the Assets, including
sales and promotional literature, sales and purchase correspondence, lists of
present and former suppliers, lists of present and former patients, personnel
and employment records, and any information relating to taxes imposed on the
Assets.
1.1.2 Right to Exclude Other Agreements. Notwithstanding the above, Buyer
shall have the right, exercisable at any time on or before the Closing Date (as
hereinafter defined), and in its sole discretion, to designate any other
license, contract or lease described above (in addition to the management
agreement with West Paces Hospital, Inc.) to be retained by Meadowbrook/GA, in
which event the license, contract or lease so designated shall not be
transferred to Buyer; provided however, there shall be no adjustment in the
purchase price as a result of Buyer's election.
1.1.3 Excluded Assets. There is specifically excluded from the sale, all
cash, cash equivalents, Medicare cost report receivables, and all accounts
receivable arising from services rendered by Meadowbrook/GA prior to the Closing
Effective Date (as defined in section 8.1 hereof).
1.1.4 Consent to Transfer Leased Property. The assignment and transfer by
Meadowbrook/GA of its right, title and interest in and to the Leased Property
shall be subject to the requirement, if any, of obtaining consent of
Meadowbrook/GA's landlord to such transaction or any other restriction on
transfer contained in the lease of the Leased Property. Selling Parties agree to
cooperate reasonably and in good faith with Buyer in seeking to obtain the
consent (if required) of Meadowbrook/GA's landlord to such transaction.
1.2 Consideration For Sale of Assets. As full payment for the transfer of the
Assets to Buyer, Buyer shall deliver at the Closing, in accordance with the
provisions of section 8.3, a bank cashier's check, payable to the order of
Meadowbrook/GA in the amount of $1,250,000.00.
1.3 Purchase and Sale of Stock. Immediately after the consummation of the sale
of the Assets as described above, and subject to the terms and conditions set
forth in this agreement, Meadowbrook/CA shall sell, convey, transfer, assign,
and deliver to Buyer, and Buyer shall purchase from Meadowbrook/CA, all of the
issued and outstanding stock of Meadowbrook/GA (the "Stock"). Prior to the
transfer of the Stock, but after the transfer of the Assets as provided above,
Meadowbrook/GA shall transfer to Meadowbrook/CA all of its assets not
transferred to Buyer hereunder, with the exception of the management agreement
with West Paces Hospital, Inc. identified herein and any other license, contract
or lease of Meadowbrook/GA designated by Buyer, pursuant to the provisions of
section 1.1.2 above, to be retained by Meadowbrook/GA, and Meadowbrook/CA shall
assume all of the obligations and liabilities of Meadowbrook/GA not assumed by
Buyer hereunder or paid or otherwise satisfied prior to or at the Closing (as
hereinafter defined).
1.4 Consideration For Sale of Stock. As full payment for the transfer of the
Stock to Buyer, Buyer shall deliver at the Closing, in accordance with the
provisions of section 8.3, a bank cashier's check, payable to the order of
Meadowbrook/CA in the amount of $50,000.
1.5 Assumption of Liabilities. Buyer agrees to assume those equipment leases,
conditional sales contracts and security interests listed in Exhibit 2.5, those
contracts listed in Exhibit 2.8 and those security agreements and related debt
on Motor Vehicles listed in Exhibit 2.17. It is expressly understood and agreed
that Buyer shall not be liable for any of the obligations or liabilities of
Meadowbrook/GA of any kind and nature other than those specifically assumed by
Buyer under this section. Without limiting the foregoing, Buyer shall not
assume, pay or perform any of the following liabilities or obligations of
Meadowbrook/GA, which, if not paid or otherwise satisfied by the Selling Parties
at or prior to the Closing, shall be assumed by and become the exclusive
responsibility of Meadowbrook/CA:
(a) Any liabilities or obligations of Meadowbrook/GA relating to employee
benefits or compensation arrangements of any nature existing on the Closing
Effective Date, including any liabilities or obligations under any of
Meadowbrook/GA's employee benefit agreements, plans or other arrangements;
(b) Any liability or obligation of Meadowbrook/GA for breach of contract,
personal injury or property damage (whether based on negligence, breach of
warranty, strict liability or any other theory) caused by or arising out of or
resulting from, directly or indirectly, any alleged or actual acts or omissions
occurring on or before the Closing Effective Date;
(c) Any liability or obligation of Meadowbrook/GA for money borrowed,
whether such liabilities and obligations were incurred in the operation of the
Business or otherwise;
(d) Any amounts due or that may be claimed or become due to Medicare,
Medicaid, or any other health care reimbursement or payment intermediary audit
adjustments, disallowances or reclassifications on account of health care
reimbursement cost report adjustments or other payment adjustments attributable
to any period ending on or before the Closing Effective Date;
(e) Any form of Medicare, Medicaid, or other health care reimbursement
recapture, adjustment, overpayment, penalty assessment or charge whatsoever with
respect to any period ending on or before the Closing Effective Date;
(f) Income taxes owed by Meadowbrook/GA which are attributable to any
period of time occurring prior to the Closing Effective Date and income taxes
owed by Meadowbrook/GA which are attributable to the sale of the Assets and the
Business; and
(g) Any and all other liabilities and obligations of every kind of
Meadowbrook/GA incurred by Meadowbrook/GA in connection with, or arising by
reason of, its ownership of the Assets or its conduct of the Business prior to
the Closing Effective Date, other than the liabilities specifically assumed
hereunder by Buyer.
1.6 Allocation of Purchase Price. The purchase price of the Assets shall be
allocated in the manner set forth in Exhibit 1.6.
Each of the parties agrees to report this transaction for federal tax
purposes in accordance with this allocation of the purchase price.
1.7 Sales and Property Taxes. Meadowbrook/GA shall pay the Georgia state
transfer tax due on the sale of the Real Property. Meadowbrook/GA and Buyer
shall each pay one-half of all other sales and use taxes arising out of the
transfer of the Assets and shall pay their respective portions, prorated as of
the Closing Effective Date, of state and local real and personal property taxes
of the business applicable to the year in which the Closing occurs. Such taxes
shall be prorated at Closing and if any assessment for the property at issue is
not then available for the 1997 tax year, the parties shall compute such
proration based on the assessed value or values applicable to the 1996 tax year.
Following the Closing, Buyer shall return any transferred assets or property for
taxes and shall pay all real or personal property taxes owing thereon.
ARTICLE TWO: REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
2. Representations and Warranties. The Selling Parties represent and warrant
that:
2.1 Organization, Standing, and Qualification of Meadowbrook/GA.
Meadowbrook/GA is a corporation duly organized, validly existing, and in good
standing under the laws of Georgia. True and correct copies of its certificate
of incorporation and bylaws and all amendments thereto are attached hereto as
Exhibit 2.1. This agreement has been duly authorized, executed and delivered by
Meadowbrook/GA and constitutes a valid and binding obligation of Meadowbrook/GA,
enforceable against Meadowbrook/GA in accordance with its terms, except to the
extent that enforceability may be limited by bankruptcy, insolvency, and other
laws affecting the enforcement of creditors' rights generally and by general
principles of equity. The sole shareholder of Meadowbrook/GA is Meadowbrook/CA.
A true and correct copy of the share certificates evidencing Meadowbrook/CA's
ownership of the Stock is attached hereto as a part of Exhibit 2.1. The Selling
Parties will deliver to Buyer, on or before the Closing Date, certified copies
of the resolutions of the boards of directors of Meadowbrook/CA and
Meadowbrook/GA authorizing and approving the sale of the Business and Assets to
Buyer on the terms and conditions provided in this Agreement.
2.2 Financial Statements.
Exhibit 2.2A to this agreement sets forth the balance sheet of
Meadowbrook/GA as of June 30, 1996, and the related statement of income and
retained earnings for the 12-month period ending June 30, 1996. The financial
statements in Exhibit 2.2A are referred to as the "June 30, 1996 Financing
Statements". While the June 30, 1996 Financial Statements have not been
separately audited (they have been audited as a part of the consolidated
financial statements of Meadowbrook/CA), they have been prepared in accordance
with generally accepted accounting principles consistently followed by
Meadowbrook/GA through the period indicated, and, in all material respects
fairly present the financial position of Meadowbrook/GA as of June 30, 1996 and
the results of its operations for the 12-month period indicated.
Exhibit 2.2B to this agreement sets forth the balance sheet of
Meadowbrook/GA as of January 31, 1997 (the "Current Balance Sheet"), and the
related statement of income and retained earnings for the 7-month period ending
on such date. The financial statements in Exhibit 2.2B are referred to as the
"Current Financial Statements". While the Current Financial Statements have not
been audited, they have been prepared in the ordinary course of business by
Meadowbrook/GA and Meadowbrook/CA, and to the best of their knowledge, fairly
present in all material respects the financial position of Meadowbrook/GA as of
its date, and the results of its operations for the period indicated.
2.3 Absence of Specified Changes. Since June 30, 1996, there has not been
any materially adverse change in the financial condition or operations of
Meadowbrook/GA except changes in the ordinary course of business, none of which
would be material in determining the company's financial condition, and except
that West Paces Hospital, Inc. has given written notice (dated February 20,1997)
of cancellation of its management agreement with Meadowbrook/GA effective
February 21, 1998.
2.4 Real Property. The Real Property is described in Exhibit 2.4. The
Selling Parties make no warranty or representation regarding the physical
condition of the Real Property, including the improvements and fixtures
constituting a part thereof. The Buyer shall be responsible for investigating
the physical condition of the Real Property, and if the Buyer is satisfied
therewith, shall purchase the Real Property "as is" and in its current state of
repair.
2.5 Equipment. To the best of Selling Parties' knowledge, Exhibit 2.5
contains a list of substantially all Equipment owned by Meadowbrook/GA and sold
to Buyer hereunder. Except as indicated in Exhibit 2.5 the Equipment is not
subject to any equipment lease, conditional sale contract, mortgage or security
agreement. True and correct copies of all such equipment leases, conditional
sales contracts, mortgages and security agreements are attached hereto as a part
of Exhibit 2.5. The Selling Parties make no warranty or representation regarding
the physical condition of the Equipment. The Buyer shall be responsible for
investigating the physical condition of the Equipment, and if the Buyer is
satisfied therewith, shall purchase the Equipment "as is" and in its current
state of repair. The Buyer shall check the actual Equipment in place against the
list contained in Exhibit 2.5. Any corrections shall be noted on Exhibit 2.5. If
Buyer shall consummate the purchase contemplated in the Agreement, Buyer shall
be deemed to be satisfied with the corrected list of Equipment. It is intended
however, that Buyer is purchasing and the Selling Parties are selling, all of
the Equipment owned by the Selling Parties and used in the Business at any of
the three locations in Georgia described in Recital A. on page 1, and the title
conveyance documents transferring title to the Equipment shall reflect that
intent.
2.6 Employment Contracts and Benefits. Exhibit 2.6 to this agreement
contains a true and correct copy of all of Meadowbrook/GA's material employment
contracts, collective bargaining agreements, and pension, bonus, profit-sharing,
stock option, or other agreements providing for employee remuneration or
benefits. To the best of Selling Parties' knowledge, Meadowbrook/GA is not in
default under any of these agreements.
2.7 Insurance Policies. Exhibit 2.7 to this agreement contains a true and
correct copy of all insurance policies held by Meadowbrook/GA concerning its
business and properties. All these policies are in the respective principal
amounts set forth in Exhibit 2.7. Meadowbrook/GA is not in default with respect
to payment of premiums on any such policy. Except as set forth in Exhibit 2.10,
no claim is pending under any such policy.
2.8 Other Contracts. Exhibit 2.8 contains a true and correct copy of all
material leases and contracts which Meadowbrook/GA is assigning to Buyer and
which will be assumed by Buyer, except for those leases and contracts, copies of
which are attached as a part of Exhibits 2.5, 2.17, 2.18 and 2.20. So far as
known to the Selling Parties, Meadowbrook/GA is not in default in the
performance of any of its obligations under any such lease or contract. The
Selling Parties warrant that all such leases and contracts are currently in full
force and effect, and have not been modified except as stated in Exhibit 2.8.
2.9 Compliance With Laws. The Selling Parties have not received notice of
any violation of any applicable federal, state, or local statute, law, or
regulation (including, without limitation, any applicable building, zoning,
environmental protection, or other law, ordinance, or regulation) affecting
Meadowbrook/GA's properties or the operation of its business; and to the best of
the knowledge of the Selling Parties, there are no such violations.
2.10 Litigation. Except as set forth in Exhibit 2.10, there is not pending
or, to the best knowledge of the Selling Parties, threatened, any suit, action,
arbitration, or legal, administrative, or other proceeding, or governmental
investigation against or affecting Meadowbrook/GA or its business, assets, or
financial condition.
2.11 Tax Matters. Except for the taxes described in section 1.7 above, the
Selling Parties have duly and timely filed with all appropriate governmental
agencies all tax returns, information returns and reports required to be filed
by the Selling Parties, which relate in any way to the tax liabilities of
Meadowbrook/GA. Except for accruals for payroll taxes payable, income taxes
payable and deferred taxes as set forth in the Current Balance Sheet
(collectively, the "Accrued Taxes"), Meadowbrook/GA has paid in full all taxes
(including taxes withheld from employees' salaries and other withholding taxes
and obligations), interest, penalties, assessments and deficiencies owed by
Meadowbrook/GA to all taxing authorities. Complete and correct copies of (i) the
income tax returns of Meadowbrook/GA for Meadowbrook/GA's two fiscal years ended
June 30, 1994, and June 30, 1995, as filed by the Selling Parties with the
Georgia Department of Revenue (collectively, the "Returns"), (ii) all audit
reports received by the Selling Parties during the last five years and issued by
the IRS or any state taxing authorities, and (iii) all consents and agreements
entered into by the Selling Parties during the last five years with the IRS or
any state taxing authorities (collectively, the "Tax Agreements") are
collectively attached hereto as Exhibit 2.11. All information reported on the
Returns is true, accurate and complete. All claims by the IRS or any state
taxing authorities for taxes due and payable by the Selling Parties have been
paid by the Selling Parties. The provisions for Accrued Taxes are adequate for
the payment of all of Meadowbrook/GA's liabilities for unpaid taxes (whether or
not disputed). Neither of the Selling Parties is a party to, or aware of, any
pending or threatened action, suit, proceeding or assessment against it for the
collection of taxes by any governmental agency.
2.12 Authority and Consents. The Selling Parties have the right, power,
legal capacity, and authority to enter into, and perform their obligations under
this agreement. No approvals or consents of any persons other than the Selling
Parties are necessary in connection herewith other than the consent of the other
parties to the leases and contracts to be assigned to Buyer. The execution and
delivery of this agreement by the Selling Parties has been duly authorized by
all necessary corporate action on the part of the Selling Parties.
2.13 Personnel Identification and Compensation. Exhibit 2.13 contains a
list of the names of all officers, directors, and employees of Meadowbrook/GA,
stating the rates of compensation payable to each and any vacation, holiday or
sick pay and any other compensation arrangements or benefits applicable to each
current employee of the Business.
2.14 Title. Meadowbrook/GA is the owner and will transfer in accordance
with the terms hereof good and marketable title to the Business and the Assets
to Buyer, subject to those debts, liens, security interests and encumbrances
permitted herein.
2.15 Contracts. Meadowbrook/GA has entered into no material contracts
relating to the Business or the Assets except as disclosed herein other than (i)
routine maintenance and utility agreements relating to the Assets and (ii)
contracts known to James L. Kelly but not known to any other officer of the
Selling Parties.
2.16 Solvency. Meadowbrook/GA is not insolvent, and will not be rendered
insolvent by the consummation of the transaction contemplated hereby.
2.17 Motor Vehicles. Exhibit 2.17 contains a list and description of all
Motor Vehicles owned by Meadowbrook/GA and sold to Buyer hereunder. Included in
Exhibit 2.17 is a true and correct copy of any security agreement encumbering
any of such Motor Vehicles, along with the note secured thereby and the related
loan amortization schedule. Also included in Exhibit 2.17 is a true and correct
copy of the title certificate for those Motor Vehicles not encumbered by a loan.
Except as indicated in Exhibit 2.17 the Motor Vehicles are not subject to any
equipment leases, conditional sales contracts, mortgages or security agreements.
2.18 Leased Property. Exhibit 2.18 contains a true, correct and complete
copy of the lease between Meadowbrook/GA and J&S Properties covering the Leased
Property. The current term expired February 28, 1997. Meadowbrook/GA has
delivered the landlord a written notice stating that the term will not be
extended, a copy of which is included in Exhibit 2.18. The Selling Parties make
no warranty or representation regarding the physical condition of the Leased
Property, including the improvements and fixtures constituting a part thereof.
The Buyer shall be responsible for investigating the physical condition of the
Leased Property, and if the Buyer is satisfied therewith, shall accept the
Leased Property "as is" and in its current state of repair.
2.19 West Paces Management Agreement. Exhibit 2.19 contains a true, correct
and complete copy of the management agreement between Meadowbrook/GA and West
Paces Hospital, Inc. Said contract has not been modified in any respect. The
Selling Parties have received a notice from West Paces Hospital, Inc., dated
February 20, 1997, stating its intent to cancel the management agreement
effective February 21, 1998. A copy of said notice is included in Exhibit 2.19.
The Selling Parties are not aware of any default on their part which would
authorize West Paces Hospital, Inc. to terminate the management agreement prior
to February 21, 1998.
2.20 Parkway Medical Management Agreement. Exhibit 2.20 contains a true,
correct and complete copy of the management agreement between Meadowbrook/GA and
Medical Center West, Inc. d/b/a Parkway Medical Center. Said contract has not
been modified in any respect. The Selling Parties are unable to determine
whether the conditions specified in paragraph 10.2(a) of the management
agreement (providing for the automatic renewal of the agreement) have been met
because they are unable to obtain the necessary information from medical Center
West, Inc. Further, the evaluation contemplated to occur in the 17th month of
the term has not yet occurred. Therefore, the Selling Parties can not represent
and warrant that said agreement has been automatically renewed for an additional
term. Other than the foregoing matters, the Selling Parties are not aware of any
default on their part which would authorize Medical Center West, Inc. to
terminate the management agreement pursuant to paragraph 10.3 thereof.
2.21 Accounts Payable. Exhibit 2.21 contains the Selling Parties' best
determination of the accounts payable of Meadowbrook/GA as of February 28, 1997.
2.22 Permits. Set forth on Exhibit 2.22 is an accurate description of each
material license, Medicaid or Medicare Participation Agreement, franchise,
permit or other similar authorization affecting, or relating in any way, to the
Business (the "Permits"). Except as set forth in said exhibit the Permits are
valid and in full force and effect, and the Selling Parties have not received
any notice of any claim, default, complaint, citation or other proceeding
relating to any of the Permits. To the best of the Selling Parties' knowledge
the Permits are legally sufficient to authorize the conduct of the Business by
Meadowbrook/GA without being in violation of any applicable law, regulation or
valid governmental requirement requiring any such Permit.
2.23 Notes Payable. Exhibit 2.23 contains a true, correct and complete
list, and description, of the notes payable of Meadowbrook/GA as of January 31,
1997. All such notes relate to Motor Vehicles. True and correct copies of the
notes listed therein are contained in Exhibit 2.17.
2.24 Patient Credit Balances. Exhibit 2.24 contains a true, correct and
complete list of the patient credit balances carried on the books of
Meadowbrook/GA as of January 31, 1997, containing the names of the patients and
the amount of credit applicable to each patient.
2.25 No Other Liabilities. To the best of the Selling Parties' knowledge
Meadowbrook/GA has no liabilities or obligations, and there is no basis for any
assertion against Meadowbrook/GA of any liability or obligation, except those
liabilities or obligations which are (a) fully reflected or adequately reserved
against in the Current Financial Statements, (b) disclosed in this agreement or
in the exhibits hereto, or (c) incurred in the ordinary course of business
consistent with past practice since January 31, 1997, the total of which would
not be material in determining the company's financial position.
2.26 Organization, Standing, and Qualification of Meadowbrook/CA.
Meadowbrook/CA is a corporation duly organized, validly existing, and in good
standing under the laws of Delaware. Attached hereto as Exhibit 2.26 is a true
and correct copy of its certificate of incorporation and bylaws and all
amendments thereto. This agreement has been duly authorized, executed and
delivered by Meadowbrook/CA and constitutes a valid and binding obligation of
Meadowbrook/CA, enforceable against Meadowbrook/CA in accordance with its terms,
except to the extent that enforceability may be limited by bankruptcy,
insolvency, and other laws affecting the enforcement of creditors' rights
generally and by general principles of equity. Meadowbrook/CA will deliver to
Buyer, on or before the Closing Date, a certified copy of a resolution of its
board of directors authorizing and approving the sale of the Stock to Buyer on
the terms and conditions provided in this Agreement.
2.27 Capitalization of Meadowbrook/GA. The aggregate number of shares of
stock which Meadowbrook/GA is authorized to issue is 100,000 common shares, of
which 10,000 shares are issued and presently outstanding. All such issued
shares, which represent all of the "Stock" as herein defined, have been validly
issued and are fully paid and nonassessable. Meadowbrook/GA has no outstanding
subscriptions, contracts, options, warrants, or other obligations to issue,
sell, or otherwise dispose of, or to purchase, redeem or otherwise acquire, any
of its stock.
2.28 Share Ownership. Meadowbrook/CA represents and warrants that it is the
owner, free and clear of any encumbrances, of all of Meadowbrook/GA's common
shares and has full right and authority to transfer said shares to Buyer, and
there are no other shares of Meadowbrook/GA owned or claimed by any other person
or entity.
2.29 Full Disclosure. None of the representations and warranties made by
the Selling Parties in this agreement, or made in any certificate furnished or
to be furnished by either of them, contains or will contain any untrue statement
of a material fact, or omits to state a material fact necessary to make the
statements made, in the light of the circumstances under which they were made,
not misleading.
ARTICLE THREE: BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants that:
3.1 Organization, Standing, and Qualification of Buyer. Buyer is a
corporation duly organized, validly existing, and in good standing under the
laws of Georgia. True and complete copies of its certificate of incorporation
and bylaws and all amendments thereto are attached hereto as Exhibit 3.1. This
agreement has been duly authorized, executed and delivered by Buyer and
constitutes a valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms, except to the extent that enforceability may be
limited by bankruptcy, insolvency, and other laws affecting the enforcement of
creditors' rights generally. The sole shareholder of Buyer is Stiles A. Kellett
III. The Buyer will deliver to Selling Parties on or before the Closing Date, a
certified copy of the resolution of the board of directors of Buyer authorizing
and approving the purchase of the Business and Assets from Meadowbrook/GA and
the Stock from Meadowbrook/CA on the terms and conditions provided in this
Agreement.
3.2 Authority and Consents. The Buyer has the right, power, legal capacity,
and authority to enter into, and perform its obligations under this agreement.
No approvals or consents of any persons other than the Buyer is necessary in
connection herewith other than the consent of the other parties to the leases
and contracts to be assigned to Buyer. The execution and delivery of this
agreement by the Buyer has been duly authorized by all necessary corporate
action on the part of the Buyer.
3.3 Investment Intent. The Stock is being acquired by Buyer for investment
for its own account and not with a view to, or for the offer for sale or for the
sale in connection with, any distribution thereof.
ARTICLE FOUR: SELLING PARTIES' OBLIGATIONS BEFORE CLOSING
Selling Parties covenant that from the date of this agreement until the
Closing Effective Date:
4.1 Buyer's Access to Premises and Information. Buyer and its counsel,
accountants, and other representatives shall have full access during normal
business hours to all properties, books, accounts, records, contracts, and
documents of or relating to Meadowbrook/GA. Selling Parties shall furnish or
cause to be furnished to Buyer and its representatives all data and information
concerning the business, finances, and properties of Meadowbrook/GA as may
reasonably be requested.
Nothing in this agreement shall obligate Selling Parties to disclose any
restricted patient information or provide any access to representatives of Buyer
prohibited or not authorized by applicable governmental authority.
4.2 Conduct of Business in Normal Course. Meadowbrook/GA will carry on its
business and activities diligently and in substantially the same manner as it
previously has been carried out.
4.3 Preservation of Business and Relationships. Meadowbrook/GA will use its
best efforts to preserve its business organization intact, to keep available to
Buyer its present employees, and to preserve its present relationships with
suppliers, customers, and others having business relationships with it.
4.4 Reserved.
4.5 Employees and Compensation. Meadowbrook/GA will not do, or agree to do,
any of the following acts: (a) make any change in compensation payable or to
become payable by it, to any officer, employee, or representative; (b) make any
change in benefits payable to any officer, employee, or representative under any
bonus or pension plan or other contract or commitment; or (c) modify any
employment agreement; except that the Selling Parties may pay bonuses to certain
existing employees of Meadowbrook/GA.
4.6 Existing Agreements. Meadowbrook/GA will not modify, amend, cancel, or
terminate any of the leases or contracts to be assigned to Buyer hereunder or
the management agreement with West Paces Hospital, Inc. without prior notice to
Buyer or agree to do any of those acts.
4.7 Consents of Others. As soon as reasonably practical after the execution
and delivery of this agreement, and in any event on or before the Closing Date,
Selling Parties will use their best efforts to obtain the written consent of the
persons whose consents are required for the assignment of the leases and
contracts to be assigned to Buyer. Buyer will exercise its best efforts, and
promptly execute and deliver any documents and instruments that may be
reasonably required, to assist Selling Parties in obtaining such consents.
4.8 Reserved.
4.9 Disposition of Assets. Meadowbrook/GA shall not sell, lease, licence or
otherwise dispose of any of the Assets or agree or commit to do any of the same,
except (i) pursuant to existing contracts or commitments and (ii) in the
ordinary course of business consistent with past practice.
4.10 Maintenance of Inventory. Meadowbrook/GA will not allow the Inventory
to be materially depleted from its level as of the date hereof or agree or
commit to do any of the same.
4.11 Maintenance of Permits. Meadowbrook/GA shall use all reasonable
efforts to maintain in full force and effect, without qualification or
limitation, all Permits currently in effect with respect to the Business.
4.12 Payment of Taxes. Meadowbrook/GA will cause to be paid when due, all
taxes, assessments and charges or levies imposed upon it with respect to or on
the Business or any of the Assets, or which it is required to withhold and pay
over, other than any which it may contest in good faith.
4.13 Reports. Meadowbrook/GA shall prepare, execute and file on a timely
basis all interim cost reports and all other reports and statements required to
be filed with all intermediaries and other public or private third party payor
or governmental authority in connection with the transactions contemplated by
this Agreement. Buyer shall be responsible for preparation and filing of all
change of ownership documents required in connection with this transaction. The
Selling Parties will file all final cost reports for services provided prior to
the Closing Effective Date using Meadowbrook/GA's existing provider number.
Buyer will apply for a new provider number and will file cost reports for
services provided after the Closing Effective Date using its new provider
number.
4.14 Payment of Medicare Obligations. The Selling Parties shall make
arrangements to repay all governmental authorities with jurisdiction over the
Business (including the Health Care Financing Administration) any amounts owed
to such governmental authorities by Meadowbrook/GA with respect to the operation
of the Business prior to the Closing Effective Date. The parties acknowledge
that overpayments or underpayments to Meadowbrook/GA by Medicaid or Medicare
programs for periods ending prior to the Closing Effective Date may be
discovered after the Closing, whether in connection with an audit of the
Business or otherwise. Meadowbrook/CA shall assume the obligation for and be
liable for all such overpayments received by Meadowbrook/GA. Meadowbrook/CA
shall be liable for and shall promptly pay all depreciation recapture, and all
recapture of property cost reimbursement, that is required under the Medicaid or
Medicare programs as a result of the transactions contemplated by this
Agreement. Any refunds shall belong to Meadowbrook/CA and shall be promptly
remitted to Meadowbrook/CA as provided in section 10.2 below.
ARTICLE FIVE: BUYER'S OBLIGATIONS BEFORE CLOSING
5.1 Information To Be Held in Confidence. The Buyer agrees that, unless and
until the Closing has been consummated, the Buyer and its officers, directors,
and other representatives will hold in strict confidence, and will not use to
the detriment of the Selling Parties all data and information with respect to
the business of the Selling Parties obtained in connection with this transaction
or agreement. If the transaction does not close, the Buyer will return to the
Selling Parties all that data and information that the Selling Parties may
reasonably request, including, but not limited to, worksheets, test reports,
manuals, lists, memoranda, and other documents prepared by or made available to
the Buyer in connection with this transaction. If the transaction does close,
the Buyer shall be free to use any information it obtains related to the
Business or Assets, but shall not disclose confidential information regarding
Meadowbrook/CA which is clearly designated as confidential by Meadowbrook/CA,
unless otherwise required by law.
5.2 Cooperation in Securing Consents of Third Parties. The Buyer will use
its best efforts to assist the Selling Parties in obtaining the consent of all
necessary persons and agencies to the assignment and transfer to the Buyer of
any and all properties, assets, and agreements to be assigned and transferred
under the terms of this agreement.
5.3 Bulk Sales Law. The Buyer waives compliance with the provisions of the
law relating to bulk transfers in connection with this sale of assets, subject
to the indemnity of the Selling Parties contained in this agreement. The Selling
Parties shall indemnify and hold the Buyer harmless from and against any and all
claims, loses, damages, liabilities, costs and expenses, including reasonable
attorneys fees, incurred by the Buyer as a result of any failure by the Selling
Parties to comply with any such bulk sales law. Nothing in this paragraph shall
stop or prevent either the Buyer or the Selling Parties from asserting as a bar
or defense to any action or proceeding brought under that law that it does not
apply to the sale contemplated under this agreement.
ARTICLE SIX: CONDITIONS PRECEDENT TO BUYER'S PERFORMANCE
The obligations of Buyer to purchase the Assets and the Stock under this
agreement are subject to the satisfaction, at or before the Closing, of all the
conditions set out below in this Article Six. The Buyer may waive any or all of
these conditions in whole or in part without prior notice; provided, however,
that no such waiver of a condition shall constitute a waiver by the Buyer of any
of its other rights or remedies, at law or in equity, if the Selling Parties
shall be in default of any of their representations, warranties, or covenants
under this agreement.
6.1 Accuracy of Selling Parties' Representations and Warranties. Except as
otherwise permitted by this agreement, all representations and warranties by the
Selling Parties in this agreement, or in any written statement that shall be
delivered to the Buyer by the Selling Parties under this agreement, shall be
true in all material respects on and as of the Closing Date as though made at
that time.
6.2 Performance by Selling Parties. The Selling Parties shall have
performed, satisfied, and complied in all material respects with all covenants,
agreements, and conditions required by this agreement to be performed or
complied with by either or both of them on or before the Closing Date or the
Closing Effective Date, as applicable.
6.3 Certification by Selling Parties. The Buyer shall have received a
certificate, dated the Closing Date, signed by the Selling Parties' president or
vice president and its secretary or treasurer certifying, in such detail as is
reasonable and customary, that to the best of such officers' knowledge the
conditions specified in sections 6.1 and 6.2 have been fulfilled.
6.4 Absence of Litigation. No action, suit, or proceeding before any court
or any governmental body or authority, pertaining to the transaction
contemplated by this agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
6.5 Commitment for Title Policy. The Buyer shall have received from Lawyers
Title Insurance Corporation a commitment to issue, at Buyer's expense, an
owner's title insurance policy in its usual form and for its usual fee, insuring
the fee simple title of Buyer to all the Real Property described in Exhibit 2.4,
subject only to (a) the lien, if any, of current real property taxes, payment of
which is not delinquent; and (b) such other exceptions as may be acceptable to
the Buyer.
6.6 FIRPTA Withholding. The Buyer shall have received a certificate of the
Selling Parties to the effect that Meadowbrook/GA is a U.S. person or such other
evidence as the Buyer may in its reasonable discretion determine to be adequate
to relieve the Buyer of any obligation to withhold under Section 1445 of the
Internal Revenue Code of 1986 (relating to withholding by buyers of U.S. real
property interests) in connection with possible liability of the Selling Parties
for income tax under the Foreign Investment in Real Property Tax Act of 1980).
6.7 Consents. All necessary agreements and consents of any parties to the
consummation of the transactions contemplated by this agreement, or otherwise
pertaining to the matters covered by it, shall have been obtained by the Selling
Parties and delivered to the Buyer. Such consent shall include, but is not
limited to, the consent of West Paces Hospital, Inc. to the transfer of the
Stock; the consent of Medical Center West, Inc. to the assignment of its
management contract with Meadowbrook/GA; the consent of the managed care
providers to the assignment of the managed care contracts identified in Exhibit
2.8; the consent of the other parties to the leases, conditional sales contracts
and security agreements identified in Exhibits 2.5 and 2.8; and the consent of
the lenders holding notes secured by encumbrances on the Motor Vehicles
identified in Exhibits 2.17 and 2.23. The closing of the transaction by Buyer
shall conclusively be presumed to be an approval by Buyer of any and all
consents obtained, or that a consent is not required with respect to transferred
leases and agreements for which no consent is obtained. The Selling Parties
shall not be responsible for any damages which Buyer may sustain after the
Closing by reason of the termination or attempted termination of any lease or
agreement, unless such termination or attempted termination is based on a
default of one of the Selling Parties which was not disclosed to the Buyer prior
to the Closing. It is recognized that the notice of termination from West Paces
Hospital, Inc. described in section 2.19 and the matters regarding automatic
renewal of the Parkway Medical Center management agreement described in section
2.20 shall be deemed not to be a default of the Selling Parties.
6.8 Permits. Buyer shall be satisfied that it will be able to obtain all
governmental permits, approvals, certificates and licenses which are necessary
to enable the Buyer to conduct the Business in the same manner that it is
presently being conducted by Meadowbrook/GA.
6.9 Extension of Lease on Leased Property. Buyer shall be satisfied that it
will be able to negotiate an extension or renewal of the lease on the Leased
Property (located at 1946 Clairmont Road, DeKalb County, Georgia) on terms and
conditions acceptable to it.
6.10 Notice Regarding Real Property. The Selling Parties shall have given
the notice required by special stipulation 13 of that certain contract between
Meadowbrook/GA, as purchaser, and TAS Contracting, Inc. and John W. Jonap d/b/a
J&S Properties (the "Original Seller"), as seller, dated February 25, 1993 (for
the purchase by Meadowbrook/GA of the Real Property) to the Original Seller, and
the Original Seller shall have declined to exercise the right of first offering
provided by such special stipulation or shall have waived same, and the Selling
Parties shall have provided written proof thereof to the Buyer in form
reasonably satisfactory to Buyer.
6.11 Condition of Real Property. The Buyer shall be satisfied with the
condition of the Real Property. The closing of the transaction shall create a
conclusive presumption that Buyer is satisfied with the condition of the Real
Property.
6.12 No Zoning or Building Code Violations. The Buyer shall be satisfied
that the Real Property shall not be in violation of zoning or building laws
applicable to the same.
6.13 Removal of Encumbrances. The Selling Parties shall have paid or
otherwise satisfied all obligations and encumbrances attaching to any of the
Assets, except for those obligations and encumbrances being specifically assumed
by the Buyer in accordance with the provisions of this agreement.
6.14 Satisfaction With Equipment. The Buyer shall be satisfied that the
Equipment listed in Exhibit 2.5 is accurate and complete and includes all of the
Equipment used in the Business, and if any Equipment is omitted from such list,
such missing Equipment shall be added to the list and shall be included in the
transfer to Buyer. Buyer shall also be satisfied with the condition of the
Equipment and that all of the Equipment is in place in one of Meadowbrook/GA's
three business locations in Metropolitan Atlanta. The closing of the transaction
shall create a conclusive presumption that Buyer is satisfied with the matters
described in this section 6.14.
6.15 Satisfaction With Insurance and Tail Coverage Endorsement. The Buyer
shall be satisfied (i) that Selling Parties shall have taken such action as may
be necessary to continue in effect the coverage provided by the insurance
policies described in and copies of which are included in Exhibit 2.7 until the
Closing Effective Date; (ii) that the Selling Parties shall have taken such
action as may be necessary to continue coverage under the "Health Care Facility
Medical Professional Liability Protection - Claims Made" provisions of such
policy (the "professional liability coverage") and the "Health Care Umbrella
Excess Liability Protection - Claims Made" provisions of such policy (the
"umbrella coverage") for an indefinite period beyond the Closing Effective Date
(the reporting endorsement or "tail coverage endorsement"); (iii) that the tail
coverage endorsement provides the same coverage as is presently afforded under
the professional liability coverage and the umbrella coverage for claims made
after the Closing Effective Date which relate to occurrences which occurred
prior to the Closing Effective Date and which would otherwise be covered under
the professional liability coverage and the umbrella coverage; (iv) that the
professional liability coverage provided by the tail coverage endorsement (but
not the umbrella coverage) provides that the coverage limits shall not be
diminished by claims arising from incidents occurring at other facilities owned,
managed or controlled by Meadowbrook/CA or its affiliates; and (v) that the
Buyer has been added as an additional insured under the tail coverage
endorsement. The tail coverage endorsement shall be in form satisfactory to
Buyer, and the Selling Parties shall have provided Buyer with proof, in form
reasonably satisfactory to Buyer, that such endorsement has been fully paid for
and the coverage provided thereunder is in full force and effect.
6.16 Satisfaction With Due Diligence Investigation. Buyer shall be
satisfied, after making such investigations of the Business, the Assets and the
Selling Parties' representations herein as the Buyer deems appropriate, (i) that
it has been offered sufficient opportunity to verify the accuracy of such
representations, (ii) that such representations appear to be accurate in all
material respects, and (iii) that nothing has come to its attention that would
indicate that the value of the Business, Assets and Stock is less than the
purchase price contained herein. The Closing of the transaction shall create a
conclusive presumption that Buyer is satisfied with its due diligence
investigations; provided however, that such presumption of satisfaction shall
not prevent the enforcement of Meadowbrook/CA's indemnity contained in section
9.3 hereof.
6.17 List of Payables. The Selling Parties shall have provided the Buyer at
the Closing, a list (the "Closing Payables List") containing the Selling
Parties' best determination of all payables of Meadowbrook/GA, including accrued
but unbilled obligations, outstanding on the Closing Date. The amount of each
such payable shall include the amount due (or expected to be due) on the
"Closing Effective Date" (as defined in section 8.1 below). Such list shall
identify separately (a) those payables (the "Identified Payables") the amounts
of which can be established with reasonable certainty through the exercise of
reasonable diligence (e.g., from written invoices, through telephone calls or
other contact with vendors, from advance estimates, or from fixed charges) and
(b) those payables (the "Estimated Payables") the amounts of which can only be
estimated (based on previous experience or other reasonable methods). Such list
shall include all outstanding payment obligations of Meadowbrook/GA which have
been incurred prior to the Closing Date, or which can reasonably be expected to
be incurred prior to the Closing Effective Date, and which can be identified
with reasonable diligence, including, but not limited to those obligations which
have been or would be allocated to the balance sheet liability categories
identified as "Accounts Payable", "Patient Credit Balances", "Accrued Payroll
and Other Wages", "Accrued Vacation/Sick" and "Withholding and Other Payroll
Liabilities" on the balance sheets contained in the Current Financial
Statements. The Closing Payables List shall separate the payables into the
balance sheet liability categories listed above. The Closing Payables List shall
be certified as to the use of reasonable diligence in its preparation and as to
its completeness and accuracy being to the best knowledge of the Selling
Parties, by the chief financial officer of Meadowbrook/CA. The payables listed
on the Closing Payables List shall be paid or otherwise satisfied as provided in
section 8.4 below.
ARTICLE SEVEN: CONDITIONS PRECEDENT TO SELLING PARTIES PERFORMANCE
The obligations of Meadowbrook/GA to sell and transfer the Assets and
Meadowbrook/CA to sell and transfer the Stock under this agreement are subject
to the satisfaction, at or before the Closing, of all the following conditions.
The Selling Parties may waive any or all of these conditions in whole or in part
without prior notice; provided, however, that no such waiver of a condition
shall constitute a waiver by the Selling Parties of any of their other rights or
remedies, at law or in equity, if the Buyer should be in default of any of its
representations, warranties, or covenants under this agreement.
7.1 Accuracy of Buyer's Representations and Warranties. All representations
and warranties by the Buyer contained in this agreement or in any written
statement delivered by the Buyer under this agreement shall be true on and as of
the Closing Date as though such representations and warranties were made on and
as of that date.
7.2 Buyer's Performance. The Buyer shall have performed and complied with
all covenants and agreements and satisfied all conditions that it is required by
this agreement to perform, comply with, or satisfy, before or at the Closing.
7.3 Certification by Buyer. The Selling Parties shall have received a
certificate, dated the Closing Date, signed by the Buyer's president and its
secretary or treasurer certifying, in such detail as is reasonable and
customary, that to the best of such officers' knowledge the conditions specified
in sections 7.1 and 7.2 have been fulfilled.
7.4 Absence of Litigation. No action, suit, or proceeding before any court
or any governmental body or authority, pertaining to the transaction
contemplated by this agreement or to its consummation, shall have been
instituted or threatened on or before the Closing Date.
ARTICLE EIGHT: THE CLOSING
8.1 Time and Place. The transfer of the Assets by Meadowbrook/GA to Buyer
and the transfer of the Stock by Meadowbrook/CA to Buyer (the "Closing") shall
take place at the offices of Smith, Bassett, Purcell & Koenig in Atlanta,
Georgia at 10:00 a.m. EST, on March 28, 1997, or at such other time and place as
the parties may agree to in writing (the "Closing Date"). Notwithstanding the
fact that the Closing will occur on March 28, 1997, the effective date of the
Closing shall be March 31, 1997 at the close of business (the "Closing Effective
Date"). All transfer and assumption documents and all prorations shall be made
effective as of the Closing Effective Date. Actual transfer of possession shall
take place on the Closing Effective Date. The Selling Parties shall remain
liable for all obligations incurred by the Business through the Closing
Effective Date and shall retain the risk of loss through the Closing Effective
Date.
8.2 The Selling Parties' Obligations at Closing.
8.2.1 On the Closing Date. On the Closing Date, the Selling Parties
shall deliver or cause to be delivered to Buyer:
(a) A limited warranty deed, properly executed and acknowledged,
conforming to and conveying the agreed state of the title to the Real Property
made effective as of the Closing Effective Date;
(b) Assignments of all contracts and leaseholds being assigned to
Buyer hereunder, made effective as of the Closing Effective Date, properly
executed by Meadowbrook/GA and accompanied by such consents as may have been
obtained of lessors and contracting parties required by this agreement and the
leases and contracts being assigned;
(c) Such other executed instruments of transfer as the title insurance
company may reasonably require to issue Buyer's owner's title insurance policy
with respect to the Real Property in accordance with this Agreement;
(d) A bill of sale for all personal property comprising part of the
Assets, made effective as of the Closing Effective Date, in form and content
reasonably acceptable to counsel for Buyer, including a transfer of title to the
Motor Vehicles;
(e) A usual and customary affidavit concerning parties in possession
and mechanics' or materialmans' liens with respect to the Real Property, in form
and substance necessary to induce the title insurance company to delete the
exceptions for such matters from Buyer's owner's title policy;
(f) Reserved.
(g) An affidavit of non-foreign status under Section 1445 of the
Internal Revenue Code, duly executed and acknowledged by Meadowbrook/GA;
(h) The certificate required by section 6.3 above;
(i) Proof that the tail coverage endorsement is in full force and
effect as required by section 6.15 above;
(j) The Closing Payables List required by section 6.17 above; and
(k) Proof of Payment, in such form as Buyer shall reasonably require,
of the payables listed or otherwise identified in Exhibit 2.21 hereto which are
not assumed by Buyer under the provisions of this agreement or which are not
listed on the Closing Payables List.
(l) After Meadowbrook/GA shall have transferred to Meadowbrook/CA all
of its assets not transferred to Buyer hereunder with the exception of the
management agreement with West Paces Hospital, Inc., and any other license,
contract or lease designated by Buyer to be retained by Meadowbrook/GA pursuant
to section 1.1.2 hereof, and Meadowbrook/CA shall have assumed all of the
obligations and liabilities of Meadowbrook/GA not assumed by Buyer hereunder (or
paid or otherwise satisfied prior to or at the Closing), all in form reasonably
satisfactory to counsel for Buyer, Meadowbrook/CA shall deliver or cause to be
delivered to Buyer:
(i) Share certificates for the Stock, made effective as of the
Closing Effective Date, which shall be in negotiable form, and which shall be
delivered free and clear of all encumbrances;
(ii) The written resignations of all of the officers and
directors of Meadowbrook/GA, made effective as of the Closing Effective Date;
(iii) The corporate minute books and all corporate and financial
records of Meadowbrook/GA; and
(iv) An opinion of counsel, dated the Closing Date, from the law
firm of Hanson, Bridgett, Marcus, Vlahos & Rudy in San Francisco, California,
counsel for the Selling Parties, to the effect that (1) the shares of
Meadowbrook/GA being acquired have been duly issued and are fully paid and
nonassessable and, to the best of its knowledge, after reasonable inquiry,
constitute all of the issued and outstanding stock of Meadowbrook/GA; (2)
Meadowbrook/CA has full power and authority to sell, assign and transfer such
shares, and, to the best of its knowledge, after reasonable inquiry, delivery of
such shares to Buyer will transfer to Buyer title thereto free and clear of all
liens, pledges, encumbrances, security interests, or claims; and (3) this
Agreement has been duly executed and delivered by Meadowbrook/CA and is a
binding obligation of Meadowbrook/CA.
8.2.2 On the Closing Effective Date. On the Closing Effective Date the
Selling Parties, through their officers, agents and employees, will put the
Buyer into full possession and enjoyment of all properties and assets to be
conveyed and transferred to Buyer by this agreement.
8.2.3 After the Closing Date. The Selling Parties, at any time after
the Closing Date, will execute, acknowledge, and deliver any further deeds,
assignments, conveyances, and other documents as may be reasonably requested by
the Buyer, and will take any other action consistent with the terms of this
agreement that may reasonably be requested by the Buyer for the purpose of
assigning, transferring, granting, conveying, and confirming to the Buyer, or
reducing to possession, any or all property to be conveyed and transferred to
Buyer under this agreement.
8.3 Buyer's Obligations at Closing. At the Closing, the Buyer shall deliver
to the Selling Parties the following instruments and documents against delivery
of the items specified in section 8.2 above:
(a) In payment of the Assets, a bank cashier's check in the amount of
$1,250,000 less the $75,000 to be deposited in the joint account described in
subsection 8.4(b) below.
(b) In payment of the Stock, a bank cashier's check in the amount of
$50,000.00;
(c) A bank cashier's check in the amount of $75,000 to be deposited in
the joint account described in subsection 8.4(b) below.
(d) A certificate executed by the president and the secretary or
treasurer of Buyer certifying that all the Buyer's representations and
warranties under this agreement are true as of the Closing Date, as though each
of those representations and warranties had been made on that date; and
(e) Instruments of assumption of the liabilities of Meadowbrook/GA
under the assigned leases and contracts and any other liabilities to be assumed
by Buyer pursuant to this agreement from and after the Closing Effective Date,
in form reasonably acceptable to the Selling Parties.
8.4 Satisfaction of Payables. The payables of Meadowbrook/GA shall be
satisfied at the Closing as follows:
(a) The Identified Payables, other than the payables contained in the
category identified as "Patient Credit Balance", and those payables which are
being assumed by Buyer under the provisions of this agreement, if any, shall be
paid at the Closing, utilizing such method as shall be reasonably satisfactory
to the Buyer. With respect to the payables in the category identified as
"Accrued Vacation/Sick", only (i) the amounts representing the accrued vacation
pay benefits of all Meadowbrook/GA employees and (ii) the amounts representing
the accrued sick leave benefits of Dottie Borders, Leeanne Dennis and Lauren
Witsaman (being Meadowbrook/GA employees who have already made claims for such
benefits in connection with requested maternity leave, and the total value of
which is $5,450), shall be paid, and such amounts shall be paid, at the sole
option of Buyer, either (i) directly to the employee to which such amount is
attributed, or (ii) to the Buyer, in which event the Buyer shall assume the
obligation to provide such employee or employees with the paid vacation or sick
leave to which the amount paid is attributed.
(b) To assure payment of the Estimated Payables and the Patient Credit
Balance portion of the Identified Payables, a portion of the proceeds received
from the Buyer shall be placed in a joint checking account to be established at
Wachovia Bank of Georgia in Atlanta, Georgia. Such joint checking account shall
require the signatures of both a representative of Meadowbrook/CA and a
representative of the Buyer on all checks drawn on such account. The amount to
be placed in the account shall be $75,000. $50,000 of such amount shall be for
the purpose of indemnifying the Buyer against claims for payment of the
Estimated Payables. $25,000 of such amount shall be for the purpose of
indemnifying the Buyer against claims for payment of the Patient Credit
Balances.
(c) With respect to the $50,000 held to indemnify the Buyer against
claims for payment of the Estimated Payables, as Meadowbrook/CA shall pay the
Estimated Payables after the Closing, it shall provide proof of such payment to
Buyer in such reasonable form as Buyer may request, and upon receipt of such
proof of payment, Buyer shall sign a check drawn on the joint account in the
amount of such payment, made payable to Meadowbrook/CA, and shall deliver such
check to Meadowbrook/CA. Such process shall be repeated until the amount of
$50,000 from the joint account has been paid over to Meadowbrook/CA for such
purpose. If after six (6) months from the Closing Effective Date, (i)
Meadowbrook/CA has provided reasonable proof to Buyer that all of the Estimated
Payables have been paid in full and (ii) Buyer has not received notice of any
unpaid Estimated Payables, Buyer shall sign a check drawn on the joint account
in the amount of the balance of the $50,000 held for such purpose remaining in
the account, made payable to Meadowbrook/CA, and shall deliver such check to
Meadowbrook/CA. If after six (6) months from the Closing Effective Date, the
events described in clauses (i) and (ii) of the preceding sentence have not
occurred, the balance of the $50,000 remaining in the joint account shall be
held in such account and released as and when the remaining Estimated Payables
are paid in accordance with the above provisions of this subsection 8.4(c).
(d) With respect to the $25,000 held to indemnify the Buyer against
claims for payment of the Patient Credit Balances, such amount shall be held in
the joint account and disbursed as follows. As Meadowbrook/CA shall pay any
claim for refund of any Patient Credit Balance item listed in Exhibit 2.24, it
shall provide proof of such payment to Buyer in such reasonable form as Buyer
may request, and upon receipt of such proof of payment, Buyer shall sign a check
drawn on the joint account in an amount equal to the lesser of: (i) the amount
of the payment made by Meadowbrook/CA for such purpose or (ii) the amount of the
$25,000 then remaining in the joint account, less the amount needed to pay any
Patient Credit Balance items listed in Exhibit 2.24 which have not been paid or
otherwise satisfied at such time. Such check shall be made payable to and
delivered to Meadowbrook/CA. Such process shall be repeated until the amount of
$25,000 from the joint account has been paid over to Meadowbrook/CA for such
purpose. If on December 1, 1997 (i) no claims for repayment of Patient Credit
Balances have been received by Meadowbrook/CA, or (ii) if any such claims have
been received, and all such claims have been paid or otherwise satisfied, then
upon the receipt of such reasonable proof thereof as Buyer shall reasonably
request, Buyer shall sign a check drawn on the joint account in the amount of
the balance of the $25,000 then held in the joint account made payable to
Meadowbrook/CA, and shall deliver such check to Meadowbrook/CA. If on December
1, 1997 any such claims have been received, but all such claims have not been
paid or otherwise satisfied, then the balance of the $25,000 then held in the
account shall continue to be held in the joint account until all such received
claims have been paid or otherwise satisfied.
(e) The provisions of subsections 8.4(c) and (d) above to the contrary
notwithstanding, if on December 31, 1997, any funds shall remain in the joint
account, the joint account shall be closed and the remaining funds shall be
delivered to Meadowbrook/CA, unless any outstanding claims against
Meadowbrook/CA for indemnification pursuant to section 9.3 hereof shall be
pending, in which event the funds in the joint account shall continue to be held
in such account pending the disposition of such claims, and distributed as
agreed upon between Meadowbrook/CA and the Buyer.
8.5 Closing Costs and Prorations. Buyer shall pay all customary closing
costs for the purchase of the Real Property, including recording fees, the cost
of obtaining the owner's title insurance policy described hereinabove, and the
cost of any boundary survey of the property obtained by Buyer. The Selling
Parties shall pay the Georgia state transfer tax incurred in connection with the
transfer of the Real Estate. Property taxes and rental, maintenance and utility
charges attributable to periods spanning the Closing Effective Date on assets
transferred to the Buyer hereunder shall be prorated between the parties as of
the Closing Effective Date. Buyer shall reimburse the Selling Parties for any
deposits related to the Business which are transferable and which are
transferred to Buyer.
8.6 Employment of Meadowbrook/GA's Employees. The Selling Parties shall, at
such date on or before the Closing Date as the Selling Parties and the Buyer
shall agree upon, notify Meadowbrook/GA's employees of this transaction, and
that their employment with Meadowbrook/GA will terminate as of the Closing
Effective Date. It is understood and agreed that the Buyer shall be under no
obligation to employ any of the employees of Meadowbrook/GA. The Selling Parties
will assist Buyer in the hiring of any such employees at Buyer's request. The
Selling Parties shall, on or before the Closing Date, discharge any liability it
may have to any of Meadowbrook/GA's employees, whether or not said employee
shall enter the employ of Buyer. Such liability shall include, but is not
limited to, wages and other compensation and accrued vacation benefits.
8.7 Reciprocal Services. In connection with the transfer to and
continuation of the Business by the Buyer, it is anticipated that Meadowbrook/CA
may provide certain personnel, financial or other services to the Buyer to
assist with the transition. Likewise, Buyer may provide certain services to
Meadowbrook/CA in connection with the transition. The terms and conditions and
compensation due for such services shall be determined by mutual agreement of
the parties by separate oral or written agreement. Each party agrees to perform
its obligations under such agreements in a timely and competent manner.
ARTICLE NINE: MEADOWBROOK/CA'S OBLIGATIONS AFTER CLOSING
9.1 Payment of Obligations Not Assumed. Meadowbrook/CA shall pay, perform
or otherwise satisfy, in a timely manner, all obligations and liabilities of
Meadowbrook/GA which were incurred or which relate to the period prior to the
Closing Effective Date, which are not paid at the Closing, and which are not
expressly assumed by Buyer hereunder, including but not limited to the
assumption, payment or satisfaction, as applicable, of the obligations and
liabilities set forth in subparts (a) through (g) of section 1.5 hereof, and the
performance of its obligations under section 8.4 hereof. Meadowbrook/CA shall
file all income tax returns and pay all income taxes owed by Meadowbrook/GA
which are attributable to the period prior to the Closing Effective Date or
which are attributable to the sale of the Assets and Business to Buyer.
9.2 Keep Insurance In Force. Meadowbrook/CA shall take all actions
necessary to keep the professional liability coverage and the umbrella coverage
provisions of the insurance policies described in sections 2.7 and 4.4, as
amended by the tail coverage endorsement, in full force and effect, and shall
take no action which would cause such insurance coverage to be modified or
canceled.
9.3 Meadowbrook/CA's Indemnity. Meadowbrook/CA shall indemnify, defend, and
hold harmless the Buyer against and in respect of any and all claims, demands,
losses, costs, expenses, obligations, liabilities, damages, recoveries, and
deficiencies, including interest, penalties, and reasonable attorneys' fees,
that the Buyer shall incur or suffer, that arise, result from, or relate to:
(a) The failure of Meadowbrook/CA to pay or perform any of the
obligations set forth in sections 9.1 and 9.2 above;
(b) The breach of any warranty or representation contained herein with
respect to the state of Meadowbrook/GA's title to any of the Assets or with
respect to the number of outstanding shares, state of title, or ownership of the
Stock by Meadowbrook/CA;
(c) The indemnity contained in section 5.3 hereof;
(d) The failure of Meadowbrook/CA to promptly notify the insurance
company of, or take appropriate action to defend against, (i) the claims
identified in Exhibit 2.10 hereof, and (ii) any claim which may be made or filed
against Meadowbrook/GA or the Buyer, which arises out of an incident or
transaction involving the Business or the Assets or the Stock, and which
incident or transaction occurred or is alleged to have occurred prior to the
Closing Effective Date; or
(e) The failure of Meadowbrook/CA to perform its obligations under
section 4.14 hereof.
None of the Selling Parties' other representations, warranties and obligations,
other than its obligations contained in this Article Nine and except as
otherwise provided in Article Seventeen hereof, shall survive the Closing.
The Buyer shall promptly notify Meadowbrook/CA of the existence of any
claim, demand, or other matter to which Meadow brook/CA's indemnification
obligation would apply, and shall give it a reasonable opportunity to defend the
same at its own expense and with counsel of its own selection; provided that the
Buyer shall at all times also have the right to fully participate in the defense
at its own expense. If Meadowbrook/CA shall, within a reasonable time after this
notice, fail to defend, the Buyer shall have the right, but not the obligation,
to undertake the defense of, and to compromise or settle (exercising reasonable
business judgment), the claim or other matter on behalf, for the account, and at
the risk, of Meadowbrook/CA. If the claim is one that cannot by its nature be
defended solely by Meadowbrook/CA (including, without limitation, any federal or
state tax proceeding), then the Buyer shall make available all information and
assistance that Meadowbrook/CA may reasonably request.
9.4 Covenant Against Competition. Meadowbrook/CA agrees that neither it,
nor its principal stockholder, Dr. Harvey Wm. Glasser, will, at any time within
the two-year period immediately following the Closing Date, directly or
indirectly, engage in, or have any interest in any person, firm, corporation, or
business (as employee, officer, director, agent, security holder, creditor,
consultant, or otherwise) that engages in any activity in any of the counties of
Douglas, Coweta, Fayette, Fulton, Cobb, Henry, Clayton, DeKalb, Gwinnett,
Rockdale, or Cherokee, Georgia, which activity is substantially the same as, and
competitive with the Business, so long as the Buyer (or any affiliated person)
shall engage in such activity in any of such counties. Meadowbrook/CA agrees
that the Buyer's remedies at law for enforcing this provision are inadequate,
and agrees that the Buyer and its affiliates shall be entitled to invoke
equitable remedies in enforcing same.
ARTICLE TEN: BUYER'S OBLIGATIONS AFTER CLOSING
10.1 Buyer's Indemnity. Buyer agrees to indemnify and hold harmless
Meadowbrook/CA against, and in respect of, any and all claims, demands, losses,
costs, expenses, obligations, liabilities, damages, recoveries, and
deficiencies, including interest, penalties, and reasonable attorneys' fees,
that Meadowbrook/CA shall incur or suffer, that arise, result from, or relate
to:
(a) Buyer's breach of or failure to perform any of its obligations
assumed under the assigned contracts and leases; or
(b) Any matter arising after the Closing Effective Date and relating
to the operation of the Business or use of the Assets by Buyer, and for which
Meadowbrook/CA is not responsible.
Meadowbrook/CA shall promptly notify Buyer of the existence of any claim,
demand, or other matter to which Buyer's indemnification obligation would apply,
and shall give it a reasonable opportunity to defend the same at its own expense
and with counsel of its own selection; provided that Meadowbrook/CA shall at all
times also have the right to fully participate in the defense at its own
expense. If Buyer shall, within a reasonable time after this notice, fail to
defend, Meadowbrook/CA shall have the right, but not the obligation, to
undertake the defense of, and to compromise or settle (exercising reasonable
business judgment), the claim or other matter on behalf, for the account, and at
the risk, of the Buyer. If the claim is one that cannot by its nature be
defended solely by the Buyer (including, without limitation, any federal or
state tax proceeding), then Meadowbrook/CA shall make available all information
and assistance that the Buyer may reasonably request.
None of the Buyer's other representations, warranties and obligations, other
than its obligations contained in this Article Ten and except as otherwise
provided in Article Seventeen hereof, shall survive the Closing.
10.2 Collection of Accounts Receivable. The Buyer agrees to assist
Meadowbrook/CA in the collection of all of its outstanding accounts receivable
which it receives from Meadowbrook/GA which are attributable to the period prior
to the Closing Effective Date. No charge shall be made to Meadowbrook/CA for the
services of the employees of Buyer, but Meadowbrook/CA shall pay or reimburse
Buyer for all out of pocket costs and for the services of any attorney or other
third party employed to collect such accounts receivable. The Buyer shall not
engage an attorney for such services without the prior consent of
Meadowbrook/CA. Meadowbrook/CA acknowledges and agrees that the Buyer shall have
no responsibility or liability for the collection of said accounts receivable or
for their delivery to Meadowbrook/CA except to exercise reasonable care in
accounting for the receipt thereof and in effecting such delivery to
Meadowbrook/CA. All receipts shall be remitted to Meadowbrook/CA within
twenty-four (24) hours from receipt or deposited into Meadowbrook/CA's account
if requested by Meadowbrook/CA.
10.3 Retention of Medical Records. The Buyer shall retain and store at its
expense all medical records of patients treated by Meadowbrook/GA within the
State of Georgia for the period required by federal or state law. Meadowbrook/CA
and governmental authorities shall have access to such records upon reasonable
prior notice.
10.4 Use of Name. The Buyer shall, as soon as reasonably practical,
discontinue the use of the name "Meadowbrook" in connection with the operation
of the Business. It is agreed, however, that the Buyer shall have the right to
continue to use the name "Meadowbrook of Georgia" for a period of one year after
the Closing, and shall have the right to represent the Business to third parties
as the successor to the Business as previously operated by Meadowbrook/GA.
Notwithstanding the foregoing, Buyer shall only have the right to use the name
"Meadowbrook of Georgia" in Georgia and contiguous states, shall use such name
in a lawful manner, and shall not use the name "Meadowbrook Rehabilitation
Group" or otherwise hold itself out as being a part of Meadowbrook
Rehabilitation Group. Meadowbrook/CA does not represent or warrant that Buyer
shall have the exclusive right to use the name "Meadowbrook of Georgia". The
Buyer shall have the right to continue to use all forms and operating procedures
currently in use in the Business for a period of one year after the Closing.
Thereafter, the use of any such forms and procedures which are copyrighted by
Meadowbrook/CA, shall be discontinued by the Buyer.
ARTICLE ELEVEN: RISK OF LOSS
The Selling Parties shall bear the risk of all loss or damage to the Assets
from all causes and all loss or damage arising out of or related to the
operation of the Business until the Closing Effective Date. If at any time prior
to the Closing Effective Date any material portion of the Assets is damaged or
destroyed as a result of fire, other casualty or for any other reason
whatsoever, or in the event condemnation or eminent domain proceedings (or
private purchase in lieu thereof) shall be commenced by any public or
quasi-public authority having jurisdiction against all or any part of the
Assets, Selling Parties shall immediately give notice thereof to the Buyer. The
Buyer shall have the right, in its sole and absolute discretion, within ten days
of receipt of such notice, to (i) elect not to proceed with the Closing (or to
rescind the Closing if same has already occurred) and terminate this agreement,
or (ii) proceed to Closing and consummate the transactions contemplated hereby
and receive any and all insurance proceeds received by the Selling Parties on
account of any such casualty. If the Buyer elects option (ii), it will be deemed
to have waived all breaches of covenants or warranties resulting from such loss.
ARTICLE TWELVE: PUBLICITY
All notices to third parties and all other publicity concerning the
transactions contemplated by this agreement shall be jointly planned and
coordinated by and between the Buyer and the Selling Parties. No party shall act
unilaterally in this regard without the prior written approval of the others;
however, this approval shall not be unreasonably withheld.
ARTICLE THIRTEEN: COSTS
13.1 Finder's or Broker's Fees. Each party represents and warrants that it
has dealt with no broker or finder in connection with any transaction
contemplated by this agreement, and, as far as it knows, no broker or other
person is entitled to any commission or finder's fee in connection with any of
these transactions.
13.2 Expenses. Subject to the provisions of section 8.5, each party shall
pay all costs and expenses incurred or to be incurred by it in negotiating and
preparing this agreement and in closing and carrying out the transactions
contemplated by this agreement.
ARTICLE FOURTEEN: FORM OF AGREEMENT
14.1 Effect of Headings. The subject headings of the sections and
subsections of this agreement are included for convenience only and shall not
affect the construction or interpretation of any of its provisions.
14.2 Entire Agreement; Modification; Waiver. This agreement constitutes the
entire agreement between the parties pertaining to the subject matter contained
in it and supersedes all prior and contemporaneous agreements, representations,
and understandings of the parties. No supplement, modification, or amendment of
this agreement shall be binding unless executed in writing by all the parties.
No waiver of any of the provisions of this agreement shall be deemed, or shall
constitute, a waiver of any other provision, whether or not similar, nor shall
any waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
14.3 Counterparts. This agreement may be executed simultaneously in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
ARTICLE FIFTEEN: PARTIES
15.1 Parties in Interest. Nothing in this agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this agreement intended to relieve or
discharge the obligation or liability of any third persons to any party to this
agreement, nor shall any provision give any third persons any right of
subrogation or action over against any party to this agreement.
15.2 Assignment. This agreement shall be binding on, and shall inure to the
benefit of, the parties to it and their respective heirs, legal representative,
successors, and assigns; provided, however, that the Buyer may not assign any of
its rights under this agreement without the consent of the Selling Parties. No
such assignment by the Buyer shall relieve the Buyer of any of its obligations
or duties under this agreement.
15.3 Obligations Joint and Several. The obligations of the Selling Parties
herein shall be joint and several.
ARTICLE SIXTEEN: REMEDIES
16.1 Arbitration. Any controversy or claim arising out of, or relating to,
this agreement, or the making, performance, or interpretation of it, shall be
settled by arbitration in Atlanta, Georgia under the commercial arbitration
rules of the American Arbitration Association then existing, and judgment on the
arbitration award may be entered in any court having jurisdiction over the
subject matter of the controversy.
16.2 Recovery of Litigation Costs. If any legal action or any arbitration
or other proceeding is brought for the enforcement of this agreement, or because
of an alleged dispute, breach, default, or misrepresentation in connection with
any of the provisions of this agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees and other costs
incurred in that action or proceeding, in addition to any other relief to which
it or they may be entitled.
ARTICLE SEVENTEEN: NATURE AND SURVIVAL OF REPRESENTATIONS AND
OBLIGATIONS
None of the representations, warranties, covenants and agreements of the
parties contained in this agreement shall survive the Closing except that the
obligations of the parties contained in Articles Four, Five, Eight and Eleven
hereof not performed or extinguished on or before the Closing Date shall expire
on midnight of the Closing Effective Date; and the obligations of Meadow-
brook/CA contained in Article Nine hereof, the obligations of the Buyer
contained in Article Ten hereof, the obligations of Meadowbrook/CA contained in
section 8.2.3 hereof and the obligations of Meadowbrook/CA and Buyer contained
in sections 4.14 and 8.4 hereof shall survive the Closing for a period of two
years after the Closing Effective Date, provided any claim for indemnity of
which the indemnifying party receives notice prior to the expiration of two
years after the Closing Effective Date shall not be barred by the provisions
hereof.
ARTICLE EIGHTEEN: NOTICES
All notices, requests, demands, and other communications under this
agreement shall be in writing and shall be deemed to have been duly given on the
date of service if served personally on the party to whom notice is to be given,
or on the second day after mailing if mailed to the party to whom notice is to
be given, by first class mail, registered or certified, postage prepaid, and
properly addressed as follows:
To Selling Parties: Meadowbrook Rehabilitation Group,
Inc.
2200 Powell Street, Suite 800
Emeryville, California 94608
Attn: President
To Buyer: Stiles A. Kellett III
Restore Respiratory Care, Inc.
200 Galleria Parkway, Suite 1800
Atlanta, Georgia 30339
Any party may change its address for purposes of this paragraph by giving the
other parties written notice of the new address in the manner set forth above.
ARTICLE NINETEEN: GOVERNING LAW
This agreement shall be construed in accordance with, and governed by, the
laws of the State of Georgia as applied to contracts that are executed and
performed entirely in Georgia.
ARTICLE TWENTY: SEVERABILITY
If any provision of this agreement is held invalid or unenforceable by any
court of final jurisdiction, it is the intent of the parties that all other
provisions of this Agreement be construed to remain fully valid, enforceable,
and binding on the parties.
IN WITNESS WHEREOF, the parties to this agreement have duly executed it on
the day and year first above written.
MEADOWBROOK REHABILITATION GROUP OF
GEORGIA, INC.
By: /s/ Harvey Wm. Glasser, M.D.
----------------------------------
President
MEADOWBROOK REHABILITATION GROUP,
INC.
By: /s/ Harvey Wm. Glasser, M.D.
----------------------------------
President
RESTORE REHABILITATION GROUP, INC.
By: /s/ Stiles A. Kellett III
----------------------------------
President
