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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
---------- ----------
COMMISSION FILE NUMBER 2-18244
-------------------
HELIAN HEALTH GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of 95-4070276
incorporation or organization) (I.R.S. Employer Identification No.)
9600 BLUE LARKSPUR LANE, SUITE 201
MONTEREY, CALIFORNIA 93940
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (408) 646-9000
(Former name, former address and former fiscal year,
if changed since last report): None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the proceeding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
The number of shares outstanding of the registrant's Common Stock, $.01 Par
Value, as of July 6, 1995 was 5,474,283 shares.
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<PAGE>
HELIAN HEALTH GROUP, INC.
FORM 10-Q QUARTERLY REPORT
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements.........................................1
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..........................5
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings............................................7
Item 2 - Changes in Securities........................................7
Item 3 - Defaults Upon Senior Securities..............................7
Item 4 - Submission of Matters to a Vote of Security Holders..........7
Item 5 - Other Information............................................7
Item 6 - Exhibits and Reports on Form 8-K.............................7
<PAGE>
HELIAN HEALTH GROUP, INC.
CONSOLIDATED BALANCE SHEETS
MAY 31, 1995 NOVEMBER 30, 1994
------------ -----------------
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents ................... $ 3,419,217 $ 4,118,459
Short-term investments ...................... 2,609,695 1,617,491
Accounts receivable, net of allowance for
doubtful accounts of $1,039,432 in 1995
and $1,146,964 in 1994 ..................... 5,751,456 6,854,010
Current portion of notes receivable ......... 181,291 186,671
Inventories ................................. 578,105 508,969
Income taxes receivable ..................... 271,930 1,071,930
Deferred income taxes ....................... 1,615,571 1,040,958
Prepaid expenses and other current assets ... 355,174 683,265
------------- -------------
Total current assets ................... 14,782,439 16,081,753
Investment in affiliated companies ............ 420,972 401,012
Notes receivable .............................. 304,526 398,875
Property and equipment, net ................... 11,788,187 12,655,061
Intangible assets, net ........................ 1,613,112 1,140,472
Other assets, net ............................. 422,882 235,877
------------- -------------
Total assets .................................. $ 29,332,118 $ 30,913,050
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable ............................ $ 913,432 $ 879,260
Accrued compensation and related expenses ... 1,855,243 1,654,247
Other accrued liabilities ................... 411,818 442,215
Payable to Palo Alto Medical Foundation ..... 141,062 306,156
Current portion of long-term debt ........... 1,113,867 1,135,178
------------- -------------
Total current liabilities .............. 4,435,422 4,417,056
Deferred income taxes ......................... 213,000 213,000
Payable to Palo Alto Medical Foundation ....... 150,000 150,000
Long-term debt ................................ 5,596,676 6,103,603
Minority interest ............................. 232,492 57,439
------------- -------------
Total liabililties ............................ 10,627,590 10,941,098
------------- -------------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 20,000,000
shares authorized, 5,451,409 shares issued
and outstanding for 1995 (5,437,928 in 1994). 54,514 54,380
Additional paid-in capital .................... 15,049,256 14,986,349
Retained earnings ............................. 3,691,678 5,022,143
Less: Treasury stock, at cost, 25,500 shares.. (90,920) (90,920)
------------- -------------
Total stockholders' equity .................... 18,704,528 19,971,952
------------- -------------
Total liabilities and stockholder's equity..... $ 29,332,118 $ 30,913,050
============= =============
1
<PAGE>
<TABLE>
HELIAN HEALTH GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED MAY 31, SIX MONTHS ENDED MAY 31,
-------------------------- ------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Patient revenues ........................... $ 8,101,130 $ 8,871,924 $14,737,540 $16,989,734
Management fees and lease income ........... 1,103,871 905,031 2,134,747 1,905,542
Other ...................................... 37,000 -- 132,097 --
----------- ----------- ----------- -----------
Total revenues ............................... 9,242,001 9,776,955 17,004,384 18,895,276
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Salaries and wages ......................... 3,653,746 3,271,820 7,089,119 6,558,133
Employee benefits .......................... 694,044 585,614 1,470,480 1,147,663
Fees to individuals and organizations ...... 995,893 549,894 1,809,945 1,952,091
Supplies and other expenses ................ 744,190 1,011,896 1,313,533 1,793,482
Purchased services ......................... 760,240 468,235 1,248,086 947,495
Building and equipment rent ................ 512,980 351,449 986,978 822,571
Provision for doubtful accounts ............ 276,184 705,995 548,328 1,350,407
Other operating costs ...................... 1,013,535 1,127,764 2,019,504 1,711,476
Depreciation and amortization .............. 839,737 688,996 1,521,408 1,366,138
Employee severance costs ................... 866,257 -- 866,257 --
----------- ----------- ----------- -----------
Total costs and expenses ................... 10,356,806 8,761,663 18,873,638 17,649,456
----------- ----------- ----------- -----------
Operating income (loss) ..................... (1,114,805) 1,015,292 (1,869,254) 1,245,820
Interest income ............................. 103,116 31,961 181,682 128,591
Interest expense ............................ (149,171) (183,364) (305,100) (450,114)
----------- ----------- ----------- -----------
Income (loss) before provision for (benefit
from) income taxes and minority interest ... (1,160,860) 863,889 (1,992,672) 924,297
Minority Interest ........................... (21,564) (150,648) (76,630) (346,183)
Provision for (benefit from) income taxes ... (367,111) 416,384 (585,577) 522,242
----------- ----------- ----------- -----------
Net income (loss) ........................... $ (772,185) $ 598,153 $(1,330,465) $ 748,238
=========== =========== =========== ===========
Net income (loss) per share ................. $(.14) $.11 $(.24) $.14
===== ==== ===== ====
Shares used in calculation
of net income (loss) per share ............. 5,450,985 5,488,361 5,450,524 5,487,993
=========== =========== =========== ===========
</TABLE>
2
<PAGE>
HELIAN HEALTH GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED MAY 31,
------------------------
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................. $(1,330,465) $ 748,238
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization .................... 1,521,408 1,366,138
Provision for doubtful accounts .................. 548,328 1,350,407
Deferred income taxes ............................ (574,613) --
Loss on sale of equipment ........................ 1,984 --
Equity in (income) losses of affiliate ........... (19,960) 150,853
Minority interest in consolidated subsidiaries ... (76,630) (232,914)
Changes in operating assets and liabilities,net
of effects from acquisition of business:
Accounts receivable ....................... 554,226 (1,447,548)
Prepaid expenses and other assets ......... 75,436 (453,978)
Accounts payable and accrued liabilities... 456,454 242,900
Income taxes receivable or payable ........ 800,000 326,839
----------- -----------
Net cash provided by operating activities ........ 1,956,168 2,050,935
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ............... (398,238) (221,634)
Sales of property and equipment ................... 67,741 --
Purchases of short-term investments, net .......... (992,204) (1,243,947)
Repayment on notes receivable ..................... 99,729 1,270,698
Acquisition of business ........................... (800,000) --
Decrease in intangibles, net ...................... 10,243 73,551
----------- -----------
Net cash used in investing activities .......... (2,012,729) (121,332)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt ........................ (724,843) (2,282,165)
Issuance of common stock .......................... 63,041 9,535
Proceeds from borrowings of long-term debt ........ 19,121 2,214,000
----------- -----------
Net cash used in financing activities .......... (642,681) (58,630)
----------- -----------
Net increase (decrease) in cash and cash equivalents (699,242) 1,870,973
Cash and cash equivalents at beginning of period ... 4,118,459 1,074,653
----------- -----------
Cash and cash equivalents at end of period ......... $ 3,419,217 $ 2,945,626
=========== ===========
3
<PAGE>
HELIAN HEALTH GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (all of which
were normal recurring accruals) necessary to present fairly Helian Health
Group's consolidated financial position as of May 31, 1995 and November
30, 1994, and the results of operations for the three and six month
periods ended May 31, 1995 and May 31, 1994, which results are not
necessarily indicative of results on an annual basis.
2. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules
and regulations of the Securities Exchange Commission. These condensed
financial statements should be read in conjunction with the financial
statements and related notes contained in the Annual Report for the fiscal
year ended November 30, 1994 on Form 10-K.
3. The consolidated financial statements include the accounts of Helian and
its wholly-owned subsidiaries. The Company consolidates all
partially-owned subsidiaries where it possesses the ability to exercise
significant influence or control over operating and financial policies of
the subsidiary. The equity method of accounting is generally used when the
Company has a 20% to 50% interest in other entities. All material
intercompany transactions and balances have been eliminated in
consolidation.
4. The Company generates revenues principally from the following sources:
Patient revenues are recorded when the service is provided to the patient
and are recognized net of allowances and contractual adjustments related
to third-party payers. Provisions for doubtful accounts are recorded as
operating expenses.
Management fees and lease income are recorded monthly under agreements
with the Surgecenter of Palo Alto, which is managed by the Company. The
management fees are based on a percentage of gross revenue and adjusted
net income plus all direct costs of Surgecenter personnel. The Company
leases furniture, fixtures and equipment and subleases the facility to the
Surgecenter.
5. Property, plant and equipment consisted of the following:
MAY 31, 1995 NOVEMBER 30, 1994
------------ -----------------
Land and land improvements ............... $ 1,713,842 $ 1,712,156
Building ................................. 3,955,107 3,953,727
Furniture, fixtures and equipment ........ 10,453,385 10,098,507
Leasehold improvements ................... 2,650,964 2,626,536
------------- -------------
18,773,298 18,390,926
Less accumulated depreciation and
amortization ............................. 6,985,111 5,735,865
------------- -------------
Net property and equipment ............... $ 11,788,187 $ 12,655,061
============= =============
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The Company had revenues of $9,242,000 and a net loss of $772,000 for the
quarter ended May 31, 1995, as compared to revenues and net income of $9,777,000
and $598,000, respectively, for the same period of 1994. For the six months
ended May 31, 1995, revenues and net loss were $17,004,000 and $1,330,000,
respectively, as compared to revenues of $18,895,000 and net income of $748,000
for the similar period of 1994. Revenues for the six months were lower primarily
as a result of a decrease in average revenue per patient visit, partially offset
by an increase in patient visits for most of the Company's operations. During
the second quarter of 1995, patient visits increased in these same operations as
compared to the same period of 1994; however, lower revenue per patient visit
more than offset this increase resulting in lower revenues. Average revenue per
patient visit decreased for the three and six months of 1995 as a result of
continuing patient discounts and managed care contracting.
Excluding the Surgecenter of Palo Alto, which derives its revenue and net income
from a management contract, total patient visits and average revenue per visit
were 79,500 and $117, respectively, for the second quarter of 1995 as compared
to 75,600 and $129, respectively, for the 1994 quarter. For the six months of
1995, total patient visits and average revenue per visit were 145,100 and $119,
respectively; and 140,100 and $131, respectively, for the 1994 period. The
Company expects that profit margins will continue to be suppressed as the
Company, and the health care industry in general, transitions from
fee-for-service reimbursement to discounted fee-for-service to an end system of
capitation or other risk-based reimbursement arrangement.
Salaries and wages increased $382,000, or 11.7%, and $531,000, or 8.1%, for the
three and six months ending May 31, 1995, respectively, as compared to the same
periods in 1994. The increase resulted primarily from hiring additional staff at
certain facilities to service increased business, partially offset by converting
full time positions to "as needed" per diem positions in other facilities.
Employee benefits increased $108,000, or 18.5%, for the second quarter of 1995
compared to the same quarter of 1994. For the six months ended May 31, 1995,
employee benefits increased $323,000, or 28%, compared to the same six months of
1994. The increase resulted from both hiring additional employees and from
higher health and life insurance costs in 1995 as compared to 1994.
Fees to individuals and organizations increased, as a percentage of revenues,
from 5.6% for the three months ended May 31, 1994 to 10.8% for the comparable
period of 1995. For the six months ended May 31, 1994 and May 31, 1995, the
costs, as a percentage of revenues, remained relatively constant at 10.3% and
10.6%, respectively. The second quarter increase is a function of increased
patient visits whereby higher priced consultants are used by the Company to
service increased business.
Supplies and other expenses decreased, as a percentage of revenues, from 10.3%
to 8.1% for the three months ended May 31, 1994 and 1995, respectively, and
decreased from 9.5% to 7.7% for the six months ended May 31, 1994 and 1995,
respectively. Cost containment efforts by the facilities, including enhanced
purchasing controls, resulted in cost savings for 1995. The lower costs were
partially offset by costs related to increased patient visits.
Purchased services increased, as a percentage of revenues, from 4.8% to 8.2% for
the quarters ended May 31, 1994 and 1995, respectively, and increased from 5.0%
to 7.3% for the six months of 1994 and 1995, respectively. The increased costs,
which occurred primarily in the second quarter, resulted from increases in
certain professional fees.
5
<PAGE>
Building and equipment rent increased $162,000 during the quarter ended May 31,
1995 compared to the same period of 1994. The increase includes a $55,000
settlement for abandonment of a lease resulting from the Company consolidating
its operations into the occupational center acquired in April 1995. The
settlement with the lessor of the abandoned facility relieves the Company of all
future lease payments.
Provision for doubtful accounts decreased from 7.2% for the three and six months
of 1994 to 3.0 % and 3.2% for the comparable periods of 1995. The decrease in
the provision is due to both improved collection results and increases in
allowances for uncollectible accounts at some of the Company's facilities during
1994.
Depreciation and amortization increased $151,000 during the second quarter of
1995 compared to second quarter of 1994. The increase includes a $272,000
write-down for equipment held for sale as the fair market value was determined
to be less than the carrying value of the equipment.
Employee severance costs represents a lump sum payment of $800,000 and
associated costs of $66,000 related to the resignation of Thomas D. Wilson, the
former Chairman, CEO and President of the Company.
The provision for (benefit from) income taxes, as a percentage of income (loss)
before income taxes, decreased from 41% for the three and six months of 1994 to
(32%) and (31%) for the three and six months ended May 31, 1995, respectively.
The Company's benefit rates of 32% and 31% are less than the statutory rate due
to the possibility not all net operating losses will provide future tax
deductions.
LIQUIDITY AND CAPITAL RESOURCES
As of May 31, 1995, the Company had working capital of $10,347,000 and a working
capital ratio of 3.33 to 1, compared to working capital of $11,665,000 and a
working capital ratio of 3.64 to 1 at November 30, 1994.
The Company's debt to equity ratio remained constant at .36 to 1 for the periods
ending May 31, 1995 and November 30, 1994.
Cash and cash equivalents decreased by $699,000 from $4,118,000 at November 30,
1994 to $3,419,000 at May 31, 1995. The decrease resulted from investing
$992,000 in short-term securities during the period. Operating activities
increased cash by $1,956,000, which was partially offset by $1,021,000 from
investing activities (excluding short-term investments) and $643,000 from
financing activities. Cash provided from operations in the amount of $1,956,000
included principally depreciation and amortization, changes in operating assets
and liabilities, income tax refund, and provision for doubtful accounts, offset
by the net loss and deferred income taxes. Cash used in investing activities in
the amount of $2,011,000 consisted primarily of net purchases of short-term
investments, cash payment for a business acquisition and purchases of property
and equipment, offset by repayment on notes receivable and proceeds from sales
of property and equipment. Cash used in financing activities in the amount of
$643,000 included primarily payments of long-term debt.
The Company acquired, on April 1, 1995, a medical center which specializes in
occupational medicine. The $800,000 purchase price was paid in cash at the
acquisition date.
On April 9, 1995, Thomas D. Wilson resigned as President, Chief Executive
Officer, Chairman of the Board and as a director of the Company. In connection
with the resignation, $866,000 of severance costs were 6 recorded during the
second quarter of 1995.
The Company believes its cash reserves, including cash generated from
operations, and the Company's borrowing capacity, are adequate to meet operating
cash requirements for at least the next twelve month.
6
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 2 - CHANGES IN SECURITIES
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of the Company was held on April 25, 1995,
and the following are the results of the vote for the election of directors :
1. Election of five directors to hold office until the 1996 Annual Meeting of
Stockholders.
FOR AGAINST
--- -------
Robert G. McCreary, III 5,041,171 31,485
William A. Hines 5,042,156 30,500
Nate Dolin 5,071,915 741
Lawrence S. Dolin 5,072,156 500
Joseph Francis Hahn, M.D.* 4,995,896 76,760
* Dr. Hahn was substituted by the Board as a nominee for election at the 1995
Annual Meeting of Stockholders following the resignation of Thomas D. Wilson
as Chairman of the Board, President, Chief Executive Officer and as a
Director in April 1995.
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1(1) Restated Certificate of Incorporation of the Company.
3.2(5) Amendment to Certificate of Incorporation of the Company
3.3(1) By-laws of the Company.
10.1(1) Asset Purchase Agreement between AMI Ambulatory Centers, Inc. and
Helian Health Group of Georgia, Inc., dated as of December 7, 1987.
7
<PAGE>
10.2(1) 1989 Amended and Restated Stock Option Plan of Helian Health Group,
Inc.
10.3(1) Asset Purchase Agreement among AMI Ambulatory Centers, Inc., Howell
Industrial Clinic, Inc. Helian Health Group, Inc., and Helian Health
Group of Atlanta, Inc. dated August 9, 1988.
10.4(1) Asset Purchase Agreement between Palo Alto Surgecenter Corporation and
Palo Alto Medical Foundation for Health Care, Research and Education
dated September 22, 1988.
10.5(1) Management Agreement between Palo Alto Surgecenter Corporation and
Palo Alto Medical Foundation for Health Care, Research and Education
dated September 22, 1988.
10.6(1) Equipment Lease between Palo Alto Surgecenter Corporation and Palo
Alto Medical Foundation for Health Care, Research and Education dated
September 22, 1988.
10.7(1) Sublease dated September 22, 1988, between Palo Alto Surgecenter
Corporation, as sublessor, and Palo Alto Medical Foundation for Health
Care, Research and Education, as sublessor, including Consent to
Sublease, covering premises at 400 Forest Avenue, Palo Alto,
California.
10.8(1) Repurchase Agreement between Palo Alto Surgecenter Corporation and
Palo Alto Medical Foundation for Health Care, Research and Education
dated September 22, 1988.
10.9(1) Letter Agreement dated October 1, 1987, between Helian Health Group of
Miami, Inc. and Kenneth Mikel, Ph.D. regarding development of
additional occupational medical facilities.
10.10(1) Recovery Inn(sm) of Los Gatos, a California Limited Partnership,
Agreement dated November 18, 1987.
10.11(1) First Amendment to the Limited Partnership Agreement of Recovery
Inn(sm) of Los Gatos dated January 15, 1988.
10.12(1) Assignment of General Partnership Interest - Recovery Inn(sm) of Los
Gatos to Helian Recovery Corporation, dated January 29, 1988.
10.13(1) Common Stock Purchase Agreement dated November 16, 1987, between
Harvey Knoernschild, M.D., Paul Schrupp, Recovery Inns(sm) of America,
Inc. and Helian Recovery Corporation.
10.14(1) Assignment Agreement to Stock Purchase Agreement dated June 2, 1989
among Helian Health Group, Inc., Margo Mynderse-Isola and Donald C.
Blanding.
10.15(1) Assignment Agreement to Stock Purchase Agreement dated July 14, 1989,
among Helian Health Group, Inc., Lori Iaconis and (i) William Hines,
(ii) Rose L. Parkes, (iii) Tony M. Schierbeck, and (iv) Kim Richmond.
10.16(1)* Key Managers Incentive Compensation Plan.
8
<PAGE>
10.17(1)* Executive Directors Incentive Compensation Plan.
10.18(1) Stock Purchase Agreement between Helian Health Group, Inc. and Andrew
Miller, dated February 1, 1987.
10.19(1)* Employment Agreement dated October 8, 1986, as amended, between Helian
Health Group, Inc. and Thomas D. Wilson.
10.20(1)* Employment Agreement dated January 1, 1993, between Helian Health
Group, Inc. and Andrew Miller.
10.21(1) Stock Option Agreement dated August 1, 1987, between Donald Blanding
and Helian Health Group, Inc.
10.22(1) Amendment to Loan Agreement between Helian Health Group, Inc. and
Society National Bank.
10.23(1) Term Loan Agreement between Helian Health Group, Inc. and Society
National Bank dated October 8, 1986.
10.24(1) Term Loan Agreement between Helian Health Group, Inc. and Society
National Bank dated January 19, 1988.
10.25(1) Term Loan Agreement between Helian Health Group, Inc. and Society
National Bank dated August 11, 1988.
10.26(1) Security Agreement between Helian Health Group, Inc. and Society
National Bank dated October 8, 1986.
10.27(1) Security Agreement between Helian Health Group, Inc. and Society
National Bank dated January 19, 1988.
10.28(1) Security Agreement between Helian Health Group, Inc. and Society
National Bank dated August 11, 1988.
10.29(1) Pledge Agreement between Helian Health Group, Inc. and Society
National Bank dated October 8, 1986.
10.30(1) Amended Pledge Agreement between Helian Health Group, Inc. and Society
National Bank dated January 19, 1988.
10.31(1) Amended Pledge Agreement between Helian Health Group, Inc. and Society
National Bank dated August 19, 1988.
10.32(1) Waiver Letter dated September 22, 1988, from Society National Bank
regarding conditions of Term Loan Agreements.
10.33(1) Lease dated December 20, 1988, between Helian Health Group, Inc., as
tenant, and Roger Winslow, as landlord, covering premises at 1000 8th
Street, Monterey, California.
10.34(1) Lease dated April 9, 1987, between Austin Occupational Health Center,
Inc., as tenant, and CrowGottesman-Hill #27, as landlord, covering
premises at 2112 Rutland Drive, Suite 180, Austin, Texas.
9
<PAGE>
10.35(1) Lease dated August 15, 1985, including Assignment, between Austin
Occupational Health Center, Inc., as tenant, and Dry Doc Building
Corporation, as landlord, covering premises at 1213 North IH35,
Austin, Texas.
10.36(1) Lease dated September 6, 1984, including Assignments and Assignment,
between Helian Health Group of Atlanta, Inc., as tenant, and as
successor-in-interest to AMI Ambulatory Centers, Inc. and Howell
Industrial Clinic, Inc., and First Union Management, Inc., as
landlord, covering premises at 730 Peachtree Building, Atlanta,
Georgia.
10.37(1) Lease dated July 12, 1974, including Amendments and Assignments,
between Helian Health Group, Inc., as tenant, and as
successor-in-interest to Industrial Clinic Professional Corporation
and AMI Ambulatory Centers, Inc., and Chestnut Associates, as
landlord, covering premises at 3580 Atlanta Avenue, Hapeville,
Georgia.
10.38(1) Lease dated December 24, 1985, including Assignment, between Helian
Health Group of Georgia, Inc., as tenant, and as successor-in-interest
to AMI Ambulatory Centers, Inc., and Homart Development Co., as
landlord, covering premises at 3490 Piedmont Road, N.E., Atlanta,
Georgia.
10.39(1) Lease dated February 26, 1987, between Helian Health Group of Georgia,
Inc., as tenant, and Peterson Properties as landlord, covering
premises at 6475 Jimmy Carter Blvd., Norcross, Georgia.
10.40(1) Lease dated September 10, 1987, between Tucson Occupational Health
Center, as tenant, and The Atrium Associates, as landlord, covering
premises at 5099 East Grant Road, Tucson, Arizona.
10.41(1) Lease dated May 2, 1980, including Assignment, between Tucson
Occupational Health Center as tenant, and as successor-in-interest to
Robert Levitin, M.D. and Marcia Levitin, d/b/a Occupational Medicine
Clinic of Tucson, and Lot One, T.B.P., as landlord, covering premises
at Lot 1, Tucson Business Yard, Tucson, Arizona.
10.42(1) Lease dated May 7, 1976, including Assignment, between Palo Alto
Surgecenter Corporation, as tenant, and Gorman Whitney Development
Co., as landlord, covering premises at 400 Forest Avenue, Palo Alto,
California.
10.44(1) Deed dated November 18, 1987, for land purchased by Recovery Inn of
Los Gatos located in Campbell, California.
10.45(1) Agreement Dated May 22, 1988, between Recovery Inns(sm) of America,
Inc. and San Jose Medical Center.
10.46(1)* Employment Agreement dated January 1, 1993, between Helian Health
Group, Inc. and Donald C. Blanding.
10.47(5) Amended and Restated 1989 Stock Option Plan of the Company
10.48(1)* Stock Option Agreement dated as of April 1, 1987, between the Company
and William A. Hines.
10.49(1) Loan Agreement dated June 27, 1990, between the Company and First
Interstate Bank of California.
10
<PAGE>
10.50(1) Security Agreement dated June 27, 1990, between the Company and First
Interstate Bank of California.
10.51(1) Installment Note dated June 14, 1990, payable to First Interstate Bank
of California.
10.52(1) Revolving Credit Note dated June 14, 1990, payable to First Interstate
Bank of California.
10.53(1) Purchase Agreement dated June 11, 1990, among Well America, a general
Partnership, J. Michael Hitt, M.D. and Tucson Occupational Health
Center, Inc., a wholly-owned subsidiary of the Company.
10.54(1) Real Estate Purchase Contract and Receipt for Deposit, dated June
1989, between the Company and the Menlo Park Willows, a California
Limited Partnership.
10.55(1) Letter Agreement, dated May 29, 1990, between Recovery Inn(sm) of Los
Gatos, a California Limited Partnership, and Sanwa Bank California, a
California corporation, as Corporate Co-Trustee for Carpenters Pension
Trust Fund for Northern California.
10.56(1) Letter Agreement, dated June 6, 1990, between Recovery Inn(sm) of Los
Gatos, a California Limited Partnership, and Tokai Bank of California.
10.57* Amendment of Employment Agreement For Thomas D. Wilson, dated December
21, 1990, between the Company and Thomas D. Wilson.
10.58(2) Asset Purchase Agreement between Steven C. Schumann, M.D., Inc.,
Steven C. Schumann, M.D., Helian Health Group of Fresno, Inc., and
Helian Health Group, Inc., dated April 1, 1991.
10.59(2) Management Service Agreement by and among Helian Health Group of
Fresno, Inc., and Steven C. Schumann, M.D., Inc.
10.60(2) Covenant Not to Compete Agreement dated April 1, 1991, between Helian
Health Group of Fresno, Inc., and Steven C. Schumann, M.D.
10.61(2) Consulting Agreement dated April 1, 1991, by and between Helian Health
Group, Inc. and Steven C. Schumann, M.D.
10.62(3) Asset Purchase Agreement among Southern Back & Orthopaedic Center,
P.C., William D. Cabot and Helian Health Group, Inc. dated June 17,
1991.
10.63(3) Employment Agreement between Rehabilitative Back Center of Atlanta,
Inc. and William D. Cabot dated June 17, 1991.
10.64(3) Consulting Agreement between Rehabilitative Back Center of Atlanta,
Inc. and William D. Cabot dated June 17, 1991.
10.65(3) Medical Supervisor Agreement between Rehabilitative Back Center of
Atlanta, Inc. and William D. Cabot dated June 17, 1991.
10.66* Employment Agreement, dated April 1, 1992, between the Company and J.
Spencer Davis.
11
<PAGE>
10.67* Employment Agreement, dated August 1, 1992, between the Company and
Michael K. McMillan.
10.68(4) Agreement to Provide Guaranty, dated April 16, 1992, as amended by the
First Amendment, between the Company and Jacob Noghreian, Jeremy Cole,
Jeffrey Aaronson, John Sherman and John Alexander.
10.69(4) Ground Lease, dated April 17, 1992, between the Company and Recovery
Inn of Menlo Park, a California limited partnership.
10.70(4) Master Lease, dated October 25, 1991, between Diagnostic Imaging of
Atlanta, L.P., and Norwest Financial Leasing, Inc.
10.71(4) Unconditional Guaranty Agreement, dated November 30, 1992, by the
Company to Norwest Financial Leasing, Inc.
10.72(4) Guaranty, dated January 22, 1993, by the Company to MetLife Capital
Corporation.
10.73(6) Management Agreement between Salinas Surgery Center and Helian ASC of
Salinas, Inc., dated, July 15, 1993.
10.74(6) Partnership Agreement between Helian ASC of Salinas and Concentrated
Care, Inc., dated, July 15, 1993.
10.75(6) Term Loan Agreement between Palo Alto Surgecenter Corporation and
MetLife Capital Corporation dated, August 5, 1993.
10.76(6) Term Loan Agreement between Recovery Inn(sm) of Los Gatos, Ltd. and
MetLife Capital Corporation dated, August 5, 1993.
10.77(6) Lease dated, March 1, 1993 between Helian Health Group, Inc. and
Lightner Place Associates covering premises at 955 Blanco Circle,
Suite A, Salinas, California.
10.78(7) Term Loan Agreement between Helian Health Group, Inc., and MetLife
Capital Corporation dated, September 14, 1993.
10.79(7) Term Loan Agreement between Salinas Surgery Center and MetLife Capital
Corporation dated, November 24, 1993.
10.80(8)* Employment Agreement dated March 26, 1994 between Helian Health Group,
Inc. and William A. Hines.
10.81* Employment Agreement dated February 1,1994 between Helian Health
Group, Inc. and Leslie J. Arliskas.
10.82(9) Loan Agreement dated May 4 , 1994 between Helian Health Group, Inc.
and Sumitomo Bank of California.
10.83(9) Management Agreement dated February 26, 1994 between Helian Health
Group, Inc. and Marin General Hospital.
12
<PAGE>
10.84 Asset Purchase Agreement by and among Industrial Medical Group,
Theodore R. Johstone, M.D., Kathryn Johnstone, R.N., Primary Care
Medical Group, Inc., Paul Cohen, M.D., Paul Cohen Family Trust and
Helian Health Group of Fresno, Inc. dated March 31, 1995.
10.85* Thomas D. WiIson Resignation Term sheet dated April 9, 1995.
- -------------------
* Employment Agreement or Compensatory Plan or Arrangement.
(1) Incorporated by reference to Registrant's Registration Statement
Number 33-31520 on Form S-1, filed October 11, 1989, Amendment Number
2 thereto filed November 21, 1989, and Post-Effective Amendments
Number 1 and Number 2 thereto filed November 22, 1990 and January 16,
1991, respectively.
(2) Incorporated by reference to corresponding exhibit number in the
Company's Form 8-K filed on April 11, 1991.
(3) Incorporated by reference to corresponding exhibit number in the
Company's Form 8-K filed on June 24, 1991.
(4) Incorporated by reference to corresponding exhibit number in the
Company's Form 10-K filed on March 1, 1993.
(5) Incorporated by reference to corresponding exhibit number in the
Company's Form 10-Q filed on July 14, 1993.
(6) Incorporated by reference to corresponding exhibit number in the
Company's Form 10-Q filed on October 14, 1993.
(7) Incorporated by reference to corresponding exhibit number in the
Company's Form 10-K filed on February 26, 1994.
(8) Incorporated by reference to corresponding exhibit number in the
Company's Form 10-Q filed on April 13, 1994.
(9) Incorporated by reference to corresponding exhibit number in the
Company's Form 10-Q filed on July 14, 1994.
(b) Reports on Form 8-K
None.
13
<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, thereunto duly authorized.
HELIAN HEALTH GROUP, INC.
July 14, 1995 /s/ Herbert W. Foster
-------------------------------------------------
Herbert W. Foster, Acting Chief Financial Officer
July 14, 1995 /s/ Donald C. Blanding
-------------------------------------------------
Donald C. Blanding, Treasurer
14
EXHIBIT 10.84
ASSET PURCHASE AGREEMENT
BY AND AMONG
INDUSTRIAL MEDICAL GROUP,
THEODORE R. JOHNSTONE, M.D.,
KATHRYN JOHNSTONE, R.N.,
PRIMARY CARE MEDICAL GROUP, INC.,
PAUL COHEN, M.D.,
PAUL COHEN FAMILY TRUST
AND
HELIAN HEALTH GROUP OF FRESNO, INC.
MARCH 31, 1995
<PAGE>
TABLE OF CONTENTS
1. Purchase of Assets and Assignment of Leases ............................ 1
1.1 Transfer of Assets ............................................... 1
(a) Furniture, Fixtures and Equipment ............................ 1
(b) Tenant Improvements .......................................... 1
(c) Inventory and Supplies ....................................... 2
(d) Data Processing Systems....................................... 2
(e) Licenses and Permits ......................................... 2
(f) Contracts and Commitments..................................... 2
(g) Prepaid Expenses and Security Deposits........................ 2
(h) Telephone Numbers, Post Office Boxes, and Other
Communication Media..................................................... 2
(i) Patient Billing Information .................................. 2
(j) Trade Names and Logos ........................................ 3
(k) Books and Records............................................. 3
(l) Goodwill and Going Concern Value ............................. 3
1.2 Assets Excluded from Purchase and Sale ........................... 3
(a) Cash ......................................................... 3
(b) Accounts Receivable .......................................... 3
(c) Retained Contracts and Commitments ........................... 3
(d) Retained Books and Records ................................... 3
2. Liabilities ............................................................ 4
2.1 No Liabilities Assumed By Buyer .................................. 4
2.2 Liabilities Retained by Seller ................................... 4
3. Patient Medical Records ................................................ 4
i
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3.1 Buyer's Covenants Concerning Medical Records ...................... 5
4. Purchase Price .......................................................... 5
4.1 Allocation of Purchase Price....................................... 5
5. Instruments of Transfer.................................................. 6
5.1 Transfer of Assets................................................. 6
5.2 Further Assurances................................................. 6
6. Property Lease. ......................................................... 6
7. Action Required Before Closing .......................................... 6
7.1 Buyer's Responsibilities .......................................... 6
7.2 Seller's Responsibilities.......................................... 6
8. Representations and Warranties of Seller................................. 7
8.1 Due Organization .................................................. 7
8.2 Approval of Sale .................................................. 7
8.3 Financial Statements .............................................. 7
8.4 Licenses .......................................................... 7
8.5 Properties of Seller .............................................. 7
(a) Furniture, Fixtures, and Equipment and Tenant Improvements..... 7
(b) Inventory and Supplies......................................... 8
(c) Other Assets. ................................................ 8
8.6 Brokers' and Finders' Fees ........................................ 8
8.7 Employee Benefits ................................................. 8
8.8 Environmental ..................................................... 8
8.9 Litigation ........................................................ 9
8.10 Certain Contracts, etc ............................................ 9
ii
<PAGE>
8.11 Material Misstatements or Omissions ............................... 9
8.12 Condition of Clinic ............................................... 9
8.13 No Violation ...................................................... 9
8.14 Insurance ......................................................... 10
8.15 Fictitious Names .................................................. 10
9. Representations and Warranties of Buyer ................................. 10
9.1 Due Organization .................................................. 10
9.2 Approval of Purchase .............................................. 11
9.3 Performance ....................................................... 11
10. Restrictive Covenants ................................................... 11
10.1 Scope of Covenant ................................................. 11
10.2 Territory ......................................................... 11
10.3 Permitted Activities .............................................. 11
10.4 Severability ...................................................... 12
10.5 Duration of Covenant .............................................. 12
10.6 Non-Solicitation Covenants ........................................ 12
10.7 Injunctive Relief ................................................. 12
11. Collection of Seller's Accounts Receivable .............................. 13
11.1 Allocation of Receipts Between Seller's and Buyer's Accounts
Receivable .............................................................. 13
11.2 Maintenance of Accounts Receivable Records ........................ 13
12. Effectiveness of Agreement; Closing Date; and Conditions to Closing ..... 14
12.1 Effectiveness of Agreement ........................................ 14
12.2 Termination of Agreement .......................................... 14
12.3 Termination Without Effect on Liability ........................... 14
iii
<PAGE>
12.4 Closing Date ...................................................... 14
12.5 Conditions to Obligation of Seller ................................ 14
(a) Representations and Warranties of Buyer to be True ............ 15
(b) Opinion of Buyer's Counsel .................................... 15
(c) Performance ................................................... 15
(d) Other Schedules and Documents ................................. 15
(e) No Action to Prevent Completion ............................... 15
12.6 Condition to Obligations of Buyer ................................. 15
(a) Representations and Warranties of Seller and Owners to
be True ........................................................... 15
(b) Final Approval of Buyer's Board of Directors .................. 16
(c) Opinion of Seller's and Owners' Counsel ....................... 16
(d) Performance of Seller's and Owners' Obligations ............... 16
(e) Exhibits ...................................................... 16
(f) No Material Adverse Change .................................... 16
(g) Consulting Agreement .......................................... 16
(h) Employment of Seller's Physicians by Medical Group ............ 16
(i) No Action to Prevent Completion ............................... 17
(j) Consents ...................................................... 17
13. Indemnification and Claims .............................................. 17
13.1 Indemnification by Seller and Owners .............................. 17
13.2 Indemnification by Buyer .......................................... 17
13.3 Prompt Notice of Claims ........................................... 18
13.4 Right to Undertake Defense ........................................ 18
13.5 Joint Liability for Claim ......................................... 18
iv
<PAGE>
14. Miscellaneous ........................................................... 18
14.1 Binding Effect .................................................... 18
14.2 Governing Law ..................................................... 19
14.3 Headings and Construction ......................................... 19
14.4 Gender and Number ................................................. 19
14.5 Joint and Several Liability ....................................... 19
14.6 Notices ........................................................... 19
14.7 Public Announcements .............................................. 20
14.8 Attorneys' Fees ................................................... 20
14.9 Survival of Representations ....................................... 20
14.10 Waiver ............................................................ 20
14.11 Expenses .......................................................... 20
14.12 Counterparts ...................................................... 20
14.13 Severability ...................................................... 20
14.14 Cumulative Rights and Remedies .................................... 21
14.15 Entire Agreement .................................................. 21
14.17 Assignment ........................................................ 21
v
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is dated as of March 31, 1995, by and among INDUSTRIAL
MEDICAL GROUP, a California general partnership ("Seller"), THEODORE JOHNSTONE,
M.D. ("Johnstone"), KATHRYN JOHNSTONE, R.N., ("Mrs. Johnstone"), PAUL COHEN,
M.D. ("Cohen"), PRIMARY CARE MEDICAL GROUP, INC., a California professional
corporation ("PCMG"), PAUL COHEN FAMILY TRUST, u/t/d September 7, 1990 (the
"Trust") and HELIAN HEALTH GROUP OF FRESNO, INC., a California corporation
("Buyer"), with reference to the following:
A. Seller presently owns and operates an occupational/industrial medical
center located at 2555 S. East Avenue, Fresno, California 93706 (the "Clinic").
B. The sole partners of Seller are PCMG (a 50% partner), and the Trust (a
50% partner). Johnstone and Mrs. Johnstone are the sole shareholders of PCMG,
owning 51% and 49% respectively, and Cohen is the trustor and trustee of the
Trust. Johnstone, Mrs. Johnstone, Cohen, PCMG and the Trust are sometimes
collectively referred to herein as the "Owners.")
C. Subject to the terms and conditions set forth herein, Buyer desires to
purchase certain assets from Seller used in the operation of the Clinic as more
fully set forth herein.
NOW, THEREFORE, for and in consideration of the premises set forth herein
and other good and valuable consideration, the receipt and sufficiency of which
are acknowledged, each of the parties, intending to be legally bound, agree as
follows:
1. Purchase of Assets and Assignment of Leases.
1.1 Transfer of Assets. On the terms and subject to the conditions set
forth in this Agreement, Seller agrees to sell, assign, transfer and deliver to
Buyer on and as of the Closing Date (as hereinafter defined), and Buyer agrees
to purchase from Seller on and as of the Closing Date, the following assets of
Seller used in the operation of the Clinic (said assets being hereinafter
collectively referred to as the "Assets"):
(a) Furniture, Fixtures and Equipment. All furniture, fixtures, and
equipment of Seller used in the operation of the Clinic more particularly
described on Schedule 1.1(a) attached hereto and incorporated herein by this
reference (the "Furniture, Fixtures, and Equipment"), except as otherwise
provided in Section 1.2 of this Agreement;
(b) Tenant Improvements. All of Seller's right, title, and interest,
if any, in and to all tenant improvements owned and installed by Seller at the
Clinic (the "Tenant Improvements"), except as otherwise provided in Section 1.2
of this Agreement;
<PAGE>
(c) Inventory and Supplies. All inventory and supplies of Seller used,
or maintained for use, in the operation of the Clinic, including, without
limitation, all surgical inventory and supplies, all nursing care inventory and
supplies, all laboratory inventory and supplies, all facility repair and
maintenance inventory and supplies, all bookkeeping and accounting inventory and
supplies, all stationery inventory and supplies, and all other administrative
and/or business inventory and supplies, as of the Closing Date (collectively,
the "Inventory and Supplies");
(d) Data Processing Systems. All of Seller's right, title and
interest, if any, in and to all data processing systems, hardware and software
used in the operation of the Clinic, including without limitation the data
processing systems described on Schedule 1.1(d) attached hereto and incorporated
herein by this reference (the "Data Processing Systems"), though Seller will
retain the right to access the Data Processing Systems for a period of not more
than 120 days following the Closing for purposes of collecting Seller's Accounts
Receivable as provided in Section 11;
(e) Licenses and Permits. All of Seller's right, title, and interest,
if any, in and to those certain licenses and permits of Seller relating to the
Clinic more particularly described on Schedule 1.1(e) attached hereto and
incorporated herein by this reference, to the extent assignable and transferable
(the "Licenses and Permits");
(f) Contracts and Commitments. All of Seller's right, title, and
interest, if any, in and to those certain contracts and commitments relating to
the Clinic and/or the Assets more particularly described on Schedule 1.1(f)
attached hereto and incorporated herein by this reference, to the extent
assignable and transferable (the "Contracts and Commitments");
(g) Prepaid Expenses and Security Deposits. All of Seller's right,
title, and interest, if any, in and to prepaid expenses and security deposits of
Seller, including without limitation those prepaids described on Schedule 1.1(g)
attached hereto and incorporated herein by this reference (the "Prepaid Expenses
and Security Deposits");
(h) Telephone Numbers, Post Office Boxes, and Other Communication
Media. All of Seller's right, title, and interest, if any, in and to all
telephone numbers, post office boxes, and other communication media used by
Seller with regard to the Clinic, including without limitation that described on
Schedule 1.1(h) attached hereto and incorporated herein by this reference (the
"Communication Media");
(i) Patient Billing Information. All of Seller's right, title, and
interest, if any, in and to those certain billing files, billing histories,
billing records, and other billing information relating to any patients of the
Clinic from inception of the Clinic (except for charts and records destroyed or
discarded in the normal course of business) through the Closing Date, including,
without limitation, all patient numbers, patient billing codes, and the like
assigned to said patients (the "Patient Billing Information"), though Seller
will retain the right to access
2
<PAGE>
the Patient Billing Information for a period of not more than 120 days following
the Closing for purposes of collecting Seller's Accounts Receivable as provided
in Section 11;
(j) Trade Names and Logos. All of Seller's right, title, and interest,
if any, in and to the trade names and logos associated with Seller or the
Clinic, including without limitation those trade names and logos described on
Schedule 1.1(j) attached hereto and incorporated herein by this reference (the
"Trade Names and Logos");
(k) Books and Records. All of Seller's right, title, and interest, if
any, in all books and records of or relating to the Clinic, including customer,
patient and client lists and records concerning patient visits, except those
books and records described in Section 1.2(d) of this Agreement (the "Books and
Records"); and
(l) Goodwill and Going Concern Value. All of Seller's right, title,
and interest, if any, in and to any goodwill and going concern value
attributable to the Assets described in Sections 1.1(a) through 1.1(k) of this
Agreement (the "Goodwill").
1.2 Assets Excluded from Purchase and Sale. Seller has not agreed to sell,
convey, transfer or assign to Buyer, and Buyer will not purchase or accept from
Seller, the following assets:
(a) Cash. Seller shall retain all cash held by or on deposit in the
name of Seller as of the Closing;
(b) Accounts Receivable. Seller shall retain all accounts receivable
of the Clinic which arise or accrue prior to the Closing Date (the "Accounts
Receivable");
(c) Retained Contracts and Commitments. Seller shall retain all
contracts and commitments relating to the Clinic and/or any of the assets
described in this Section 1.2, other than the Contracts and Commitments,
including, without limitation, those certain contracts and commitments more
particularly described on Schedule 1.2(c) attached hereto and incorporated
herein by this reference;
(d) Retained Books and Records. Seller shall retain all consulting
books, records, forms and files, and all general ledgers, cash receipts and
disbursement journals, schedules of accounts receivable and accounts payable,
checkbooks, cancelled checks, bank books, bank statements, and tax returns and
files of Seller (the "Retained Books and Records"). Seller shall provide Buyer
with access to the Retained Books and Records;
2. Liabilities.
2.1 No Liabilities Assumed By Buyer. Buyer does not agree to pay or
discharge any debts, liabilities or obligations of Seller, Owners or related to
the Clinic.
3
<PAGE>
2.2 Liabilities Retained by Seller. Seller and Owners shall continue to be
obligated to timely pay, perform and discharge the following debts, obligations
and liabilities:
(i) Any and all claims of any third party payors, fixed or
accruing prior to the Closing Date;
(ii) Federal, state (including franchise taxes) and local income
taxes, if any, payable with respect to any activities of Seller, fixed or
accruing prior to the Closing Date or as a result of the sale of the Assets to
Buyer pursuant to this Agreement;
(iii) Any and all liability relating to Seller's employee benefit
plans, including, without limitation, liabilities relating to vacation time,
sick time, continuing medical education, professional association or society
dues, and holiday time benefits fixed or accruing prior to the Closing Date;
(iv) All litigation relating to Seller, the Assets, the Owners or
the Clinic fixed or accruing prior to the Closing Date;
(v) Any and all income or franchise taxes associated with or
arising from the use of the Assets up to and through the Closing Date;
(vi) Any debt, obligation or liability of Seller relating to the
violation of any applicable law, rule or regulation of any governmental
authority, relating to environmental matters affecting the Clinic, the Assets or
the premises under which the Clinic is located, fixed, arising or accruing prior
to the Closing Date; and
(vii) Any other debt, obligation or liability of Seller, fixed,
arising or accruing prior to the Closing Date, whether or not such debt,
obligation or liability is disclosed.
2.3 Malpractice Tail Coverage. Seller and Owners shall secure at their cost
tail coverage (which is reasonably satisfactory to Buyer) for professional
liability insurance for physicians employed by Seller who provided professional
services to patients of Seller, effective as of the Closing Date.
3. Patient Medical Records. Seller, to assure continuity in the provision of
patient care by its successor health care providers, agrees to transfer to
Buyer, as part of the Assets, all medical records relating to any past or
current patients of the Clinic, including, without limitation, all patient
charts, x-rays, laboratory results and data, slides and sections, nurses' notes,
physical therapists' notes and records, records of prescriptions, hospital
records, and correspondence ("Medical Records"). On or subsequent to the Closing
Date, Buyer and/or Steven C. Schumann, M.D., Inc. ("P.C."), the "Medical Group"
specified under the Management Services Agreement between P.C. and Buyer, will
maintain the Medical Records of Seller in accordance with the Management
Services Agreement and the laws and professional standards for medical clinics
and practitioners in the State of California.
4
<PAGE>
3.1 Buyer's Covenants Concerning Medical Records. Buyer agrees that it or
its designated Medical Group shall:
(i) Store the Medical Records in compliance with all applicable
laws;
(ii) Retain the Medical Records for at least seven (7) years
following the last patient visit, or, in the case of a patient who is a minor,
for the longer of (A) seven (7) years following the last patient visit, or (B)
one (1) year after said patient reaches age eighteen (18) years;
(iii) Retain Medical Records relating to asbestos exposure cases
for at least thirty (30) years, unless applicable law permits a shorter
retention period;
(iv) Permit Seller, Owners or physicians affiliated with Seller
to inspect and copy, at their expense, the Medical Records as necessary if any
claim is made against Seller or such physicians to which the Medical Records may
be material;
(v) Administer requests by third parties to inspect, copy and
disclose the Medical Records in accordance with law; and
(vi) Except as otherwise required or permitted by law, the
Medical Records transferred pursuant to this Agreement shall be disclosed only
to (1) Seller or its affiliated physicians, (2) personnel of Buyer when
providing services to any Medical Group assuming the practice of medicine at the
Clinic, or practicing at another facility managed by Buyer, only when such
disclosure of the Medical Records is lawfully permitted, and (3) to other
physicians and health care professionals, as permitted by law, when necessary to
assure continuity of care to patients whose records have been transferred to
Buyer pursuant to this Agreement.
4. Purchase Price. The purchase price (the "Purchase Price") for the Assets is
EIGHT HUNDRED THOUSAND DOLLARS ($800,000), payable at the Closing by means of a
certified check or wire transfer of immediately available funds into one or more
bank accounts designated by Seller.
4.1 Allocation of Purchase Price. The parties agree to allocate the
Purchase Price pursuant to Internal Revenue Code Section 1060 within fifteen
(15) days before the Closing Date, in accordance with Schedule 4.1. The parties
agree to report the purchase and sale of the Assets to the Internal Revenue
Service on Form 8594 in accordance with this Section 4.1.
5. Instruments of Transfer.
5.1 Transfer of Assets. On the Closing Date, Seller shall execute and
deliver to Buyer, in a form satisfactory to Buyer, appropriate assignment
instruments and bills of sale, pursuant to which Seller shall sell, assign,
transfer and deliver to Buyer:
5
<PAGE>
(a) Good and marketable title in and to the Furniture, Fixtures, and
Equipment and the Inventory and Supplies, free and clear of any liens, claims,
options, charges, security interests, and encumbrances of any nature; and
(b) All of Seller's right, title, and interest, if any, in and to the
Tenant Improvements, the Data Processing Systems, the Licenses and Permits, the
Contracts and Commitments, the Prepaid Expenses and Security Deposits, the
Communication Media, the Patient Billing Information, the Trade Names and Logos,
the Books and Records, and the Goodwill.
5.2 Further Assurances. Seller shall from time to time, at Buyer's request
and without further consideration, execute and deliver to Buyer such instruments
of transfer, conveyance and assignment as Buyer may reasonably request to
evidence further the transfer, conveyance and assignment of the Assets to Buyer
in the condition of title set forth in Section 5.1 of this Agreement.
6. Property Lease. Seller and/or the Owners shall lease to Buyer the Clinic
premises located at 2555 S. East Avenue, Fresno, California 93706, subject to
the terms and conditions of the Lease attached hereto as Exhibit 6 (the
"Lease").
7. Action Required Before Closing.
7.1 Buyer's Responsibilities. Buyer has obtained, or shall use its
reasonable efforts to obtain on or before the Closing Date, the necessary
approvals, certificates, licenses and permits required, if any, under federal,
state and/or local law for Buyer to purchase the Assets. Buyer has obtained, or
shall use its best efforts to obtain on or before the Closing Date, the
necessary accounting reviews and audits or other requirements imposed on it by
rules and regulations of the Securities Exchange Commission and/or NASDAQ
National Market System.
7.2 Seller's Responsibilities. Seller and Owners shall use their best
efforts to assist Buyer in obtaining and completing the approvals, audits,
accounting reviews, certificates, licenses and permits referred to in Section
7.1 of this Agreement, and shall cooperate fully with Buyer in this regard.
8. Representations and Warranties of Seller. Seller and Owners hereby jointly
and severally represent, warrant, covenant and agree as follows:
8.1 Due Organization. Seller is a general partnership duly organized,
validly existing and in good standing under the laws of the State of California.
8.2 Approval of Sale. The execution, delivery and performance of this
Agreement have been duly approved by all the partners of Seller. To the best of
Seller's and Owners' knowledge, as of the Closing Date, the joinder of no person
or entity other than Seller will
6
<PAGE>
be necessary to convey the Assets to Buyer. PCMG and the Trust are the sole
partners of Seller. Johnstone and Mrs. Johnstone are the sole shareholders of
PCMG, and Cohen is the sole trustor and trustee of the Trust. Conditioned upon
Seller obtaining the consents and/or approvals more particularly described on
Schedule 8.2 attached hereto and incorporated herein by this reference, to the
knowledge of Seller and Owners, the execution, delivery and performance of this
Agreement will not cause any default under or breach of any provision of
applicable law, rules or regulation, or any regulation, indenture, mortgage loan
agreement, contract, lease or other instrument to which Seller is a party or by
which any of Seller or any of its properties or assets is bound or affected.
8.3 Financial Statements. Seller has delivered to Buyer the unaudited, cash
basis balance sheet and income statement dated December 31, 1994, for the twelve
(12) month period ended December 31, 1994, and the unaudited cash basis balance
sheet and income statement dated , 1995, for the
-------------------- --- ---
month period ended , 1995, which are attached hereto and
------------------ ----
incorporated herein as Schedule 8.3 (the "Financial Statements"). To the best of
Seller's and Owners' knowledge, the Financial Statements fairly and accurately
reflect the financial condition of Seller, and to the knowledge of Seller and
Owners, there have been no material and adverse changes to the financial
condition of the Clinic since the most current of the Financial Statements.
8.4 Licenses. To the best knowledge of Seller and Owners, the Clinic has
the lawful authority and all necessary federal, California or local governmental
licenses or permits required to conduct the businesses of the Clinic as are
presently being conducted. A list of all licenses and permits relating to the
Clinic is attached as Schedule 8.4.
8.5 Properties of Seller.
(a) Furniture, Fixtures, and Equipment and Tenant Improvements. Except
as set forth on Schedule 8.5(a) attached hereto and incorporated herein by this
reference, the Furniture, Fixtures, and Equipment and the Tenant Improvements
are, and as of the Closing Date shall be, in good working order and free from
any defects (other than those resulting from normal wear and tear), and free and
clear of any and all liens, claims, options, charges, security interests, and
encumbrances of any nature.
(b) Inventory and Supplies. Except as set forth on Schedule 8.5(b)
attached hereto and incorporated herein by this reference, the Inventory and
Supplies are, or as of the Closing Date will be, of a quality usable in the
normal operation of the Clinic, and free and clear of any and all liens, claims,
options, charges, security interests, and encumbrances of any nature.
(c) Other Assets. Except as set forth on Schedule 8.5(c) attached
hereto and incorporated herein by this reference, neither Seller nor Owners has
granted to any other person any voluntary lien, option, security interest, or
any encumbrance of any nature, and to the knowledge of Seller and Owners, no
other person has any involuntary lien upon, any
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claims against, or claims to have any lien, option, security interest, or other
encumbrance affecting the Data Processing Systems, the Contracts and
Commitments, the Communication Media, the Patient Billing Information, the
Tradenames and Logos, the Books and Records, or the Goodwill.
8.6 Brokers' and Finders' Fees. No agent, broker, person or firm acting on
behalf of, or under the authority of, Seller is or will be entitled to any
commission or broker's or finder's fee from any of the parties hereto in
connection with this Agreement or any of the transactions contemplated hereby,
except as disclosed in Schedule 8.6.
8.7 Employee Benefits.
(a) Seller is not, as it relates to the operation of the Clinic, a
party to, or bound by any agreements evidencing a pension, profit sharing,
deferred compensation, retirement, bonus or similar plan for employee benefits
other than as described in Schedule 8.7(a).
(b) Schedule 8.7(b) contains a list of each medical, malpractice,
health, disability, insurance, vacation, sick leave, severance pay, continuing
medical education, professional association or society dues, or other plan,
program, practice or arrangement, formal or informal of Seller which covers the
employees of the Clinic.
(c) Seller has not taken any actions which would cause Buyer to be
liable under any plans described in Schedule 8.7(a) or Schedule 8.7(b), and no
representations or statements have been made by Seller or its agents or
employees to any employee of Seller that any of such employee benefit plans
would be continued by Buyer following the Closing.
(d) Attached as Schedule 8.7(d) is a list of the accrued vacation,
continuing medical education, sick and holiday time for Seller's non-physician
employees and independent contractors as of January 31, 1995.
8.8 Environmental. To the best knowledge of Seller and Owners, there are no
existing, threatened or pending actions of any federal, California or local
authority under any environmental laws requiring any remedial action with
respect to the Clinic or the Assets.
8.9 Litigation. To the best knowledge of Seller and Owners, there is no
pending litigation or investigation arising in connection with or affecting the
Assets, Seller, Owners, or the Clinic, and no such actions are threatened,
except for those matters set forth on Schedule 8.9 attached hereto.
8.10 Certain Contracts, etc. Except as set forth in Schedules 1.1(f) or
1.2(c), or as may be terminated upon thirty (30) days' prior notice and do not
obligate Seller in excess of One Thousand Dollars ($1,000), as of the date of
execution of this Agreement by Seller, Seller has no:
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(a) Collective bargaining or other labor union agreements which would
be binding on Buyer;
(b) Material oral or written contracts or agreements with hospitals,
health care professionals, clinics, physicians, or any partnership or
professional association or corporation owned by physicians which would be
binding on Buyer;
(c) Material oral or written contracts or agreements relating to the
operation, maintenance, repair or supplying of the Clinic which would be binding
on Buyer; or
(d) Oral or written contract or agreement for the purchase, sale or
lease of goods, materials, equipment or capital assets for the Clinic which
would be binding on Buyer.
8.11 Material Misstatements or Omissions. To the best knowledge of Seller
and Owners, no representation or warranty made by the Seller or Owners in this
Agreement or in any document, statement, certificate, exhibit or schedule
furnished or to be furnished to Helian or Buyer pursuant hereto contains, or as
to documents, statements, certificates, exhibits or schedules to be furnished,
will contain at the time they are furnished, any untrue statement of material
fact or omits to state a material fact required to make any such representation
or warranty not misleading.
8.12 Condition of Clinic. To the knowledge of Seller and Owners, except as
disclosed in Schedule , the Seller warrants and represents that the Clinic has
all necessary state, federal or local government authorizations, licenses or
permits and have passed all health code and OSHA compliance inspections, if any.
8.13 No Violation. To the knowledge of Seller and Owners, except as set
forth in Schedule , neither the execution and delivery of this Agreement (or any
agreement referred to herein or contemplated hereby) nor the consummation of the
transactions contemplated hereby and thereby by Seller will violate any
provision of or be in conflict with, constitute a default or breach under,
require the consent of any other party to or result in the creation or
imposition of a security interest, lien or other encumbrance upon the Assets
under any agreement or commitment to which Seller is a party, or violate any
statute or law or any judgment, decree, order, regulation or rule of any court
or governmental authority.
8.14 Insurance. Schedule attached hereto and incorporated herein by this
reference contains a list of all policies and contracts of insurance maintained
by Seller with regard to the Assets. If any award for damages is made with
respect to any theft, fire or physical damage to the Clinic or the Assets
occurring during the period from the date of execution hereof but before the
Closing Date which is awarded after the Closing Date, the proceeds therefrom
shall be transferred promptly to Buyer, if such theft, fire or physical damages
have not previously been rectified or corrected by Seller. The business and
operations of the Clinic will be covered as of the Closing Date by liability or
workers'
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compensation insurance. If a claim is made for damage occurring during the
period from the date of execution hereof but before the Closing Date which is
covered by such liability or workers' compensation insurance policy, Seller
shall promptly notify Buyer of the pendency of such a claim. Seller hereby
authorizes Buyer to obtain from Seller's insurers information about Seller's
past malpractice experience in the operation of the Clinic, and in connection
therewith, to execute any releases or other documents which may be required to
allow Buyer access to such information; provided, however, that Buyer shall keep
said information confidential and shall not disclose said information to any
other person without the prior written consent of Seller.
8.15 Fictitious Names. Except for the use of the name "Industrial Medical
Group of Fresno," to the best knowledge of Seller and Owners, Seller has not
operated under any fictitious business names. After the Closing, Seller shall
not use the name "Industrial Medical Group" or "IMG" or any confusingly similar
name. Notwithstanding the foregoing, Seller may continue to use its fictitious
business name "Industrial Medical Group of Fresno" for up to 150 days after the
Closing for the exclusive purpose of effecting collection on Seller's Accounts
Receivable; at the Closing, Seller and Owners shall deliver to Buyer an executed
Abandonment of Fictitious Business Name Statement which Buyer may file and
publish anytime following 150 days after the Closing.
8.16 Performance. Seller and Owners shall timely perform and comply with
all covenants and agreements, and satisfy all conditions, that they are required
to perform, comply with, and satisfy under this Agreement and/or any documents
to be executed concurrently herewith or pursuant hereto.
9. Representations and Warranties of Buyer. Buyer hereby represents, warrants,
covenants and agrees as follows:
9.1 Due Organization. Buyer is a corporation duly organized and validly
existing and in good standing under the laws of the State of California.
9.2 Approval of Purchase. The execution, delivery and performance of this
Agreement and any documents to be executed concurrently herewith or pursuant
hereto have been duly approved and/or authorized by the directors and
shareholders of Buyer, and such actions are within the powers of Buyer.
9.3 Performance. Buyer and Helian shall timely perform and comply with all
covenants and agreement, and satisfy all conditions, that they are required to
perform, comply with, and satisfy under this Agreement and/or any documents to
be executed concurrently herewith or pursuant hereto.
10. Restrictive Covenants.
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10.1 Scope of Covenant. During the term specified in Section of this
Agreement, Seller and each of the Owners jointly and severally represent,
warrant, covenant and agree that they shall not, directly or indirectly, engage
in, or have any interest in any firm, corporation, person or business (whether
as an employee, agent, security holder, creditor, consultant, investigator,
owner, shareholder, partner or otherwise) that engages in occupational or
industrial medicine, and/or which markets itself to clients as providers of
"occupational or industrial medicine" within the Territory defined in Section .
The term "occupational or industrial medicine" shall mean medical services and
treatment (including physical therapy and employee physical examinations)
provided within the scope of state and/or federal workers' compensation laws, or
the providing of work-related injury prevention and work-related safety programs
to employers.
10.2 Territory. The agreements and covenants contained in Section shall
cover the activities of Seller and Owners within a twenty (20) mile radius of
the Clinic (the "Territory").
10.3 Permitted Activities. Notwithstanding any other provision of this
Agreement to the contrary, the following activities shall be permitted:
(a) Johnstone and Mrs. Johnstone may remain owners and employees of
PCMG, a provider of primary care and occupational medicine, located at 509 S. I
Street, Madera, California, provided that PCMG does not relocate to an address
that would otherwise be located within the Territory;
(b) Cohen may continue to be the operator (whether as an employee,
agent, security holder, creditor, consultant, investor, owner, shareholder,
partners or otherwise) of Tower Health Clinics, a provider of primary care, so
long as neither Cohen nor Tower Health Clinics engages in occupational or
industrial medicine with the Territory; and
(c) Own ten percent (10%) or less of the debt or equity securities of
any publicly traded corporation or debt instruments or capital interests of any
publicly traded partnership, or any interest in a mutual fund, which ownership
interest would otherwise be in violation of this Agreement.
10.4 Severability. The covenant not to compete contained in this Section 10
shall be construed as if it is divided into separate and distinct covenants,
relating to the various prohibited activities and territories described. Each
such covenant shall constitute separate and several covenants distinct from all
other such covenants. The parties acknowledge and recognize that the covenants
and territorial restrictions contained herein are properly required for the
adequate protection of the Assets acquired by Helian from Seller under the
Purchase Agreement and that if any covenant or other provision contained herein
shall be deemed to be illegal, unenforceable or unreasonable by a court with
respect to any part of the whole described territory, such covenant or provision
shall not be affected with respect to any other part of the described territory.
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10.5 Duration of Covenant. The duration of the covenant contained in
Section 10.1 of this Agreement shall be five (5) years.
10.6 Non-Solicitation Covenants. Seller and each of the Owners jointly and
severally represent, warrant, covenant and agree that they shall not:
(i) Attempt, directly or indirectly, to solicit, entice, persuade
or induce any employee of the Clinic whom Buyer or Medical Group employs after
the Closing to terminate his or her employment by the Buyer or Medical Group or
to become employed by any person, firm or corporation other than the Buyer or
Medical Group, or approach any such employee for any of the foregoing purposes
or authorize and/or assist in the taking of any such action by any third party;
or
(ii) Attempt, directly or indirectly, to solicit, entice,
persuade or induce any patient of the Clinic, who at any time was treated or
examined by the at the Clinic prior to the Closing Date, to terminate his or her
use of the Clinic or its Medical Group for his or her medical needs or the
medical needs of such person's family, or to solicit, entice, persuade or induce
such patient to seek medical services from the Owners or their affiliates; or
(iii) Attempt, directly or indirectly, to solicit, entice,
persuade or induce any employer (or other client) whose employees (or members)
have, at any time, been treated or examined by at the Clinic prior to the
Closing Date, to terminate its use of the Clinic or its Medical Group for its
medical needs or the medical needs of its employees, or to solicit, entice,
persuade or induce such employer to seek medical services from the Owners or
their affiliates.
10.7 Injunctive Relief. Each of the parties acknowledges that (i) the
covenants and restrictions contained herein are necessary, fundamental and
required for the protection of the Assets and Goodwill purchased by Buyer; (ii)
such covenants relate to matters which are of a special, unique and
extraordinary character; and (iii) a breach of any of such covenants may result
in irreparable harm and damages to Buyer which cannot be adequately compensated
by a monetary award. Accordingly, the parties expressly agree that in addition
to all remedies available at law or in equity, Buyer may be entitled to the
immediate remedy of a temporary restraining order, preliminary injunction or
such other form of injunctive or equitable relief as may be used by any court of
competent jurisdiction to specifically enforce the provisions hereof.
11. Collection of Seller's Accounts Receivable. As provided in Section 1.2(b)
of this Agreement, the Assets being acquired by Buyer do not include the
Accounts Receivable. Seller shall be responsible for collecting its Accounts
Receivable at Seller's own cost. At no charge to Seller, however, Buyer will
assist in collections of Seller's Accounts Receivable for a period of one
hundred twenty (120) days following the Closing Date; provided, however, Seller
and Owners release and hold Buyer harmless from and against all liabilities,
costs, damages and causes of action that may arise in connection with Buyer's
collection of Seller's
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Accounts Receivable. Buyer shall not be required to take any extraordinary
collection action with regard to the Accounts Receivable, including without
limitation sending dunning letters, initiating legal action or engaging a
collection firm. If Seller desires the assistance of Buyer or any of its
personnel to collect the Accounts Receivable beyond the first one hundred twenty
(120) days following the Closing Date, Seller shall negotiate with Buyer
regarding the terms of collection services to be provided, which shall include a
reasonable and customary fee to Buyer for its collection services. Seller shall
not be precluded from taking any lawful action to effect collection of Seller's
accounts receivable.
11.1 Allocation of Receipts Between Seller's and Buyer's Accounts
Receivable. Buyer and Seller agree that payments received by Buyer which apply
to clients of both Seller and Buyer shall be applied to the specific patient or
invoice indicated by the payment or payor. If the payor does not direct a
payment to a particular patient or invoice, or application is otherwise
uncertain, such payment shall be applied on a first-in, first-out basis to the
oldest undisputed outstanding balance relating to the applicable patient or
client, unless the payor indicates a dispute as to the prior amount or some
other desired application. If a dispute is indicated, but no particular
application of the payment is indicated, such payment shall be then first
applied on a first-in, first-out basis, to the oldest undisputed amount owed by
such payor.
11.2 Maintenance of Accounts Receivable Records. While Buyer is assisting
in the collection of Seller's Accounts Receivable for the period provided in
Section , Buyer shall use its reasonable efforts to preserve the computerized
records of the Accounts Receivable. Seller may make back-up disks of the
computer data relating to the Accounts Receivable for up to six (6) months
following the Closing.
12. Effectiveness of Agreement; Closing Date; and Conditions to Closing.
12.1 Effectiveness of Agreement. This Agreement shall become effective on
and as of the date hereof upon execution by all parties hereto.
12.2 Termination of Agreement. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement may be terminated and abandoned at any time
before the Closing:
(a) By the mutual consent of Buyer and Seller; or
(b) Although the parties to this Agreement intend for it to close as
soon as practicable after all conditions have been satisfied or waived, if the
Closing has not occurred by April 3,, 1995, provided that Buyer and Seller have
exercised their best efforts to satisfy all conditions to Closing. In the event
of termination and abandonment under this Section 12.2, this Agreement shall
forthwith become void, and there shall be no liability on the part of any party
hereto.
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12.3 Termination Without Effect on Liability. Buyer or Seller (in either
case, the "Terminating Party") may terminate this Agreement at any time prior to
the Closing by delivering written notice of such termination to the other party
(the "Defaulting Party"), if (i) the Defaulting Party has failed in a material
respect to perform or comply in a timely manner with any of the material
covenants, agreements or undertakings to be performed or complied with by the
Defaulting Party pursuant to this Agreement, or (ii) the Defaulting Party has
breached any of the representations and warranties made by the Defaulting Party
pursuant to this Agreement in a material respect; provided, however, that the
Terminating Party shall have delivered to the Defaulting Party written notice
describing in reasonable detail the nature of such noncompliance or breach, and
the Defaulting Party shall have failed to cure such noncompliance or breach
within ten (10) business days after receiving such notice of noncompliance or
breach. In the event of a noncompliance or breach under this Section 12.3, in
addition to all of its other rights and remedies, the Terminating Party shall
have the right to recover from the Defaulting Party all losses, damages, costs,
fees and expenses, including reasonable attorneys' fees, incurred by the
Terminating Party, as a result of such noncompliance or breach.
12.4 Closing Date. The delivery of the Purchase Price pursuant to Section
4; the sale, transfer, assignment and delivery of the Assets pursuant to Section
5.1; the assumption of the Liabilities pursuant to Section 2.1; the execution
and delivery of the Lease under Section 6; and the delivery of the other
instruments and certificates required under this Section 12, shall be effective
as of 12:01 a.m. on April 1, 1995 (the "Closing" or "Closing Date"), or such
other date as the parties shall mutually agree.
12.5 Conditions to Obligation of Seller. The obligation of Seller to effect
the transactions contemplated hereby to be performed on or after the Closing
Date by Seller shall be subject to the satisfaction (or waiver by Seller) on or
before the Closing Date of the following conditions:
(a) Representations and Warranties of Buyer to be True. The
representations and warranties of Buyer herein contained shall be true in all
material respects on and as of the Closing Date with the same effect as though
made at such time, except to the extent any such representations or warranties
are waived in writing by Seller.
(b) Opinion of Buyer's Counsel. Seller shall have received from
counsel for Buyer an opinion, dated as of the Closing Date, opining only as to
the following:
(i) The Buyer has been duly incorporated and is validly existing
in good standing under the laws of the State of California;
(ii) The Buyer has all requisite corporate power and corporate
authority to execute, deliver, and perform the Agreement; and
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(iii) The execution, delivery and performance of the Agreement
have been duly authorized by all necessary corporate action on the part of the
Buyer.
(c) Performance. Buyer shall have timely and fully performed all
obligations required of it by this Agreement prior to the Closing Date.
(d) Other Schedules and Documents. Buyer shall have provided Seller
with all schedules and other documents required by this Agreement to be
delivered to Seller prior to the Closing Date, which shall be reasonably
acceptable to Seller, including any updated schedules.
(e) No Action to Prevent Completion. No action or proceeding shall
have been instituted or be imminently threatened before any court or
governmental agency on or prior to the Closing Date to restrain or prohibit, or
to obtain damages in respect of, this Agreement or the consummation of the
transactions contemplated hereby, which in the reasonably exercised opinion of
Seller makes it inadvisable to consummate such transactions.
12.6 Condition to Obligations of Buyer. The obligations of Buyer to effect
the transactions contemplated hereby to be performed on or after the Closing
Date shall be subject to satisfaction (or waiver by Buyer) on or before the
Closing Date of the following conditions:
(a) Representations and Warranties of Seller and Owners to be True.
The representations and warranties of Seller and Owners herein contained shall
be true in all material respects on and as of the Closing Date with the same
effect as though made at such time, except to the extent that any such
representations and warranties are waived in writing by Buyer.
(b) Final Approval of Buyer's Board of Directors. The Buyer's board of
directors shall have approved the transactions contemplated hereunder.
(c) Opinion of Seller's and Owners' Counsel. Buyer shall have received
from counsel for the Seller and Owners, an opinion, dated the Closing Date,
opining only as to the following:
(i) The Seller is a validly organized California partnership;
(ii) PCMG has been duly incorporated and is validly existing in
good standing under the laws of the State of California;
(iii) The Seller, PCMG and Trust have all requisite power and
authority to execute, deliver, and perform the Agreement;
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(iv) The execution, delivery and performance of the Agreement
have been duly authorized by all necessary partnership, corporate and trust
action on the part of the Seller, PCMG and Trust.
(d) Performance of Seller's and Owners' Obligations. Seller and Owners
shall have timely and fully performed all obligations required of them by this
Agreement prior to the Closing Date.
(e) Exhibits. Seller shall have provided Buyer with all schedules,
exhibits and other documents required by this Agreement to be delivered to Buyer
prior to the Closing Date, which shall be reasonably acceptable to Buyer, and
all schedules and exhibits shall be including any updated schedules and
exhibits.
(f) No Material Adverse Change. There shall not have occurred since
the date of this Agreement (i) any material and adverse change in the business,
properties, results or operations or business condition of the Seller, Assets or
Clinic, or (ii) any material loss or damage to any of the Assets (whether owned
or leased), whether or not covered by insurance.
(g) Consulting Agreement. Buyer and Johnstone shall have entered into
a Consulting Agreement in the form attached hereto and incorporated herein as
Exhibit 12.6(g).
(h) Employment of Seller's Physicians by Medical Group. Prior to the
Closing, Buyer, in consultation with its Medical Group, shall determine which of
Seller's physicians will be retained, and those physicians shall have entered
into satisfactory contractual arrangements with Medical Group to provide
professional services after the Closing at the Clinic or other clinics of Buyer.
(i) No Action to Prevent Completion. No action or proceeding shall
have been instituted or be imminently threatened before any court or
governmental agency on or prior to the Closing Date to restrain or prohibit, or
to obtain damages in respect of, this Agreement or the consummation of the
transactions contemplated hereby, which in the reasonably exercised opinion of
Buyer makes it inadvisable to consummate such transactions.
(j) Consents. Seller, as appropriate, shall have received from third
parties with whom it has contractual or other relations, consents, agreements or
estoppel certificates reasonably satisfactory to Buyer, appropriate or necessary
to permit Buyer to carry out the transactions contemplated by this Agreement.
(k) No Representation Regarding Continued Use of Clinic. Buyer
understands and acknowledges that neither Seller nor Owners make any
representation or warranty regarding the continued use of the Clinic after the
Closing Date by any former patient or client of the Seller. However, Seller and
Owners acknowledge that they are restricted from soliciting patients and clients
under Section 10.6.
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13. Indemnification and Claims.
13.1 Indemnification by Seller and Owners. Seller and Owners jointly and
severally agree to defend and indemnify Buyer and hold Buyer harmless from and
against any and all losses, liabilities, damages, costs (including, without
limitation, court costs) and expenses (including, without limitation, reasonable
attorneys' fees) that Buyer incurs as a result of, or with respect to:
(a) Any and all debts, obligations or liabilities of Seller arising or
accruing prior to the Closing Date;
(b) Any inaccuracy in or breach of any representation, warranty,
covenant or agreement of Seller and/or Owners contained in this Agreement; and
(c) Any claim, cause of action, liability or obligation (actual or
alleged) of any nature whatsoever of Seller and/or Owners arising out of or
relating to any act or omission of Seller and/or Owners, or any of their agents,
independent contractors, employees, or officers, occurring prior to the Closing
Date, including, without limitation, any claim or cause of action arising out of
or relating to compliance with any bulk transfer notice requirements or any act
of medical malpractice occurring prior to the Closing Date.
13.2 Indemnification by Buyer. Buyer shall defend and indemnify Seller
Owners and hold Seller and Owners harmless from and against any and all losses,
liabilities, damages, costs (including, without limitation, court costs) and
expenses (including, without limitation, reasonable attorneys' fees) that Seller
and Owners incur as result of, or with respect to:
(a) Any and all debts, obligations or liabilities of Buyer arising or
accruing prior in connection with the Clinic after the Closing Date;
(b) Any inaccuracy in or breach of any representation, warranty,
covenant or agreement of Buyer contained in this Agreement; and
(c) Any claim, cause of action, liability or obligation (actual or
alleged), relating to the Clinic, arising out of or relating to any act or
omission of Buyer, or any of its agents, independent contractors, employees, or
officers, occurring after the Closing Date.
13.3 Prompt Notice of Claims. If Buyer seeks indemnification hereunder (the
"Indemnitee"), it will give the other party or parties hereto (the "Indemnitor")
notice of any such claim promptly after the Indemnitee receives notice thereof,
and the Indemnitor shall have the right to undertake the defense, compromise or
settlement of such claim thereof at its sole cost and expense by representatives
of its own choosing.
13.4 Right to Undertake Defense. If the Indemnitor shall elect not to
undertake such defense by its own representatives, or if within a reasonable
time after receipt of notice of any
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such claim, the Indemnitor fails to defend, the Indemnitee shall (upon further
notice to the Indemnitor) have the right to undertake the defense, compromise or
settlement of such claim on behalf of and for the account and risk of the
Indemnitor, by counsel or other representatives reasonably designated by the
Indemnitee subject to the right of the Indemnitor to assume the defense of such
claim at any time prior to settlement, compromise or final determination
thereof.
13.5 Joint Liability for Claim. If any such claim shall arise out of a
transaction or cover any period or periods wherein Seller (and/or Owners), on
the one hand, and Buyer, on the other hand, shall each be liable hereunder for
part of the liability or obligation arising therefrom, then the parties shall,
each choosing its own counsel and bearing its own expense, defend such claim,
and no settlement or compromise of such claim may be made without the joint
consent or approval of Seller and Buyer, except where the respective liabilities
and obligations of Seller and Buyer are clearly allocable or attributable on the
basis of objective facts.
14. Miscellaneous.
14.1 Binding Effect. Subject to the provisions of Section 14.4 of this
Agreement, this Agreement shall inure to the benefit of and shall be binding
upon Seller, Owners, Buyer, and their respective heirs, executors,
administrators, successors and permitted assigns.
14.2 Governing Law. This Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed and governed by and in accordance
with, the laws of the State of California.
14.3 Headings and Construction. The section and subsection headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. No provision in this
Agreement is to be interpreted for or against either party because that party or
its legal representative drafted such provision.
14.4 Gender and Number. As used in this Agreement, the masculine, feminine
or neuter gender, and the singular or plural number, shall each include the
others whenever the context so indicates.
14.5 Joint and Several Liability. The liabilities of Seller, Johnstone and
Cohen under this Agreement shall be joint and several.
14.6 Notices. All communications provided for hereunder shall be in writing
and shall be deemed to be given when delivered in person, if personally served
on the person to whom it is directed, or on the third (3rd) day after deposited
in the United States mail, first class, registered or certified, return receipt
requested, with proper postage prepaid, and
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If to Seller or Owners: Theodore Johnstone, M.D.
2983 West Canterbury Court
Fresno, CA 93711
with copy to: Robert A. Mallek, Jr.
Dietrich, Glasrud & Jones
5250 N. Palm Avenue, Suite 402
Fresno, CA 93704
and
Paul Cohen, M.D.
249 Ocean Boulevard, Suite 604
Long Beach, CA 90802
with a copy to: Allan V. Africk
1501 Avenue of the Stars, Suite 940
Los Angeles, CA 90067
If to Buyer: Helian Health Group of Fresno, Inc.
9600 Blue Larkspur
Monterey, CA 93940
Attn: CEO and General Counsel
14.7 Public Announcements. Neither Seller nor Owners shall make any
announcement regarding the transactions contemplated by this Agreement without
the prior written consent of Buyer. Seller and Owners agree to keep the terms of
this Agreement confidential, except as disclosure may be required by law and
except for Seller's and Owners' professional advisors.
14.8 Attorneys' Fees. If any legal action is brought for the violation or
the breach of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' and paralegals' fees and other costs
in connection therewith, including any attorneys' and paralegals' fees and other
costs incurred after a judgment has been rendered by a court of competent
jurisdiction. (Any judgment shall include an attorneys' fees clause which shall
entitle the judgment creditor to recover attorneys' and paralegals' fees and
costs incurred to enforce a judgment hereon, which attorneys' and paralegals'
fees and costs shall be an element of post-judgment costs; the parties agree
that this attorneys' fee provision shall not merge into any judgment.) The
parties acknowledge that each was represented by counsel in the negotiations and
execution of this Agreement.
14.9 Survival of Representations. All the representations, warranties,
covenants and agreements contained in this Agreement shall survive the Closing
Date for a period of four (4) years.
19
<PAGE>
14.10 Waiver. No performance or execution of this Agreement in whole or in
part by any party hereto, no course of dealing between or among the parties
hereto, or any delay or failure on the part of any party in exercising any
rights hereunder or at law or in equity, and no investigation by any party
hereto shall operate as a waiver of any rights of such party, except to the
extent expressly waived in writing by such party.
14.11 Expenses. Each of the parties hereto shall bear its own expenses in
connection with the preparation and execution of this Agreement and in
connection with the transactions contemplated hereby.
14.12 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
14.13 Severability. Each and every provision of this Agreement is severable
and the invalidity of one or more of such provisions shall not, in any way,
affect the validity of this Agreement or any other provision hereof.
14.14 Cumulative Rights and Remedies. Any right, power or remedy provided
under this Agreement to any party hereto shall be cumulative and in addition to
any other right, power or remedy provided under this Agreement or existing in
law or in equity (including, without limitation, the remedies of injunctive
relief and specific performance).
14.15 Entire Agreement. This Agreement (including all Schedules and
Exhibits attached hereto) is intended by the parties hereto to be the final
expression of their agreement and is the complete and exclusive statement of the
terms thereof notwithstanding any representation or statement to the contrary
heretofore made. This Agreement may be modified only by a written instrument
signed by each of the parties hereto.
14.16 Further Assurances. The parties shall at their own cost and expense
execute and deliver such further documents and instruments and shall take such
other actions as may be reasonably required or appropriate to evidence or carry
out the intent and purposes of this Agreement.
14.17 Assignment. This Agreement may not be assigned by any party without
the written consent of all other parties.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
HELIAN HEALTH GROUP OF FRESNO, INC.,
a California Corporation
BY: ----------------------------- ATTEST: -----------------------------
WILLIAM A. HINES ANDREW W. MILLER,
Chief Operating Officer Vice President
INDUSTRIAL MEDICAL GROUP,
a California General Partnership
BY: PRIMARY CARE MEDICAL GROUP,
INC., Its General Partner
BY: ------------------------------------
THEODORE JOHNSTONE, M.D., President
BY: PAUL COHEN FAMILY TRUST,
Its General Partner
BY: -------------------------------------
PAUL COHEN, M.D., Sole Trustee
- -------------------------------------- --------------------------------
THEODORE JOHNSTONE, M.D., PAUL COHEN, M.D.,
An Individual An Individual
- --------------------------------------
KATHRYN R. JOHNSTONE, R.N.,
An Individual
21
<PAGE>
SCHEDULE 4.1
ALLOCATION OF PURCHASE PRICE
The Purchase Price for the Assets shall be allocated as follows:
Class I Cash $0.00
Class II Securities $0.00
Class III Tangible Assets
Accounts Receivable $0.00
Leasehold Interest + Leasehold
Improvements + Furniture,
Fixtures and Equipment $100,000.00
Inventory/Supplies
Patient Charts and Records
Covenant Not to Compete $35,000.00
Class IV Goodwill $665,000.00
TOTAL $ 800,000.00
Exhibit 10.85
THOMAS D. WILSON RESIGNATION TERM SHEET
o Resignation as officer, employee and director, effective April 9, 1995.
o Lump-sum severance payment of $800,000, less payroll taxes, payable by
check on or before April 14, 1995. Helian will allow, if possible,
contributions at Mr. Wilson's discretion from the $800,000 into the
Helian 401k and cafeteria plans.
o Thomas D. Wilson will use reasonable and good faith efforts to refer
sufficient business to Helian to generate at least $50,000 of pre-tax
income during the next 12 months. He will also assist with the transition
of operational responsibilities to Helian managers in a reasonable and
good faith manner.
o Helian continues Mr. Wilson's health insurance in its current form until
April 8, 1998. Mr. Wilson will pay to Helian the standard employee
contribution for family and dependent coverage under the health insurance
plans if he elects such family and dependent coverage.
o No later than Friday, April 14, 1995, Mr. Wilson and Helian shall use
their best efforts to prepare and execute a formal resignation and
settlement agreement approved by both parties embodying the terms of this
Term Sheet and such other terms as are not inconsistent herewith.
Notwithstanding their best efforts to prepare and execute a formal
agreement, both parties intend for this Term Sheet to be a binding and
enforceable agreement between them.
o Mr. Wilson waives all other rights to all benefits/payments under his
employment contract; his employment contract is terminated; and each of
Mr. Wilson and Helian hereafter have no obligation to the other under his
employment contract.
o Mr. Wilson and Helian agree to mutual general releases of all claims
against the other (including employees, officers, directors and
investors), except that Mr. Wilson shall not be released from any claims
relating to misappropriation or misapplication of Helian funds to or for
the benefit of Mr. Wilson. Helian's officers and directors do not have,
as of the date hereof, any information or knowledge that Mr. Wilson has
misappropriated or misapplied Helian funds.
o If either party is required to initiate legal action to enforce this Term
Sheet, the prevailing party shall be entitled to reasonable attorneys'
fees. This Term Sheet
<PAGE>
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. Signed copies of this Term Sheet transmitted
by facsimile shall be deemed originals until the parties exchange
original executed copies.
o Mr. Wilson acknowledges that he has consulted with counsel regarding the
review and execution of this Term Sheet.
AGREED TO:
HELIAN HEALTH GROUP, INC.
/s/ BY:/s/
- ------------------------------- ----------------------------------
THOMAS D. WILSON MICHAEL K. McMILLAN,
General Counsel
Dated: April 9, 1995 Dated: April 9, 1995
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<PERIOD-START> MAR-01-1995
<PERIOD-END> MAY-31-1995
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<SECURITIES> 2,609,695
<RECEIVABLES> 5,751,456
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