<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
October 6, 1997
---------------------------------------------------
Date of Report (Date of earliest event reported)
Renal Treatment Centers, Inc.
-------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 1-14142 23-2518331
- ---------------------------------------------- ------- ----------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification
Number)
1180 W. Swedesford Road, Building 2, Suite 300, Berwyn, PA 19312
- ---------------------------------------------------------- --------
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: 610/644-4796
------------
<PAGE>
ITEM 2. Acquisition or Disposition of Assets
- ---------------------------------------------
On October 6, 1997, Renal Treatment Centers, Inc. (the "Company") entered into
definitive agreements to acquire substantially all of the non-current and
certain other assets of California Kidney Centers ("CKC"), California Kidney
Centers, Orange, L.L.C. ("CKC Orange"), Dialysis Systems, L.L.C. ("DS"),
California Kidney Centers, Inpatient Services, L.L.C. ("CKCIS") and Dialysis
Systems, Inpatient Services, L.L.C. ("DSIS"),which together operate twelve
Medicare-certified end-stage renal disease dialysis facilities (collectively
"the Facilities") and provide acute inpatient dialysis services to 29 hospitals
in the service areas of the outpatient dialysis centers. CKC, CKC Orange, DS,
CKCIS and DSIS are hereinafter referred to collectively as the "Sellers". CKC
operates nine facilities located in southern California. CKC Orange operates a
single facility also located in southern California, which commenced operations
in August 1997. DS operates two facilities located in Las Vegas, Nevada. The
Company will acquire all of Sellers' inventory, equipment, patient lists,
goodwill and other non-current assets used in the operation of the Facilities
and provision of acute services.
The foregoing transactions are expected to be completed in November 1997,
subject to receipt of required regulatory approvals, including those required
under the Hart-Scott-Rodino Antitrust Improvements Act and the approval of the
Attorney General of the State of California, and certain other contingencies.
As part of the transactions, the Company will also enter into covenants not to
compete with Sellers and their respective owners. In addition, the Company will
enter into medical director agreements with, or receive assignments of current
medical director agreements from, the current medical directors of the
facilities.
The Company will pay aggregate consideration of $116,800,000 in cash, plus the
assumption of certain liabilities. The Company determined the consideration
based on negotiations with Sellers and the Company's determination of the fair
market value of the assets of Sellers as a going concern, which recognized the
recent growth in Sellers' business and the Company's expectations of future
growth in the business.
The cash consideration will be funded entirely through borrowings under the
Company's revolving credit agreement with a consortium of banks.
ITEM 7. Financial Statements and Exhibits.
- -------------------------------------------
(a) Financial Statements of Businesses Acquired.
The following lists the historical financial statements of California Kidney
Centers, California Kidney Centers, Orange, L.L.C., Dialysis Systems, L.L.C.,
California Kidney Centers, Inpatient Services, L.L.C. and Dialysis Systems,
Inpatient Services, L.L.C., presented on a combined basis.
Report of Independent Accountants
Combined Balance Sheets
at December 31, 1996 and 1995 and June 30, 1997 (unaudited) and
1996 (unaudited)
Combined Statements of Operations
for the years ended December 31, 1996 and 1995 and for the
six months ended June 30, 1997 (unaudited) and 1996 (unaudited)
Combined Statements of Changes in Owners' Equity
for the years ended December 31, 1996 and 1995 and for the
six months ended June 30, 1997 (unaudited) and 1996 (unaudited)
Combined Statements of Cash Flows
for the years ended December 31, 1996 and 1995 and for the
six months ended June 30, 1997 (unaudited) and 1996 (unaudited)
Notes to Financial Statements
<PAGE>
(b) Pro Forma Financial Information.
The following lists the pro forma financial information filed herewith:
Pro forma Consolidated Balance Sheets as of June 30, 1997
Pro forma Consolidated Statements of Operations for the
year ended December 31, 1996 and the six months
ended June 30, 1997
Notes to Pro Forma Consolidated Financial Statements
(c) Exhibits.
The following exhibits are filed herewith:
Exhibit No. Document
----------- --------
2.1 Asset Purchase Agreement, dated as of October 6, 1997,
between Renal Treatment Centers - California, Inc. and
California Kidney Centers (the exhibits and schedules to
this agreement have been omitted pursuant to Item 601(b)(2)
of Regulation S-K and will be provided supplementally to the
Commission upon its request).
2.2 Asset Purchase Agreement, dated as of October 6, 1997,
between Renal Treatment Centers - California, Inc. and
California Kidney Centers, Orange, L.L.C. (the exhibits and
schedules to this agreement have been omitted pursuant to
Item 601(b)(2) of Regulation S-K and will be provided
supplementally to the Commission upon its request).
2.3 Asset Purchase Agreement, dated as of October 6, 1997,
between Renal Treatment Centers - California, Inc. and
California Kidney Centers, Inpatient Services, L.L.C. (the
exhibits and schedules to this agreement have been omitted
pursuant to Item 601(b)(2) of Regulation S-K and will be
provided supplementally to the Commission upon its request).
2.4 Asset Purchase Agreement, dated as of October 6, 1997,
between Renal Treatment Centers - West, Inc. and Dialysis
Systems, L.L.C. (the exhibits and schedules to this
agreement have been omitted pursuant to Item 601(b)(2) of
Regulation S-K and will be provided supplementally to the
Commission upon its request).
2.5 Asset Purchase Agreement, dated as of October 6, 1997,
between Renal Treatment Centers - West, Inc. and Dialysis
Systems, Inpatient Services, L.L.C. (the exhibits and
schedules to this agreement have been omitted pursuant to
Item 601(b)(2) of Regulation S-K and will be provided
supplementally to the Commission upon its request).
23.1 Consent of Frank, Rimerman & Co. LLP
99.1 Press Release dated October 7, 1997
<PAGE>
SIGNATURES
- ----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RENAL TREATMENT CENTERS, INC.
Date: October 14, 1997 By: /s/Ronald H. Rodgers, Jr.
---------------------- -------------------------
Ronald H. Rodgers, Jr.
CFO and Vice President - Finance
<PAGE>
FRANK, RIMERMAN + CO. LLP
CERTIFIED PUBLIC ACCOUNTANTS
Satellite Dialysis Centers, Inc.
Redwood City, California
INDEPENDENT AUDITORS' REPORT
----------------------------
We have audited the accompanying combined balance sheets of Satellite Affiliated
Companies (Note 1) as of December 31, 1996 and 1995, and the related combined
statements of income, changes in owners' equity, and cash flows for the years
then ended. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Satellite Affiliated
Companies as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
/s/ Frank, Rimerman & Co. LLP
September 24, 1997
2882 SAND HILL ROAD MENLO PARK, CA 94025 415.854.3344 FAX 415.854.2234
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINED BALANCE SHEETS
-----------------------
December 31, 1996 and 1995
--------------------------
(in thousands)
<TABLE>
<CAPTION>
ASSETS(Note 7)
------
1996 1995
-------- --------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,138 $ 2,896
Accounts receivable, less allowance for
doubtful accounts of $2,111 in 1996 and
$1,200 in 1995 9,996 10,829
Medical supplies inventory 661 801
Prepaid expenses 146 106
------- -------
Total current assets 12,941 14,632
INVESTMENT IN AFFILIATE 150 --
PROPERTY AND EQUIPMENT, net (Note 4) 4,732 5,844
INTANGIBLE ASSETS, net (Notes 2, 5, and 9) 12,022 14,588
------- -------
$29,845 $35,064
======= =======
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 996 $ 1,303
Accrued expenses (Note 3) 854 699
Refundable service fees (Note 6) 1,983 1,983
Current maturities of long-term debt (Note 7) 965 1,038
------- -------
Total current liabilities 4,798 5,023
LONG-TERM DEBT, less current maturities (Note 7) 4,258 5,222
COMMITMENTS AND CONTINGENCIES (Notes 6 and 8) -- --
OWNERS' EQUITY 20,789 24,819
------- -------
$29,845 $35,064
======= =======
</TABLE>
See Notes to Combined Financial Statement
- 2 -
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINED STATEMENTS OF INCOME
-----------------------------
Years Ended December 31, 1996 and 1995
--------------------------------------
(in thousands)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
DIALYSIS AND ANCILLARY SERVICES REVENUE, net $ 44,470 $ 38,537
-------- --------
PATIENT CARE COSTS
Medical supplies and pharmaceuticals 14,825 11,867
Dialysis unit staff costs 10,810 10,833
-------- --------
Total patient care costs 25,635 22,700
-------- --------
PATIENT CARE MARGIN 18,835 15,837
-------- --------
OPERATING EXPENSES
Dialysis unit operations 1,039 889
General and administrative (Note 3) 5,234 4,506
Depreciation and amortization 2,163 2,208
Impairment loss (Note 9) 1,688 --
-------- --------
Total operating expenses 10,124 7,603
-------- --------
Income from operations 8,711 8,234
OTHER INCOME (EXPENSE)
Investment income 123 80
Other income 111 1,245
Interest expense (470) (488)
-------- --------
Net income $ 8,475 $ 9,071
======== ========
</TABLE>
See Notes to Combined Financial Statement
- 3 -
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINED STATEMENTS OF CHANGES IN OWNERS' EQUITY
------------------------------------------------
Years Ended December 31, 1996 and 1995
--------------------------------------
(in thousands)
<TABLE>
<S> <C>
BALANCE, December 31, 1994 $ 22,551
Capital contributed 19
Net income 9,071
Cash distributions (6,843)
Reduction in equity related note receivable 21
--------
BALANCE, December 31, 1995 24,819
Net income 8,475
Cash distributions (12,543)
Reduction in equity related note receivable 38
--------
BALANCE, December 31, 1996 $ 20,789
========
</TABLE>
See Notes to Combined Financial Statement
- 4 -
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINED STATEMENTS OF CASH FLOWS
---------------------------------
Years Ended December 31, 1996 and 1995
--------------------------------------
(in thousands)
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 8,475 $ 9,071
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization expense 2,163 2,208
Provision for doubtful accounts 911 285
Provision for impairment loss 1,688
Loss on sale of equipment -- 3
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable (78) (2,371)
Decrease (increase) in medical supplies inventory 140 (155)
(Increase) decrease in prepaid expenses (40) 31
(Decrease) increase in accounts payable (307) 343
Increase (decrease) in accrued expenses 155 (63)
Increase in refundable service fees -- 1,315
-------- --------
Net cash provided by operating activities 13,107 10,667
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of equipment -- 4
Acquisition of property and equipment (149) (509)
Acquisition of investment in affiliate (150) --
Proceeds from members' notes receivable 38 21
Acquisition of dialysis units -- (5,400)
-------- --------
Net cash used in investing activities (261) (5,884)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to equity holders (12,543) (6,843)
Payments on long-term debt (1,061) (2,294)
Proceeds from long-term debt -- 5,369
-------- --------
Net cash used in financing activities (13,604) (3,768)
-------- --------
Net (decrease) increase in cash and cash equivalents
(balance carried forward) (758) 1,015
</TABLE>
(Continued)
- 5 -
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINED STATEMENTS OF CASH FLOWS
---------------------------------
Years Ended December 31, 1996 and 1995
--------------------------------------
(in thousands)
(Continued)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Net (decrease) increase in cash and cash equivalents
(balance brought forward) (758) 1,015
CASH AND CASH EQUIVALENTS, beginning 2,896 1,881
------- -------
CASH AND CASH EQUIVALENTS, ending $ 2,138 $ 2,896
======= =======
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Equipment acquired in connection with capital
lease obligations $ 24 $ 39
======= =======
Net book value of assets distributed to equity holders $ -- $ 376
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest $ 470 $ 488
======= =======
</TABLE>
See Notes to Combined Financial Statement
- 6 -
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
1. Basis of Presentation, Nature of Business, and Significant
----------------------------------------------------------
Accounting Policies
-------------------
Basis of Presentation
The combined financial statements of Satellite Affiliated Companies
(Companies) includes the operations of the following entities, all of
which are direct or indirect investees (Affiliates) of Satellite
Dialysis Centers, Inc. (SDC), a California not-for-profit
corporation:
California Kidney Centers (a California Joint Venture) (CKC)
California Kidney Centers Inpatient Services, LLC (CKCIS) California
Kidney Centers, Orange, LLC (CKC Orange) Dialysis Systems, LLC
(DSLLC) Dialysis Systems Inpatient Services, LLC (DSIS)
Subsequent to December 31, 1996, the Board of Directors of SDC
determined that SDC's charitable purpose would best be served if
certain assets of the Affiliates were sold. After this determination
and under the direction of SDC, efforts were initiated to identify
potential buyers and to actively market the identified assets. These
combined financial statements have been prepared to assist SDC in
this activity. The assets expected to be sold are stated at
historical cost, which is less than their expected market value.
Nature of Business
The Companies provide outpatient hemodialysis treatment, continuous
ambulatory peritoneal dialysis, home dialysis treatment support
services, and inpatient dialysis services to hospitals. Although the
Companies' patients are individuals, accounts receivable for services
provided are collected primarily from government agencies,
predominantly Medicare. Additional amounts are collected from private
insurance companies and individual patients.
The Companies' operations are conducted in Southern California and
Nevada.
Significant Accounting Policies
Principles of Combination:
The combined financial statements have been prepared in accordance
with generally accepted accounting principles and include the
accounts of the entities listed above. All significant intercompany
accounts and transactions have been eliminated.
-7-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
1. Basis of Presentation, Nature of Business, and Significant Accounting
---------------------------------------------------------------------
Policies (continued)
--------
Revenue Recognition:
Dialysis and ancillary service revenues include amounts for services
reimbursable by Medicare, Medicaid, MediCal, and other third party
payors under contracted reimbursement formulas. Revenues are
recognized when services are provided. Revenues are reported at the
amounts expected to be realized from governmental, third-party
payors, and patients based on reimbursement contracts in force when
the services are provided.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from
those estimates.
Concentration of Credit Risk:
Financial instruments which potentially subject the Companies to
concentrations of credit risk, consist principally of cash and cash
equivalents and accounts receivable. The Companies invest their
excess cash in a single bank. Deposits with this bank are insured up
to $100,000 per depositor by an agency of the Federal government.
Accounts receivable, which are unsecured, are primarily due from
agencies of the United States Government (62%), the State of
California (8%) and private insurance companies and hospitals (30%).
Receivables from individual patients are not significant. Before
providing services, the Companies perform insurance verification on
all patients to ascertain adequacy of insurance coverage from
government and private sources. An allowance for doubtful accounts is
provided based on management's estimate of amounts which may prove
uncollectible from private insurers or patients.
Income Taxes:
The combining entities are considered partnerships for Federal and
state income tax purposes. Accordingly, the equity owners account for
their pro rata share of the combining entities' income, deductions,
and credits in their separate tax returns. As a result, income tax
expense, assets, and liabilities are not recognized in the combined
financial statements of the Companies.
-8-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
1. Basis of Presentation, Nature of Business, and Significant Accounting
---------------------------------------------------------------------
Policies (continued)
--------
Medical Supplies Inventory:
Medical supplies inventory is stated at the lower of cost, first-in,
first-out method, or market.
Property and Equipment:
Property and equipment is stated at cost. Depreciation is provided
using the straight line method over estimated useful lives of five to
ten years.
Amortization of leasehold improvements is provided using the
straight-line method over the lesser of the lease term or the useful
life of the improvement, generally ten years.
Intangible Assets:
Intangible assets are stated at cost. Amortization is provided using
the straight-line method over the following estimated useful lives:
Years
---------
Intangible assets, including patient lists 4 - 15
Goodwill 15 - 31
Organization costs 10
Cash and Cash Equivalents:
The Companies consider all highly-liquid debt instruments purchased
with an original maturity of three months or less to be cash
equivalents.
2. Acquisition of Dialysis Units
-----------------------------
In 1995, substantially all the assets of an operating dialysis
facility located in San Bernardino, California were acquired for
$5,400,000. The purchase price was allocated based on the estimated
fair value of the assets at the date of acquisition as follows:
$958,000 to property and equipment; $25,000 to inventory; $700,000 to
covenant not to compete; and $3,717,000 to goodwill.
-9-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
3. Related Party Transactions
--------------------------
Management fees of $1,738,000 in 1996 and $1,607,000 in 1995 and
directors' fees of $587,000 in 1996 and $572,000 in 1995 paid to SDC
are included in general and administrative expenses. Included in
accrued expenses are management fees due to SDC of $104,000 at
December 31, 1996 and $242,000 at December 31, 1995.
4. Property and Equipment
----------------------
Property and equipment consist of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Leasehold improvements $2,973 $3,266
Medical equipment 3,424 3,344
Office equipment 330 307
Furniture and fixtures 650 643
Computer equipment 38 22
Vehicles 46 22
------ ------
7,461 7,604
Less accumulated depreciation and
amortization 2,729 1,760
------ ------
$4,732 $5,844
====== ======
</TABLE>
Depreciation and amortization expense related to property and
equipment was $1,043,000 in 1996 and $949,000 in 1995.
-10-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
5. Intangible Assets
-----------------
Intangible assets consist of the following at December 31 (in
thousands):
1996 1995
------- -------
Intangible assets, including patient lists $ 5,386 $ 5,386
Goodwill 8,753 10,478
Organization costs 85 85
------- -------
14,224 15,949
Less accumulated amortization 2,202 1,361
------- -------
$12,022 $14,588
======= =======
Amortization expense related to intangible assets was $1,120,000 in
1996 and $1,259,000 in 1995.
6. Refundable Service Fees
-----------------------
In August, 1993, the provisions of the Omnibus Budget Reconciliation
Act of 1993 (OBRA 93) became effective. In April, 1995, the Health
Care Financing Administration (HCFA) changed its interpretation of
the OBRA 93 provisions regarding whether Medicare is the primary
payor for certain End Stage Renal Disorder patients who are eligible
for Medicare and also covered by an employer group health insurance
plan. Because HCFA's reinterpretation was made retroactive to August,
1993, the Companies began billing Medicare for amounts previously
billed to private third-party payors under the old guidelines. Before
any amounts were refunded to the private payors, a preliminary
injunction was issued by a Federal court preventing HCFA from
retroactively applying its reinterpretation of OBRA 93. The Companies
have accrued a liability for amounts which it expects to refund to
payors upon the settlement of this issue. The actual amount of the
refunds may change depending on the court's action and any subsequent
HCFA guidance.
-11-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
7. Long-term Debt
--------------
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
(in thousands) (in thousands)
-------------- --------------
<S> <C> <C>
Note payable to a bank, due in monthly installments of $22,000 plus
interest at the bank's prime rate (8.25%), balance due October, 1999,
secured by substantially all assets of CKC and guaranteed by equity
holders $ 759 $1,049
Note payable to a bank due in monthly installments of $39,000 plus
interest at the bank's prime rate (8.25%), balance due May, 2005,
secured by substantially all assets of
CKC and guaranteed by equity holders 3,914 4,379
Note payable to a bank, due in monthly installments of $12,000 plus
interest at the bank's prime rate (8.25%), balance due March, 2000,
secured by accounts receivable and
guaranteed by equity holders 455 595
Note payable to a finance company, due in monthly installments of
$9,000 plus interest at 9.25%. Balance due September, 1997
Secured by medical equipment 73 174
Other 22 63
------ ------
5,223 6,260
Less current maturities 965 1,038
------ ------
$4,258 $5,222
====== ======
</TABLE>
-12-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
7. Long-term Debt (continued)
--------------
Future minimum payments on long-term debt are as follows:
(in thousands)
1997 $ 965
1998 877
1999 828
2000 501
2001 465
Thereafter 1,587
------------
$ 5,223
============
In addition to its long-term debt, the Companies have two revolving
credit agreements with a bank that provide for borrowings up to a
total of $800,000 for general working capital purposes. Borrowings
under one agreement (up to $500,000) are unsecured and accrue
interest at the bank's prime rate. Borrowings under the second
agreement are secured by receivables, inventory, property and
equipment of DSLLC and accrue interest at the bank's prime rate. The
Companies had no outstanding borrowings against these lines at
December 31, 1996 or 1995. These credit facilities expired in 1997
and have not been renewed.
8. Lease Commitments
-----------------
The Companies lease their dialysis facilities under noncancellable
operating lease agreements which expire between 1999 and 2010. The
leases require the Companies to pay insurance and property taxes on
improvements. Rent expense under such agreements was approximately
$1,165,000 in 1996 and $1,114,000 in 1995.
The following is a schedule of the future minimum lease payments
under all operating leases as of December 31, 1996 (in thousands):
1997 $ 1,347
1998 1,200
1999 1,137
2000 877
2001 726
Thereafter 3,883
$ 9,170
============
-13-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
9. Impairment Loss
---------------
In 1996, a decision was made to close a dialysis facility located in
Anaheim, California in the first quarter of 1997. The Anaheim
facility had been acquired in 1994 and, based on the original
purchase price allocation, had unamortized goodwill of $1,448,000
associated with it at June 30, 1996. In accordance with Statement of
Financial Accounting Standards No. 121, Accounting for Impairment of
Long-Live Assets and for Long-Lived Assets to be Disposed Of, the
Company wrote off this goodwill at June 30, 1996. The Company also
recorded an impairment loss of $240,000, related to the net book
value of leasehold improvements which will be abandoned at the
Anaheim facility.
-14-
<PAGE>
FRANK, RIMERMAN + CO. LLP
CERTIFIED PUBLIC ACCOUNTANTS
Satellite Dialysis Centers, Inc.
Redwood City, California
INDEPENDENT AUDITORS' REPORT
----------------------------
ON SUPPLEMENTAL INFORMATION
---------------------------
Our report on our audits of the combined financial statements of Satellite
Affiliated Companies for the years ended December 31, 1996 and 1995 appears on
page one. Those audits were made for the purpose of forming an opinion on the
combined financial statements taken as a whole. The information in Schedules
I-IV is presented for purposes of additional analysis of the combined financial
statements rather than to present the financial position, results of operations,
and cash flows of the individual companies. Such information has been subjected
to the auditing procedures applied in the audits of the combined financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the combined financial statements taken as a whole.
/s/ Frank Rimerman & Co. LLP
September 24, 1997
2882 SAND HILL ROAD MENLO PARK, CA 94025 415.854.3344 FAX 415.854.2234
<PAGE>
Schedule I
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINING BALANCE SHEETS
------------------------
December 31, 1996
-----------------
<TABLE>
<CAPTION>
CKC Combined
CKC DS, LLC CKC-IS DS-IS Orange Eliminations (6 entities)
--- ------- ------- ----- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
------
Cash and cash equivalents $ 1,457,000 $ 314,000 $ 209,000 $ 158,000 $ - $ 2,138,000
Accounts receivable, less allowance for
doubtful accounts 7,111,000 2,537,000 241,000 306,000 (199,000) 9,996,000
Medical supplies inventory 402,000 259,000 - - 661,000
Deposits and prepaid expenses 107,000 39,000 - - 146,000
------------- ------------ ---------- ---------- --------- --------------
Total current assets 9,077,000 3,149,000 450,000 464,000 - 12,941,000
Investment in affiliate 150,000 - - - 150,000
Property and equipment, net 2,892,000 1,840,000 - - 4,732,000
Intangible assets 7,738,000 3,935,000 139,000 210,000 12,022,000
------------- ------------ ---------- ---------- --------- --------------
$ 19,857,000 $ 8,924,000 $ 589,000 $ 674,000 $ - $ 29,845,000
============= ============ ========== ========== ========= ==============
LIABILITIES AND OWNERS' EQUITY
------------------------------
Accounts payable $ 836,000 $ 224,000 $ 77,000 $ 58,000 $ - $ (199,000) $ 996,000
Accrued expenses 632,000 222,000 - - 854,000
Refundable service fees 1,723,000 260,000 - - 1,983,000
Current maturities of long-term debt 752,000 213,000 - - 965,000
------------- ------------ ---------- ---------- --------- --------------
Total current liabilities 3,943,000 919,000 77,000 58,000 - 4,798,000
Long-term debt, less current maturities 3,943,000 315,000 - - 4,258,000
Commitments and contingencies - - - - -
Joint ventures' equity/Members equity 11,971,000 7,690,000 512,000 616,000 20,789,000
------------- ------------ ---------- ---------- --------- --------------
$ 19,857,000 $ 8,924,000 $ 589,000 $ 674,000 $ - $ 29,845,000
============= ============ ========== ========== ========= ==============
</TABLE>
-16-
<PAGE>
Schedule II
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINING BALANCE SHEETS
------------------------
December 31, 1995
-----------------
<TABLE>
<CAPTION>
CKC Combined
CKC DS, LLC CKC-IS DS-IS Orange Eliminations (6 entities)
--- ------- ------- ----- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
------
Cash and cash equivalents $ 2,359,000 $ 332,000 $ 184,000 $ 21,000 $ - $ 2,896,000
Accounts receivable, less allowance for
doubtful accounts 7,501,000 2,966,000 324,000 494,000 (456,000) 10,829,000
Medical supplies inventory 505,000 296,000 - - 801,000
Deposits and prepaid expenses 57,000 49,000 - - 106,000
------------- ------------- ------------ ----------- ---------- -------------
Total current assets 10,422,000 3,643,000 508,000 515,000 - 14,632,000
Investment in affiliate - - - - -
Property and equipment, net 3,768,000 2,076,000 - - 5,844,000
Intangible assets 9,988,000 4,225,000 149,000 226,000 14,588,000
------------- ------------ ------------ ----------- ---------- -------------
$ 24,178,000 $ 9,944,000 $ 657,000 $ 741,000 $ - $ 35,064,000
============= ============ ============ =========== ========== =============
LIABILITIES AND OWNERS' EQUITY
------------------------------
Accounts payable $ 1,070,000 $ 269,000 $ 239,000 $ 181,000 $ - $ (456,000) $ 1,303,000
Accrued expenses 449,000 250,000 - - 699,000
Refundable service fees 1,723,000 260,000 - - 1,983,000
Current maturities of long-term debt 773,000 265,000 - - 1,038,000
------------- ------------- ------------ ----------- ---------- -------------
Total current liabilities 4,015,000 1,044,000 239,000 181,000 - 5,023,000
Long-term debt, less current maturities 4,694,000 528,000 - - 5,222,000
Commitments and contingencies - - - - -
Joint ventures' equity/Members equity 15,469,000 8,372,000 418,000 560,000 24,819,000
------------- ------------- ------------ ----------- ---------- -------------
$ 24,178,000 $ 9,944,000 $ 657,000 $ 741,000 $ - $ 35,064,000
============= ============= ============ =========== ========== =============
</TABLE>
-17-
<PAGE>
Schedule III
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINING STATEMENTS OF INCOME
------------------------------
December 31, 1996
-----------------
<TABLE>
<CAPTION>
CKC Combined
CKC DS, LLC CKC-IS DS-IS Orange Eliminations (6 entities)
--- ------- ------- ----- ------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dialysis and ancillary services revenue,
net $ 30,876,000 $ 11,096,000 $ 1,348,000 $ 1,173,000 $ - $ (23,000) $ 44,470,000
------------- -------------- ------------ ------------ ------- --------------
Patient Care Costs
- ------------------
Medical supplies and pharmaceuticals 9,788,000 3,498,000 859,000 703,000 - (23,000) 14,825,000
Dialysis unit staff costs 7,945,000 2,865,000 - - - 10,810,000
------------- -------------- ------------ ------------ ------- ---------------
Total patient care costs 17,733,000 6,363,000 859,000 703,000 - 25,635,000
------------- -------------- ------------ ------------ ------- ---------------
Patient Care Margin 13,143,000 4,733,000 489,000 470,000 - 18,835,000
------------- -------------- ------------ ------------ ------- ---------------
Operating Expenses
- ------------------
Dialysis unit operations 728,000 309,000 2,000 - - 1,039,000
General and administrative 3,206,000 2,021,000 3,000 4,000 - 5,234,000
Depreciation and amortization 1,531,000 605,000 11,000 16,000 - 2,163,000
Impairment loss 1,688,000 - - - - 1,688,000
------------- -------------- ------------ ------------ ------- ---------------
Total operating expenses 7,153,000 2,935,000 16,000 20,000 - 10,124,000
------------- -------------- ------------ ------------ ------- ---------------
Income from operations 5,990,000 1,798,000 473,000 450,000 - 8,711,000
OTHER INCOME (EXPENSE)
- ---------------------
Investment income 83,000 20,000 10,000 10,000 - 123,000
Other income 97,000 14,000 - - - 111,000
Interest expense (418,000) (52,000) - - - (470,000)
------------- -------------- ------------ ------------ ------- ---------------
Net income $ 5,752,000 $ 1,780,000 $ 483,000 $ 460,000 $ - $ 8,475,000
============= ============== ============ ============ ======= ===============
</TABLE>
-18-
<PAGE>
Schedule IV
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINING STATEMENTS OF INCOME
------------------------------
December 31, 1995
-----------------
<TABLE>
<CAPTION>
CKC Combined
CKC DS, LLC CKC-IS DS-IS Orange Eliminations (6 entities)
--- ------- ------- ----- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dialysis and ancillary services
revenue, net $ 26,366,000 $ 10,224,000 $ 1,238,000 $ 722,000 $ - $ (13,000) $ 38,537,000
------------ -------------- ------------ ----------- ------------ ---------------
Patient Care Costs
- ------------------
Medical supplies and
pharmaceuticals
Dialysis unit staff costs 7,852,000 2,868,000 771,000 389,000 - (13,000) 11,867,000
Total patient care costs 7,918,000 2,915,000 - - - 10,833,000
------------ -------------- ------------ ----------- ------------ ---------------
15,770,000 5,783,000 771,000 389,000 - 22,700,000
------------ -------------- ------------ ----------- ------------ ---------------
Patient Care Margin
10,596,000 4,441,000 467,000 333,000 - 15,837,000
------------ -------------- ------------ ----------- ------------ ---------------
Operating Expenses
- ------------------
Dialysis unit operations 624,000 265,000 - - - 889,000
General and administrative 2,638,000 1,868,000 - - - 4,506,000
Depreciation and amortization 1,591,000 597,000 11,000 9,000 - 2,208,000
Impairment loss - - - - - -
------------ -------------- ------------ ----------- ------------ ---------------
Total operating expenses 4,853,000 2,730,000 11,000 9,000 - 7,603,000
------------ -------------- ------------ ----------- ------------ ---------------
Income from operations 5,743,000 1,711,000 456,000 324,000 - 8,234,000
OTHER INCOME (EXPENSE)
- ---------------------
Investment income 54,000 23,000 2,000 1,000 - 80,000
Other income 848,000 397,000 - - - 1,245,000
Interest expense (364,000) (124,000) - - - (488,000)
------------ -------------- ------------ ----------- ------------ ---------------
Net income $ 6,281,000 $ 2,007,000 $ 458,000 $ 325,000 $ - $ 9,071,000
============ ============== ============ =========== ============ ===============
</TABLE>
-19-
<PAGE>
FRANK, RIMERMAN + CO. LLP
CERTIFIED PUBLIC ACCOUNTANTS
Satellite Dialysis Centers, Inc.
Redwood City, California
ACCOUNTANTS' COMPILATION REPORT
-------------------------------
We have compiled the accompanying combined balance sheets of Satellite
Affiliated Companies (Note 1) as of June 30, 1997 and 1996, and the related
combined statements of income, changes in owners' equity, and cash flows for the
six month periods then ended, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
/s/ Frank, Rimerman & Co. L.L.P.
September 24, 1997
2882 SAND HILL ROAD MENLO PARK, CA 94025 415.854.3344 FAX 415.854.2234
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINED BALANCE SHEETS
-----------------------
June 30, 1997 and 1996
----------------------
(in thousands)
<TABLE>
<CAPTION>
ASSETS(Note 6)
------
1997 1996
------- -------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,663 $ 2,744
Accounts receivable, less allowance for doubtful accounts
of $2,621 in 1997 and $1,668 in 1996 11,816 8,595
Medical supplies inventory 797 877
Prepaid expenses 56 101
------- -------
Total current assets 15,332 12,317
INVESTMENT IN AFFILIATE 150 --
PROPERTY AND EQUIPMENT, net (Note 3) 5,248 5,146
INTANGIBLE ASSETS, net (Notes 4 and 8) 11,503 12,588
------- -------
$32,233 $30,051
======= =======
<CAPTION>
LIABILITIES AND OWNERS' EQUITY
------------------------------
CURRENT LIABILITIES
Accounts payable $ 3,065 $ 1,114
Accrued expenses (Note 2) 733 782
Refundable service fees (Note 5) 2,306 1,114
Current maturities of long-term debt (Note 6) 942 990
------- -------
Total current liabilities 7,046 4,000
LONG-TERM DEBT, less current maturities (Note 6) 3,819 4,741
COMMITMENTS AND CONTINGENCIES (Notes 5 and 7) -- --
OWNER'S EQUITY 21,368 21,310
------- -------
$32,233 $30,051
======= =======
</TABLE>
See Accountants' Compilation Report and
Notes to Combined Financial Statement
- 2 -
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINED STATEMENTS OF INCOME
-----------------------------
Six Months Ended June 30, 1997 and 1996
---------------------------------------
(in thousands)
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
DIALYSIS AND ANCILLARY SERVICES REVENUE, net $ 23,210 $ 21,604
-------- --------
PATIENT CARE COSTS
Medical supplies and pharmaceuticals 8,231 7,206
Dialysis unit staff costs 3,661 3,239
-------- --------
Total patient care costs 11,892 10,445
-------- --------
PATIENT CARE MARGIN 11,318 11,159
-------- --------
OPERATING EXPENSES
Dialysis unit operations 3,677 3,336
General and administrative (Note 2) 1,713 1,460
Depreciation and amortization 1,003 1,082
Impairment loss (Note 8) -- 1,688
-------- --------
Total operating expenses 6,393 7,566
-------- --------
Income from operations 4,925 3,593
OTHER INCOME (EXPENSE)
Investment income 50 65
Other expense (6) (6)
Interest expense (201) (243)
-------- --------
Net income $ 4,768 $ 3,409
======== ========
</TABLE>
See Accountants' Compilation Report and
Notes to Combined Financial Statement
- 3 -
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINED STATEMENTS OF CHANGES IN OWNER'S EQUITY
------------------------------------------------
Six Months Ended June 30, 1997 and 1996
---------------------------------------
(in thousands)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
BALANCE, beginning of period $ 20,789 $ 24,819
Net income 4,768 3,409
Cash distributions (4,289) (6,939)
Capital contributed 100 --
Proceeds from equity-related notes receivable -- 21
-------- --------
BALANCE, end of period $ 21,368 $ 21,310
======== ========
</TABLE>
See Accountants' Compilation Report and
Notes to Combined Financial Statement
-4-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINED STATEMENTS OF CASH FLOWS
---------------------------------
Six Months Ended June 30, 1997 and 1996
---------------------------------------
(in thousands)
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,768 $ 3,409
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization expense 1,003 1,082
Provision for doubtful accounts 511 468
Provision for impairment loss -- 1,688
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable (2,331) 1,766
(Increase) in medical supplies inventory (136) (76)
Decrease in prepaid expenses 90 5
Increase (decrease) in accounts payable 2,069 (189)
(Decrease) increase in accrued expenses (121) 83
Increase (decrease) in refundable service fees 323 (869)
------- -------
Net cash provided by operating activities 6,176 7,367
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of property and equipment (1,000) (48)
Proceeds from notes receivable from equity holders -- 21
------- -------
Net cash used in investing activities (1,000) (27)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash distributions to equity holders (4,289) (6,939)
Capital contributions 100 --
Payments on long-term debt (462) (553)
------- -------
Net cash used in financing activities (4,651) (7,492)
------- -------
Net increase (decrease) in cash and cash equivalents
(balance carried forward) 525 (152)
</TABLE>
(Continued)
-5-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINED STATEMENTS OF CASH FLOWS
---------------------------------
Six Months Ended June 30, 1997 and 1996
---------------------------------------
(in thousands)
(Continued)
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Net increase (decrease) in cash and cash equivalents
(balance brought forward) 525 (152)
CASH AND CASH EQUIVALENTS, beginning 2,138 2,896
------ -------
CASH AND CASH EQUIVALENTS, ending $2,663 $ 2,744
====== =======
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING
AND FINANCING ACTIVITIES
Equipment acquired in connection with capital
lease obligations $ -- $ 24
====== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest $ 201 $ 243
====== =======
</TABLE>
See Accountants' Compilation Report and
Notes to Combined Financial Statement
-6-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
1. Basis of Presentation, Nature of Business, and Significant Accounting
---------------------------------------------------------------------
Policies
--------
Basis of Presentation
The combined financial statements of Satellite Affiliated Companies
(Companies) includes the operations of the following entities, all of
which are direct or indirect investees (Affiliates) of Satellite
Dialysis Centers, Inc. (SDC), a California not-for-profit corporation:
California Kidney Centers (a California Joint Venture) (CKC)
California Kidney Centers Inpatient Services, LLC (CKCIS)
California Kidney Centers, Orange, LLC (CKC Orange) Dialysis
Systems, LLC (DSLLC) Dialysis Systems Inpatient Services, LLC
(DSIS)
During 1997, the Board of Directors of SDC determined that SDC's
charitable purpose would best be served if certain assets of the
Affiliates were sold. After this determination and under the direction
of SDC, efforts were initiated to identify potential buyers and to
actively market the identified assets. These combined financial
statements have been prepared to assist SDC in this activity. The
assets expected to be sold are stated at historical cost, which is less
than their expected market value.
Nature of Business
The Companies provide outpatient hemodialysis treatment, continuous
ambulatory peritoneal dialysis, home dialysis treatment support
services, and inpatient dialysis services to hospitals. Although the
Companies' patients are individuals, accounts receivable for services
provided are collected primarily from government agencies,
predominantly Medicare. Additional amounts are collected from private
insurance companies and individual patients.
The Companies' operations are conducted in Southern California and
Nevada.
Significant Accounting Policies
Principles of Combination:
The combined financial statements have been prepared in accordance with
generally accepted accounting principles and include the accounts of
the entities listed above. All significant intercompany accounts and
transactions have been eliminated.
See Accountants' Compilation Report
-7-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
1. Basis of Presentation, Nature of Business, and Significant Accounting
---------------------------------------------------------------------
Policies (continued)
--------
Revenue Recognition:
Dialysis and ancillary service revenues include amounts for services
reimbursable by Medicare, Medicaid, MediCal, and other third party
payors under contracted reimbursement formulas. Revenues are recognized
when services are provided. Revenues are reported at the amount
expected to be realized from governmental, third-party payors, and
patients based on reimbursement contracts in force when the services
are provided.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimates.
Concentration of Credit Risk:
Financial instruments which potentially subject the Companies to
concentrations of credit risk, consist principally of cash and cash
equivalents and accounts receivable. The Companies invest their excess
cash in a single bank. Deposits with this bank are insured up to
$100,000 per depositor by an agency of the Federal government. Accounts
receivable, which are unsecured, are primarily due from agencies of the
United States Government (65%), the State of California (9%) and
private insurance companies and hospitals (26%). Receivables from
individual patients are not significant. Before providing services, the
Companies perform insurance verification on all patients to ascertain
adequacy of insurance coverage from government and private sources. An
allowance for doubtful accounts is provided based on management's
estimate of amounts which may prove uncollectible from private insurers
or patients.
Income Taxes:
The combining entities are considered partnerships for Federal and
state income tax purposes. Accordingly, the equity owners account for
their pro rata share of the combining entities' income, deductions, and
credits in their separate tax returns. As a result, income tax expense,
assets, and liabilities are not recognized in the combined financial
statements of the Companies.
See Accountants' Compilation Report
-8-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
1. Basis of Presentation, Nature of Business, and Significant Accounting
---------------------------------------------------------------------
Policies (continued)
--------
Medical Supplies Inventory:
Medical supplies inventory is stated at the lower of cost, first-in,
first-out method, or market.
Property and Equipment:
Property and equipment is stated at cost. Depreciation is provided
using the straight-line method over estimated useful lives of five to
ten years.
Amortization of leasehold improvements is provided using the
straight-line method over the lesser of the lease term or the useful
life of the improvement, generally ten years.
Intangible Assets:
Intangible assets are stated at cost. Amortization is provided using
the straight-line method over the following estimated useful lives:
Years
------
Intangible assets, including patient lists 4 - 15
Goodwill 15 - 31
Organization costs 10
Cash and Cash Equivalents:
The Companies consider all highly-liquid debt instruments purchased
with an original maturity of three months or less to be cash
equivalents.
See Accountants' Compilation Report
-9-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
2. Related Party Transactions
--------------------------
Management fees and directors' fees of $920,000 for the six months
ended June 30, 1997 and $861,000 for the six months ended June 30, 1996
paid to SDC are included in general and administrative expenses.
Included in accrued expenses are management fees due to SDC of $170,000
at June 30, 1997 and $206,000 at June 30, 1996.
3. Property and Equipment
----------------------
Property and equipment consist of the following at June 30 (in
thousands):
1997 1996
------- ------
Leasehold improvements $3,375 $2,965
Medical equipment 3,939 3,369
Office equipment 367 315
Furniture and fixtures 686 652
Computer equipment 58 35
Vehicles 46 22
------ ------
8,471 7,358
Less accumulated depreciation and
amortization 3,223 2,212
------ ------
$5,248 $5,146
====== ======
Depreciation and amortization expense related to property and equipment
was $490,000 for the six months ended June 30, 1997 and $518,000 for
the six months ended June 30, 1996.
See Accountants' Compilation Report
-10-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
4. Intangible Assets
-----------------
Intangible assets consist of the following at June 30 (in thousands):
1997 1996
------- -------
Intangible assets, including patient lists $ 7,073 $ 7,003
Goodwill 8,753 8,734
Organization costs 95 85
------- -------
15,921 15,822
Less accumulated amortization 4,418 3,234
------- -------
$11,503 $12,588
======= =======
Amortization expense related to intangible assets was $513,000 for the
six months ended June 30, 1997 and $564,000 for the six months ended
June 30, 1996.
5. Refundable Service Fees
-----------------------
In August, 1993, the provisions of the Omnibus Budget Reconciliation
Act of 1993 (OBRA 93) became effective. In April, 1995, the Health Care
Financing Administration (HCFA) changed its interpretation of the OBRA
93 provisions regarding whether Medicare is the primary payor for
certain End Stage Renal Disorder patients who are eligible for Medicare
and also covered by an employer group health insurance plan. Because
HCFA's reinterpretation was made retroactive to August, 1993, the
Companies began billing Medicare for amounts previously billed to
private third-party payors under the old guidelines. Before any amounts
were refunded to the private payors, a preliminary injunction was
issued by a Federal court preventing HCFA from retroactively applying
its reinterpretation of OBRA 93. The Companies have accrued a liability
for amounts which it expects to refund to payors upon the settlement of
this issue. The actual amount of the refunds may change depending on
the court's action and any subsequent HCFA guidance.
See Accountants' Compilation Report
-11-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
6. Long-term Debt
--------------
Long-term debt consists of the following at June 30:
<TABLE>
<CAPTION>
1997 1996
(in thousands) (in thousands)
----------------- ---------------
<S> <C> <C>
Note payable to a bank, due in monthly installments of $22,000 plus
interest at the bank's prime rate (8.50%), balance due October, 1999,
secured by substantially all assets of CKC and guaranteed by equity
holders. $ 623 $ 915
Note payable to a bank, due in monthly installments of $39,000 plus
interest at the bank's prime rate (8.50%), balance due May, 2005,
secured by substantially all assets of CKC and guaranteed by equity
holders. 3,683 4,146
Note payable to a bank, due in monthly installments of $12,000 plus
interest at the bank's prime rate (8.50%). Balance due March, 2000.
Secured by accounts receivable and guaranteed by equity holders. 385 525
Note payable to a finance company due in monthly installments of
$9,000, plus interest at 9.25%. Balance due September, 1997. Secured by 29 135
medical equipment.
41 10
Other 4,761 5,731
942 990
Less current maturities ------------------ ------------------
$ 3,819 $ 4,741
================== ==================
</TABLE>
See Accountants' Compilation Report
-12-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
6. Long-term Debt (continued)
--------------
Future minimum payments on long-term debt are as follows:
Twelve months ending June 30:
(in thousands)
--------------
1998 $ 942
1999 950
2000 590
2001 468
2002 468
Thereafter 1,343
--------------
$ 4,761
==============
In addition to its long-term debt, the Companies have two revolving
credit agreements with a bank that provides for borrowings up to a
total of $800,000 for general working capital purposes. Borrowings
under one agreement (up to $500,000) are unsecured and accrue interest
at the bank's prime rate. Borrowings under the second agreement are
secured by receivables, inventory, property and equipment of DSLLC and
accrue interest at the bank's prime rate. The Companies had no
outstanding borrowings against these lines at June 30, 1997 or 1996.
Subsequent to June 30, 1997, these credit facilities expired and were
not renewed.
See Accountants' Compilation Report
-13-
<PAGE>
SATELLITE AFFILIATED COMPANIES
------------------------------
NOTES TO COMBINED FINANCIAL STATEMENTS
--------------------------------------
7. Lease Commitments
-----------------
The Companies lease their dialysis facilities under noncancellable
operating lease agreements which expire between 1999 and 2010. The
leases require the Companies to pay insurance and property taxes on
improvements. Rent expense under such agreements was approximately
$652,000 for the six months ended June 30, 1997 and $604,000 for the
six months ended June 30, 1996.
The following is a schedule of the future minimum lease payments under
all operating leases as of June 30, 1997 (in thousands):
Twelve months ending June 30:
1998 $ 1,367
1999 1,255
2000 1,121
2001 893
2002 722
Thereafter 3,560
$ 8,918
=============
8. Impairment Loss
---------------
In 1996, a decision was made to close a dialysis facility in Anaheim,
California in the first quarter of 1997. The Anaheim facility had been
acquired in 1994 and, based on the original purchase price allocation,
had unamortized goodwill of $1,448,000 associated with it at June 30,
1996. In accordance with Statement of Financial Accounting Standards
No. 121, Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, the Company wrote off this
goodwill at June 30, 1996. The Company also recorded an impairment loss
of $240,000, related to the net book value of leasehold improvements
which will be abandoned at the Anaheim facility.
See Accountants' Compilation Report
-14-
<PAGE>
FRANK, RIMERMAN + CO. LLP
CERTIFIED PUBLIC ACCOUNTANTS
Satellite Dialysis Centers, Inc.
Redwood City, California
ACCOUNTANTS' COMPILATION REPORT
-------------------------------
ON SUPPLEMENTAL INFORMATION
---------------------------
Our report on our compilation of the combined financial statements of Satellite
Affiliated Companies for the six month periods ended June 30, 1997 and 1996
appears on page one. The information in Schedules I-IV is the representation of
management. We have not audited or reviewed the accompanying supplemental
schedules and, accordingly, do not express an opinion or any other form of
assurance on them.
/s/ Frank Rimerman + Co. LLP
September 24, 1997
2882 SAND HILL ROAD MENLO PARK, CA 94025 415.854.3344 FAX 415.854.2234
<PAGE>
Schedule I
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINING BALANCE SHEETS
------------------------
June 30, 1997
-------------
<TABLE>
<CAPTION>
CKC Combined
CKC DS, LLC CKC-IS DS-IS Orange Eliminations (6 entities)
--- ------- ------- ----- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
------
Cash and cash equivalents $ 2,017,000 $ 376,000 $ 128,000 $ 89,000 $ 53,000 $ 2,663,000
Accounts receivable, less allowance
for doubtful accounts 8,392,000 3,035,000 341,000 366,000 - (318,000) 11,816,000
Medical supplies inventory 489,000 308,000 - - - 797,000
Deposits and prepaid expenses 43,000 6,000 - - 7,000 56,000
------------- ------------ ----------- ------------ ----------- -------------
Total current assets 10,941,000 3,725,000 469,000 455,000 60,000 15,332,000
Investment in affiliate 426,000 - - - - (276,000) 150,000
Property and equipment, net 2,991,000 1,894,000 - - 363,000 5,248,000
Intangible assets 7,380,000 3,777,000 133,000 203,000 10,000 11,503,000
------------- ------------ ----------- ------------ ----------- -------------
$ 21,738,000 $ 9,396,000 $ 602,000 $ 658,000 $ 433,000 $ 32,233,000
============= ============ =========== ============ =========== =============
LIABILITIES AND OWNERS' EQUITY
------------------------------
Accounts payable $ 2,286,000 $ 746,000 $ 167,000 $ 151,000 $ 33,000 $ (318,000) $ 3,065,000
Accrued expenses 509,000 224,000 - - - 733,000
Refundable service fees 2,004,000 302,000 - - - 2,306,000
Current maturities of long-term debt 773,000 169,000 - - - 942,000
------------- ------------ ----------- ------------ ----------- -------------
Total current liabilities 5,572,000 1,441,000 167,000 151,000 33,000 7,046,000
Long-term debt, less current maturities 3,574,000 245,000 - - - 3,819,000
Commitments and contingencies - - - - - -
Joint ventures' equity/Members equity 12,592,000 7,710,000 435,000 507,000 400,000 (276,000) 21,368,000
------------- ------------ ----------- ------------ ----------- -------------
$ 21,738,000 $ 9,396,000 $ 602,000 $ 658,000 $ 433,000 $ 32,233,000
============= ============ =========== ============ =========== =============
</TABLE>
-16-
<PAGE>
Schedule II
SATELLITE AFFILIATED COMPANIES
------------------------------
COMBINING BALANCE SHEETS
------------------------
June 30, 1996
-------------
<TABLE>
<CAPTION>
CKC Combined
CKC DS, LLC CKC-IS DS-IS Orange Eliminations (6 entities)
--- ------- ------- ----- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
------
Cash and cash equivalents $ 1,986,000 $ 259,000 $ 221,000 $ 278,000 $ - $ 2,744,000
Accounts receivable, less allowance
for doubtful accounts 5,645,000 2,651,000 227,000 383,000 - (311,000) 8,595,000
Medical supplies inventory 486,000 391,000 - - - 877,000
Deposits and prepaid expenses 59,000 42,000 - - - 101,000
------------- ------------ ----------- ----------- ----------- -------------
Total current assets 8,176,000 3,343,000 448,000 661,000 - 12,317,000
Property and equipment, net 3,207,000 1,939,000 - - - 5,146,000
Intangible assets 8,149,000 4,077,000 144,000 218,000 - 12,588,000
------------- ------------ ----------- ----------- ----------- -------------
$ 19,532,000 $ 9,359,000 $ 592,000 $ 879,000 $ - $ 30,051,000
============= ============ =========== =========== =========== =============
LIABILITIES AND OWNERS' EQUITY
------------------------------
Accounts payable $ 714,000 $ 430,000 $ 106,000 $ 175,000 $ - $ (311,000) $ 1,114,000
Accrued expenses 571,000 211,000 - - - 782,000
Refundable service fees 854,000 260,000 - - - 1,114,000
Current maturities of long-term debt 742,000 248,000 - - - 990,000
------------- ------------ ----------- ----------- ----------- -------------
Total current liabilities 2,881,000 1,149,000 106,000 175,000 - 4,000,000
Long-term debt, less current maturities 4,329,000 412,000 - - - 4,741,000
Commitments and contingencies - - - - - -
Joint ventures' equity/Members equity 12,322,000 7,798,000 486,000 704,000 - 21,310,000
------------- ------------ ----------- ----------- ----------- -------------
$ 19,532,000 $ 9,359,000 $ 592,000 $ 879,000 $ - $ 30,051,000
============= ============ =========== =========== =========== =============
</TABLE>
-17-
<PAGE>
Schedule III
SATELLITE AFFILIATED COMPANIES
COMBINING STATEMENTS OF INCOME
June 30, 1997
<TABLE>
<CAPTION>
CKC Combined
CKC DS, LLC CKC-IS DS-IS Orange Eliminations (6 entities)
--- ------- ------- ----- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dialysis and ancillary services
revenue, net $ 15,982,000 $ 5,780,000 $ 753,000 $ 709,000 $ - $ (14,000) $ 23,210,000
------------- -------------------------- ----------- ------------ ---------------
Patient Care Costs
Medical supplies and
pharmaceuticals 5,317,000 1,980,000 487,000 461,000 (14,000) 8,231,000
Dialysis unit staff costs 2,663,000 998,000 - - 3,661,000
------------- -------------------------- ----------- ------------ ---------------
Total patient care costs 7,980,000 2,978,000 487,000 461,000 - 11,892,000
------------- -------------------------- ----------- ------------ ---------------
Patient Care Margin 8,002,000 2,802,000 266,000 248,000 - 11,318,000
------------- -------------------------- ----------- ------------ ---------------
Operating Expenses
Dialysis unit operations 2,492,000 1,184,000 1,000 - 3,677,000
General and administrative 1,042,000 666,000 2,000 3,000 1,713,000
Depreciation and amortization 670,000 320,000 5,000 8,000 1,003,000
Impairment loss - - - - -
------------- -------------------------- ----------- ------------ ---------------
Total operating expenses 4,204,000 2,170,000 8,000 11,000 - 6,393,000
------------- -------------------------- ----------- ------------ ---------------
Income from operations 3,798,000 632,000 258,000 237,000 - 4,925,000
OTHER INCOME (EXPENSE)
Investment income 33,000 8,000 5,000 4,000 50,000
Other income (24,000) (6,000) - - 24,000 (6,000)
Interest expense (183,000) (18,000) - - (201,000)
------------- -------------------------- ----------- ------------ ---------------
Net income $ 3,624,000 $ 616,000 $ 263,000 $ 241,000 $ - $ 4,768,000
============= ========================== =========== ============ ===============
</TABLE>
-18-
<PAGE>
Schedule IV
SATELLITE AFFILIATED COMPANIES
COMBINING STATEMENTS OF INCOME
June 30, 1996
<TABLE>
<CAPTION>
CKC Combined
CKC DS, LLC KC-IS DS-IS Orange Eliminations (6 entities)
--- ------- ------ ----- ------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Dialysis and ancillary services
revenue, net $ 15,094,000 $ 5,214,000 $ 651,000 $ 657,000 $ - $ (12,000) $ 21,604,000
------------- ------------- ----------- ------------ ------------ ---------------
Patient Care Costs
Medical supplies and
pharmaceuticals 4,769,000 1,683,000 412,000 354,000 (12,000) 7,206,000
Dialysis unit staff costs 2,519,000 720,000 - - 3,239,000
------------- ------------- ----------- ------------ ------------ ---------------
Total patient care costs 7,288,000 2,403,000 412,000 354,000 - 10,445,000
------------- ------------- ----------- ------------ ------------ ---------------
Patient Care Margin 7,806,000 2,811,000 239,000 303,000 - 11,159,000
------------- ------------- ----------- ------------ ------------ ---------------
Operating Expenses
Dialysis unit operations 2,252,000 1,082,000 2,000 - 3,336,000
General and administrative 892,000 568,000 - - 1,460,000
Depreciation and amortization 768,000 301,000 5,000 8,000 1,082,000
Impairment loss 1,688,000 - - - 1,688,000
------------- ------------- ----------- ------------ ------------ ---------------
Total operating expenses 5,600,000 1,951,000 7,000 8,000 - 7,566,000
------------- ------------- ----------- ------------ ------------ ---------------
Income from operations 2,206,000 860,000 232,000 295,000 - 3,593,000
OTHER INCOME (EXPENSE)
Investment income 44,000 12,000 5,000 4,000 65,000
Other income (1,000) (5,000) - - (6,000)
Interest expense (214,000) (29,000) - - (243,000)
------------- ------------- ----------- ------------ ------------ ---------------
Net income $ 2,035,000 $ 838,000 $ 237,000 $ 299,000 $ - $ 3,409,000
============= ============= =========== ============ ============ ===============
</TABLE>
-19-
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
June 30, 1997
<TABLE>
<CAPTION>
Renal Treatment Pro forma
Centers, Inc. Sellers adjustments (1) Pro forma
(unaudited) (unaudited) (unaudited) (unaudited)
-------------- ------------- --------------- --------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash $ 9,129,138 $ 2,663,000 $ (2,663,000) $ 9,129,138
Accounts receivable, net 94,948,837 11,816,000 (11,816,000) 94,948,837
Inventories 5,064,238 797,000 5,861,238
Deferred taxes 765,145 765,145
Prepaid expenses and other current assets 6,943,144 56,000 6,999,144
-------------- ------------- --------------- --------------
Total current assets 116,850,502 15,332,000 (14,479,000) 117,703,502
Property and equipment, net 51,891,707 5,248,000 57,139,707
Intangibles, net 187,097,297 11,503,000 99,196,000 297,796,297
Deferred taxes, non-current 2,807,064 2,807,064
-------------- ------------- --------------- --------------
Total assets $ 358,646,570 $ 32,083,000 $ 84,717,000 $ 475,446,570
============== ============= =============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,313,808 $ 942,000 $ (942,000) $ 1,313,808
Accounts payable 10,848,340 3,065,000 (3,065,000) 10,848,340
Accrued compensation 4,464,111 4,464,111
Accrued expenses 5,956,394 3,039,000 (3,039,000) 5,956,394
Accrued income taxes 1,280,317 1,280,317
Accrued interest 3,430,002 3,430,002
-------------- ------------- --------------- --------------
Total current liabilities 27,292,972 7,046,000 (7,046,000) 27,292,972
Long term debt 175,629,792 3,819,000 112,981,000 (2) 292,429,792
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized, none issued
Common stock, $.01 par value, 45,000,000 shares
authorized; 25,025,739 shares issued and
outstanding 250,257 250,257
Additional paid-in capital 94,094,774 94,094,774
Retained earnings 61,766,453 21,368,000 (21,368,000) 61,766,453
-------------- ------------- --------------- --------------
Less treasury stock, 36,598 shares at cost (387,678) (387,678)
-------------- ------------- --------------- --------------
Total liabilities and stockholders' equity $ 358,646,570 $ 32,233,000 $ 84,567,000 $ 475,446,570
============== ============= =============== ==============
</TABLE>
<PAGE>
RENAL TREATMENT CENTERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
For the year ended December 31, 1996 and the six months ended June 30, 1997
<TABLE>
<CAPTION>
For the year ended December 31, 1996
Historical
----------
Renal
Treatment Pro forma
Centers, Inc. Sellers(A) adjustments Pro forma
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net patient revenue $ 235,396,566 $ 45,442,000 (B) $ 280,838,566
Patient care costs 114,803,209 25,635,000 140,438,209
------------- ------------ ------------ ------------
Operating profit 120,593,357 19,807,000 140,400,357
General and administrative expense 58,471,984 7,690,000 (B) (1,738,000)(C) 64,423,984
Provision for doubtful accounts 6,621,122 1,243,000 (B) 7,864,122
Depreciation and amortization expense 17,076,827 2,163,000 5,566,754 (D) 24,806,581
Merger expenses 2,808,247 2,808,247
------------- ------------ ------------ ------------
Income from operations 35,615,177 8,711,000 (3,828,754) 40,497,423
------------- ------------ ------------ ------------
Interest expense, net 4,384,043 236,000 7,356,000 (E) 11,976,043
------------- ------------ ------------ ------------
Income before income taxes 31,231,134 8,475,000 (11,184,754) 28,521,380
Provision for income taxes 11,940,869 (1,002,609)(F) 10,938,260
------------- ------------ ------------ ------------
Net income $ 19,290,265 $8,475,000 $ (10,182,145) $ 17,583,120
============= ============ ============ ============
Pro forma net income per common
and common stock equivalent (G) $ 0.70
============
Pro forma weighted average common
shares used in computing earnings
per share 25,067,900
===========
<CAPTION>
For the year ended December 31, 1996
Historical
----------
Renal
Treatment Pro forma
Centers, Inc. Sellers(A) adjustments Pro forma
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net patient revenue $ 148,380,503 $ 23,210,000 $ 171,590,503
Patient care costs 70,998,558 11,892,000 82,890,558
------------- ------------ ------------- -------------
Operating profit 77,381,945 11,318,000 88,699,945
General and administrative expense 36,748,462 4,741,000 (B) (690,000)(C) 40,799,462
Provision for doubtful accounts 4,238,674 649,000 (B) 4,887,674
Depreciation and amortization expense 12,067,654 1,003,000 2,861,877 (D) 15,932,531
Merger expenses
------------- ------------ ------------- -------------
Income from operations 24,327,155 4,925,000 (2,171,877) 27,080,278
------------- ------------ ------------- -------------
Interest expense, net 3,978,874 157,000 3,639,000 (E) 7,774,874
------------- ------------ ------------- -------------
Income before income taxes 20,348,281 4,768,000 (5,810,877) 19,305,404
Provision for income taxes 7,582,832 (388,993)(F) 7,193,839
------------- ------------ ------------- -------------
Net income $ 12,765,449 $ 4,768,000 $ (5,421,884) $ 12,111,565
============= ============ ============= =============
Pro forma net income per common
and common stock equivalent (G) $ 0.48
=============
Pro forma weighted average common
shares used in computing earnings per share 25,490,834
=============
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
On October 6, 1997, Renal Treatment Centers, Inc. (the "Company") entered into
definitive agreements to acquire substantially all of the non-current and
certain other assets of California Kidney Centers ("CKC"), California Kidney
Centers, Orange, L.L.C. ("CKC Orange"), Dialysis Systems, L.L.C. ("DS"),
California Kidney Centers, Inpatient Services, L.L.C. ("CKCIS") and Dialysis
Systems, Inpatient Services, L.L.C. ("DSIS"),which together operate twelve
Medicare-certified end-stage renal disease dialysis facilities (collectively
"the Facilities") and provide acute inpatient dialysis services to 29 hospitals
in the service areas of the outpatient dialysis centers. CKC, CKC Orange, DS,
CKCIS and DSIS are hereinafter referred to collectively as the "Sellers". CKC
operates nine facilities located in southern California. CKC Orange operates a
single facility also located in southern California, which commenced operations
in August 1997. DS operates two facilities located in Las Vegas, Nevada. The
Company will acquire all of the Sellers' inventory, equipment, patient lists,
goodwill and other non-current assets used in the operation of the Facilities
and provision of acute services.
The foregoing transactions are expected to be completed in November 1997,
subject to receipt of required regulatory approvals, including those required
under the Hart-Scott-Rodino Antitrust Improvements Act and the approval of the
Attorney General of the State of California, and certain other contingencies.
As part of the transactions, the Company will also enter into covenants not to
compete with Sellers and their respective owners. In addition, the Company will
enter into medical director agreements with, or receive assignments of current
medical director agreements from, the current medical directors of the
facilities.
The Company will pay aggregate consideration of $116,800,000 in cash, plus the
assumption of certain liabilities. The Company determined the consideration
based on negotiations with Sellers and the Company's determination of the fair
market value of the assets of the Sellers as a going concern, which recognized
the recent growth in Seller' business and the Company's expectation of future
growth in the business.
The cash consideration will be funded entirely through borrowings under the
Company's revolving credit agreement with a consortium of banks.
Basis of Presentation
The unaudited pro forma financial statements are presented to illustrate (i) the
pro forma effects on the Company's balance sheet as of June 30, 1997 and (ii)
the pro forma effects on the Company's results of operations for the year ended
December 31, 1996 and for the six month period ended June 30, 1997 as if the
foregoing transaction had occurred on January 1, 1996. The unaudited pro forma
financial statements include adjustments resulting from the use of the purchase
method of accounting and are not necessarily indicative of what the combined
financial position or results of operations would have been had the transaction
occurred on January 1, 1996, nor are they necessarily indicative of future
results of the combined entities.
Certain pro forma adjustments are based on preliminary estimates of the fair
values of assets acquired and are thus subject to change.
Adjustments to Pro Forma Consolidated Balance Sheets
- ----------------------------------------------------
(1) Adjusts assets to fair market value and eliminates certain assets and
liabilities of Sellers not assumed by the Company in connection with the
acquisition.
(2) Reflects an increase in long-term debt to account for payment of the
purchase price.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Adjustments to Pro Forma Consolidated Statements of Operations
- --------------------------------------------------------------
(A) CKC Orange did not commence operations until August 1997, therefore no
amounts are included for CKC Orange.
(B) Reflects adjustments to properly classify bad debt expense.
(C) Reflects adjustment to eliminate management fees incurred by Sellers.
(D) Reflects depreciation and amortization expense resulting from the
revaluation required by the purchase method of accounting for fixed assets
and intangible assets of $4,516,514 and $2,258,257, respectively, offset by
Sellers' historical depreciation and amortization of $2,163,000 and
$1,003,000 for the year ended December 31, 1996 and for the six months
ended June 30, 1997, respectively. Also reflects additional amortization
over a 25-year period of the excess cost over net assets acquired of
$3,213,240 and $1,606,620 for the year ended December 31, 1996 and for the
six months ended June 30, 1997, respectively, as if Sellers were acquired
as of January 1, 1996.
(E) Reflects an adjustment to interest expense to account for long-term debt
incurred in connection with the acquisition, as well as the elimination of
interest expense on borrowings not assumed by the Company.
(F) Reflects the adjustments to income taxes which would have been provided on
pro forma income before taxes.
(G) Pro forma net income per common and common stock equivalents is computed by
dividing pro forma net income by the weighted average number of common and
common stock equivalents outstanding during the period.
<PAGE>
EXHIBIT INDEX
- -------------
Exhibit No. Document
- ----------- --------
2.1 Asset Purchase Agreement, dated as of October 6, 1997, between
Renal Treatment Centers - California, Inc. and California Kidney
Centers (the exhibits and schedules to this agreement have been
omitted pursuant to Item 601(b)(2) of Regulation S-K and will be
provided supplementally to the Commission upon its request).
2.2 Asset Purchase Agreement, dated as of October 6, 1997, between
Renal Treatment Centers - California, Inc. and California Kidney
Centers, Orange, L.L.C. (the exhibits and schedules to this
agreement have been omitted pursuant to Item 601(b)(2) of
Regulation S-K and will be provided supplementally to the
Commission upon its request).
2.3 Asset Purchase Agreement, dated as of October 6, 1997, between
Renal Treatment Centers - California, Inc. and California Kidney
Centers, Inpatient Services, L.L.C. (the exhibits and schedules
to this agreement have been omitted pursuant to Item 601(b)(2)
of Regulation S-K and will be provided supplementally to the
Commission upon its request).
2.4 Asset Purchase Agreement, dated as of October 6, 1997, between
Renal Treatment Centers - West, Inc. and Dialysis Systems,
L.L.C. (the exhibits and schedules to this agreement have been
omitted pursuant to Item 601(b)(2) of Regulation S-K and will be
provided supplementally to the Commission upon its request).
2.5 Asset Purchase Agreement, dated as of October 6, 1997, between
Renal Treatment Centers - West, Inc. and Dialysis Systems,
Inpatient Services, L.L.C. (the exhibits and schedules to this
agreement have been omitted pursuant to Item 601(b)(2) of
Regulation S-K and will be provided supplementally to the
Commission upon its request).
23.1 Consent of Frank, Rimerman & Co. LLP
99.1 Press Release dated October 7, 1997.
<PAGE>
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CALIFORNIA KIDNEY CENTERS
and
RENAL TREATMENT CENTERS - CALIFORNIA, INC.
DATED AS OF OCTOBER 6, 1997
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE 1. PURCHASE AND SALE OF ASSETS............................................................. 1
Section 1.1 Assets to be Transferred................................................................ 1
Section 1.2 Assumed Contracts....................................................................... 2
ARTICLE 2. ASSUMPTION OF LIABILITIES............................................................... 2
Section 2.1 Liabilities to be Assumed............................................................... 2
Section 2.2 Liabilities Not to be Assumed........................................................... 3
ARTICLE 3. PAYMENT OF PURCHASE PRICE; CLOSING ..................................................... 3
Section 3.1 Purchase Price.......................................................................... 3
Section 3.2 Payment of Purchase Price............................................................... 3
Section 3.3 Closing................................................................................. 3
Section 3.4 Items to be Delivered at the Closing by the Company..................................... 3
Section 3.5 Items to be Delivered at the Closing by the Purchaser................................... 4
Section 3.6 Prorations.............................................................................. 4
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................... 4
Section 4.1 Formation and Existence................................................................. 4
Section 4.2 Power and Authority..................................................................... 5
Section 4.3 Conflicts............................................................................... 5
Section 4.4 Financial Statements.................................................................... 5
Section 4.5 Title to and Condition of Assets........................................................ 5
Section 4.6 Subsidiaries and Partnerships........................................................... 6
Section 4.7 Contracts............................................................................... 6
Section 4.8 Proprietary Rights...................................................................... 6
Section 4.9 Sufficiency of Purchased Assets......................................................... 6
Section 4.10 Compliance With Laws................................................................... 6
Section 4.11 Litigation............................................................................. 7
Section 4.12 Labor Matters.......................................................................... 7
Section 4.13 Liabilities............................................................................ 7
Section 4.14 Environmental.......................................................................... 8
Section 4.15 Brokers' Fees.......................................................................... 8
Section 4.16 Required Filings and Consents.......................................................... 8
Section 4.17 Patients............................................................................... 8
Section 4.18 Physicians............................................................................. 8
Section 4.19 Medicare Certification; State Licensure................................................ 8
Section 4.20 Ownership.............................................................................. 9
Section 4.21 Insurance.............................................................................. 9
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER......................................... 9
Section 5.1 Corporate Existence..................................................................... 9
Section 5.2 Corporate Power and Authority........................................................... 9
Section 5.3 Conflicts............................................................................... 9
Section 5.4 Litigation.............................................................................. 10
Section 5.5 Brokers' Fees........................................................................... 10
i
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Section 5.6 Financing............................................................................... 10
Section 5.7 Compliance With Laws.................................................................... 10
ARTICLE 6. COVENANTS OF THE COMPANY AND THE PURCHASER.............................................. 10
Section 6.1 Company Covenants....................................................................... 10
Section 6.2 Purchaser Covenants..................................................................... 12
ARTICLE 7. CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE.......................................... 13
Section 7.1 Accuracy of Representations and Warranties.............................................. 13
Section 7.2 Performance............................................................................. 13
Section 7.3 Governmental Consents................................................................... 13
Section 7.4 Third Party Consents.................................................................... 13
Section 7.5 Additional Documents.................................................................... 14
Section 7.6 No Injunction........................................................................... 14
ARTICLE 8. CONDITIONS TO OBLIGATION OF THE COMPANY TO CLOSE........................................ 14
Section 8.1 Accuracy of Representations and Warranties.............................................. 14
Section 8.2 Performance............................................................................. 14
Section 8.3 No Injunction........................................................................... 14
Section 8.4 Equityholder Approval; Attorney General Consent......................................... 14
Section 8.5 Governmental Consents................................................................... 15
Section 8.6 Third Party Consents.................................................................... 15
Section 8.7 Additional Documents.................................................................... 15
ARTICLE 9. TERMINATION OF AGREEMENT................................................................ 15
Section 9.1 Right to Terminate Agreement............................................................ 15
Section 9.2 Effect of Termination................................................................... 15
ARTICLE 10. INDEMNIFICATION AND RELATED MATTERS..................................................... 16
Section 10.1 Indemnification by the Company......................................................... 16
Section 10.2 Indemnification by the Purchaser....................................................... 16
Section 10.3 Expiration of Representations, Warranties and Covenants................................ 16
Section 10.4 Deductible Amount...................................................................... 16
Section 10.5 Maximum Liability...................................................................... 17
Section 10.6 Knowledge of Breach.................................................................... 17
Section 10.7 No Implied Representations............................................................. 17
Section 10.8 Indemnification Claims................................................................. 17
Section 10.9 Defense of Third Party Actions......................................................... 18
Section 10.10 Subrogation........................................................................... 18
Section 10.11 Exclusivity........................................................................... 19
Section 10.12 Accounts Receivable................................................................... 19
Section 10.13 Tax Matters........................................................................... 19
Section 10.14 Tail Insurance........................................................................ 19
ARTICLE 11. MISCELLANEOUS PROVISIONS................................................................ 19
ii
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Section 11.1 Time of Essence........................................................................ 19
Section 11.2 Compliance with Laws................................................................... 19
Section 11.3 Publicity.............................................................................. 19
Section 11.4 Access of the Company to Books and Records............................................. 20
Section 11.5 Governing Law.......................................................................... 20
Section 11.6 Venue and Jurisdiction................................................................. 20
Section 11.7 Notices................................................................................ 20
Section 11.8 Table of Contents and Headings......................................................... 21
Section 11.9 Assignment............................................................................. 21
Section 11.10 Parties in Interest................................................................... 21
Section 11.11 Severability.......................................................................... 21
Section 11.12 Entire Agreement...................................................................... 21
Section 11.13 Expenses.............................................................................. 21
Section 11.14 Waiver................................................................................ 22
Section 11.15 Amendments............................................................................ 22
Section 11.16 Counterparts.......................................................................... 22
Section 11.17 Waiver of Bulk Transfer Laws.......................................................... 22
Section 11.18 Post-Signing Procedure................................................................ 22
Section 11.19 Interpretation of Agreement........................................................... 22
Section 11.20 Commercially Reasonable Efforts....................................................... 23
iii
</TABLE>
<PAGE>
EXHIBITS:
Exhibit A Defined Terms
Exhibit B Bill of Sale and Assignment
Exhibit C Noncompetition Agreement
Exhibit D Assumption Agreement
Exhibit E Allocation of Purchase Price
Exhibit F Statement of Adjustments
SCHEDULES:
Disclosure Schedule
Schedule 6.2(e) Assumed Employees
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
October 6, 1997, by and between CALIFORNIA KIDNEY CENTERS, a California General
Partnership (the "Company") and RENAL TREATMENT CENTERS - CALIFORNIA, INC., a
Delaware corporation (the "Purchaser"). Certain capitalized terms used in this
Agreement are defined in Exhibit A.
RECITALS
A. The Company provides (i) outpatient dialysis services to end stage
renal disease patients ("ESRD Patients") at Medicare certified outpatient
hemodialysis facilities owned by the Company, (ii) home dialysis supplies and
support services and (iii) acute inpatient dialysis services at local hospitals
in Irvine, California under contract (collectively, the "Business").
B. The Purchaser and its Affiliates are experienced in the ownership,
management and operations of hemodialysis facilities and inpatient dialysis
services.
C. The Purchaser desires to purchase from the Company, and the Company
desires to sell to the Purchaser, substantially all of the assets of the Company
relating to the Business.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties, intending to be legally bound, agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS.
Section 1.1 Assets to be Transferred. Subject to the terms and
conditions of this Agreement, on the Closing Date the Company shall sell,
transfer, convey, assign, and deliver to the Purchaser, and the Purchaser shall
purchase and accept from the Company, all of the assets, rights, claims and
contracts (of every kind and nature, character and description, whether real,
personal or mixed, whether tangible or intangible, whether accrued, contingent
or otherwise, wherever situated) owned by the Company and used in the conduct of
the Business, except the Excluded Assets, (the "Purchased Assets"). The
Purchased Assets shall include, without limitation, the following other than
Excluded Assets:
(a) Fixtures. All fixtures and improvements to any
real property in which the Company has a leasehold interest used in the conduct
of the Business.
(b) Personal Assets. All tangible personal property,
including without limitation, all equipment, materials, dialysis machines,
dialysis chairs, home dialysis equipment, computers and related hardware,
telecopy and photocopy machines and telecommunications equipment used in the
conduct of the Business as more particularly described in Part 4.5(a) of the
Disclosure Schedule.
(c) Inventory. All inventory of usable goods,
including all medical supplies and other current assets used in the conduct of
the Business, together with any additions thereto and subject to any reductions
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therefrom received, ordered or in transit by the Company operating the Business
in the ordinary course after the date hereof through the Closing Date.
(d) Proprietary Rights. All Proprietary Rights used
in the conduct of the Business.
(e) Goodwill. All of the goodwill of the Business.
(f) Contracts. All contracts, contractual rights, and
other written agreements of the Company, including, without
limitation, all payor agreements, supply agreements, medical director
agreements, license agreements, consulting agreements, real estate leases and
acute dialysis service agreements used in the conduct of the Business (the
"Assumed Contracts").
(g) Licenses; Permits. To the extent permitted by
Law, all licenses, permits, certificates and approvals of the Company used in
the conduct of the Business. The Company agrees to use commercially reasonable
efforts to cause any license, permits, certificates or approvals assignable with
the consent of a Governmental Entity to be assigned to the Purchaser before the
Closing Date, and, if not assigned or transferred by the Closing Date, to be
assigned or transferred thereafter.
Section 1.2 Assumed Contracts. To the extent that any Assumed Contract
for which assignment is provided herein is not assignable without the consent of
another party, this Agreement shall not constitute an assignment or an attempted
assignment thereof if such assignment or attempted assignment would constitute a
breach thereof. The Company and the Purchaser agree to use commercially
reasonable efforts (without any requirement on the part of the Purchaser or the
Company to pay any money or agree to any change in the terms of any such Assumed
Contract) to obtain the consent of such other party to the assignment of any
such Assumed Contract to the Purchaser in all cases in which such consent is or
may be required for such assignment. If any such consent shall not be obtained,
the Company agrees to cooperate with the Purchaser in any reasonable arrangement
designed to provide for the Purchaser the benefits intended to be assigned to
the Purchaser under the relevant Assumed Contract, including enforcement at the
cost and for the account of the Purchaser of any and all rights of the Company
against the other party thereto arising out of the breach or cancellation
thereof by such other party or otherwise. If and to the extent that such
arrangement cannot be made, the Purchaser, upon notice to the Company, shall
have no obligation pursuant to Section 2.1 or otherwise with respect to any such
Assumed Contract and any such Assumed Contract shall not be deemed to be a
Purchased Asset hereunder.
ARTICLE 2
ASSUMPTION OF LIABILITIES.
Section 2.1 Liabilities to be Assumed Subject to the terms and
conditions of this Agreement, on the Closing Date, the Purchaser shall assume
and agree to perform and discharge to the extent indicated below the following,
and only the following, specific liabilities and obligations of the Company
(collectively the "Assumed Liabilities"):
(a) Contractual Liabilities. The Company's
liabilities and obligations arising from and after the Closing Date under and
pursuant to the Assumed Contracts.
2.
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(b) Liabilities Under Permits and Licenses. The
Company's obligations arising from and after the Closing Date under any permits
or licenses listed in Part 4.10(b) of the Disclosure Schedule and assigned to
the Purchaser at or after the Closing.
(c) H-S-R Filing. All fees incurred by the parties in
connection with the filing under the HSR Act.
Section 2.2 Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.1, the Purchaser is not assuming any debts,
liabilities, obligations or contracts of the Company and all such debts,
liabilities, obligations and contracts shall be and remain the responsibility of
the Company.
ARTICLE 3
PAYMENT OF PURCHASE PRICE; CLOSING .
Section 3.1 Purchase Price. The purchase price (the "Purchase Price")
for the Purchased Assets shall be:
(a) the assumption of the Assumed Liabilities;
plus
(b) the sum of Seventy-Five Million Seven Hundred
Eight-Five Thousand Dollars ($75,785,000) in cash.
Section 3.2 Payment of Purchase Price. The Purchase Price shall be paid
by the Purchaser as follows:
(a) At the Closing, the Purchaser shall deliver to
the Company such documents and instruments as are reasonably required to
evidence the assumption of the Assumed Liabilities.
(b) At the Closing, the Purchaser shall deliver to
the Company in cash the sum of the amount required to be paid in Section
3.1.(b).
Section 3.3 Closing. The closing of the Acquisition (the "Closing") is
contemplated to take place on or before the Scheduled Closing Time, and shall
take place at the offices of Cooley Godward LLP, and shall occur within five (5)
days after the last to occur of, (a) approval of the Acquisition and the
transactions contemplated by the Agreement by the Office of the California
Attorney General, (b) the termination of the applicable waiting period under the
HSR Act, and (c) upon satisfaction of the conditions set forth herein, or at
such other place, time and/or date as may be jointly designated by the Company
and the Purchaser.
Section 3.4 Items to be Delivered at the Closing by the Company. At the
Closing, the Company shall deliver or cause to be delivered to the
Purchaser:
(a) Bill of Sale and Assignment, in substantially the
form of Exhibit B.
(b) Instruments of transfer in the form customarily
used in commercial transactions in the area in which the personal property is
located sufficient to transfer each personal property interest owned by the
3.
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Company not otherwise transferred by the Bill of Sale referred to in Section
3.4(a).
(c) Such other instruments of transfer necessary or
appropriate to transfer to and vest in the Purchaser all of the Company
right, title and interest in and to the Purchased Assets, including all
necessary consents of third parties.
(d) The opinions, certificates, consents and other
documents referred to herein as then deliverable by the Company.
(e) Noncompetition Agreement or Agreements,
substantially in the form of Exhibit C (the "Noncompetition Agreement").
(f) The Company and the Purchaser shall complete and
deliver a statement of the allocation of purchase price in substantially
the form of Exhibit E.
Section 3.5 Items to be Delivered at the Closing by the Purchaser. At
the Closing, the Purchaser shall deliver to the Company:
(a) The cash portion of the Purchase Price.
(b) An Assumption Agreement, in substantially the
form of Exhibit D.
(c) The opinions, certificates, consents and other
documents referred to herein as then deliverable by the Purchaser.
Section 3.6 Prorations. Except as otherwise set forth herein, at and as
of the Closing Date, the Purchaser and the Company shall proportionately
allocate (i) real property taxes and assessments for each of the Company's
dialysis facilities, (ii) rents and other payments, including, without
limitation, CAM charges, under the real property leases of the Company paid in
advance of the Closing Date, (iii) utility and sewer charges paid in advance of
the Closing Date, (iv) payments under the Assumed Contracts paid in advance of
the Closing Date and (v) fees for transferable licenses and permits. All
deposits under the Company's real property leases and all utilities and other
deposits shall be remitted to the Company, or in lieu of such remittance, the
amount of such deposits shall be added to the Purchase Price and paid over to
the Company by the Purchaser. In the event the parties are unable to
proportionately allocate such amounts and other operating expenses under this
Section 3.6, whether paid in advance or payable subsequent to the Closing, the
parties agree to pro rate such amounts as of the Closing Date. On the Closing
Date, or as soon as practicable thereafter, the Company and Purchaser shall
complete and deliver a statement of adjustments in substantially the form of
Exhibit F setting forth the various allocations described in this Section 3.6.
Any party owing funds to the other party shall remit such amounts as soon as
practicable, but in any event within 30 days after demand therefor.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Subject to the limitations set forth in Article 10 and elsewhere in
this Agreement, to the best of its Knowledge, the Company hereby represents and
warrants to the Purchaser that, except as set forth on the Disclosure Schedule,
the following are accurate in all material respects:
4.
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Section 4.1 Formation and Existence. The Company is a limited liability
company duly formed, validly existing and in good standing under the laws of the
State of California. The Company has full power to carry on its business as now
being conducted and to own and operate the property and assets now owned and
operated by it, and is duly qualified to transact business and is in good
standing in each jurisdiction where the ownership of its properties or the
conduct of its business requires such qualification and the failure to be so
qualified will have a Material Adverse Effect.
Section 4.2 Power and Authority. The Company has all requisite power
and authority to execute and deliver this Agreement and each other agreement,
document, or instrument or certificate contemplated by this Agreement to be
executed by the Company in connection with the consummation of the transactions
contemplated hereby (together with this Agreement, the "Acquisition Documents"),
and to consummate the transactions contemplated hereby and thereby. This
Agreement and each of the other Acquisition Documents will be at or prior to the
Closing, duly and validly authorized, executed and delivered by the Company and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each of the other
Acquisition Documents when so executed and delivered will constitute, legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section 4.3 Conflicts. The execution and delivery by the Company of
this Agreement and the other Acquisition Documents, the consummation of the
transactions contemplated hereby or thereby or compliance by the Company with
any of the provisions hereof or thereof (i) will not violate any provision of
the partnership agreement/operating agreement of the Company; (ii) subject to
obtaining the consents referred to in Part 4.3 of the Disclosure Schedule, will
not conflict with, violate, result in the breach or termination of, or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company is a party or
by which its properties or assets are bound; (iii) will not violate any statute,
rule, regulation, order or decree of any Governmental Entity by which the
Company is bound; or (iv) will not result in the creation of any encumbrance
upon the Purchased Assets except, in case of clauses (ii) and (iii), for such
conflicts, violations, breaches or defaults as will not have a Material Adverse
Effect.
Section 4.4 Financial Statements. The Company has furnished the
Purchaser with the Financial Statements. Except as set forth therein, the
Financial Statements fairly present, in all material respects, the financial
condition and results of operations, as applicable, of the Company as of the
dates and for the periods indicated thereon prepared in accordance with GAAP;
provided, that the Unaudited Financial Statements are subject to normal
recurring year-end adjustments, none of which are reasonably expected to have a
Material Adverse Effect, and do not contain all footnotes required under GAAP.
Section 4.5 Title to and Condition of Assets.
(a) Marketable Title. The Company has good and merchantable title to
all of its tangible assets used in the operations of the Business ("Physical
Assets") or has valid leasehold interests in all leased real property and
Physical Assets listed thereon as leased by the Company, except such as shall
have been disposed of as obsolete or in the ordinary course of business since
the date of Part 4.5(a) of the Disclosure Schedule. At Closing, the Purchaser
shall receive good and merchantable title to the Purchased Assets free of any
Encumbrances except for Permitted Encumbrances.
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(b) Condition. All of the Physical Assets are in good operating
condition and repair, have been maintained consistent with the standards
generally followed in the industry and applicable legal standards.
Section 4.6 Subsidiaries and Partnerships. Except as set forth on Part
4.6 of the Disclosure Schedule, the Company has no subsidiaries or investments
in other corporations, partnerships or joint ventures.
Section 4.7 Contracts. Part 4.7(a) of the Disclosure Schedule lists all
written agreements to which the Company is a party or to which the Company, or
any of its properties is subject or by which any thereof is bound that is deemed
a Material Contract under this Agreement. As used in this Agreement, the term
"Material Contract" shall mean each written agreement that (a) after December
31, 1996 obligates the Company to pay an amount of $50,000 or more, (b) has an
unexpired term as of the date hereof in excess of one year, (c) contains a
covenant not to compete or otherwise significantly restricts the Business of the
Company, (d) provides for the extension of credit, (e) limits the ability of the
Company to conduct its Business, including as to manner or place, (f)
constitutes a collective bargaining agreement or provides for severance benefits
to any officer, director or employee, (g) represents a written agreement with a
third party payor, including but not limited to a provider agreement under a
Medical Reimbursement Program, (h) represents a written agreement with a
physician who provides service to the Company, (i) involves the providing of
acute dialysis services, (j) provides for a leasehold in real property used in
the operations of the Business, or (k) was not made in the ordinary course of
business consistent with past practice. Part 4.7(a) of the Disclosure Schedule
also identifies each written agreement of the Company in which its officers or
directors (or any person, firm or corporation affiliated with such persons) have
a material interest. Except as set forth on Part 4.7(a) of the Disclosure
Schedule, each Material Contract is a legal, valid and binding agreement, and
none of the Material Contracts is in default by its terms or has been canceled
by the other party, and the Company has not received any claim of default under
any such Material Contract, except where such failure, default or claim of
default would not have a Material Adverse Effect. Part 4.7(b) of the Disclosure
Schedule lists as of the date hereof all of the agreements and contracts of the
Company used in the operation of the Business.
Section 4.8 Proprietary Rights. Part 4.8 of the Disclosure Schedule
sets forth all patents, trademarks, trade names, service marks, copyrights, and
pending applications therefor, software (other than third-party "off-the-shelf"
software), and intellectual property and other proprietary rights, the loss of
which would reasonably be likely to have a Material Adverse Effect (the
"Proprietary Rights"). Except as disclosed on Part 4.8 of the Disclosure
Schedule, the Company is not bound by or a party to any options, licenses or
agreements of any kind with respect to the Proprietary Rights except those that
will not have a Material Adverse Effect. Except as disclosed on Part 4.8 of the
Disclosure Schedule, the Company has not been informed of any claims or suits
pending or threatened against the Company claiming an infringement by the
Company of any patents, copyrights, licenses, trademarks, service marks or trade
names of others.
Section 4.9 Sufficiency of Purchased Assets. Except as set forth on
Part 4.9 of Disclosure Schedule, the Purchased Assets, both tangible and
intangible, are (and as of the Closing will be) sufficient for the operation of
the Business of the Company as currently conducted.
Section 4.10 Compliance With Laws.
(a) Compliance. The Company is in compliance with all laws, rules,
regulations, orders, judgments, ordinances or decrees of any Governmental Entity
6.
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applicable to the Business (collectively, "Laws") (including, without
limitation, Laws in respect of overpayments, refunds, discounts or adjustments
in connection with Medical Reimbursement Programs ("Overpayments")), the
non-compliance with which would have a Material Adverse Effect. Except as set
forth in Part 4.10 of the Disclosure Schedule the Company has not received
notice of any violation or alleged violation of, nor is the Company subject to
any liability (whether accrued, absolute, contingent, direct or indirect) for
past or continuing violation of, any Laws in connection with the Company's use
of the Purchased Assets which would have a Material Adverse Effect.
(b) Licenses and Permits.
(i) The Company has all licenses, permits, approvals,
authorizations and consents of all governmental and regulatory
authorities and all certification organizations required for the operation of
the Business of the Company as currently conducted. All such licenses, permits,
approvals, authorizations and consents are described in Part 4.10 of the
Disclosure Schedule, are in full force and effect and except as specifically
indicated in Part 4.10 of the Disclosure Schedule are assignable to the
Purchaser in accordance with the terms hereof.
(ii) Except as set forth in Part 4.10 of the Disclosure Schedule,
the Company has been in compliance with all such permits and licenses,
approvals, authorizations and consents. The Company is not the subject of any
actual or threatened investigation of disciplinary action by the California
Board of Health, the Health Care Financing Administration ("HCFA"), California
Department of Health Services or the Office of Inspector General of the United
States Department of Health and Human Services.
Section 4.11 Litigation. Except as set forth in Part 4.11 of the
Disclosure Schedule, there is no litigation, proceeding or investigation pending
or threatened, by or against the Company before any Governmental Entity that
would (i) prohibit or restrain the ability of the Company to enter into this
Agreement or to consummate the transactions contemplated hereby or (ii) have a
Material Adverse Effect.
Section 4.12 Labor Matters. Part 4.12 of the Disclosure Schedule lists
the collective bargaining agreements or other labor union contracts and employee
benefit plans applicable to employees which are employed by the Company, and the
Company is as of the date of this Agreement in full compliance with the terms
and conditions of such agreements and contracts, except where the failure to be
in compliance would not have a Material Adverse Effect. Except as set forth on
Part 4.12 of the Disclosure Schedule (i) there are no charges or allegations of
unfair labor practices pending or threatened under Federal or state labor laws;
(ii) there are no pending arbitration matters or grievance procedures under any
of the agreements listed in Part 4.12 of the Disclosure Schedule; (iii) there
are no facts or conditions existing which upon the giving of notice, or lapse of
time, will result in a breach under any collective bargaining agreement or under
any of the other foregoing agreements, which will have a Material Adverse
Effect; and (iv) there is no pending or threatened labor dispute, strike or work
stoppage which will have a Material Adverse Effect.
Section 4.13 Liabilities. Other than as set forth in Part 4.13 of the
Disclosure Schedule or as reflected in the Financial Statements, there are no
liabilities or contingent liabilities of a nature required to be reflected in
the Financial Statements or the notes thereto affecting any of the Purchased
Assets, except current liabilities incurred in the ordinary course of business
subsequent to the Statement Date which will not have a Material Adverse Effect.
7.
<PAGE>
Section 4.14 Environmental. All applicable federal, state and local
laws relating to pollution, storage, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic, hazardous or
petroleum-based substances or wastes ("Waste") into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Waste
including, without limitation, the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA"), as
amended, and their state and local counterparts, are herein collectively
referred to as the "Environmental Laws." Except as set forth in Part 4.14 of the
Disclosure Schedule, the Company is in compliance in all material respects with
all limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws. There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, official proceeding, notice or
demand letter pending or threatened against the Company relating in any way to
the Environmental Laws.
Section 4.15 Brokers' Fees. Except for the consideration payable to
Hambrecht & Quist, which shall be the sole responsibility and obligation of the
Company, neither the Company nor any of the Subsidiaries has incurred any
liability for brokerage fees, finders' fees, agents' commissions or other
similar forms of compensation in connection with this Agreement and the
transactions contemplated hereby.
Section 4.16 Required Filings and Consents. Except as set forth on Part
4.16 of the Disclosure Schedule, the execution and delivery of this Agreement by
the Company does not, and the performance of this Agreement by the Company will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign, except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, will not
prevent the Company from performing its obligations under this Agreement, and
will not have a Material Adverse Effect.
Section 4.17 Patients. Part 4.17 of the Disclosure Schedule lists, as
of the last treatment date prior to the date hereof, all Registered Patients (by
patient code) for which the Company provides either in-center treatment or home
dialysis support services. The Company makes no representation or warranty as to
which, if any, of the Registered Patients listed on Part 4.17 of the Disclosure
Schedule will continue to receive services from the Business subsequent to such
last treatment date.
Section 4.18 Physicians. Part 4.18 of the Disclosure Schedule lists all
physicians or groups of physicians admitting patients to the Company's dialysis
facilities indicating the number of Registered Patients admitted by each such
physician or group of physicians. The Company makes no representation or
warranty as to which, if any, physicians listed on Part 4.18 of the Disclosure
Schedule will continue to admit or keep patients at the Company's dialysis
facilities subsequent to the date hereof.
Section 4.19 Medicare Certification; State Licensure. Each of the
Company's dialysis facilities are certified under the conditions of coverage and
participation in the federal Medicare program as an end stage renal disease
facility providing the end stage renal disease services indicated on Part 4.19
of the Disclosure Schedule. The operating certificate issued by California
Department of Health Services and the Medicare certificates of the Company's
dialysis facilities are in full force and effect and no violation of the
conditions and standards of coverage, participation or certification exists.
8.
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Section 4.20 Ownership. Part 4.20 of the Disclosure Schedule is a
complete and accurate list of all beneficial owners of an equity interest in the
Company, and, in the case of any beneficial owner who is not a natural person,
all beneficial owners of an equity interest therein.
Section 4.21 Insurance. Except as set forth in Part 4.21 of the
Disclosure Schedule, for the five (5) year period prior to the date of this
Agreement, the Company has maintained adequate insurance for the Business and
the Purchased Assets with respect to risks normally insured against by similar
businesses.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Subject to the limitations set forth in Article 10 and elsewhere in
this Agreement, to the best of its Knowledge, the Purchaser hereby represents
and warrants to the Company that the following are accurate in all material
respects:
Section 5.1 Corporate Existence. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power to carry on its
business as now being conducted and to own and operate the property and assets
now owned and operated by it, and is duly qualified to transact business and is
in good standing in each jurisdiction where the ownership of its properties or
the conduct of its business requires such qualification and the failure to be so
qualified would have a material adverse effect on the business, operations or
financial condition of the Purchaser (a "Purchaser Material Adverse Effect").
Section 5.2 Corporate Power and Authority. The Purchaser has all
requisite corporate power and authority to execute and deliver this Agreement
and the other Acquisition Documents and to consummate the transactions
contemplated hereby and thereby. All corporate action necessary to authorize the
execution, delivery and performance of this Agreement and each of the other
Acquisition Documents has been duly taken by the Purchaser. This Agreement has
been, and each of the Acquisition Documents will be at or prior to the Closing,
duly and validly executed and delivered by the Purchaser and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each of the Acquisition Documents when so
executed and delivered will constitute, legal, valid and binding obligations of
the Purchaser, enforceable against the Purchaser in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
Section 5.3 Conflicts. Neither the execution and delivery by the
Purchaser of this Agreement and the other Acquisition Documents, the
consummation of the transactions contemplated hereby or thereby, or compliance
by the Purchaser with any of the provisions hereof or thereof will (i) violate
any provision of the certificate of incorporation or bylaws of the Purchaser;
(ii) conflict with, violate, result in the breach or termination of, or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Purchaser is a party or
by which its respective properties or assets are bound; or (iii) violate any
statute, rule, regulation, order or decree of any Governmental Entity by which
the Purchaser is bound except, in case of clauses (ii) and (iii), for such
conflicts, violations, breaches or defaults as will not have a Purchaser
Material Adverse Effect.
9.
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Section 5.4 Litigation. There is no litigation, proceeding or
investigation pending or, to the Purchaser's knowledge, threatened, by or
against the Purchaser before any Governmental Entity that would prohibit or
restrain the ability of the Purchaser to enter into this Agreement or to
consummate the transactions contemplated hereby.
Section 5.5 Brokers' Fees. The Purchaser has not incurred any liability
for brokerage fees, finders' fees, agents' commissions or other similar forms of
compensation in connection with this Agreement and the transactions
contemplated.
Section 5.6 Financing. The Purchaser has available all of the funds
necessary to perform its obligations hereunder and under the other
Acquisition Documents.
Section 5.7 Compliance With Laws. The Purchaser is in compliance with
all laws, regulations, orders, judgments, ordinances or decrees of any
Governmental Entity applicable to the business of the Purchaser, the non-
compliance with which would have a Purchaser Material Adverse Effect. The
Purchaser has not received notice of any violation or alleged violation of, nor
are any of them subject to any liability (whether accrued, absolute, contingent,
direct or indirect) for past or continuing violation of, any laws, regulations,
orders, judgments, ordinances or decrees of any Governmental Entity applicable
to the business of the Purchaser.
ARTICLE 6
COVENANTS OF THE COMPANY AND THE PURCHASER.
Section 6.1 Company Covenants. The Company covenants that from the date
of this Agreement until the Closing (the "Pre-Closing Period"):
(a) Conduct of Business in Ordinary Course. Except
as disclosed on Part 6.1(a) of the Disclosure Schedule or as contemplated by
this Agreement or any other Acquisition Document or as may be necessary to carry
out the transactions contemplated by this Agreement or any other Acquisition
Document, the Company will carry on its business in the ordinary course, and it
shall not make or institute any unusual or novel methods of purchase, sale,
lease, management, accounting or operation that will vary materially from those
methods used by it prior to the date of this Agreement. The Company will not
sell, lease or dispose of, or agree to sell, lease or dispose of, any of the
assets or properties of the Company other than in the ordinary course of
business, or pursuant to any existing plan, agreement or practice. The Company
will carry on its business diligently and in the same manner as heretofore and
will continue to see patients and will not make or institute any adverse changes
in its method of purchase, medical treatment, management, accounting or
operation.
(b) Preservation of Business and Relationships. The
Company will use commercially reasonable efforts to preserve its business intact
and to maintain its present material relationships with patients, creditors,
suppliers, lessors, licensors, employees and others having business
relationships with it or them.
(c) The Purchaser's Access to Premises and
Information. The Purchaser and its Associates shall have reasonable access
during normal business hours to all properties, books, accounts, records,
contracts and documents of or relating to the Company.
(d) Governmental Approvals. The Company shall
cooperate with the Purchaser (i) in promptly determining whether any
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governmental approvals, authorizations, licenses, permits, consents, or other
filings are required to be or should obtained under any federal, state or local
law and (ii) in promptly applying for or submitting any such governmental
approvals, authorizations, licenses, permits, consents, or other filings,
furnishing information required in connection therewith and seeking timely to
obtain such. The Company will make any and all filings required to be made on
its part under the HSR Act.
(e) Employees; Employee Benefits Matters. The Company shall fully
compensate its employees for any accrued vacation pay through the effectiveness
of the Closing. The Company shall cause interests of Assumed Employees of the
Company in its 401(k) plan to become distributable pursuant to Internal Revenue
Code Section 401(k)(10)(A) and any amounts distributed to such employees may be
rolled over pursuant to Internal Revenue Code Section 402 to a comparable plan
maintained by the Purchaser.
(f) No Negotiation. The Company shall ensure that, during the
Pre-Closing Period, neither the Company, the Owners nor any of the Company's
Representatives directly or indirectly:
(i) solicits or encourages the initiation of any inquiry, proposal
or offer from any Person (other than the Purchaser) relating to any Acquisition
Transaction; or
(ii) subject to Section 11.3, participates in any discussions or
negotiations with, or provides any non-public information to, any Person (other
than the Purchaser) relating to any Acquisition Transaction.
(g) Medical Director Agreements. The Company will use commercially
reasonable efforts to (i) extend existing medical director agreements of the
Company for a period of seven (7) years from the date hereof; (ii) assign to
Purchaser all existing medical director agreements of the Company; and (iii)
eliminate those provisions of each such agreement as they relate to the
transfers of patients.
(h) Consents; Real Property Leases. The Company will use commercially
reasonable efforts to obtain all consents required to be obtained (from
creditors, licensors, lessors and other Persons) in connection with the
transactions contemplated hereby, including, without limitation, consents to the
assignment of the Company's acute dialysis services agreements and the Company's
real property leases. In each instance in which (i) the term of any of the
Company's real property leases does not extend for, or (ii) extension options
under such leases do not provide for, a remaining term of at least seven (7)
years from the date hereof, the Company will use commercially reasonable efforts
to extend the remaining terms of such leases for a minimum of seven (7) years
from the date hereof.
(i) Cooperation. The Company shall cooperate fully with the Purchaser,
and shall provide the Purchaser with such assistance as the Purchaser may
reasonably request, for the purpose of facilitating the performance by the
Purchaser of its obligations under this Agreement and the Acquisition Documents.
(j) Conditions. The Company shall use commercially reasonable efforts
to ensure that the conditions required to be satisfied on the part of the
Company are satisfied on a timely basis.
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(k) Confidentiality. The Company shall continue to be
bound by its obligations under the Nondisclosure Agreement.
Section 6.2 Purchaser Covenants. The Purchaser covenants during
the Pre-Closing Period:
(a) Certain Filings. The Purchaser will make
any and all filings required to be made on its part under the HSR Act. The
Company and the Purchaser shall furnish each other such necessary information
and reasonable assistance as the other may request in connection with its
preparation of necessary filings or submissions under the provisions of such
laws.
(b) Sales Taxes. The Purchaser shall pay all
real and personal property transfer taxes and fees, if any, sales taxes, if
any, and all use, gross receipt or documentary taxes and other similar taxes, if
any, imposed on or in connection with the purchase, sale or transfer of the
Purchased Assets to, and the assumption of the Assumed Liabilities by, the
Purchaser pursuant to this Agreement. The Purchaser shall promptly reimburse the
Company for any such taxes and fees which, under applicable law, are imposed
upon the Company.
(c) Cooperation. The Purchaser shall cooperate
fully with the Company, and shall provide the Company with such assistance as
the Company may reasonably request, for the purpose of facilitating the
performance by the Company of its obligations under this Agreement and the
Acquisition Documents.
(d) Governmental Approvals. The Purchaser shall
cooperate with the Company (i) in promptly determining whether any governmental
approvals, authorizations, licenses, permits, consents, or other filings are
required to be or should obtained under any federal, state or local law and (ii)
in promptly applying for or submitting any such governmental approvals,
authorizations, licenses, permits, consents, or other filings, furnishing
information required in connection therewith and seeking timely to obtain such.
(e) Employees. The Purchaser will offer
employment to those current employees of the Company (as of the Closing Date)
working in the Business whose names and positions are set forth on Schedule
6.2(e) (the "Assumed Employees"). The Purchaser will pay the Assumed Employees
at wage rates competitive in the dialysis industry within the region in which
the Company operates and will provide benefits under standard Purchaser benefit
plans which shall be comparable to those provided to the other Purchaser
employees (including healthcare benefits which do not contain any exclusions or
waiting periods for pre-existing conditions with respect to Assumed Employees'
initial enrollment). This Section 6.2(e) in no way constitutes an employment
agreement between Purchaser and the Assumed Employees as such Assumed Employees
shall be employed by the Purchaser on an "at will" basis. The Purchaser
disclaims any commitment to employ such Assumed Employees for any specific
period.
(f) Investigation. In conducting its
investigation of the business, operations and legal affairs of the Company, the
Purchaser shall use its best efforts not to interfere in any manner with the
business or operations of the Company or with the performance of any of the
Company's employees.
(g) Conditions. The Purchaser shall use
commercially reasonable efforts to ensure that the conditions required to be
satisfied on the part of the Purchaser are satisfied on a timely basis.
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(h) Confidentiality. The Purchaser shall
continue to be bound by its obligations under the Nondisclosure Agreement.
ARTICLE 7
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE.
The obligation of the Purchaser to purchase the Purchased Assets and
otherwise consummate the transactions that are to be consummated at the Closing
is subject to the satisfaction, as of the Scheduled Closing Time and as of the
Closing Date, of the following conditions (any of which may be waived by the
Purchaser in whole or in part):
Section 7.1 Accuracy of Representations and Warranties. The
representations and warranties of the Company set forth in Article 4 shall be
accurate in all material respects as of the Scheduled Closing Time and as of the
Closing Date, except to the extent that (a) any of such representations and
warranties refers specifically to a date other than the Scheduled Closing Time
or the Closing Date in which event such representation and warranty shall be
accurate as of such date, (b) the accuracy of any of such representations and
warranties is affected by any of the transactions contemplated by this Agreement
or the Acquisition Documents, and (c) any such representation and warranty is
modified in a Disclosure Schedule revised as of the Closing Date (which
Disclosure Schedule shall be accurate as of the Closing Date) delivered to the
Purchaser at least five calendar days prior to the Scheduled Closing Time, to
which modifications the Purchaser shall have been deemed to have consented;
provided the facts or circumstances described or referred to in such
modifications have not had nor would reasonably be expected to have a Material
Adverse Effect.
Section 7.2 Performance. The Company shall have performed, in all
material respects, all obligations required under this Agreement and the
Acquisition Documents to be performed by the Company on or before the Closing
Date.
Section 7.3 Governmental Consents. The Company shall have received all
other consents, approvals, authorizations and waivers required to be obtained by
the Company from all Governmental Entities with jurisdiction over the Company in
connection with the transactions contemplated by this Agreement and the
Acquisition Documents and the operation of the Purchased Assets, except where
failure to obtain such consents, approvals, authorizations or waivers will not
have a Material Adverse Effect.
Section 7.4 Third Party Consents. To the extent permitted by Law, the
Purchaser shall have received all other consents, approvals, authorizations and
waivers from Persons necessary to the assignment and transfer of the Purchased
Assets set forth in Schedule 7.4, except where failure to obtain such consents,
approval, authorizations or waivers will not have a Material Adverse Effect.
Notwithstanding the foregoing, (i) the Company shall have obtained the consent
to the assignment of the Company's real property leases to the Purchaser from
each of the lessors under such leases, and (ii) the Company shall have obtained
the consents necessary to (a) the assignment of all of the Company's medical
director agreements to Purchaser, (b) the extension for a period of seven (7)
years from the date hereof of the terms of the Company's medical director
agreements in a manner mutually acceptable to the Company and the Purchaser with
the following Persons: Orange County Renal Medical Group, Inc. and Nephrology
Associates and (c) the elimination of those provisions from such medical
director agreements as they relate to the transfer of patients.
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Section 7.5 Additional Documents. The Purchaser shall have received the
following documents:
(a) an opinion letter from Stradling, Yocca, Carlson
& Rauth, dated the Closing Date, in a form reasonably acceptable to the
Purchaser;
(b) each of the Acquisition Documents shall have been
executed and delivered by the parties thereto; and
(c) such other documents as the Purchaser may reasonably
request in good faith for the purpose of (i) evidencing the accuracy of any
representation or warranty made by the Company, (ii) evidencing the compliance
by the Company with, or the performance by the Company of, any covenant or
obligation set forth in this Agreement or any of the Acquisition Documents,
(iii) evidencing the satisfaction of any condition set forth in this Section 7,
or (iv) otherwise facilitating the consummation or performance of any of the
transactions contemplated by this Agreement or any of the Acquisition Documents.
Section 7.6 No Injunction. There shall not be in effect, at the
Closing, any injunction or other binding order of any Governmental Entity having
jurisdiction over the Purchaser that prohibits the consummation of the
transactions contemplated by this Agreement and the Acquisition Documents.
ARTICLE 8
CONDITIONS TO OBLIGATION OF THE COMPANY TO CLOSE.
The obligation of the Company to sell the Purchased Assets to the
Purchaser and otherwise consummate the transactions that are to be consummated
at the Closing is subject to the satisfaction, as of the Scheduled Closing Time
and as of the Closing Date, of the following conditions (any of which may be
waived by the Company in whole or in part):
Section 8.1 Accuracy of Representations and Warranties. The
representations and warranties of the Purchaser set forth in Section 5 shall be
accurate in all material respects as of the Scheduled Closing Time and as of the
Closing Date.
Section 8.2 Performance. The Purchaser shall have performed, in all
material respects, all obligations required by this Agreement and the
Acquisition Documents to be performed by the Purchaser on or before the Closing
Date.
Section 8.3 No Injunction. There shall not be in effect, at the
Closing, any injunction or other binding order of any Governmental Entity having
jurisdiction over the Company that prohibits the consummation of the
transactions contemplated by this Agreement and the Acquisition Documents.
Section 8.4 Equityholder Approval; Attorney General Consent. The
Company shall have received the consent and approval of the Owners to the
transactions contemplated by this Agreement and the Acquisition Documents, and
Satellite Dialysis Centers, Inc. shall have received written notification from
the Office of the California Attorney General that it does not oppose or object
to the participation by Satellite Dialysis Centers, Inc. in the Acquisition and
the transactions contemplated by the Agreement. In the case of Satellite
Dialysis Centers, Inc. (in its capacity as an Owner and not as Agent), it is
expressly understood and agreed that its consent and approval is subject to the
fiduciary obligations of its board of trustees consistent with its charitable
purpose. The parties agree that such consent and approval by the
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board of trustees and receipt of approval from the Office of the California
Attorney General may only be waived by Satellite Dialysis Centers, Inc. in its
sole and absolute discretion.
Section 8.5 Governmental Consents. To the extent permitted by Law, the
Company shall have received all other consents, approvals, authorizations and
waivers required to be obtained from all federal, state, municipal and other
governmental authorities with jurisdiction over the Company in connection with,
and as a condition to, the transactions contemplated by this Agreement and the
Acquisition Documents and the operation of the Purchased Assets, except where
failure to obtain such consents, approvals, authorizations or waivers will not
have a Material Adverse Effect.
Section 8.6 Third Party Consents. The Company shall have received all
other consents, approvals, authorizations and waivers from Persons necessary to
the assignment and transfer of the Purchased Assets, except where failure to
obtain such consents, approvals, authorizations or waivers will not have a
Material Adverse Effect.
Section 8.7 Additional Documents. The Company shall have received the
following documents:
(a) an opinion letter from Duane, Morris & Heckscher, dated
the Closing Date, in a form reasonably acceptable to the Company;
(b) each of the Acquisition Documents shall have been
executed and delivered by the parties thereto; and
(c) such other documents as the Company may reasonably
request in good faith for the purpose of (i) evidencing the accuracy of any
representation or warranty made by the Purchaser, (ii) evidencing the compliance
by the Purchaser with, or the performance by the Purchaser of, any covenant or
obligation set forth in this Agreement or any of the Acquisition Documents,
(iii) evidencing the satisfaction of any condition set forth in this Section 8,
or (iv) otherwise facilitating the consummation or performance of any of the
transactions contemplated by this Agreement or any of the Acquisition Documents.
ARTICLE 9
TERMINATION OF AGREEMENT.
Section 9.1 Right to Terminate Agreement. This Agreement may be
terminated prior to the Closing:
(a) by the mutual agreement of the Company and the
Purchaser;
(b) by the Purchaser at any time after the Termination
Date, if any condition set forth in Section 7 shall not have been satisfied or
waived; or
(c) by the Company at any time after the Termination Date,
if any condition set forth in Section 8 shall not have been satisfied or waived.
Section 9.2 Effect of Termination. Upon the termination of this
Agreement pursuant to Section 9.1:
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(a) The Purchaser shall promptly cause to be returned to
the Company all documents and information obtained in connection with this
Agreement and the transactions contemplated by this Agreement and all documents
and information obtained in connection with the Purchaser's investigation of the
Company's business, operations and legal affairs, including any copies made by
the Purchaser or any of the Purchaser's Associates of any such documents or
information; and
(b) neither party hereto shall have any obligation or
liability to the other party hereto, except that (i) the Purchaser and the
Company shall have the obligations set forth in the Memorandum, and (ii) the
Purchaser and the Company shall remain bound by the provisions of the
Nondisclosure Agreement, this Section 9.2 and Article 11.
ARTICLE 10
INDEMNIFICATION AND RELATED MATTERS.
Section 10.1 Indemnification by the Company. Subject to the limitations
set forth in this Article 10 and elsewhere in this Agreement, the Company shall
indemnify the Purchaser against any Damages that the Purchaser actually incurs
during the one-year period commencing on the Closing Date which arise from,
occur as a result of or in connection with (a) any breach by the Company of any
representation, warranty or covenant of the Company set forth in this Agreement
or any of the Acquisition Documents or (b) any liability that arises from or
relates to (i) the Excluded Assets or (ii) the Excluded Liabilities.
Section 10.2 Indemnification by the Purchaser. Subject to the
limitations set forth in this Article 10 and elsewhere in this Agreement, the
Purchaser shall indemnify the Company and the Owners against any Damages that
the Company actually incurs during the one-year period commencing on the Closing
Date which arise from, occur as a result of or in connection with (a) any breach
by the Purchaser of any representation, warranty or covenant of the Purchaser
set forth in this Agreement or any of the Acquisition Documents, or (b) any
liability that arises from or relates to (i) the operation of the Purchased
Assets after the Closing, and (ii) the Assumed Liabilities.
Section 10.3 Expiration of Representations, Warranties and Covenants.
Except for the covenants set forth in Section 6.2(b) (sales taxes), the
covenants set forth in Article 6 shall terminate and expire, and shall cease to
be of any force or effect, on the Closing Date, and all liability of the parties
hereto with respect to such covenants shall thereupon be extinguished. Except as
set forth in the immediately preceding sentence, all of the representations,
warranties, covenants and obligations of the Company and the Purchaser set forth
in this Agreement and any of the Acquisition Documents shall terminate and
expire, and shall cease to be of any force or effect, at 2:00 p.m. (California
time) on the first anniversary of the Closing Date, and all liability of the
Company or the Purchaser with respect thereto (including their respective
obligations under Section 10.1 or Section 10.2, as the case may be) shall
thereupon be extinguished; provided, that if, prior to such first anniversary,
either party shall have duly delivered a Claim Notice in conformity with all of
the applicable procedures set forth in Section 10.8, then the specific
indemnification claim set forth in such Claim Notice shall survive such first
anniversary (and shall not be extinguished thereby).
Section 10.4 Deductible Amount. Without limiting the effect of any of
the other limitations set forth herein, neither the Purchaser nor the Company
shall be required to make any indemnification payment hereunder with respect to
any breach of any of their respective representations, warranties, covenants and
obligations, except to the extent that the cumulative amount of the Damages
actually incurred by the party to be indemnified as a result of all such
breaches of such representations, warranties, covenants and
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obligations actually exceeds the Deductible Amount; and each party hereto shall
only be required to pay, and shall only be liable for, the amount by which the
cumulative amount of the Damages actually incurred by the party to be
indemnified as a result of all such breaches of such representations,
warranties, covenants and obligations actually exceeds the Deductible Amount.
The "Deductible Amount" shall be an amount equal to one-half percent (0.5%) of
the Purchase Price. Notwithstanding the foregoing, claims for indemnification
relating to (i) the Excluded Liabilities (including, without limitation, taxes
of the Company described in such definition and Overpayments) and (ii) (a) the
Assumed Liabilities and (b) the operation of the Purchased Assets after the
Closing, shall not be subject to the Deductible Amount.
Section 10.5 Maximum Liability. The total amount of the payments that
either the Company or the Purchaser, as the case may be, shall be required to
make under or in connection with this Agreement or any of the Acquisition
Documents pursuant to such party's indemnification obligations shall be limited
in the aggregate to a maximum of ten percent (10%) of the Purchase Price, and
neither party's respective cumulative liability shall exceed such amount.
Section 10.6 Knowledge of Breach. For purposes of this Article 10,
neither party hereto shall be deemed to have breached any representation or
warranty if the other party had, on or prior to the Closing Date, Knowledge of
the breach of, or of any facts or circumstances constituting or resulting in a
breach of, such representation or warranty.
Section 10.7 No Implied Representations. The Purchaser and the Company
acknowledge that, except as expressly provided in Articles 4 and 5, neither
party hereto, and none of the Associates of either party hereto, has made or is
making any representations or warranties whatsoever, implied or otherwise.
Section 10.8 Indemnification Claims. If either party hereto (the
"Claimant") wishes to assert an indemnification claim against the other party
hereto, the Claimant shall deliver to the other party a written notice (a "Claim
Notice") setting forth:
(a) the specific representation, warranty or covenant
alleged to have been breached by such other party, or the specific liability to
have been incurred;
(b) a detailed description of the facts and circumstances
giving rise to the alleged breach of such representation, warranty or covenant,
or incurrence of such liability; and
(c) a detailed description of, and a reasonable estimate of
the total amount of, the Damages actually incurred or expected to be incurred by
the Claimant as a direct result of such alleged breach.
Notwithstanding anything to the contrary contained in this Agreement, Claimant
shall not be permitted to deliver any Claim Notice to the other party (and shall
not be entitled to assert any indemnification claim set forth in any Claim
Notice) unless:
(i) the indemnification claim set forth in such Claim
Notice shall have arisen from a bona fide lawsuit or other bona fide legal
proceeding that was instituted by a third party against Claimant or the Company
prior to the delivery of such Claim Notice to the other party; or
(ii) Claimant shall have provided evidence in reasonable
detail demonstrating to the other party, before the delivery of such Claim
Notice, that Claimant has therefore actually incurred, or is reasonably likely
to incur, Damages as a result of the alleged breach described in such Claim
Notice.
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Any Claim Notice that is delivered to the Purchaser or the Company in
contravention of the prohibition set forth in the preceding sentence shall be
deemed not to have been "duly delivered" for purposes of Section 10.3 and shall
be of no force or effect.
Section 10.9 Defense of Third Party Actions. If either party hereto
(the "Indemnitee") receives notice or otherwise obtains knowledge of any Matter
or any threatened Matter that may give rise to an indemnification claim against
the other party hereto (the "Indemnifying Party"), then the Indemnitee shall
promptly deliver to the Indemnifying Party a written notice describing such
Matter in reasonable detail; provided, that for the sole purpose of determining
whether a Matter or threatened Matter may give rise to an indemnification claim
against the Indemnifying Party within the meaning of this sentence, the
limitation set forth in Section 10.4 shall not be taken into account. The timely
delivery of such written notice by the Indemnitee to the Indemnifying Party
shall be a condition precedent to any liability on the part of the Indemnifying
Party under this Section 10 with respect to such Matter. The Indemnifying Party
shall have the right, at its option, to assume the defense of any such Matter
with its own counsel reasonably satisfactory to the Indemnitee. If the
Indemnifying Party elects to assume the defense of any such Matter, then:
(a) notwithstanding anything to the contrary contained in
this Agreement, the Indemnifying Party shall not be required to pay or otherwise
indemnify the Indemnitee against any attorneys' fees or other expenses incurred
on behalf of the Indemnitee in connection with such Matter following the
Indemnifying Party's election to assume the defense of such Matter;
(b) the Indemnitee shall make available to the Indemnifying
Party all books, records and other documents and materials that are under the
direct or indirect control of the Indemnitee and that the Indemnifying Party
considers necessary or desirable for the defense of such Matter;
(c) the Indemnitee shall fully cooperate as reasonably
requested by the Indemnifying Party in the defense of such Matter and execute
such documents and take such other actions as the Indemnifying Party may
reasonably request for the purpose of facilitating the defense of, or any
settlement, compromise or adjustment relating to, such Matter;
(d) the Indemnitee shall not admit any liability with
respect to such Matter; and
(e) the Indemnifying Party shall not settle, adjust or
compromise such Matter without the prior written consent or approval of the
Indemnitee.
If the Indemnifying Party elects not to assume the defense of such Matter, then
the Indemnitee shall proceed diligently to defend such Matter with the
assistance of counsel satisfactory to the Indemnifying Party; provided, that the
Indemnitee shall not settle, adjust or compromise such Matter, or admit any
liability with respect to such Matter, without the prior written consent of the
Indemnifying Party.
Section 10.10 Subrogation. To the extent that either party hereto (the
"Indemnitor") makes or is required to make any indemnification payment to the
other party hereto (the "Indemnified Party"), the Indemnitor shall be entitled
to exercise, and shall be subrogated to, any rights and remedies (including
rights of indemnity, rights of contribution and other rights of recovery) that
the Indemnified Party or any of the Indemnified Party's Associates may have
against any other Person with respect to any Damages, circumstances or Matter to
which such indemnification payment is directly or indirectly related. The
Indemnified Party shall permit the Indemnitor to use the name of the Indemnified
Party and the names of
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the Indemnified Party's Associates in any transaction or in any proceeding or
other Matter involving any of such rights or remedies; and the Indemnified Party
shall take such actions as the Indemnitor may reasonably request for the purpose
of enabling the Indemnitor to perfect or exercise the Indemnitor's right of
subrogation hereunder.
Section 10.11 Exclusivity. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article 10 shall be the sole and exclusive right and remedy exercisable by such
party with respect to any breach by the other party hereto of any
representation, warranty, covenant or obligation. Without limiting the
generality of the foregoing, no Indemnitee shall have the right to withhold and
deduct any sum that may be owed to such Indemnitee from any amount otherwise
payable by such Indemnitee to the Indemnifying Party.
Section 10.12 Accounts Receivable. In the event the Company receives
any payment that relates to accounts receivable generated from services rendered
by the Business after the Closing Date, the Company shall promptly transmit
these funds to the Purchaser. In the event the Purchaser receives any payment
that related to accounts receivable generated from services rendered by the
Business on or before the Closing Date, the Purchaser shall promptly transmit
these funds to the Company.
Section 10.13 Tax Matters. Each party will provide the other such
assistance as may reasonably be requested in connection with the preparation of
any reimbursement-related audit, any tax return, any audit or other examination
by any taxing authority, or any judicial or administrative proceedings relating
to liability for taxes, and each will retain and provide the other with any
records or information which may be relevant to such return, audit or
examination, proceedings or determination. The party requesting assistance
hereunder shall reimburse the other party for reasonable expenses incurred in
providing such assistance. Any information obtained pursuant to this Section or
pursuant to any other Section hereof providing for the sharing of information or
the review of any tax return or other schedule relating to taxes shall be kept
confidential by the Parties and not disclosed to any Person.
Section 10.14 Tail Insurance. The Company shall use commercially
reasonable efforts to maintain in force and effect for five years from the
Closing Date the Tail Insurance Coverage relating back five years from the
Closing Date. The "Tail Insurance Coverage" shall be health care services
professional liability coverage with The Doctors Company or such other
financially sound and reputable insurance company or association selected by the
Company with limits of liability of $1,000,000 per loss.
ARTICLE 11
MISCELLANEOUS PROVISIONS.
Section 11.1 Time of Essence. Time is of the essence with respect to
this Agreement.
Section 11.2 Compliance with Laws. Each party shall execute such
agreements and other documents, and shall take such other actions, as the other
may reasonably request (prior to, at or after the Closing) for the purpose of
ensuring that the transactions contemplated by this Agreement are carried out in
full compliance with the provisions of all applicable laws and regulations.
Section 11.3 Publicity. No press release, notice to any third party or
other publicity concerning the transactions contemplated by this Agreement or
any of the Acquisition Documents shall be issued, given or otherwise
disseminated without the prior written consent of the Agent and the Purchaser,
which will not be unreasonably withheld or delayed; provided, that (a) without
the approval of the Purchaser, the Agent
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shall be entitled to make disclosures regarding the transactions contemplated
hereby (i) to the Office of the California Attorney General and (ii) as may be
necessary to effect the transactions contemplated hereby, and (b) either party
may make such disclosures as may be contemplated herein or as may be and to the
extent required by applicable law.
Section 11.4 Access of the Company to Books and Records. At all times
after the Closing Date, the Purchaser shall give the Company and the Company's
Associates reasonable access to the books and records of the Company to inspect
and copy such books and records.
Section 11.5 Governing Law. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflicts of law).
Section 11.6 Venue and Jurisdiction. If any legal proceeding or other
legal action relating to this Agreement is brought or otherwise initiated, the
venue therefor shall be in San Francisco, California, which shall be deemed to
be a convenient forum. The Purchaser and the Company hereby expressly and
irrevocably consent and submit to the jurisdiction of the courts in San
Francisco, California.
Section 11.7 Notices. All notices, consents and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given and duly delivered when (i) delivered by hand or (ii) when received by the
addressee, if sent by certified mail, return receipt requested, by Express Mail,
Federal Express or other express delivery service (receipt requested), in each
case, at the appropriate addresses as set forth below (or to such other address
as a party may designate as to itself by notice to the other parties):
if to the Purchaser:
Renal Treatment Centers - California, Inc.
1180 W. Swedesford Road, Bldg. 2, Ste. 300
Berwyn, PA 19312
Attention: Thomas J. Karl
Vice President, Secretary and General Counsel
with a copy (not constituting notice) to:
Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, PA 19103
Attention: Jeffrey S. Henderson, Esq.
if to the Company:
California Kidney Centers
Nephrology Associates
4361 Latham Street
Riverside, CA 92501
Attention: John Robertson, M.D.
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with a copy (not constituting notice) to:
Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Attention: Ben A. Frydman
Satellite Dialysis Centers, Inc.
345 Convention Way, Suite B
Redwood City, CA 94063-1402
Attention: Marc Branson
Chief Financial Officer
and
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Brian C. Cunningham
Section 11.8 Table of Contents and Headings. The table of contents of
this Agreement and the underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
Section 11.9 Assignment. Neither party hereto may assign any of its
rights or delegate any of its obligations under this Agreement to any other
Person without the prior written consent of the other party hereto; provided,
that the Company may, prior to or after the Closing, assign to any Person its
right to receive all or any portion of the amount payable to the Company under
Section 3.1.
Section 11.10 Parties in Interest. Nothing in this Agreement is
intended to provide any rights or remedies to any Person (including any employee
or creditor of the Company) other than the parties hereto.
Section 11.11 Severability. In the event that any provision of this
Agreement, or the application of such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
Section 11.12 Entire Agreement. This Agreement, the Memorandum, the
other Acquisition Documents and the Nondisclosure Agreement set forth the entire
understanding of the Purchaser and the Company and supersede all other
agreements and understandings between the Purchaser and the Company relating to
the subject matter hereof and thereof.
Section 11.13 Expenses. Each of the parties shall be responsible for
and pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement.
21.
<PAGE>
Section 11.14 Waiver. No failure on the part of either party hereto to
exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of either party hereto in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a waiver thereof; and
no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy.
Section 11.15 Amendments. This Agreement may not be amended, modified,
altered or supplemented except by means of a written instrument executed on
behalf of both the Purchaser and the Company.
Section 11.16 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be as original and all of
which, when taken together, will be deemed to constitute one and the same.
Section 11.17 Waiver of Bulk Transfer Laws. To the extent applicable,
the Purchaser and the Company waive compliance with the provisions of Division 6
of the Uniform Commercial Code of the State of California and the provisions of
any other applicable laws relating to bulk transfers of assets.
Section 11.18 Post-Signing Procedure. The parties are executing this
agreement in advance of finalizing the terms of one or more Exhibits, prior to
the delivery of certain parts of the Disclosure Schedule that may qualify the
representations and warranties herein set forth, and prior to the Purchaser's
completion and analysis of its due diligence investigation.
(a) The Company shall be responsible for preparing all
Parts of the Disclosure Schedule other than as specifically agreed. The Company
shall deliver a proposed Disclosure Schedule for review by the Purchaser within
seven (7) days of the date of this Agreement. The Disclosure Schedule shall be
deemed accepted by the Purchaser within five (5) business days after delivery
thereof unless the Purchaser notifies the Company of any objections. If the
Purchaser determines in good faith that the Disclosure Schedule reveals
information that had not been previously known by or disclosed to the Purchaser,
and would have in the Purchaser's reasonable judgment a Material Adverse Effect,
then the Purchaser will immediately notify the Company of such information (but
within such five-day period), and the parties shall in good faith use
commercially reasonable efforts to eliminate, waive or resolve any problem. If,
notwithstanding such efforts, such problem cannot be eliminated, waived or
resolved, either the Company or the Purchaser may elect to terminate this
Agreement pursuant to the terms of Section 9.1(b) or 9.1(c), as the case may be.
(b) The Purchaser shall promptly complete its final due
diligence investigation of the Company by October 5, 1997.
Section 11.19 Interpretation of Agreement.
(a) Each party hereto acknowledges that it has participated
in the drafting of this Agreement, and any applicable rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in connection with the construction or
interpretation of this Agreement.
(b) Whenever required by the context hereof, the
singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
22.
<PAGE>
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words "without
limitation."
(d) References herein to "Articles," "Sections" and
"Exhibits" are intended to refer to Sections of and Exhibits to this Agreement.
Section 11.20 Commercially Reasonable Efforts. Throughout this
Agreement and the other Acquisition Documents, subject to Section 1.2,
"commercially reasonable efforts" of a Person shall mean the efforts that a
prudent Person using ordinary business practice and judgment consistent with
industry practice and desiring to achieve a particular result would use in order
to obtain such result, which efforts may include, among other things, the
expenditure of funds; provided, that such efforts shall not require a Person to
(i) expend funds other than for the payment of reasonable and customary costs
and expenses of employees, legal counsel, consultants, representatives or agents
of such Person or (ii) institute litigation or arbitration proceedings as a part
of its efforts.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
CALIFORNIA KIDNEY CENTERS
By: Kidney Healthcare Centers, Inc.
By: /s/ Mark Burke
--------------------------
Name: Mark Burke
Title: President
RENAL TREATMENT CENTERS-CALIFORNIA, INC.
By: /s/ Robert L. Mayer, Jr.
----------------------------------
Name: Robert L. Mayer, Jr.
Title: Chairman, President and CEO
ASSET PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
DEFINED TERMS
For purposes of this Agreement (including the Disclosure Schedule):
"Agreement" shall mean the Asset Purchase Agreement to which this
Exhibit A is attached.
"Acquisition" means the acquisition by the Purchaser of the Purchased
Assets.
"Acquisition Documents" shall have meaning specified in Section 4.2.
"Acquisition Transaction" shall mean any transaction involving:
(a) the sale or other disposition of all or any portion of
the Company's business or assets (other than in the ordinary course of
business);
(b) the issuance, sale or other disposition of any Equity
Securities of the Company; or
(c) any merger, consolidation, business combination, share
exchange, reorganization or similar transaction involving the Company.
"Affiliate" means a Person that directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with, specified Person.
"Agent" shall have the meaning specified in the Memorandum.
"Associates" of a Person shall include:
(a) such Person's affiliates, stockholders, directors,
officers, employees, agents, attorneys, accountants and representatives; and
(b) all stockholders, directors, officers, employees,
agents, attorneys, accountants and representatives of each of such Person's
affiliates.
"Assumed Contracts" shall have the meaning specified in Section 1.1(f).
"Assumed Liabilities" shall have the meaning specified in Section 2.1.
"Audited Financial Statements" shall mean the audited balance sheet of
the Company as of December 31, 1996, and such related audited statement of
operations of the Company for the period then ended, including the notes
thereto, accompanied by the report of Frank Rimmerman & Co. thereon.
"Business" shall have the meaning specified in the Recitals.
"Claim Notice" shall have the meaning specified in Section 10.8.
"Claimant" shall have the meaning specified in Section 10.8.
1.
<PAGE>
"Closing" shall have the meaning specified in Section 3.3.
"Closing Date" shall mean the time and date as of which the Closing
actually takes place.
"Company" shall mean California Kidney Centers, a California general
partnership.
"Damages" shall mean out-of-pocket losses and damages; provided, that
for purposes of computing the amount of Damages incurred by any Person, there
shall be deducted an amount equal to the amount of any insurance proceeds,
indemnification payments, contribution payments or reimbursements directly or
indirectly received by such Person or any of such Person's affiliates in
connection with such Damages or the circumstances giving rise thereto.
"Deductible Amount" shall have the meaning specified in Section 10.4.
"Disclosure Schedule" shall mean that certain Disclosure Schedule
delivered together with the Agreement, which shall be arranged in parts to
correspond with the sections and subsections of the Agreement and each
disclosure set forth therein shall be deemed to modify each and every
representation, warranty and covenant of the Company set forth in the Agreement
as it pertains to such representation, warranty or covenant. The contents of
each of the contracts and other documents referred to in the Disclosure Schedule
shall be deemed to be incorporated and referred to in the Disclosure Schedule as
though set forth in full therein.
"Encumbrance" shall mean any encumbrance, lien, mortgage, pledge, lease
or noncontingent charge.
"Equity Securities" means any capital stock or other equity interest,
or securities convertible into or exchangeable for capital stock or other equity
interest, or any other rights, warrants or options to acquire any of the
foregoing securities.
"ESRD Patients" has the meaning specified in the Recitals.
"Excluded Assets" shall mean (i) all of the Company's cash balances,
cash equivalents and accounts receivable, (ii) the Company's corporate franchise
and related indicia, (iii) the consideration delivered to the Company pursuant
to and all rights arising under this Agreement or any of the Acquisition
Documents, (iv) the Company's tax returns, refunds and tax records, (v) all
insurance policies and surety bonds of the Company, (vi) all items of prepaid
expenses, deposits and other similar sums to which the Company may become
entitled to a refund, (vii) all payroll processing agreements, (viii) all
vending service agreements, including, without limitation, the Cold Drink
Equipment Agreement entered into by Dialysis Systems, LLC, and (ix) any and all
administrative service agreements between the Company and Satellite Dialysis
Centers, Inc.
"Excluded Liabilities" shall mean (i) any and all of the Company's
Closing transaction fees and expenses, including, without limitation, the
Company's financial advisory, accounting and legal fees and expenses, (ii)
subject to Sections 6.1(e) and 6.2(e), obligations relating to the Company's
employees, including, without limitation, accrued salaries and wages,
obligations under the Company's employee benefit plans, and retention bonuses
and severance obligations payable to employees of the Company, through the
Closing Date as a result of the transactions contemplated by this Agreement and
the other Acquisition Documents, (iii) any and all federal and state income
taxes payable by the Company as a result of the transactions contemplated by
this Agreement and the Acquisition Documents, (iv) the Company's federal, state
and local taxes for any period prior to the Closing accrued through the Closing
2.
<PAGE>
Date, (v) any liability arising out of or relating to overpayments, malpractice,
fraud and violations of applicable federal and state fraud and abuse,
anti-kickback and Stark laws occurring prior to Closing Date, or (vi) any
liability or obligation of the Company that is not expressly assumed by the
Purchaser herein.
"Financial Statements" shall mean the Audited Financial Statements and
the Unaudited Financial Statements.
"GAAP" shall mean generally accepted accounting principles, applied on
a basis consistent with the basis on which the applicable financial statements
were prepared.
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government or any quasi-governmental authority
or self-regulatory organization (such as the New York Stock Exchange, Inc.),
whether federal, state or local.
"HCFA" shall have the meaning specified in Section 4.10(b).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and the rules promulgated thereunder.
"Indemnified Party" shall have the meaning specified in Section 10.10.
"Indemnifying Party" shall have the meaning specified in Section 10.9.
"Indemnitee" shall have the meaning specified in Section 10.9.
"Indemnitor" shall have the meaning specified in Section 10.10.
"Knowledge," to the best knowledge of, to which a Person is aware,
known to a Person, or any variation thereof shall mean the actual knowledge of
such Person without having made independent investigation in connection with
this Agreement. For the Company, Knowledge shall be the actual knowledge of John
Robertson, M.D., Joseph Lee, M.D., Chao Sun, M.D., Mark Burke and Marc Branson.
"Laws" shall have the meaning specified in Section 4.10(a).
"Material Adverse Effect" shall mean any occurrence, event or
condition, either individually or in the aggregate, having a material adverse
effect on the business operations or financial condition of the Company, or the
Purchased Assets, taken together as a whole.
"Material Contract" shall have the meaning specified in Section 4.7.
"Matter" shall mean any claim, demand, dispute, action, suit,
examination, audit, proceeding, investigation, inquiry or other similar matter.
"Medicaid" means that means-tested entitlement program under Title XIX
of the Social Security Act that provides federal grants to states for medical
insurance based on specific eligibility criteria, as interpreted by the
appropriate Governmental Entities prior to the date hereof.
3.
<PAGE>
"Medical Reimbursement Programs" means the Medicare, Medicaid programs
and any other health care program operated by or serviced in whole or in part by
any federal, state or local government, each as interpreted by the appropriate
Governmental Entities prior to date hereof.
"Medicare" means that government-sponsored entitlement program under
Title XVIII of the Social Security Act that provides for a health insurance
program for eligible elderly and disabled individuals, as interpreted by the
appropriate Governmental Entities prior to the date hereof.
"Memorandum" means that certain Memorandum of Understanding of even
date herewith by and among the Purchaser, California Kidney Centers, California
Kidney Centers, Inpatient Services, LLC, California Kidney Centers, Orange, LLC,
Dialysis Systems, Inpatient Services, LLC, Dialysis Systems, LLC and Satellite
Dialysis Centers, Inc., solely as agent for the selling parties thereto.
"Noncompetition Agreement" shall have the meaning specified in Section
3.4(e).
"Nondisclosure Agreement" shall mean that certain Nondisclosure
Agreement, dated May 27, 1997, between the Purchaser and Satellite Dialysis
Centers, Inc., on behalf of itself and as agent for the Company and the Owners.
"Overpayments" shall have the meaning specified in Section 4.10(a).
"Owner" shall mean each holder of Equity Securities of the Company.
"Permitted Encumbrances" shall mean (i) those encumbrances resulting
from taxes that have not yet become due and delinquent, (ii) minor encumbrances
that do not materially detract from the value of the real property interests
subject thereto or materially impair their operations, (iii) zoning laws and
other use restrictions of public record, (iv) encumbrances that arise or have
otherwise arisen in the ordinary course of business, (v) restrictions arising
under all Laws, and (vi) those encumbrances described in Part 4.5 of the
Disclosure Schedule.
"Person" shall mean any individual, corporation, association, general
partnership, limited partnership, venture, trust, association, firm,
organization, company, business, entity, union, society, government (or
political subdivision thereof) or governmental agency, authority or
instrumentality.
"Physical Assets" shall have the meaning specified in Section 4.5.
"Purchase Price" shall have the meaning specified in Section 3.1.
"Purchased Assets" shall have the meaning specified in the Section 1.1.
"Purchaser" shall mean Renal Treatment Centers - West, Inc., a Delaware
corporation/Renal Treatment Centers - California, Inc., a Delaware corporation.
"Purchaser Material Adverse Effect" shall have the meaning specified in
Section 5.1.
"Proprietary Rights" shall have the meaning specified in Section 4.8.
"Registered Patients" shall mean patients who have completed and mailed
Health Care Financing Administration Form 2728 indicating that they are
registered patients of one of the Sellers' facilities.
4.
<PAGE>
"Scheduled Closing Time" shall mean 2:00 p.m. (California time) on
October 31, 1997 or such time and date as may be postponed by the mutual
agreement of the parties hereto.
"Statement Date" December 31, 1996.
"Termination Date" shall mean the later of (i) December 31, 1997 and
(ii) seven (7) days after receipt of all consents, approvals, authorizations and
waivers of all Governmental Entities required to be obtained under this
Agreement.
"Unaudited Financial Statements" shall mean the unaudited balance sheet
of the Company as of June 30, 1997, and such related statement of operations of
the Company for the period then ended prepared by the Company.
5.
<PAGE>
Exhibit 2.2
-----------
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CALIFORNIA KIDNEY CENTERS, ORANGE, LLC
and
RENAL TREATMENT CENTERS - CALIFORNIA, INC.
DATED AS OF OCTOBER 6, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1. PURCHASE AND SALE OF ASSETS.......................... 1
Section 1.1 Assets to be Transferred............................. 1
Section 1.2 Assumed Contracts.................................... 2
ARTICLE 2. ASSUMPTION OF LIABILITIES............................ 2
Section 2.1 Liabilities to be Assumed............................ 2
Section 2.2 Liabilities Not to be Assumed........................ 3
ARTICLE 3. PAYMENT OF PURCHASE PRICE; CLOSING .................. 3
Section 3.1 Purchase Price....................................... 3
Section 3.2 Payment of Purchase Price............................ 3
Section 3.3 Closing.............................................. 3
Section 3.4 Items to be Delivered at the Closing by the Company.. 3
Section 3.5 Items to be Delivered at the Closing by the Purchaser. 4
Section 3.6 Prorations........................................... 4
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........ 4
Section 4.1 Formation and Existence.............................. 4
Section 4.2 Power and Authority.................................. 5
Section 4.3 Conflicts............................................ 5
Section 4.4 Financial Statements................................. 5
Section 4.5 Title to and Condition of Assets..................... 5
Section 4.6 Subsidiaries and Partnerships........................ 6
Section 4.7 Contracts............................................ 6
Section 4.8 Proprietary Rights................................... 6
Section 4.9 Sufficiency of Purchased Assets...................... 6
Section 4.10 Compliance With Laws................................ 6
Section 4.11 Litigation.......................................... 7
Section 4.12 Labor Matters....................................... 7
Section 4.13 Liabilities......................................... 7
Section 4.14 Environmental....................................... 8
Section 4.15 Brokers' Fees....................................... 8
Section 4.16 Required Filings and Consents....................... 8
Section 4.17 Patients............................................ 8
Section 4.18 Physicians.......................................... 8
Section 4.19 Medicare Certification; State Licensure............. 8
Section 4.20 Ownership........................................... 9
Section 4.21 Insurance........................................... 9
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER...... 9
Section 5.1 Corporate Existence.................................. 9
Section 5.2 Corporate Power and Authority........................ 9
Section 5.3 Conflicts............................................ 9
Section 5.4 Litigation........................................... 10
Section 5.5 Brokers' Fees........................................ 10
i
<PAGE>
TABLE OF CONTENTS
PAGE
Section 5.6 Financing............................................ 10
Section 5.7 Compliance With Laws................................. 10
ARTICLE 6. COVENANTS OF THE COMPANY AND THE PURCHASER........... 10
Section 6.1 Company Covenants.................................... 10
Section 6.2 Purchaser Covenants.................................. 12
ARTICLE 7. CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE....... 13
Section 7.1 Accuracy of Representations and Warranties........... 13
Section 7.2 Performance.......................................... 13
Section 7.3 Governmental Consents................................ 13
Section 7.4 Third Party Consents................................. 13
Section 7.5 Additional Documents................................. 14
Section 7.6 No Injunction........................................ 14
ARTICLE 8. CONDITIONS TO OBLIGATION OF THE COMPANY TO CLOSE..... 14
Section 8.1 Accuracy of Representations and Warranties........... 14
Section 8.2 Performance.......................................... 14
Section 8.3 No Injunction........................................ 14
Section 8.4 Equityholder Approval; Attorney General Consent...... 14
Section 8.5 Governmental Consents................................ 15
Section 8.6 Third Party Consents................................. 15
Section 8.7 Additional Documents................................. 15
ARTICLE 9. TERMINATION OF AGREEMENT............................. 15
Section 9.1 Right to Terminate Agreement......................... 15
Section 9.2 Effect of Termination................................ 15
ARTICLE 10. INDEMNIFICATION AND RELATED MATTERS.................. 16
Section 10.1 Indemnification by the Company...................... 16
Section 10.2 Indemnification by the Purchaser.................... 16
Section 10.3 Expiration of Representations,
Warranties and Covenants........................... 16
Section 10.4 Deductible Amount................................... 16
Section 10.5 Maximum Liability................................... 17
Section 10.6 Knowledge of Breach................................. 17
Section 10.7 No Implied Representations.......................... 17
Section 10.8 Indemnification Claims.............................. 17
Section 10.9 Defense of Third Party Actions...................... 18
Section 10.10 Subrogation........................................ 18
Section 10.11 Exclusivity........................................ 19
Section 10.12 Accounts Receivable................................ 19
Section 10.13 Tax Matters........................................ 19
Section 10.14 Tail Insurance..................................... 19
ARTICLE 11. MISCELLANEOUS PROVISIONS............................. 19
ii
<PAGE>
TABLE OF CONTENTS
PAGE
Section 11.1 Time of Essence..................................... 19
Section 11.2 Compliance with Laws................................ 19
Section 11.3 Publicity........................................... 19
Section 11.4 Access of the Company to Books and Records.......... 20
Section 11.5 Governing Law....................................... 20
Section 11.6 Venue and Jurisdiction.............................. 20
Section 11.7 Notices............................................. 20
Section 11.8 Table of Contents and Headings...................... 21
Section 11.9 Assignment.......................................... 21
Section 11.10 Parties in Interest................................ 21
Section 11.11 Severability....................................... 21
Section 11.12 Entire Agreement................................... 21
Section 11.13 Expenses........................................... 21
Section 11.14 Waiver............................................. 22
Section 11.15 Amendments......................................... 22
Section 11.16 Counterparts....................................... 22
Section 11.17 Waiver of Bulk Transfer Laws....................... 22
Section 11.18 Post-Signing Procedure............................. 22
Section 11.19 Interpretation of Agreement........................ 22
Section 11.20 Commercially Reasonable Efforts.................... 23
iii
<PAGE>
EXHIBITS:
Exhibit A Defined Terms
Exhibit B Bill of Sale and Assignment
Exhibit C Noncompetition Agreement
Exhibit D Assumption Agreement
Exhibit E Allocation of Purchase Price
Exhibit F Statement of Adjustments
SCHEDULES:
Disclosure Schedule
Schedule 6.2(e) Assumed Employees
iv.
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
October 6, 1997, by and between CALIFORNIA KIDNEY CENTERS, ORANGE, LLC, a
California limited liability company (the "Company") and RENAL TREATMENT CENTERS
- - CALIFORNIA, INC., a Delaware corporation (the "Purchaser"). Certain
capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. The Company provides (i) outpatient dialysis services to end stage
renal disease patients ("ESRD Patients") at Medicare certified outpatient
hemodialysis facilities owned by the Company, (ii) home dialysis supplies and
support services and (iii) acute inpatient dialysis services at local hospitals
in Irvine, California under contract (collectively, the "Business").
B. The Purchaser and its Affiliates are experienced in the ownership,
management and operations of hemodialysis facilities and inpatient dialysis
services.
C. The Purchaser desires to purchase from the Company, and the Company
desires to sell to the Purchaser, substantially all of the assets of the Company
relating to the Business.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties, intending to be legally bound, agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS.
Section 1.1 Assets to be Transferred. Subject to the terms and
conditions of this Agreement, on the Closing Date the Company shall sell,
transfer, convey, assign, and deliver to the Purchaser, and the Purchaser shall
purchase and accept from the Company, all of the assets, rights, claims and
contracts (of every kind and nature, character and description, whether real,
personal or mixed, whether tangible or intangible, whether accrued, contingent
or otherwise, wherever situated) owned by the Company and used in the conduct of
the Business, except the Excluded Assets, (the "Purchased Assets"). The
Purchased Assets shall include, without limitation, the following other than
Excluded Assets:
(a) Fixtures. All fixtures and improvements to any real property in
which the Company has a leasehold interest used in the conduct of the Business.
(b) Personal Assets. All tangible personal property, including without
limitation, all equipment, materials, dialysis machines, dialysis chairs, home
dialysis equipment, computers and related hardware, telecopy and photocopy
machines and telecommunications equipment used in the conduct of the Business as
more particularly described in Part 4.5(a) of the Disclosure Schedule.
(c) Inventory. All inventory of usable goods, including all medical
supplies and other current assets used in the conduct of the Business, together
with any additions thereto
1.
<PAGE>
and subject to any reductions therefrom received, ordered or in transit by the
Company operating the Business in the ordinary course after the date hereof
through the Closing Date.
(d) Proprietary Rights. All Proprietary Rights used in the conduct of
the Business.
(e) Goodwill. All of the goodwill of the Business.
(f) Contracts. All contracts, contractual rights, and other written
agreements of the Company, including, without limitation, all payor agreements,
supply agreements, medical director agreements, license agreements, consulting
agreements, real estate leases and acute dialysis service agreements used in the
conduct of the Business (the "Assumed Contracts").
(g) Licenses; Permits. To the extent permitted by Law, all licenses,
permits, certificates and approvals of the Company used in the conduct of the
Business. The Company agrees to use commercially reasonable efforts to cause any
license, permits, certificates or approvals assignable with the consent of a
Governmental Entity to be assigned to the Purchaser before the Closing Date,
and, if not assigned or transferred by the Closing Date, to be assigned or
transferred thereafter.
Section 1.2 Assumed Contracts. To the extent that any Assumed Contract
for which assignment is provided herein is not assignable without the consent of
another party, this Agreement shall not constitute an assignment or an attempted
assignment thereof if such assignment or attempted assignment would constitute a
breach thereof. The Company and the Purchaser agree to use commercially
reasonable efforts (without any requirement on the part of the Purchaser or the
Company to pay any money or agree to any change in the terms of any such Assumed
Contract) to obtain the consent of such other party to the assignment of any
such Assumed Contract to the Purchaser in all cases in which such consent is or
may be required for such assignment. If any such consent shall not be obtained,
the Company agrees to cooperate with the Purchaser in any reasonable arrangement
designed to provide for the Purchaser the benefits intended to be assigned to
the Purchaser under the relevant Assumed Contract, including enforcement at the
cost and for the account of the Purchaser of any and all rights of the Company
against the other party thereto arising out of the breach or cancellation
thereof by such other party or otherwise. If and to the extent that such
arrangement cannot be made, the Purchaser, upon notice to the Company, shall
have no obligation pursuant to Section 2.1 or otherwise with respect to any such
Assumed Contract and any such Assumed Contract shall not be deemed to be a
Purchased Asset hereunder.
ARTICLE 2
ASSUMPTION OF LIABILITIES.
Section 2.1 Liabilities to be Assumed Subject to the terms and
conditions of this Agreement, on the Closing Date, the Purchaser shall assume
and agree to perform and discharge to the extent indicated below the following,
and only the following, specific liabilities and obligations of the Company
(collectively the "Assumed Liabilities"):
(a) Contractual Liabilities. The Company's liabilities and obligations
arising from and after the Closing Date under and pursuant to the Assumed
Contracts.
2.
<PAGE>
(b) Liabilities Under Permits and Licenses. The Company's obligations
arising from and after the Closing Date under any permits or licenses listed in
Part 4.10(b) of the Disclosure Schedule and assigned to the Purchaser at or
after the Closing.
(c) H-S-R Filing. All fees incurred by the parties in connection with
the filing under the HSR Act.
Section 2.2 Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.1, the Purchaser is not assuming any debts,
liabilities, obligations or contracts of the Company and all such debts,
liabilities, obligations and contracts shall be and remain the responsibility of
the Company.
ARTICLE 3
PAYMENT OF PURCHASE PRICE; CLOSING.
Section 3.1 Purchase Price. The purchase price (the "Purchase Price")
for the Purchased Assets shall be:
(a) the assumption of the Assumed Liabilities;
plus
(b) the sum of Six Million Seventy-Six Thousand Dollars
($6,076,000) in cash.
Section 3.2 Payment of Purchase Price. The Purchase Price shall be paid
by the Purchaser as follows:
(a) At the Closing, the Purchaser shall deliver to the Company such
documents and instruments as are reasonably required to evidence the assumption
of the Assumed Liabilities.
(b) At the Closing, the Purchaser shall deliver to the Company in cash
the sum of the amount required to be paid in Section 3.1.(b).
Section 3.3 Closing. The closing of the Acquisition (the "Closing") is
contemplated to take place on or before the Scheduled Closing Time, and shall
take place at the offices of Cooley Godward LLP, and shall occur within five (5)
days after the last to occur of, (a) approval of the Acquisition and the
transactions contemplated by the Agreement by the Office of the California
Attorney General, (b) the termination of the applicable waiting period under the
HSR Act, and (c) upon satisfaction of the conditions set forth herein, or at
such other place, time and/or date as may be jointly designated by the Company
and the Purchaser.
Section 3.4 Items to be Delivered at the Closing by the Company. At the
Closing, the Company shall deliver or cause to be delivered to the
Purchaser:
(a) Bill of Sale and Assignment, in substantially the form of Exhibit
B.
(b) Instruments of transfer in the form customarily used in commercial
transactions in the area in which the personal property is located sufficient to
transfer each personal
3.
<PAGE>
property interest owned by the Company not otherwise transferred by the Bill of
Sale referred to in Section 3.4(a).
(c) Such other instruments of transfer necessary or
appropriate to transfer to and vest in the Purchaser all of the Company
right, title and interest in and to the Purchased Assets, including all
necessary consents of third parties.
(d) The opinions, certificates, consents and other documents referred
to herein as then deliverable by the Company.
(e) Noncompetition Agreement or Agreements,
substantially in the form of Exhibit C (the "Noncompetition Agreement").
(f) The Company and the Purchaser shall complete and deliver a
statement of the allocation of purchase price in substantially the form of
Exhibit E.
Section 3.5 Items to be Delivered at the Closing by the Purchaser. At
the Closing, the Purchaser shall deliver to the Company:
(a) The cash portion of the Purchase Price.
(b) An Assumption Agreement, in substantially the
form of Exhibit D.
(c) The opinions, certificates, consents and other
documents referred to herein as then deliverable by the Purchaser.
Section 3.6 Prorations. Except as otherwise set forth herein, at and as
of the Closing Date, the Purchaser and the Company shall proportionately
allocate (i) real property taxes and assessments for each of the Company's
dialysis facilities, (ii) rents and other payments, including, without
limitation, CAM charges, under the real property leases of the Company paid in
advance of the Closing Date, (iii) utility and sewer charges paid in advance of
the Closing Date, (iv) payments under the Assumed Contracts paid in advance of
the Closing Date and (v) fees for transferable licenses and permits. All
deposits under the Company's real property leases and all utilities and other
deposits shall be remitted to the Company, or in lieu of such remittance, the
amount of such deposits shall be added to the Purchase Price and paid over to
the Company by the Purchaser. In the event the parties are unable to
proportionately allocate such amounts and other operating expenses under this
Section 3.6, whether paid in advance or payable subsequent to the Closing, the
parties agree to pro rate such amounts as of the Closing Date. On the Closing
Date, or as soon as practicable thereafter, the Company and Purchaser shall
complete and deliver a statement of adjustments in substantially the form of
Exhibit F setting forth the various allocations described in this Section 3.6.
Any party owing funds to the other party shall remit such amounts as soon as
practicable, but in any event within 30 days after demand therefor.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Subject to the limitations set forth in Article 10 and elsewhere in
this Agreement, to the best of its Knowledge, the Company hereby represents and
warrants to the Purchaser that, except as set forth on the Disclosure Schedule,
the following are accurate in all material respects:
4.
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Section 4.1 Formation and Existence. The Company is a limited liability
company duly formed, validly existing and in good standing under the laws of the
State of California. The Company has full power to carry on its business as now
being conducted and to own and operate the property and assets now owned and
operated by it, and is duly qualified to transact business and is in good
standing in each jurisdiction where the ownership of its properties or the
conduct of its business requires such qualification and the failure to be so
qualified will have a Material Adverse Effect.
Section 4.2 Power and Authority. The Company has all requisite power
and authority to execute and deliver this Agreement and each other agreement,
document, or instrument or certificate contemplated by this Agreement to be
executed by the Company in connection with the consummation of the transactions
contemplated hereby (together with this Agreement, the "Acquisition Documents"),
and to consummate the transactions contemplated hereby and thereby. This
Agreement and each of the other Acquisition Documents will be at or prior to the
Closing, duly and validly authorized, executed and delivered by the Company and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each of the other
Acquisition Documents when so executed and delivered will constitute, legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section 4.3 Conflicts. The execution and delivery by the Company of
this Agreement and the other Acquisition Documents, the consummation of the
transactions contemplated hereby or thereby or compliance by the Company with
any of the provisions hereof or thereof (i) will not violate any provision of
the partnership agreement/operating agreement of the Company; (ii) subject to
obtaining the consents referred to in Part 4.3 of the Disclosure Schedule, will
not conflict with, violate, result in the breach or termination of, or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company is a party or
by which its properties or assets are bound; (iii) will not violate any statute,
rule, regulation, order or decree of any Governmental Entity by which the
Company is bound; or (iv) will not result in the creation of any encumbrance
upon the Purchased Assets except, in case of clauses (ii) and (iii), for such
conflicts, violations, breaches or defaults as will not have a Material Adverse
Effect.
Section 4.4 Financial Statements. The Company has furnished the
Purchaser with the Financial Statements. Except as set forth therein, the
Financial Statements fairly present, in all material respects, the financial
condition and results of operations, as applicable, of the Company as of the
dates and for the periods indicated thereon prepared in accordance with GAAP;
provided, that the Unaudited Financial Statements are subject to normal
recurring year-end adjustments, none of which are reasonably expected to have a
Material Adverse Effect, and do not contain all footnotes required under GAAP.
Section 4.5 Title to and Condition of Assets.
(a) Marketable Title. The Company has good and merchantable title to
all of its tangible assets used in the operations of the Business ("Physical
Assets") or has valid leasehold interests in all leased real property and
Physical Assets listed thereon as leased by the Company, except such as shall
have been disposed of as obsolete or in the ordinary course of business since
the date of Part 4.5(a) of the Disclosure Schedule. At Closing, the Purchaser
shall receive good and merchantable title to the Purchased Assets free of any
Encumbrances except for Permitted Encumbrances.
5.
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(b) Condition. All of the Physical Assets are in good operating
condition and repair, have been maintained consistent with the standards
generally followed in the industry and applicable legal standards.
Section 4.6 Subsidiaries and Partnerships. Except as set forth on
Part 4.6 of the Disclosure Schedule, the Company has no subsidiaries or
investments in other corporations, partnerships or joint ventures.
Section 4.7 Contracts. Part 4.7(a) of the Disclosure Schedule lists all
written agreements to which the Company is a party or to which the Company, or
any of its properties is subject or by which any thereof is bound that is deemed
a Material Contract under this Agreement. As used in this Agreement, the term
"Material Contract" shall mean each written agreement that (a) after December
31, 1996 obligates the Company to pay an amount of $50,000 or more, (b) has an
unexpired term as of the date hereof in excess of one year, (c) contains a
covenant not to compete or otherwise significantly restricts the Business of the
Company, (d) provides for the extension of credit, (e) limits the ability of the
Company to conduct its Business, including as to manner or place, (f)
constitutes a collective bargaining agreement or provides for severance benefits
to any officer, director or employee, (g) represents a written agreement with a
third party payor, including but not limited to a provider agreement under a
Medical Reimbursement Program, (h) represents a written agreement with a
physician who provides service to the Company, (i) involves the providing of
acute dialysis services, (j) provides for a leasehold in real property used in
the operations of the Business, or (k) was not made in the ordinary course of
business consistent with past practice. Part 4.7(a) of the Disclosure Schedule
also identifies each written agreement of the Company in which its officers or
directors (or any person, firm or corporation affiliated with such persons) have
a material interest. Except as set forth on Part 4.7(a) of the Disclosure
Schedule, each Material Contract is a legal, valid and binding agreement, and
none of the Material Contracts is in default by its terms or has been canceled
by the other party, and the Company has not received any claim of default under
any such Material Contract, except where such failure, default or claim of
default would not have a Material Adverse Effect. Part 4.7(b) of the Disclosure
Schedule lists as of the date hereof all of the agreements and contracts of the
Company used in the operation of the Business.
Section 4.8 Proprietary Rights. Part 4.8 of the Disclosure Schedule
sets forth all patents, trademarks, trade names, service marks, copyrights, and
pending applications therefor, software (other than third-party "off-the-shelf"
software), and intellectual property and other proprietary rights, the loss of
which would reasonably be likely to have a Material Adverse Effect (the
"Proprietary Rights"). Except as disclosed on Part 4.8 of the Disclosure
Schedule, the Company is not bound by or a party to any options, licenses or
agreements of any kind with respect to the Proprietary Rights except those that
will not have a Material Adverse Effect. Except as disclosed on Part 4.8 of the
Disclosure Schedule, the Company has not been informed of any claims or suits
pending or threatened against the Company claiming an infringement by the
Company of any patents, copyrights, licenses, trademarks, service marks or trade
names of others.
Section 4.9 Sufficiency of Purchased Assets. Except as set forth on
Part 4.9 of Disclosure Schedule, the Purchased Assets, both tangible and
intangible, are (and as of the Closing will be) sufficient for the operation of
the Business of the Company as currently conducted.
Section 4.10 Compliance With Laws.
(a) Compliance. The Company is in compliance with all laws, rules,
regulations, orders, judgments, ordinances or decrees of any Governmental Entity
applicable to the
6.
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Business (collectively, "Laws") (including, without limitation, Laws in respect
of overpayments, refunds, discounts or adjustments in connection with Medical
Reimbursement Programs ("Overpayments")), the non-compliance with which would
have a Material Adverse Effect. Except as set forth in Part 4.10 of the
Disclosure Schedule the Company has not received notice of any violation or
alleged violation of, nor is the Company subject to any liability (whether
accrued, absolute, contingent, direct or indirect) for past or continuing
violation of, any Laws in connection with the Company's use of the Purchased
Assets which would have a Material Adverse Effect.
(b) Licenses and Permits.
(i) The Company has all licenses, permits, approvals, authorizations
and consents of all governmental and regulatory authorities and all
certification organizations required for the operation of the Business of the
Company as currently conducted. All such licenses, permits, approvals,
authorizations and consents are described in Part 4.10 of the Disclosure
Schedule, are in full force and effect and except as specifically indicated in
Part 4.10 of the Disclosure Schedule are assignable to the Purchaser in
accordance with the terms hereof.
(ii) Except as set forth in Part 4.10 of the Disclosure Schedule, the
Company has been in compliance with all such permits and licenses, approvals,
authorizations and consents. The Company is not the subject of any actual or
threatened investigation of disciplinary action by the California Board of
Health, the Health Care Financing Administration ("HCFA"), California Department
of Health Services or the Office of Inspector General of the United States
Department of Health and Human Services.
Section 4.11 Litigation. Except as set forth in Part 4.11 of the
Disclosure Schedule, there is no litigation, proceeding or investigation pending
or threatened, by or against the Company before any Governmental Entity that
would (i) prohibit or restrain the ability of the Company to enter into this
Agreement or to consummate the transactions contemplated hereby or (ii) have a
Material Adverse Effect.
Section 4.12 Labor Matters. Part 4.12 of the Disclosure Schedule lists
the collective bargaining agreements or other labor union contracts and employee
benefit plans applicable to employees which are employed by the Company, and the
Company is as of the date of this Agreement in full compliance with the terms
and conditions of such agreements and contracts, except where the failure to be
in compliance would not have a Material Adverse Effect. Except as set forth on
Part 4.12 of the Disclosure Schedule (i) there are no charges or allegations of
unfair labor practices pending or threatened under Federal or state labor laws;
(ii) there are no pending arbitration matters or grievance procedures under any
of the agreements listed in Part 4.12 of the Disclosure Schedule; (iii) there
are no facts or conditions existing which upon the giving of notice, or lapse of
time, will result in a breach under any collective bargaining agreement or under
any of the other foregoing agreements, which will have a Material Adverse
Effect; and (iv) there is no pending or threatened labor dispute, strike or work
stoppage which will have a Material Adverse Effect.
Section 4.13 Liabilities. Other than as set forth in Part 4.13 of the
Disclosure Schedule or as reflected in the Financial Statements, there are no
liabilities or contingent liabilities of a nature required to be reflected in
the Financial Statements or the notes thereto affecting any of the Purchased
Assets, except current liabilities incurred in the ordinary course of business
subsequent to the Statement Date which will not have a Material Adverse Effect.
7.
<PAGE>
Section 4.14 Environmental. All applicable federal, state and local
laws relating to pollution, storage, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic, hazardous or
petroleum-based substances or wastes ("Waste") into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Waste
including, without limitation, the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA"), as
amended, and their state and local counterparts, are herein collectively
referred to as the "Environmental Laws." Except as set forth in Part 4.14 of the
Disclosure Schedule, the Company is in compliance in all material respects with
all limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws. There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, official proceeding, notice or
demand letter pending or threatened against the Company relating in any way to
the Environmental Laws.
Section 4.15 Brokers' Fees. Except for the consideration payable to
Hambrecht & Quist, which shall be the sole responsibility and obligation of the
Company, neither the Company nor any of the Subsidiaries has incurred any
liability for brokerage fees, finders' fees, agents' commissions or other
similar forms of compensation in connection with this Agreement and the
transactions contemplated hereby.
Section 4.16 Required Filings and Consents. Except as set forth on Part
4.16 of the Disclosure Schedule, the execution and delivery of this Agreement by
the Company does not, and the performance of this Agreement by the Company will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign, except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, will not
prevent the Company from performing its obligations under this Agreement, and
will not have a Material Adverse Effect.
Section 4.17 Patients. Part 4.17 of the Disclosure Schedule lists, as
of the last treatment date prior to the date hereof, all Registered Patients (by
patient code) for which the Company provides either in-center treatment or home
dialysis support services. The Company makes no representation or warranty as to
which, if any, of the Registered Patients listed on Part 4.17 of the Disclosure
Schedule will continue to receive services from the Business subsequent to such
last treatment date.
Section 4.18 Physicians. Part 4.18 of the Disclosure Schedule lists all
physicians or groups of physicians admitting patients to the Company's dialysis
facilities indicating the number of Registered Patients admitted by each such
physician or group of physicians. The Company makes no representation or
warranty as to which, if any, physicians listed on Part 4.18 of the Disclosure
Schedule will continue to admit or keep patients at the Company's dialysis
facilities subsequent to the date hereof.
Section 4.19 Medicare Certification; State Licensure. Each of the
Company's dialysis facilities are certified under the conditions of coverage and
participation in the federal Medicare program as an end stage renal disease
facility providing the end stage renal disease services indicated on Part 4.19
of the Disclosure Schedule. The operating certificate issued by California
Department of Health Services and the Medicare certificates of the Company's
dialysis facilities are in full force and effect and no violation of the
conditions and standards of coverage, participation or certification exists.
8.
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Section 4.20 Ownership. Part 4.20 of the Disclosure Schedule is a
complete and accurate list of all beneficial owners of an equity interest in the
Company, and, in the case of any beneficial owner who is not a natural person,
all beneficial owners of an equity interest therein.
Section 4.21 Insurance. Except as set forth in Part 4.21 of the
Disclosure Schedule, for the five (5) year period prior to the date of this
Agreement, the Company has maintained adequate insurance for the Business and
the Purchased Assets with respect to risks normally insured against by similar
businesses.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Subject to the limitations set forth in Article 10 and elsewhere in
this Agreement, to the best of its Knowledge, the Purchaser hereby represents
and warrants to the Company that the following are accurate in all material
respects:
Section 5.1 Corporate Existence. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power to carry on its
business as now being conducted and to own and operate the property and assets
now owned and operated by it, and is duly qualified to transact business and is
in good standing in each jurisdiction where the ownership of its properties or
the conduct of its business requires such qualification and the failure to be so
qualified would have a material adverse effect on the business, operations or
financial condition of the Purchaser (a "Purchaser Material Adverse Effect").
Section 5.2 Corporate Power and Authority. The Purchaser has all
requisite corporate power and authority to execute and deliver this Agreement
and the other Acquisition Documents and to consummate the transactions
contemplated hereby and thereby. All corporate action necessary to authorize the
execution, delivery and performance of this Agreement and each of the other
Acquisition Documents has been duly taken by the Purchaser. This Agreement has
been, and each of the Acquisition Documents will be at or prior to the Closing,
duly and validly executed and delivered by the Purchaser and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each of the Acquisition Documents when so
executed and delivered will constitute, legal, valid and binding obligations of
the Purchaser, enforceable against the Purchaser in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
Section 5.3 Conflicts. Neither the execution and delivery by the
Purchaser of this Agreement and the other Acquisition Documents, the
consummation of the transactions contemplated hereby or thereby, or compliance
by the Purchaser with any of the provisions hereof or thereof will (i) violate
any provision of the certificate of incorporation or bylaws of the Purchaser;
(ii) conflict with, violate, result in the breach or termination of, or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Purchaser is a party or
by which its respective properties or assets are bound; or (iii) violate any
statute, rule, regulation, order or decree of any Governmental Entity by which
the Purchaser is bound except, in case of clauses (ii) and (iii), for such
conflicts, violations, breaches or defaults as will not have a Purchaser
Material Adverse Effect.
9.
<PAGE>
Section 5.4 Litigation. There is no litigation, proceeding or
investigation pending or, to the Purchaser's knowledge, threatened, by or
against the Purchaser before any Governmental Entity that would prohibit or
restrain the ability of the Purchaser to enter into this Agreement or to
consummate the transactions contemplated hereby.
Section 5.5 Brokers' Fees. The Purchaser has not incurred any liability
for brokerage fees, finders' fees, agents' commissions or other similar forms of
compensation in connection with this Agreement and the transactions
contemplated.
Section 5.6 Financing. The Purchaser has available all of the funds
necessary to perform its obligations hereunder and under the other Acquisition
Documents.
Section 5.7 Compliance With Laws. The Purchaser is in compliance with
all laws, regulations, orders, judgments, ordinances or decrees of any
Governmental Entity applicable to the business of the Purchaser, the
non-compliance with which would have a Purchaser Material Adverse Effect. The
Purchaser has not received notice of any violation or alleged violation of, nor
are any of them subject to any liability (whether accrued, absolute, contingent,
direct or indirect) for past or continuing violation of, any laws, regulations,
orders, judgments, ordinances or decrees of any Governmental Entity applicable
to the business of the Purchaser.
ARTICLE 6
COVENANTS OF THE COMPANY AND THE PURCHASER.
Section 6.1 Company Covenants. The Company covenants that from the date
of this Agreement until the Closing (the "Pre-Closing Period"):
(a) Conduct of Business in Ordinary Course. Except as disclosed on Part
6.1(a) of the Disclosure Schedule or as contemplated
by this Agreement or any other Acquisition Document or as may be necessary to
carry out the transactions contemplated by this Agreement or any other
Acquisition Document, the Company will carry on its business in the ordinary
course, and it shall not make or institute any unusual or novel methods of
purchase, sale, lease, management, accounting or operation that will vary
materially from those methods used by it prior to the date of this Agreement.
The Company will not sell, lease or dispose of, or agree to sell, lease or
dispose of, any of the assets or properties of the Company other than in the
ordinary course of business, or pursuant to any existing plan, agreement or
practice. The Company will carry on its business diligently and in the same
manner as heretofore and will continue to see patients and will not make or
institute any adverse changes in its method of purchase, medical treatment,
management, accounting or operation.
(b) Preservation of Business and Relationships. The Company will use
commercially reasonable efforts to preserve its business intact and to maintain
its present material relationships with patients, creditors, suppliers, lessors,
licensors, employees and others having business relationships with it or them.
(c) The Purchaser's Access to Premises and Information. The Purchaser
and its Associates shall have reasonable access during normal business hours to
all properties, books, accounts, records, contracts and documents of or relating
to the Company.
(d) Governmental Approvals. The Company shall cooperate with the
Purchaser (i) in promptly determining whether any governmental approvals,
authorizations, licenses,
10.
<PAGE>
permits, consents, or other filings are required to be or should obtained under
any federal, state or local law and (ii) in promptly applying for or submitting
any such governmental approvals, authorizations, licenses, permits, consents, or
other filings, furnishing information required in connection therewith and
seeking timely to obtain such. The Company will make any and all filings
required to be made on its part under the HSR Act.
(e) Employees; Employee Benefits Matters. The Company shall fully
compensate its employees for any accrued vacation pay through the effectiveness
of the Closing. The Company shall cause interests of Assumed Employees of the
Company in its 401(k) plan to become distributable pursuant to Internal Revenue
Code Section 401(k)(10)(A) and any amounts distributed to such employees may be
rolled over pursuant to Internal Revenue Code Section 402 to a comparable plan
maintained by the Purchaser.
(f) No Negotiation. The Company shall ensure that, during the
Pre-Closing Period, neither the Company, the Owners nor any of the Company's
Representatives directly or indirectly:
(i) solicits or encourages the initiation of any inquiry,
proposal or offer from any Person (other than the Purchaser) relating to any
Acquisition Transaction; or
(ii) subject to Section 11.3, participates in any discussions or
negotiations with, or provides any non-public information to, any Person (other
than the Purchaser) relating to any Acquisition Transaction.
(g) Medical Director Agreements. The Company will use commercially
reasonable efforts to (i) extend existing medical director agreements of the
Company for a period of seven (7) years from the date hereof; (ii) assign to
Purchaser all existing medical director agreements of the Company; and (iii)
eliminate those provisions of each such agreement as they relate to the
transfers of patients.
(h) Consents; Real Property Leases. The Company will use commercially
reasonable efforts to obtain all consents required to be obtained (from
creditors, licensors, lessors and other Persons) in connection with the
transactions contemplated hereby, including, without limitation, consents to the
assignment of the Company's acute dialysis services agreements and the Company's
real property leases. In each instance in which (i) the term of any of the
Company's real property leases does not extend for, or (ii) extension options
under such leases do not provide for, a remaining term of at least seven (7)
years from the date hereof, the Company will use commercially reasonable efforts
to extend the remaining terms of such leases for a minimum of seven (7) years
from the date hereof.
(i) Cooperation. The Company shall cooperate fully with the Purchaser,
and shall provide the Purchaser with such assistance as the Purchaser may
reasonably request, for the purpose of facilitating the performance by the
Purchaser of its obligations under this Agreement and the Acquisition Documents.
(j) Conditions. The Company shall use commercially
reasonable efforts to ensure that the conditions required to be satisfied
on the part of the Company are satisfied on a timely basis.
11.
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(k) Confidentiality. The Company shall continue to be bound by its
obligations under the Nondisclosure Agreement.
Section 6.2 Purchaser Covenants. The Purchaser covenants during the
Pre-Closing Period:
(a) Certain Filings. The Purchaser will make any and all filings
required to be made on its part under the HSR Act. The
Company and the Purchaser shall furnish each other such necessary information
and reasonable assistance as the other may request in connection with its
preparation of necessary filings or submissions under the provisions of such
laws.
(b) Sales Taxes. The Purchaser shall pay all real and personal property
transfer taxes and fees, if any, sales taxes, if any, and all use, gross receipt
or documentary taxes and other similar taxes, if any, imposed on or in
connection with the purchase, sale or transfer of the Purchased Assets to, and
the assumption of the Assumed Liabilities by, the Purchaser pursuant to this
Agreement. The Purchaser shall promptly reimburse the Company for any such taxes
and fees which, under applicable law, are imposed upon the Company.
(c) Cooperation. The Purchaser shall cooperate fully with the Company,
and shall provide the Company with such assistance as the Company may reasonably
request, for the purpose of facilitating the performance by the Company of its
obligations under this Agreement and the Acquisition Documents.
(d) Governmental Approvals. The Purchaser shall cooperate with the
Company (i) in promptly determining whether any governmental approvals,
authorizations, licenses, permits, consents, or other filings are required to be
or should obtained under any federal, state or local law and (ii) in promptly
applying for or submitting any such governmental approvals, authorizations,
licenses, permits, consents, or other filings, furnishing information required
in connection therewith and seeking timely to obtain such.
(e) Employees. The Purchaser will offer employment to those current
employees of the Company (as of the Closing Date) working in the Business whose
names and positions are set forth on Schedule 6.2(e) (the "Assumed Employees").
The Purchaser will pay the Assumed Employees at wage rates competitive in the
dialysis industry within the region in which the Company operates and will
provide benefits under standard Purchaser benefit plans which shall be
comparable to those provided to the other Purchaser employees (including
healthcare benefits which do not contain any exclusions or waiting periods for
pre-existing conditions with respect to Assumed Employees' initial enrollment).
This Section 6.2(e) in no way constitutes an employment agreement between
Purchaser and the Assumed Employees as such Assumed Employees shall be employed
by the Purchaser on an "at will" basis. The Purchaser disclaims any commitment
to employ such Assumed Employees for any specific period.
(f) Investigation. In conducting its investigation of the business,
operations and legal affairs of the Company, the Purchaser shall use its best
efforts not to interfere in any manner with the business or operations of the
Company or with the performance of any of the Company's employees.
(g) Conditions. The Purchaser shall use commercially
reasonable efforts to ensure that the conditions required to be
satisfied on the part of the Purchaser are satisfied on a timely basis.
12.
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(h) Confidentiality. The Purchaser shall continue to be bound by its
obligations under the Nondisclosure Agreement.
ARTICLE 7
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE.
The obligation of the Purchaser to purchase the Purchased Assets and
otherwise consummate the transactions that are to be consummated at the Closing
is subject to the satisfaction, as of the Scheduled Closing Time and as of the
Closing Date, of the following conditions (any of which may be waived by the
Purchaser in whole or in part):
Section 7.1 Accuracy of Representations and Warranties. The
representations and warranties of the Company set forth in Article 4 shall be
accurate in all material respects as of the Scheduled Closing Time and as of the
Closing Date, except to the extent that (a) any of such representations and
warranties refers specifically to a date other than the Scheduled Closing Time
or the Closing Date in which event such representation and warranty shall be
accurate as of such date, (b) the accuracy of any of such representations and
warranties is affected by any of the transactions contemplated by this Agreement
or the Acquisition Documents, and (c) any such representation and warranty is
modified in a Disclosure Schedule revised as of the Closing Date (which
Disclosure Schedule shall be accurate as of the Closing Date) delivered to the
Purchaser at least five calendar days prior to the Scheduled Closing Time, to
which modifications the Purchaser shall have been deemed to have consented;
provided the facts or circumstances described or referred to in such
modifications have not had nor would reasonably be expected to have a Material
Adverse Effect.
Section 7.2 Performance. The Company shall have performed, in all
material respects, all obligations required under this Agreement and the
Acquisition Documents to be performed by the Company on or before the Closing
Date.
Section 7.3 Governmental Consents. The Company shall have received all
other consents, approvals, authorizations and waivers required to be obtained by
the Company from all Governmental Entities with jurisdiction over the Company in
connection with the transactions contemplated by this Agreement and the
Acquisition Documents and the operation of the Purchased Assets, except where
failure to obtain such consents, approvals, authorizations or waivers will not
have a Material Adverse Effect.
Section 7.4 Third Party Consents. To the extent permitted by Law, the
Purchaser shall have received all other consents, approvals, authorizations and
waivers from Persons necessary to the assignment and transfer of the Purchased
Assets set forth in Schedule 7.4, except where failure to obtain such consents,
approval, authorizations or waivers will not have a Material Adverse Effect.
Notwithstanding the foregoing, (i) the Company shall have obtained the consent
to the assignment of the Company's real property leases to the Purchaser from
each of the lessors under such leases, and (ii) the Company shall have obtained
the consents necessary to (a) the assignment of all of the Company's medical
director agreements to Purchaser, (b) the extension for a period of seven (7)
years from the date hereof of the terms of the Company's medical director
agreements in a manner mutually acceptable to the Company and the Purchaser with
the following Person: Michael E. Arquilla, M.D., and (c) the elimination of
those provisions from such medical director agreements as they relate to the
transfer of patients.
13.
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Section 7.5 Additional Documents. The Purchaser shall have received the
following documents:
(a) an opinion letter from Bruce Voss, Esq., dated the Closing Date, in
a form reasonably acceptable to the Purchaser;
(b) each of the Acquisition Documents shall have been executed and
delivered by the parties thereto; and
(c) such other documents as the Purchaser may reasonably request in
good faith for the purpose of (i) evidencing the accuracy of any representation
or warranty made by the Company, (ii) evidencing the compliance by the Company
with, or the performance by the Company of, any covenant or obligation set forth
in this Agreement or any of the Acquisition Documents, (iii) evidencing the
satisfaction of any condition set forth in this Section 7, or (iv) otherwise
facilitating the consummation or performance of any of the transactions
contemplated by this Agreement or any of the Acquisition Documents.
Section 7.6 No Injunction. There shall not be in effect, at the
Closing, any injunction or other binding order of any Governmental Entity having
jurisdiction over the Purchaser that prohibits the consummation of the
transactions contemplated by this Agreement and the Acquisition Documents.
ARTICLE 8
CONDITIONS TO OBLIGATION OF THE COMPANY TO CLOSE.
The obligation of the Company to sell the Purchased Assets to the
Purchaser and otherwise consummate the transactions that are to be consummated
at the Closing is subject to the satisfaction, as of the Scheduled Closing Time
and as of the Closing Date, of the following conditions (any of which may be
waived by the Company in whole or in part):
Section 8.1 Accuracy of Representations and Warranties. The
representations and warranties of the Purchaser set forth in Section 5 shall be
accurate in all material respects as of the Scheduled Closing Time and as of the
Closing Date.
Section 8.2 Performance. The Purchaser shall have performed, in all
material respects, all obligations required by this Agreement and the
Acquisition Documents to be performed by the Purchaser on or before the Closing
Date.
Section 8.3 No Injunction. There shall not be in effect, at the
Closing, any injunction or other binding order of any Governmental Entity having
jurisdiction over the Company that prohibits the consummation of the
transactions contemplated by this Agreement and the Acquisition Documents.
Section 8.4 Equityholder Approval; Attorney General Consent. The
Company shall have received the consent and approval of the Owners to the
transactions contemplated by this Agreement and the Acquisition Documents, and
Satellite Dialysis Centers, Inc. shall have received written notification from
the Office of the California Attorney General that it does not oppose or object
to the participation by Satellite Dialysis Centers, Inc. in the Acquisition and
the transactions contemplated by the Agreement. In the case of Satellite
Dialysis Centers, Inc. (in its capacity as an Owner and not as Agent), it is
expressly understood and agreed that its consent and approval is subject to the
fiduciary obligations of its board of trustees consistent with its charitable
purpose. The parties agree that such consent and approval by the
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board of trustees and receipt of approval from the Office of the California
Attorney General may only be waived by Satellite Dialysis Centers, Inc. in its
sole and absolute discretion.
Section 8.5 Governmental Consents. To the extent permitted by Law, the
Company shall have received all other consents, approvals, authorizations and
waivers required to be obtained from all federal, state, municipal and other
governmental authorities with jurisdiction over the Company in connection with,
and as a condition to, the transactions contemplated by this Agreement and the
Acquisition Documents and the operation of the Purchased Assets, except where
failure to obtain such consents, approvals, authorizations or waivers will not
have a Material Adverse Effect.
Section 8.6 Third Party Consents. The Company shall have received all
other consents, approvals, authorizations and waivers from Persons necessary to
the assignment and transfer of the Purchased Assets, except where failure to
obtain such consents, approvals, authorizations or waivers will not have a
Material Adverse Effect.
Section 8.7 Additional Documents. The Company shall have received the
following documents:
(a) an opinion letter from Duane, Morris & Heckscher, dated the Closing
Date, in a form reasonably acceptable to the Company;
(b) each of the Acquisition Documents shall have been executed and
delivered by the parties thereto; and
(c) such other documents as the Company may reasonably request in good
faith for the purpose of (i) evidencing the accuracy of any representation or
warranty made by the Purchaser, (ii) evidencing the compliance by the Purchaser
with, or the performance by the Purchaser of, any covenant or obligation set
forth in this Agreement or any of the Acquisition Documents, (iii) evidencing
the satisfaction of any condition set forth in this Section 8, or (iv) otherwise
facilitating the consummation or performance of any of the transactions
contemplated by this Agreement or any of the Acquisition Documents.
ARTICLE 9
TERMINATION OF AGREEMENT.
Section 9.1 Right to Terminate Agreement. This Agreement may be
terminated prior to the Closing:
(a) by the mutual agreement of the Company and the Purchaser;
(b) by the Purchaser at any time after the Termination Date, if any
condition set forth in Section 7 shall not have been satisfied or waived; or
(c) by the Company at any time after the Termination Date, if any
condition set forth in Section 8 shall not have been
satisfied or waived.
Section 9.2 Effect of Termination. Upon the termination of this
Agreement pursuant to Section 9.1:
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(a) The Purchaser shall promptly cause to be returned to the Company
all documents and information obtained in connection with this Agreement and the
transactions contemplated by this Agreement and all documents and information
obtained in connection with the Purchaser's investigation of the Company's
business, operations and legal affairs, including any copies made by the
Purchaser or any of the Purchaser's Associates of any such documents or
information; and
(b) neither party hereto shall have any obligation or liability to the
other party hereto, except that (i) the Purchaser and the Company shall have the
obligations set forth in the Memorandum, and (ii) the Purchaser and the Company
shall remain bound by the provisions of the Nondisclosure Agreement, this
Section 9.2 and Article 11.
ARTICLE 10
INDEMNIFICATION AND RELATED MATTERS.
Section 10.1 Indemnification by the Company. Subject to the limitations
set forth in this Article 10 and elsewhere in this Agreement, the Company shall
indemnify the Purchaser against any Damages that the Purchaser actually incurs
during the one-year period commencing on the Closing Date which arise from,
occur as a result of or in connection with (a) any breach by the Company of any
representation, warranty or covenant of the Company set forth in this Agreement
or any of the Acquisition Documents or (b) any liability that arises from or
relates to (i) the Excluded Assets or (ii) the Excluded Liabilities.
Section 10.2 Indemnification by the Purchaser. Subject to the
limitations set forth in this Article 10 and elsewhere in this Agreement, the
Purchaser shall indemnify the Company and the Owners against any Damages that
the Company actually incurs during the one-year period commencing on the Closing
Date which arise from, occur as a result of or in connection with (a) any breach
by the Purchaser of any representation, warranty or covenant of the Purchaser
set forth in this Agreement or any of the Acquisition Documents, or (b) any
liability that arises from or relates to (i) the operation of the Purchased
Assets after the Closing, and (ii) the Assumed Liabilities.
Section 10.3 Expiration of Representations, Warranties and Covenants.
Except for the covenants set forth in Section 6.2(b) (sales taxes), the
covenants set forth in Article 6 shall terminate and expire, and shall cease to
be of any force or effect, on the Closing Date, and all liability of the parties
hereto with respect to such covenants shall thereupon be extinguished. Except as
set forth in the immediately preceding sentence, all of the representations,
warranties, covenants and obligations of the Company and the Purchaser set forth
in this Agreement and any of the Acquisition Documents shall terminate and
expire, and shall cease to be of any force or effect, at 2:00 p.m. (California
time) on the first anniversary of the Closing Date, and all liability of the
Company or the Purchaser with respect thereto (including their respective
obligations under Section 10.1 or Section 10.2, as the case may be) shall
thereupon be extinguished; provided, that if, prior to such first anniversary,
either party shall have duly delivered a Claim Notice in conformity with all of
the applicable procedures set forth in Section 10.8, then the specific
indemnification claim set forth in such Claim Notice shall survive such first
anniversary (and shall not be extinguished thereby).
Section 10.4 Deductible Amount. Without limiting the effect of any of
the other limitations set forth herein, neither the Purchaser nor the Company
shall be required to make any indemnification payment hereunder with respect to
any breach of any of their respective representations, warranties, covenants and
obligations, except to the extent that the cumulative amount of the Damages
actually incurred by the party to be indemnified as a result of all such
breaches of such representations, warranties, covenants and
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obligations actually exceeds the Deductible Amount; and each party hereto shall
only be required to pay, and shall only be liable for, the amount by which the
cumulative amount of the Damages actually incurred by the party to be
indemnified as a result of all such breaches of such representations,
warranties, covenants and obligations actually exceeds the Deductible Amount.
The "Deductible Amount" shall be an amount equal to one-half percent (0.5%) of
the Purchase Price. Notwithstanding the foregoing, claims for indemnification
relating to (i) the Excluded Liabilities (including, without limitation, taxes
of the Company described in such definition and Overpayments) and (ii) (a) the
Assumed Liabilities and (b) the operation of the Purchased Assets after the
Closing, shall not be subject to the Deductible Amount.
Section 10.5 Maximum Liability. The total amount of the payments that
either the Company or the Purchaser, as the case may be, shall be required to
make under or in connection with this Agreement or any of the Acquisition
Documents pursuant to such party's indemnification obligations shall be limited
in the aggregate to a maximum of ten percent (10%) of the Purchase Price, and
neither party's respective cumulative liability shall exceed such amount.
Section 10.6 Knowledge of Breach. For purposes of this Article 10,
neither party hereto shall be deemed to have breached any representation or
warranty if the other party had, on or prior to the Closing Date, Knowledge of
the breach of, or of any facts or circumstances constituting or resulting in a
breach of, such representation or warranty.
Section 10.7 No Implied Representations. The Purchaser and the Company
acknowledge that, except as expressly provided in Articles 4 and 5, neither
party hereto, and none of the Associates of either party hereto, has made or is
making any representations or warranties whatsoever, implied or otherwise.
Section 10.8 Indemnification Claims. If either party hereto (the
"Claimant") wishes to assert an indemnification claim against the other party
hereto, the Claimant shall deliver to the other party a written notice (a "Claim
Notice") setting forth:
(a) the specific representation, warranty or covenant alleged to have
been breached by such other party, or the specific liability to have been
incurred;
(b) a detailed description of the facts and circumstances giving rise
to the alleged breach of such representation, warranty or covenant, or
incurrence of such liability; and
(c) a detailed description of, and a reasonable estimate of the total
amount of, the Damages actually incurred or expected to be incurred by the
Claimant as a direct result of such alleged breach.
Notwithstanding anything to the contrary contained in this Agreement, Claimant
shall not be permitted to deliver any Claim Notice to the other party (and shall
not be entitled to assert any indemnification claim set forth in any Claim
Notice) unless:
(i) the indemnification claim set forth in such Claim Notice
shall have arisen from a bona fide lawsuit or other bona fide legal proceeding
that was instituted by a third party against Claimant or the Company prior to
the delivery of such Claim Notice to the other party; or
(ii) Claimant shall have provided evidence in reasonable detail
demonstrating to the other party, before the delivery of such Claim Notice, that
Claimant has therefore actually incurred, or is reasonably likely to incur,
Damages as a result of the alleged breach described in such Claim Notice.
17.
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Any Claim Notice that is delivered to the Purchaser or the Company in
contravention of the prohibition set forth in the preceding sentence shall be
deemed not to have been "duly delivered" for purposes of Section 10.3 and shall
be of no force or effect.
Section 10.9 Defense of Third Party Actions. If either party hereto
(the "Indemnitee") receives notice or otherwise obtains knowledge of any Matter
or any threatened Matter that may give rise to an indemnification claim against
the other party hereto (the "Indemnifying Party"), then the Indemnitee shall
promptly deliver to the Indemnifying Party a written notice describing such
Matter in reasonable detail; provided, that for the sole purpose of determining
whether a Matter or threatened Matter may give rise to an indemnification claim
against the Indemnifying Party within the meaning of this sentence, the
limitation set forth in Section 10.4 shall not be taken into account. The timely
delivery of such written notice by the Indemnitee to the Indemnifying Party
shall be a condition precedent to any liability on the part of the Indemnifying
Party under this Section 10 with respect to such Matter. The Indemnifying Party
shall have the right, at its option, to assume the defense of any such Matter
with its own counsel reasonably satisfactory to the Indemnitee. If the
Indemnifying Party elects to assume the defense of any such Matter, then:
(a) notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay
or otherwise indemnify the Indemnitee against any attorneys' fees or other
expenses incurred on behalf of the Indemnitee in connection with such Matter
following the Indemnifying Party's election to assume the defense of such
Matter;
(b) the Indemnitee shall make available to the Indemnifying Party all
books, records and other documents and materials that are under the direct or
indirect control of the Indemnitee and that the Indemnifying Party considers
necessary or desirable for the defense of such Matter;
(c) the Indemnitee shall fully cooperate as reasonably requested by the
Indemnifying Party in the defense of such Matter and execute such documents and
take such other actions as the Indemnifying Party may reasonably request for the
purpose of facilitating the defense of, or any settlement, compromise or
adjustment relating to, such Matter;
(d) the Indemnitee shall not admit any liability with respect to such
Matter; and
(e) the Indemnifying Party shall not settle, adjust or compromise such
Matter without the prior written consent or approval of the Indemnitee.
If the Indemnifying Party elects not to assume the defense of such Matter, then
the Indemnitee shall proceed diligently to defend such Matter with the
assistance of counsel satisfactory to the Indemnifying Party; provided, that the
Indemnitee shall not settle, adjust or compromise such Matter, or admit any
liability with respect to such Matter, without the prior written consent of the
Indemnifying Party.
Section 10.10 Subrogation. To the extent that either party hereto (the
"Indemnitor") makes or is required to make any indemnification payment to the
other party hereto (the "Indemnified Party"), the Indemnitor shall be entitled
to exercise, and shall be subrogated to, any rights and remedies (including
rights of indemnity, rights of contribution and other rights of recovery) that
the Indemnified Party or any of the Indemnified Party's Associates may have
against any other Person with respect to any Damages, circumstances or Matter to
which such indemnification payment is directly or indirectly related. The
Indemnified Party shall permit the Indemnitor to use the name of the Indemnified
Party and the names of
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the Indemnified Party's Associates in any transaction or in any proceeding or
other Matter involving any of such rights or remedies; and the Indemnified Party
shall take such actions as the Indemnitor may reasonably request for the purpose
of enabling the Indemnitor to perfect or exercise the Indemnitor's right of
subrogation hereunder.
Section 10.11 Exclusivity. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article 10 shall be the sole and exclusive right and remedy exercisable by such
party with respect to any breach by the other party hereto of any
representation, warranty, covenant or obligation. Without limiting the
generality of the foregoing, no Indemnitee shall have the right to withhold and
deduct any sum that may be owed to such Indemnitee from any amount otherwise
payable by such Indemnitee to the Indemnifying Party.
Section 10.12 Accounts Receivable. In the event the Company receives
any payment that relates to accounts receivable generated from services rendered
by the Business after the Closing Date, the Company shall promptly transmit
these funds to the Purchaser. In the event the Purchaser receives any payment
that related to accounts receivable generated from services rendered by the
Business on or before the Closing Date, the Purchaser shall promptly transmit
these funds to the Company.
Section 10.13 Tax Matters. Each party will provide the other such
assistance as may reasonably be requested in connection with the preparation of
any reimbursement-related audit, any tax return, any audit or other examination
by any taxing authority, or any judicial or administrative proceedings relating
to liability for taxes, and each will retain and provide the other with any
records or information which may be relevant to such return, audit or
examination, proceedings or determination. The party requesting assistance
hereunder shall reimburse the other party for reasonable expenses incurred in
providing such assistance. Any information obtained pursuant to this Section or
pursuant to any other Section hereof providing for the sharing of information or
the review of any tax return or other schedule relating to taxes shall be kept
confidential by the Parties and not disclosed to any Person.
Section 10.14 Tail Insurance. The Company shall use commercially
reasonable efforts to maintain in force and effect for five years from the
Closing Date the Tail Insurance Coverage relating back five years from the
Closing Date. The "Tail Insurance Coverage" shall be health care services
professional liability coverage with The Doctors Company or such other
financially sound and reputable insurance company or association selected by the
Company with limits of liability of $1,000,000 per loss.
ARTICLE 11
MISCELLANEOUS PROVISIONS.
Section 11.1 Time of Essence. Time is of the essence with respect to
this Agreement.
Section 11.2 Compliance with Laws. Each party shall execute such
agreements and other documents, and shall take such other actions, as the other
may reasonably request (prior to, at or after the Closing) for the purpose of
ensuring that the transactions contemplated by this Agreement are carried out in
full compliance with the provisions of all applicable laws and regulations.
Section 11.3 Publicity. No press release, notice to any third party or
other publicity concerning the transactions contemplated by this Agreement or
any of the Acquisition Documents shall be issued, given or otherwise
disseminated without the prior written consent of the Agent and the Purchaser,
which will not be unreasonably withheld or delayed; provided, that (a) without
the approval of the Purchaser, the Agent
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shall be entitled to make disclosures regarding the transactions contemplated
hereby (i) to the Office of the California Attorney General and (ii) as may be
necessary to effect the transactions contemplated hereby, and (b) either party
may make such disclosures as may be contemplated herein or as may be and to the
extent required by applicable law.
Section 11.4 Access of the Company to Books and Records. At all times
after the Closing Date, the Purchaser shall give the Company and the Company's
Associates reasonable access to the books and records of the Company to inspect
and copy such books and records.
Section 11.5 Governing Law. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflicts of law).
Section 11.6 Venue and Jurisdiction. If any legal proceeding or other
legal action relating to this Agreement is brought or otherwise initiated, the
venue therefor shall be in San Francisco, California, which shall be deemed to
be a convenient forum. The Purchaser and the Company hereby expressly and
irrevocably consent and submit to the jurisdiction of the courts in San
Francisco, California.
Section 11.7 Notices. All notices, consents and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given and duly delivered when (i) delivered by hand or (ii) when received by the
addressee, if sent by certified mail, return receipt requested, by Express Mail,
Federal Express or other express delivery service (receipt requested), in each
case, at the appropriate addresses as set forth below (or to such other address
as a party may designate as to itself by notice to the other parties):
if to the Purchaser:
Renal Treatment Centers - California, Inc.
1180 W. Swedesford Road, Bldg. 2, Ste. 300
Berwyn, PA 19312
Attention: Thomas J. Karl
Vice President, Secretary and General Counsel
with a copy (not constituting notice) to:
Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, PA 19103
Attention: Jeffrey S. Henderson, Esq.
if to the Company:
California Kidney Centers, Orange, LLC
1310 W. Steward Drive, Suite 206
Orange, CA 92868
Attention: Michael Arquilla, M.D.
20.
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with a copy (not constituting notice) to:
Micro Optics
23 Mauchly, Suite 100
Irvine, CA 92618
Bruce Voss, Esq.
Satellite Dialysis Centers, Inc.
345 Convention Way, Suite B
Redwood City, CA 94063-1402
Attention: Marc Branson
Chief Financial Officer
and
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Brian C. Cunningham
Section 11.8 Table of Contents and Headings. The table of contents of
this Agreement and the underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
Section 11.9 Assignment. Neither party hereto may assign any of its
rights or delegate any of its obligations under this Agreement to any other
Person without the prior written consent of the other party hereto; provided,
that the Company may, prior to or after the Closing, assign to any Person its
right to receive all or any portion of the amount payable to the Company under
Section 3.1.
Section 11.10 Parties in Interest. Nothing in this Agreement is
intended to provide any rights or remedies to any Person (including any employee
or creditor of the Company) other than the parties hereto.
Section 11.11 Severability. In the event that any provision of this
Agreement, or the application of such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
Section 11.12 Entire Agreement. This Agreement, the Memorandum, the
other Acquisition Documents and the Nondisclosure Agreement set forth the entire
understanding of the Purchaser and the Company and supersede all other
agreements and understandings between the Purchaser and the Company relating to
the subject matter hereof and thereof.
Section 11.13 Expenses. Each of the parties shall be responsible for
and pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement.
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Section 11.14 Waiver. No failure on the part of either party hereto to
exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of either party hereto in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a waiver thereof; and
no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy.
Section 11.15 Amendments. This Agreement may not be amended, modified,
altered or supplemented except by means of a written instrument executed on
behalf of both the Purchaser and the Company.
Section 11.16 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be as original and all of
which, when taken together, will be deemed to constitute one and the same.
Section 11.17 Waiver of Bulk Transfer Laws. To the extent applicable,
the Purchaser and the Company waive compliance with the provisions of Division 6
of the Uniform Commercial Code of the State of California and the provisions of
any other applicable laws relating to bulk transfers of assets.
Section 11.18 Post-Signing Procedure. The parties are executing this
agreement in advance of finalizing the terms of one or more Exhibits, prior to
the delivery of certain parts of the Disclosure Schedule that may qualify the
representations and warranties herein set forth, and prior to the Purchaser's
completion and analysis of its due diligence investigation.
(a) The Company shall be responsible for preparing all Parts of the
Disclosure Schedule other than as specifically agreed. The Company shall deliver
a proposed Disclosure Schedule for review by the Purchaser within seven (7) days
of the date of this Agreement. The Disclosure Schedule shall be deemed accepted
by the Purchaser within five (5) business days after delivery thereof unless the
Purchaser notifies the Company of any objections. If the Purchaser determines in
good faith that the Disclosure Schedule reveals information that had not been
previously known by or disclosed to the Purchaser, and would have in the
Purchaser's reasonable judgment a Material Adverse Effect, then the Purchaser
will immediately notify the Company of such information (but within such
five-day period), and the parties shall in good faith use commercially
reasonable efforts to eliminate, waive or resolve any problem. If,
notwithstanding such efforts, such problem cannot be eliminated, waived or
resolved, either the Company or the Purchaser may elect to terminate this
Agreement pursuant to the terms of Section 9.1(b) or 9.1(c), as the case may be.
(b) The Purchaser shall promptly complete its final due diligence
investigation of the Company by October 5, 1997.
Section 11.19 Interpretation of Agreement.
(a) Each party hereto acknowledges that it has participated in the
drafting of this Agreement, and any applicable rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in connection with the construction or interpretation of this
Agreement.
(b) Whenever required by the context hereof, the
singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; and the neuter gender
shall include the masculine and feminine genders.
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(c) As used in this Agreement, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, and shall be
deemed to be followed by the words "without limitation."
(d) References herein to "Articles," "Sections" and "Exhibits" are
intended to refer to Sections of and Exhibits to this Agreement.
Section 11.20 Commercially Reasonable Efforts. Throughout this
Agreement and the other Acquisition Documents, subject to Section 1.2,
"commercially reasonable efforts" of a Person shall mean the efforts that a
prudent Person using ordinary business practice and judgment consistent with
industry practice and desiring to achieve a particular result would use in order
to obtain such result, which efforts may include, among other things, the
expenditure of funds; provided, that such efforts shall not require a Person to
(i) expend funds other than for the payment of reasonable and customary costs
and expenses of employees, legal counsel, consultants, representatives or agents
of such Person or (ii) institute litigation or arbitration proceedings as a part
of its efforts.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
CALIFORNIA KIDNEY CENTERS, ORANGE, LLC
By: California Kidney Centers
By: Kidney Healthcare Centers, Inc.
By: /s/ Mark Burke
-------------------------
Name: Mark Burke
Title: President
RENAL TREATMENT CENTERS-CALIFORNIA, INC.
By: /s/ Robert L. Mayer, Jr.
-----------------------------------
Name: Robert L. Mayer, Jr.
Title: Chairman, President and Chief
Executive Officer
ASSET PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
DEFINED TERMS
For purposes of this Agreement (including the Disclosure Schedule):
"Agreement" shall mean the Asset Purchase Agreement to which this
Exhibit A is attached.
"Acquisition" means the acquisition by the Purchaser of the Purchased
Assets.
"Acquisition Documents" shall have meaning specified in Section 4.2.
"Acquisition Transaction" shall mean any transaction involving:
(a) the sale or other disposition of all or any portion of the
Company's business or assets (other than in the ordinary course of business);
(b) the issuance, sale or other disposition of any Equity Securities of
the Company; or
(c) any merger, consolidation, business combination, share exchange,
reorganization or similar transaction involving the Company.
"Affiliate" means a Person that directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with, specified Person.
"Agent" shall have the meaning specified in the Memorandum.
"Associates" of a Person shall include:
(a) such Person's affiliates, stockholders, directors, officers,
employees, agents, attorneys, accountants and representatives; and
(b) all stockholders, directors, officers, employees, agents,
attorneys, accountants and representatives of each of such Person's affiliates.
"Assumed Contracts" shall have the meaning specified in Section 1.1(f).
"Assumed Liabilities" shall have the meaning specified in Section 2.1.
"Audited Financial Statements" shall mean the audited balance sheet of
the Company as of December 31, 1996, and such related audited statement of
operations of the Company for the period then ended, including the notes
thereto, accompanied by the report of Frank Rimmerman & Co. thereon.
"Business" shall have the meaning specified in the Recitals.
"Claim Notice" shall have the meaning specified in Section 10.8.
"Claimant" shall have the meaning specified in Section 10.8.
1.
<PAGE>
"Closing" shall have the meaning specified in Section 3.3.
"Closing Date" shall mean the time and date as of which the Closing
actually takes place.
"Company" shall mean California Kidney Centers, Orange, LLC, a
California limited liability company.
"Damages" shall mean out-of-pocket losses and damages; provided, that
for purposes of computing the amount of Damages incurred by any Person, there
shall be deducted an amount equal to the amount of any insurance proceeds,
indemnification payments, contribution payments or reimbursements directly or
indirectly received by such Person or any of such Person's affiliates in
connection with such Damages or the circumstances giving rise thereto.
"Deductible Amount" shall have the meaning specified in Section 10.4.
"Disclosure Schedule" shall mean that certain Disclosure Schedule
delivered together with the Agreement, which shall be arranged in parts to
correspond with the sections and subsections of the Agreement and each
disclosure set forth therein shall be deemed to modify each and every
representation, warranty and covenant of the Company set forth in the Agreement
as it pertains to such representation, warranty or covenant. The contents of
each of the contracts and other documents referred to in the Disclosure Schedule
shall be deemed to be incorporated and referred to in the Disclosure Schedule as
though set forth in full therein.
"Encumbrance" shall mean any encumbrance, lien, mortgage, pledge, lease
or noncontingent charge.
"Equity Securities" means any capital stock or other equity interest,
or securities convertible into or exchangeable for capital stock or other equity
interest, or any other rights, warrants or options to acquire any of the
foregoing securities.
"ESRD Patients" has the meaning specified in the Recitals.
"Excluded Assets" shall mean (i) all of the Company's cash balances,
cash equivalents and accounts receivable, (ii) the Company's corporate franchise
and related indicia, (iii) the consideration delivered to the Company pursuant
to and all rights arising under this Agreement or any of the Acquisition
Documents, (iv) the Company's tax returns, refunds and tax records, (v) all
insurance policies and surety bonds of the Company, (vi) all items of prepaid
expenses, deposits and other similar sums to which the Company may become
entitled to a refund, (vii) all payroll processing agreements, (viii) all
vending service agreements, including, without limitation, the Cold Drink
Equipment Agreement entered into by Dialysis Systems, LLC, and (ix) any and all
administrative service agreements between the Company and Satellite Dialysis
Centers, Inc.
"Excluded Liabilities" shall mean (i) any and all of the Company's
Closing transaction fees and expenses, including, without limitation, the
Company's financial advisory, accounting and legal fees and expenses, (ii)
subject to Sections 6.1(e) and 6.2(e), obligations relating to the Company's
employees, including, without limitation, accrued salaries and wages,
obligations under the Company's employee benefit plans, and retention bonuses
and severance obligations payable to employees of the Company, through the
Closing Date as a result of the transactions contemplated by this Agreement and
the other Acquisition Documents, (iii) any and all federal and state income
taxes payable by the Company as a result of the transactions contemplated by
this Agreement and the Acquisition Documents, (iv) the
2.
<PAGE>
Company's federal, state and local taxes for any period prior to the Closing
accrued through the Closing Date, (v) any liability arising out of or relating
to overpayments, malpractice, fraud and violations of applicable federal and
state fraud and abuse, anti-kickback and Stark laws occurring prior to Closing
Date, or (vi) any liability or obligation of the Company that is not expressly
assumed by the Purchaser herein.
"Financial Statements" shall mean the Audited Financial Statements and
the Unaudited Financial Statements.
"GAAP" shall mean generally accepted accounting principles, applied on
a basis consistent with the basis on which the applicable financial statements
were prepared.
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government or any quasi-governmental authority
or self-regulatory organization (such as the New York Stock Exchange, Inc.),
whether federal, state or local.
"HCFA" shall have the meaning specified in Section 4.10(b).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and the rules promulgated thereunder.
"Indemnified Party" shall have the meaning specified in Section 10.10.
"Indemnifying Party" shall have the meaning specified in Section 10.9.
"Indemnitee" shall have the meaning specified in Section 10.9.
"Indemnitor" shall have the meaning specified in Section 10.10.
"Knowledge," to the best knowledge of, to which a Person is aware,
known to a Person, or any variation thereof shall mean the actual knowledge of
such Person without having made independent investigation in connection with
this Agreement. For the Company, Knowledge shall be the actual knowledge of Mark
Burke, Marc Branson and Michael E. Arquilla, M.D..
"Laws" shall have the meaning specified in Section 4.10(a).
"Material Adverse Effect" shall mean any occurrence, event or
condition, either individually or in the aggregate, having a material adverse
effect on the business operations or financial condition of the Company, or the
Purchased Assets, taken together as a whole.
"Material Contract" shall have the meaning specified in Section 4.7.
"Matter" shall mean any claim, demand, dispute, action, suit,
examination, audit, proceeding, investigation, inquiry or other similar matter.
"Medicaid" means that means-tested entitlement program under Title XIX
of the Social Security Act that provides federal grants to states for medical
insurance based on specific eligibility criteria, as interpreted by the
appropriate Governmental Entities prior to the date hereof.
3.
<PAGE>
"Medical Reimbursement Programs" means the Medicare, Medicaid programs
and any other health care program operated by or serviced in whole or in part by
any federal, state or local government, each as interpreted by the appropriate
Governmental Entities prior to date hereof.
"Medicare" means that government-sponsored entitlement program under
Title XVIII of the Social Security Act that provides for a health insurance
program for eligible elderly and disabled individuals, as interpreted by the
appropriate Governmental Entities prior to the date hereof.
"Memorandum" means that certain Memorandum of Understanding of even
date herewith by and among the Purchaser, California Kidney Centers, California
Kidney Centers, Inpatient Services, LLC, California Kidney Centers, Orange, LLC,
Dialysis Systems, Inpatient Services, LLC, Dialysis Systems, LLC and Satellite
Dialysis Centers, Inc., solely as agent for the selling parties thereto.
"Noncompetition Agreement" shall have the meaning specified in
Section 3.4(e).
"Nondisclosure Agreement" shall mean that certain Nondisclosure
Agreement, dated May 27, 1997, between the Purchaser and Satellite Dialysis
Centers, Inc., on behalf of itself and as agent for the Company and the Owners.
"Overpayments" shall have the meaning specified in Section 4.10(a).
"Owner" shall mean each holder of Equity Securities of the Company.
"Permitted Encumbrances" shall mean (i) those encumbrances resulting
from taxes that have not yet become due and delinquent, (ii) minor encumbrances
that do not materially detract from the value of the real property interests
subject thereto or materially impair their operations, (iii) zoning laws and
other use restrictions of public record, (iv) encumbrances that arise or have
otherwise arisen in the ordinary course of business, (v) restrictions arising
under all Laws, and (vi) those encumbrances described in Part 4.5 of the
Disclosure Schedule.
"Person" shall mean any individual, corporation, association, general
partnership, limited partnership, venture, trust, association, firm,
organization, company, business, entity, union, society, government (or
political subdivision thereof) or governmental agency, authority or
instrumentality.
"Physical Assets" shall have the meaning specified in Section 4.5.
"Purchase Price" shall have the meaning specified in Section 3.1.
"Purchased Assets" shall have the meaning specified in the Section 1.1.
"Purchaser" shall mean Renal Treatment Centers - West, Inc., a Delaware
corporation/Renal Treatment Centers - California, Inc., a Delaware corporation.
"Purchaser Material Adverse Effect" shall have the meaning specified in
Section 5.1.
"Proprietary Rights" shall have the meaning specified in Section 4.8.
"Registered Patients" shall mean patients who have completed and mailed
Health Care Financing Administration Form 2728 indicating that they are
registered patients of one of the Sellers' facilities.
4.
<PAGE>
"Scheduled Closing Time" shall mean 2:00 p.m. (California time) on
October 31, 1997 or such time and date as may be postponed by the mutual
agreement of the parties hereto.
"Statement Date" December 31, 1996.
"Termination Date" shall mean the later of (i) December 31, 1997 and
(ii) seven (7) days after receipt of all consents, approvals, authorizations and
waivers of all Governmental Entities required to be obtained under this
Agreement.
"Unaudited Financial Statements" shall mean the unaudited balance sheet
of the Company as of June 30, 1997, and such related statement of operations of
the Company for the period then ended prepared by the Company.
5.
<PAGE>
EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CALIFORNIA KIDNEY CENTERS, INPATIENT SERVICES, LLC
and
RENAL TREATMENT CENTERS - CALIFORNIA, INC.
DATED AS OF OCTOBER 6, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1. PURCHASE AND SALE OF ASSETS............................1
Section 1.1 Assets to be Transferred...............................1
Section 1.2 Assumed Contracts......................................2
ARTICLE 2. ASSUMPTION OF LIABILITIES..............................2
Section 2.1 Liabilities to be Assumed..............................2
Section 2.2 Liabilities Not to be Assumed..........................3
ARTICLE 3. PAYMENT OF PURCHASE PRICE; CLOSING ....................3
Section 3.1 Purchase Price.........................................3
Section 3.2 Payment of Purchase Price..............................3
Section 3.3 Closing................................................3
Section 3.4 Items to be Delivered at the Closing by the Company....3
Section 3.5 Items to be Delivered at the Closing by the Purchaser..4
Section 3.6 Prorations.............................................4
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........4
Section 4.1 Formation and Existence................................4
Section 4.2 Power and Authority....................................5
Section 4.3 Conflicts..............................................5
Section 4.4 Financial Statements...................................5
Section 4.5 Title to and Condition of Assets.......................5
Section 4.6 Subsidiaries and Partnerships..........................6
Section 4.7 Contracts..............................................6
Section 4.8 Proprietary Rights.....................................6
Section 4.9 Sufficiency of Purchased Assets........................6
Section 4.10 Compliance With Laws..................................6
Section 4.11 Litigation............................................7
Section 4.12 Labor Matters.........................................7
Section 4.13 Liabilities...........................................7
Section 4.14 Environmental.........................................8
Section 4.15 Brokers' Fees.........................................8
Section 4.16 Required Filings and Consents.........................8
Section 4.17 Patients..............................................8
Section 4.18 Physicians............................................8
Section 4.19 Medicare Certification; State Licensure...............8
Section 4.20 Ownership.............................................9
Section 4.21 Insurance.............................................9
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER........9
Section 5.1 Corporate Existence....................................9
Section 5.2 Corporate Power and Authority..........................9
Section 5.3 Conflicts..............................................9
Section 5.4 Litigation............................................10
Section 5.5 Brokers' Fees.........................................10
i
<PAGE>
TABLE OF CONTENTS
PAGE
Section 5.6 Financing............................................10
Section 5.7 Compliance With Laws.................................10
ARTICLE 6. COVENANTS OF THE COMPANY AND THE PURCHASER.............10
Section 6.1 Company Covenants....................................10
Section 6.2 Purchaser Covenants..................................12
ARTICLE 7. CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE.........13
Section 7.1 Accuracy of Representations and Warranties...........13
Section 7.2 Performance..........................................13
Section 7.3 Governmental Consents................................13
Section 7.4 Third Party Consents.................................13
Section 7.5 Additional Documents.................................14
Section 7.6 No Injunction........................................14
ARTICLE 8. CONDITIONS TO OBLIGATION OF THE COMPANY TO CLOSE.......14
Section 8.1 Accuracy of Representations and Warranties...........14
Section 8.2 Performance..........................................14
Section 8.3 No Injunction........................................14
Section 8.4 Equityholder Approval; Attorney General Consent......14
Section 8.5 Governmental Consents................................15
Section 8.6 Third Party Consents.................................15
Section 8.7 Additional Documents.................................15
ARTICLE 9. TERMINATION OF AGREEMENT............................. .15
Section 9.1 Right to Terminate Agreement.........................15
Section 9.2 Effect of Termination................................15
ARTICLE 10. INDEMNIFICATION AND RELATED MATTERS....................16
Section 10.1 Indemnification by the Company.......................16
Section 10.2 Indemnification by the Purchaser.....................16
Section 10.3 Expiration of Representations, Warranties and
Covenants..........................................16
Section 10.4 Deductible Amount....................................16
Section 10.5 Maximum Liability....................................17
Section 10.6 Knowledge of Breach..................................17
Section 10.7 No Implied Representations...........................17
Section 10.8 Indemnification Claims...............................17
Section 10.9 Defense of Third Party Actions.......................18
Section 10.10 Subrogation..........................................18
Section 10.11 Exclusivity..........................................19
Section 10.12 Accounts Receivable..................................19
Section 10.13 Tax Matters..........................................19
Section 10.14 Tail Insurance.......................................19
ARTICLE 11. MISCELLANEOUS PROVISIONS...............................19
ii
<PAGE>
TABLE OF CONTENTS
PAGE
Section 11.1 Time of Essence.......................................19
Section 11.2 Compliance with Laws..................................19
Section 11.3 Publicity.............................................19
Section 11.4 Access of the Company to Books and Records............20
Section 11.5 Governing Law.........................................20
Section 11.6 Venue and Jurisdiction................................20
Section 11.7 Notices...............................................20
Section 11.8 Table of Contents and Headings........................21
Section 11.9 Assignment............................................21
Section 11.10 Parties in Interest..................................21
Section 11.11 Severability.........................................21
Section 11.12 Entire Agreement.....................................21
Section 11.13 Expenses.............................................21
Section 11.14 Waiver...............................................22
Section 11.15 Amendments...........................................22
Section 11.16 Counterparts.........................................22
Section 11.17 Waiver of Bulk Transfer Laws.........................22
Section 11.18 Post-Signing Procedure...............................22
Section 11.19 Interpretation of Agreement..........................22
Section 11.20 Commercially Reasonable Efforts......................23
iii
<PAGE>
EXHIBITS:
Exhibit A Defined Terms
Exhibit B Bill of Sale and Assignment
Exhibit C Noncompetition Agreement
Exhibit D Assumption Agreement
Exhibit E Allocation of Purchase Price
Exhibit F Statement of Adjustments
SCHEDULES:
Disclosure Schedule
Schedule 6.2(e) Assumed Employees
iv.
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
October 6, 1997, by and between CALIFORNIA KIDNEY CENTERS, INPATIENT SERVICES,
LLC, a California limited liability company (the "Company") and RENAL TREATMENT
CENTERS - CALIFORNIA, INC., a Delaware corporation (the "Purchaser"). Certain
capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. The Company provides (i) outpatient dialysis services to end stage
renal disease patients ("ESRD Patients") at Medicare certified outpatient
hemodialysis facilities owned by the Company, (ii) home dialysis supplies and
support services and (iii) acute inpatient dialysis services at local hospitals
in Irvine, California under contract (collectively, the "Business").
B. The Purchaser and its Affiliates are experienced in the ownership,
management and operations of hemodialysis facilities and inpatient dialysis
services.
C. The Purchaser desires to purchase from the Company, and the Company
desires to sell to the Purchaser, substantially all of the assets of the Company
relating to the Business.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties, intending to be legally bound, agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS.
Section 1.1 Assets to be Transferred. Subject to the terms and
conditions of this Agreement, on the Closing Date the Company shall sell,
transfer, convey, assign, and deliver to the Purchaser, and the Purchaser shall
purchase and accept from the Company, all of the assets, rights, claims and
contracts (of every kind and nature, character and description, whether real,
personal or mixed, whether tangible or intangible, whether accrued, contingent
or otherwise, wherever situated) owned by the Company and used in the conduct of
the Business, except the Excluded Assets, (the "Purchased Assets"). The
Purchased Assets shall include, without limitation, the following other than
Excluded Assets:
(a) Fixtures. All fixtures and improvements to any real property
in which the Company has a leasehold interest used in the conduct of the
Business.
(b) Personal Assets. All tangible personal property, including
without limitation, all equipment, materials, dialysis machines, dialysis
chairs, home dialysis equipment, computers and related hardware, telecopy and
photocopy machines and telecommunications equipment used in the conduct of the
Business as more particularly described in Part 4.5(a) of the Disclosure
Schedule.
(c) Inventory. All inventory of usable goods, including all
medical supplies and other current assets used in the conduct of the Business,
together with any additions thereto
1.
<PAGE>
and subject to any reductions therefrom received, ordered or in transit by the
Company operating the Business in the ordinary course after the date hereof
through the Closing Date.
(d) Proprietary Rights. All Proprietary Rights used in the
conduct of the Business.
(e) Goodwill. All of the goodwill of the Business.
(f) Contracts. All contracts, contractual rights, and other
written agreements of the Company, including, without limitation, all payor
agreements, supply agreements, medical director agreements, license agreements,
consulting agreements, real estate leases and acute dialysis service agreements
used in the conduct of the Business (the "Assumed Contracts").
(g) Licenses; Permits. To the extent permitted by Law, all
licenses, permits, certificates and approvals of the Company used in the conduct
of the Business. The Company agrees to use commercially reasonable efforts to
cause any license, permits, certificates or approvals assignable with the
consent of a Governmental Entity to be assigned to the Purchaser before the
Closing Date, and, if not assigned or transferred by the Closing Date, to be
assigned or transferred thereafter.
Section 1.2 Assumed Contracts. To the extent that any Assumed Contract
for which assignment is provided herein is not assignable without the consent of
another party, this Agreement shall not constitute an assignment or an attempted
assignment thereof if such assignment or attempted assignment would constitute a
breach thereof. The Company and the Purchaser agree to use commercially
reasonable efforts (without any requirement on the part of the Purchaser or the
Company to pay any money or agree to any change in the terms of any such Assumed
Contract) to obtain the consent of such other party to the assignment of any
such Assumed Contract to the Purchaser in all cases in which such consent is or
may be required for such assignment. If any such consent shall not be obtained,
the Company agrees to cooperate with the Purchaser in any reasonable arrangement
designed to provide for the Purchaser the benefits intended to be assigned to
the Purchaser under the relevant Assumed Contract, including enforcement at the
cost and for the account of the Purchaser of any and all rights of the Company
against the other party thereto arising out of the breach or cancellation
thereof by such other party or otherwise. If and to the extent that such
arrangement cannot be made, the Purchaser, upon notice to the Company, shall
have no obligation pursuant to Section 2.1 or otherwise with respect to any such
Assumed Contract and any such Assumed Contract shall not be deemed to be a
Purchased Asset hereunder.
ARTICLE 2
ASSUMPTION OF LIABILITIES.
Section 2.1 Liabilities to be Assumed. Subject to the terms and
conditions of this Agreement, on the Closing Date, the Purchaser shall assume
and agree to perform and discharge to the extent indicated below the following,
and only the following, specific liabilities and obligations of the Company
(collectively the "Assumed Liabilities"):
(a) Contractual Liabilities. The Company's liabilities and
obligations arising from and after the Closing Date under and pursuant to the
Assumed Contracts.
2.
<PAGE>
(b) Liabilities Under Permits and Licenses. The Company's
obligations arising from and after the Closing Date under any permits or
licenses listed in Part 4.10(b) of the Disclosure Schedule and assigned to the
Purchaser at or after the Closing.
(c) H-S-R Filing. All fees incurred by the parties in connection
with the filing under the HSR Act.
Section 2.2 Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.1, the Purchaser is not assuming any debts,
liabilities, obligations or contracts of the Company and all such debts,
liabilities, obligations and contracts shall be and remain the responsibility of
the Company.
ARTICLE 3
PAYMENT OF PURCHASE PRICE; CLOSING.
Section 3.1 Purchase Price. The purchase price (the "Purchase Price")
for the Purchased Assets shall be:
(a) the assumption of the Assumed Liabilities;
plus
(b) the sum of Two Million Six Hundred Ten Thousand Dollars
($2,610,000) in cash.
Section 3.2 Payment of Purchase Price. The Purchase Price shall be paid
by the Purchaser as follows:
(a) At the Closing, the Purchaser shall deliver to the Company
such documents and instruments as are reasonably required to evidence the
assumption of the Assumed Liabilities.
(b) At the Closing, the Purchaser shall deliver to the Company in
cash the sum of the amount required to be paid in Section 3.1.(b).
Section 3.3 Closing. The closing of the Acquisition (the "Closing") is
contemplated to take place on or before the Scheduled Closing Time, and shall
take place at the offices of Cooley Godward LLP, and shall occur within five (5)
days after the last to occur of, (a) approval of the Acquisition and the
transactions contemplated by the Agreement by the Office of the California
Attorney General, (b) the termination of the applicable waiting period under the
HSR Act, and (c) upon satisfaction of the conditions set forth herein, or at
such other place, time and/or date as may be jointly designated by the Company
and the Purchaser.
Section 3.4 Items to be Delivered at the Closing by the Company. At the
Closing, the Company shall deliver or cause to be delivered to the Purchaser:
(a) Bill of Sale and Assignment, in substantially the form of
Exhibit B.
(b) Instruments of transfer in the form customarily used in
commercial transactions in the area in which the personal
3.
<PAGE>
property is located sufficient to transfer each personal property interest owned
by the Company not otherwise transferred by the Bill of Sale referred to in
Section 3.4(a).
(c) Such other instruments of transfer necessary or appropriate to
transfer to and vest in the Purchaser all of the Company right, title and
interest in and to the Purchased Assets, including all necessary consents of
third parties.
(d) The opinions, certificates, consents and other documents
referred to herein as then deliverable by the Company.
(e) Noncompetition Agreement or Agreements, substantially in the
form of Exhibit C (the "Noncompetition Agreement").
(f) The Company and the Purchaser shall complete and
deliver a statement of the allocation of purchase price in substantially
the form of Exhibit E.
Section 3.5 Items to be Delivered at the Closing by the Purchaser. At
the Closing, the Purchaser shall deliver to the Company:
(a) The cash portion of the Purchase Price.
(b) An Assumption Agreement, in substantially the form of
Exhibit D.
(c) The opinions, certificates, consents and other documents
referred to herein as then deliverable by the Purchaser.
Section 3.6 Prorations. Except as otherwise set forth herein, at and as
of the Closing Date, the Purchaser and the Company shall proportionately
allocate (i) real property taxes and assessments for each of the Company's
dialysis facilities, (ii) rents and other payments, including, without
limitation, CAM charges, under the real property leases of the Company paid in
advance of the Closing Date, (iii) utility and sewer charges paid in advance of
the Closing Date, (iv) payments under the Assumed Contracts paid in advance of
the Closing Date and (v) fees for transferable licenses and permits. All
deposits under the Company's real property leases and all utilities and other
deposits shall be remitted to the Company, or in lieu of such remittance, the
amount of such deposits shall be added to the Purchase Price and paid over to
the Company by the Purchaser. In the event the parties are unable to
proportionately allocate such amounts and other operating expenses under this
Section 3.6, whether paid in advance or payable subsequent to the Closing, the
parties agree to pro rate such amounts as of the Closing Date. On the Closing
Date, or as soon as practicable thereafter, the Company and Purchaser shall
complete and deliver a statement of adjustments in substantially the form of
Exhibit F setting forth the various allocations described in this Section 3.6.
Any party owing funds to the other party shall remit such amounts as soon as
practicable, but in any event within 30 days after demand therefor.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Subject to the limitations set forth in Article 10 and elsewhere in
this Agreement, to the best of its Knowledge, the Company hereby represents and
warrants to the Purchaser that, except as set forth on the Disclosure Schedule,
the following are accurate in all material respects:
4.
<PAGE>
Section 4.1 Formation and Existence. The Company is a limited liability
company duly formed, validly existing and in good standing under the laws of the
State of California. The Company has full power to carry on its business as now
being conducted and to own and operate the property and assets now owned and
operated by it, and is duly qualified to transact business and is in good
standing in each jurisdiction where the ownership of its properties or the
conduct of its business requires such qualification and the failure to be so
qualified will have a Material Adverse Effect.
Section 4.2 Power and Authority. The Company has all requisite power
and authority to execute and deliver this Agreement and each other agreement,
document, or instrument or certificate contemplated by this Agreement to be
executed by the Company in connection with the consummation of the transactions
contemplated hereby (together with this Agreement, the "Acquisition Documents"),
and to consummate the transactions contemplated hereby and thereby. This
Agreement and each of the other Acquisition Documents will be at or prior to the
Closing, duly and validly authorized, executed and delivered by the Company and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each of the other
Acquisition Documents when so executed and delivered will constitute, legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section 4.3 Conflicts. The execution and delivery by the Company of
this Agreement and the other Acquisition Documents, the consummation of the
transactions contemplated hereby or thereby or compliance by the Company with
any of the provisions hereof or thereof (i) will not violate any provision of
the partnership agreement/operating agreement of the Company; (ii) subject to
obtaining the consents referred to in Part 4.3 of the Disclosure Schedule, will
not conflict with, violate, result in the breach or termination of, or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company is a party or
by which its properties or assets are bound; (iii) will not violate any statute,
rule, regulation, order or decree of any Governmental Entity by which the
Company is bound; or (iv) will not result in the creation of any encumbrance
upon the Purchased Assets except, in case of clauses (ii) and (iii), for such
conflicts, violations, breaches or defaults as will not have a Material Adverse
Effect.
Section 4.4 Financial Statements. The Company has furnished the
Purchaser with the Financial Statements. Except as set forth therein, the
Financial Statements fairly present, in all material respects, the financial
condition and results of operations, as applicable, of the Company as of the
dates and for the periods indicated thereon prepared in accordance with GAAP;
provided, that the Unaudited Financial Statements are subject to normal
recurring year-end adjustments, none of which are reasonably expected to have a
Material Adverse Effect, and do not contain all footnotes required under GAAP.
Section 4.5 Title to and Condition of Assets.
(a) Marketable Title. The Company has good and merchantable title
to all of its tangible assets used in the operations of the Business ("Physical
Assets") or has valid leasehold interests in all leased real property and
Physical Assets listed thereon as leased by the Company, except such as shall
have been disposed of as obsolete or in the ordinary course of business since
the date of Part 4.5(a) of the Disclosure Schedule. At Closing, the Purchaser
shall receive good and merchantable title to the Purchased Assets free of any
Encumbrances except for Permitted Encumbrances.
5.
<PAGE>
(b) Condition. All of the Physical Assets are in good operating
condition and repair, have been maintained consistent with the standards
generally followed in the industry and applicable legal standards.
Section 4.6 Subsidiaries and Partnerships. Except as set forth on Part
4.6 of the Disclosure Schedule, the Company has no subsidiaries or investments
in other corporations, partnerships or joint ventures.
Section 4.7 Contracts. Part 4.7(a) of the Disclosure Schedule lists all
written agreements to which the Company is a party or to which the Company, or
any of its properties is subject or by which any thereof is bound that is deemed
a Material Contract under this Agreement. As used in this Agreement, the term
"Material Contract" shall mean each written agreement that (a) after December
31, 1996 obligates the Company to pay an amount of $50,000 or more, (b) has an
unexpired term as of the date hereof in excess of one year, (c) contains a
covenant not to compete or otherwise significantly restricts the Business of the
Company, (d) provides for the extension of credit, (e) limits the ability of the
Company to conduct its Business, including as to manner or place, (f)
constitutes a collective bargaining agreement or provides for severance benefits
to any officer, director or employee, (g) represents a written agreement with a
third party payor, including but not limited to a provider agreement under a
Medical Reimbursement Program, (h) represents a written agreement with a
physician who provides service to the Company, (i) involves the providing of
acute dialysis services, (j) provides for a leasehold in real property used in
the operations of the Business, or (k) was not made in the ordinary course of
business consistent with past practice. Part 4.7(a) of the Disclosure Schedule
also identifies each written agreement of the Company in which its officers or
directors (or any person, firm or corporation affiliated with such persons) have
a material interest. Except as set forth on Part 4.7(a) of the Disclosure
Schedule, each Material Contract is a legal, valid and binding agreement, and
none of the Material Contracts is in default by its terms or has been canceled
by the other party, and the Company has not received any claim of default under
any such Material Contract, except where such failure, default or claim of
default would not have a Material Adverse Effect. Part 4.7(b) of the Disclosure
Schedule lists as of the date hereof all of the agreements and contracts of the
Company used in the operation of the Business.
Section 4.8 Proprietary Rights. Part 4.8 of the Disclosure Schedule
sets forth all patents, trademarks, trade names, service marks, copyrights, and
pending applications therefor, software (other than third-party "off-the-shelf"
software), and intellectual property and other proprietary rights, the loss of
which would reasonably be likely to have a Material Adverse Effect (the
"Proprietary Rights"). Except as disclosed on Part 4.8 of the Disclosure
Schedule, the Company is not bound by or a party to any options, licenses or
agreements of any kind with respect to the Proprietary Rights except those that
will not have a Material Adverse Effect. Except as disclosed on Part 4.8 of the
Disclosure Schedule, the Company has not been informed of any claims or suits
pending or threatened against the Company claiming an infringement by the
Company of any patents, copyrights, licenses, trademarks, service marks or trade
names of others.
Section 4.9 Sufficiency of Purchased Assets. Except as set forth on
Part 4.9 of Disclosure Schedule, the Purchased Assets, both tangible and
intangible, are (and as of the Closing will be) sufficient for the operation of
the Business of the Company as currently conducted.
Section 4.10 Compliance With Laws.
(a) Compliance. The Company is in compliance with all laws, rules,
regulations, orders, judgments, ordinances or decrees of any Governmental Entity
applicable to the
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Business (collectively, "Laws") (including, without limitation, Laws in respect
of overpayments, refunds, discounts or adjustments in connection with Medical
Reimbursement Programs ("Overpayments")), the non-compliance with which would
have a Material Adverse Effect. Except as set forth in Part 4.10 of the
Disclosure Schedule the Company has not received notice of any violation or
alleged violation of, nor is the Company subject to any liability (whether
accrued, absolute, contingent, direct or indirect) for past or continuing
violation of, any Laws in connection with the Company's use of the Purchased
Assets which would have a Material Adverse Effect.
(b) Licenses and Permits.
(i) The Company has all licenses, permits, approvals,
authorizations and consents of all governmental and regulatory authorities and
all certification organizations required for the operation of the Business of
the Company as currently conducted. All such licenses, permits, approvals,
authorizations and consents are described in Part 4.10 of the Disclosure
Schedule, are in full force and effect and except as specifically indicated in
Part 4.10 of the Disclosure Schedule are assignable to the Purchaser in
accordance with the terms hereof.
(ii) Except as set forth in Part 4.10 of the Disclosure
Schedule, the Company has been in compliance with all such permits and licenses,
approvals, authorizations and consents. The Company is not the subject of any
actual or threatened investigation of disciplinary action by the California
Board of Health, the Health Care Financing Administration ("HCFA"), California
Department of Health Services or the Office of Inspector General of the United
States Department of Health and Human Services.
Section 4.11 Litigation. Except as set forth in Part 4.11 of the
Disclosure Schedule, there is no litigation, proceeding or investigation pending
or threatened, by or against the Company before any Governmental Entity that
would (i) prohibit or restrain the ability of the Company to enter into this
Agreement or to consummate the transactions contemplated hereby or (ii) have a
Material Adverse Effect.
Section 4.12 Labor Matters. Part 4.12 of the Disclosure Schedule lists
the collective bargaining agreements or other labor union contracts and employee
benefit plans applicable to employees which are employed by the Company, and the
Company is as of the date of this Agreement in full compliance with the terms
and conditions of such agreements and contracts, except where the failure to be
in compliance would not have a Material Adverse Effect. Except as set forth on
Part 4.12 of the Disclosure Schedule (i) there are no charges or allegations of
unfair labor practices pending or threatened under Federal or state labor laws;
(ii) there are no pending arbitration matters or grievance procedures under any
of the agreements listed in Part 4.12 of the Disclosure Schedule; (iii) there
are no facts or conditions existing which upon the giving of notice, or lapse of
time, will result in a breach under any collective bargaining agreement or under
any of the other foregoing agreements, which will have a Material Adverse
Effect; and (iv) there is no pending or threatened labor dispute, strike or work
stoppage which will have a Material Adverse Effect.
Section 4.13 Liabilities. Other than as set forth in Part 4.13 of the
Disclosure Schedule or as reflected in the Financial Statements, there are no
liabilities or contingent liabilities of a nature required to be reflected in
the Financial Statements or the notes thereto affecting any of the Purchased
Assets, except current liabilities incurred in the ordinary course of business
subsequent to the Statement Date which will not have a Material Adverse Effect.
7.
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Section 4.14 Environmental. All applicable federal, state and local
laws relating to pollution, storage, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic, hazardous or
petroleum-based substances or wastes ("Waste") into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Waste
including, without limitation, the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA"), as
amended, and their state and local counterparts, are herein collectively
referred to as the "Environmental Laws." Except as set forth in Part 4.14 of the
Disclosure Schedule, the Company is in compliance in all material respects with
all limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws. There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, official proceeding, notice or
demand letter pending or threatened against the Company relating in any way to
the Environmental Laws.
Section 4.15 Brokers' Fees. Except for the consideration payable to
Hambrecht & Quist, which shall be the sole responsibility and obligation of the
Company, neither the Company nor any of the Subsidiaries has incurred any
liability for brokerage fees, finders' fees, agents' commissions or other
similar forms of compensation in connection with this Agreement and the
transactions contemplated hereby.
Section 4.16 Required Filings and Consents. Except as set forth on Part
4.16 of the Disclosure Schedule, the execution and delivery of this Agreement by
the Company does not, and the performance of this Agreement by the Company will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign, except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, will not
prevent the Company from performing its obligations under this Agreement, and
will not have a Material Adverse Effect.
Section 4.17 Patients. Part 4.17 of the Disclosure Schedule lists, as
of the last treatment date prior to the date hereof, all Registered Patients (by
patient code) for which the Company provides either in-center treatment or home
dialysis support services. The Company makes no representation or warranty as to
which, if any, of the Registered Patients listed on Part 4.17 of the Disclosure
Schedule will continue to receive services from the Business subsequent to such
last treatment date.
Section 4.18 Physicians. Part 4.18 of the Disclosure Schedule lists all
physicians or groups of physicians admitting patients to the Company's dialysis
facilities indicating the number of Registered Patients admitted by each such
physician or group of physicians. The Company makes no representation or
warranty as to which, if any, physicians listed on Part 4.18 of the Disclosure
Schedule will continue to admit or keep patients at the Company's dialysis
facilities subsequent to the date hereof.
Section 4.19 Medicare Certification; State Licensure. Each of the
Company's dialysis facilities are certified under the conditions of coverage and
participation in the federal Medicare program as an end stage renal disease
facility providing the end stage renal disease services indicated on Part 4.19
of the Disclosure Schedule. The operating certificate issued by California
Department of Health Services and the Medicare certificates of the Company's
dialysis facilities are in full force and effect and no violation of the
conditions and standards of coverage, participation or certification exists.
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Section 4.20 Ownership. Part 4.20 of the Disclosure Schedule is a
complete and accurate list of all beneficial owners of an equity interest in the
Company, and, in the case of any beneficial owner who is not a natural person,
all beneficial owners of an equity interest therein.
Section 4.21 Insurance. Except as set forth in Part 4.21 of the
Disclosure Schedule, for the five (5) year period prior to the date of this
Agreement, the Company has maintained adequate insurance for the Business and
the Purchased Assets with respect to risks normally insured against by similar
businesses.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Subject to the limitations set forth in Article 10 and elsewhere in
this Agreement, to the best of its Knowledge, the Purchaser hereby represents
and warrants to the Company that the following are accurate in all material
respects:
Section 5.1 Corporate Existence. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power to carry on its
business as now being conducted and to own and operate the property and assets
now owned and operated by it, and is duly qualified to transact business and is
in good standing in each jurisdiction where the ownership of its properties or
the conduct of its business requires such qualification and the failure to be so
qualified would have a material adverse effect on the business, operations or
financial condition of the Purchaser (a "Purchaser Material Adverse Effect").
Section 5.2 Corporate Power and Authority. The Purchaser has all
requisite corporate power and authority to execute and deliver this Agreement
and the other Acquisition Documents and to consummate the transactions
contemplated hereby and thereby. All corporate action necessary to authorize the
execution, delivery and performance of this Agreement and each of the other
Acquisition Documents has been duly taken by the Purchaser. This Agreement has
been, and each of the Acquisition Documents will be at or prior to the Closing,
duly and validly executed and delivered by the Purchaser and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each of the Acquisition Documents when so
executed and delivered will constitute, legal, valid and binding obligations of
the Purchaser, enforceable against the Purchaser in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
Section 5.3 Conflicts. Neither the execution and delivery by the
Purchaser of this Agreement and the other Acquisition Documents, the
consummation of the transactions contemplated hereby or thereby, or compliance
by the Purchaser with any of the provisions hereof or thereof will (i) violate
any provision of the certificate of incorporation or bylaws of the Purchaser;
(ii) conflict with, violate, result in the breach or termination of, or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Purchaser is a party or
by which its respective properties or assets are bound; or (iii) violate any
statute, rule, regulation, order or decree of any Governmental Entity by which
the Purchaser is bound except, in case of clauses (ii) and (iii), for such
conflicts, violations, breaches or defaults as will not have a Purchaser
Material Adverse Effect.
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Section 5.4 Litigation. There is no litigation, proceeding or
investigation pending or, to the Purchaser's knowledge, threatened, by or
against the Purchaser before any Governmental Entity that would prohibit or
restrain the ability of the Purchaser to enter into this Agreement or to
consummate the transactions contemplated hereby.
Section 5.5 Brokers' Fees. The Purchaser has not incurred any liability
for brokerage fees, finders' fees, agents' commissions or other similar forms of
compensation in connection with this Agreement and the transactions
contemplated.
Section 5.6 Financing. The Purchaser has available all of the funds
necessary to perform its obligations hereunder and under the other Acquisition
Documents.
Section 5.7 Compliance With Laws. The Purchaser is in compliance with
all laws, regulations, orders, judgments, ordinances or decrees of any
Governmental Entity applicable to the business of the Purchaser, the
non-compliance with which would have a Purchaser Material Adverse Effect. The
Purchaser has not received notice of any violation or alleged violation of, nor
are any of them subject to any liability (whether accrued, absolute, contingent,
direct or indirect) for past or continuing violation of, any laws, regulations,
orders, judgments, ordinances or decrees of any Governmental Entity applicable
to the business of the Purchaser.
ARTICLE 6
COVENANTS OF THE COMPANY AND THE PURCHASER.
Section 6.1 Company Covenants. The Company covenants that from the date
of this Agreement until the Closing (the "Pre-Closing Period"):
(a) Conduct of Business in Ordinary Course. Except as disclosed
on Part 6.1(a) of the Disclosure Schedule or as contemplated by this Agreement
or any other Acquisition Document or as may be necessary to carry out the
transactions contemplated by this Agreement or any other Acquisition Document,
the Company will carry on its business in the ordinary course, and it shall not
make or institute any unusual or novel methods of purchase, sale, lease,
management, accounting or operation that will vary materially from those methods
used by it prior to the date of this Agreement. The Company will not sell, lease
or dispose of, or agree to sell, lease or dispose of, any of the assets or
properties of the Company other than in the ordinary course of business, or
pursuant to any existing plan, agreement or practice. The Company will carry on
its business diligently and in the same manner as heretofore and will continue
to see patients and will not make or institute any adverse changes in its method
of purchase, medical treatment, management, accounting or operation.
(b) Preservation of Business and Relationships. The Company will
use commercially reasonable efforts to preserve its business intact and to
maintain its present material relationships with patients, creditors, suppliers,
lessors, licensors, employees and others having business relationships with it
or them.
(c) The Purchaser's Access to Premises and Information. The
Purchaser and its Associates shall have reasonable access during normal business
hours to all properties, books, accounts, records, contracts and documents of or
relating to the Company.
(d) Governmental Approvals. The Company shall cooperate with the
Purchaser (i) in promptly determining whether any governmental approvals,
authorizations, licenses,
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permits, consents, or other filings are required to be or should obtained under
any federal, state or local law and (ii) in promptly applying for or submitting
any such governmental approvals, authorizations, licenses, permits, consents, or
other filings, furnishing information required in connection therewith and
seeking timely to obtain such. The Company will make any and all filings
required to be made on its part under the HSR Act.
(e) Employees; Employee Benefits Matters. The Company shall fully
compensate its employees for any accrued vacation pay through the effectiveness
of the Closing. The Company shall cause interests of Assumed Employees of the
Company in its 401(k) plan to become distributable pursuant to Internal Revenue
Code Section 401(k)(10)(A) and any amounts distributed to such employees may be
rolled over pursuant to Internal Revenue Code Section 402 to a comparable plan
maintained by the Purchaser.
(f) No Negotiation. The Company shall ensure that, during the
Pre-Closing Period, neither the Company, the Owners nor any of the Company's
Representatives directly or indirectly:
(i) solicits or encourages the initiation of any inquiry,
proposal or offer from any Person (other than the Purchaser) relating
to any Acquisition Transaction; or
(ii) subject to Section 11.3, participates in any discussions or
negotiations with, or provides any non-public information to, any
Person (other than the Purchaser) relating to any Acquisition
Transaction.
(g) Medical Director Agreements. The Company will use commercially
reasonable efforts to (i) extend existing medical director agreements of the
Company for a period of seven (7) years from the date hereof; (ii) assign to
Purchaser all existing medical director agreements of the Company; and (iii)
eliminate those provisions of each such agreement as they relate to the
transfers of patients.
(h) Consents; Real Property Leases. The Company will use
commercially reasonable efforts to obtain all consents required to be obtained
(from creditors, licensors, lessors and other Persons) in connection with the
transactions contemplated hereby, including, without limitation, consents to the
assignment of the Company's acute dialysis services agreements and the Company's
real property leases. In each instance in which (i) the term of any of the
Company's real property leases does not extend for, or (ii) extension options
under such leases do not provide for, a remaining term of at least seven (7)
years from the date hereof, the Company will use commercially reasonable efforts
to extend the remaining terms of such leases for a minimum of seven (7) years
from the date hereof.
(i) Cooperation. The Company shall cooperate fully with the
Purchaser, and shall provide the Purchaser with such assistance as the Purchaser
may reasonably request, for the purpose of facilitating the performance by the
Purchaser of its obligations under this Agreement and the Acquisition Documents.
(j) Conditions. The Company shall use commercially reasonable
efforts to ensure that the conditions required to be satisfied on the part of
the Company are satisfied on a timely basis.
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(k) Confidentiality. The Company shall continue to be bound by its
obligations under the Nondisclosure Agreement.
Section 6.2 Purchaser Covenants. The Purchaser covenants during the
Pre-Closing Period:
(a) Certain Filings. The Purchaser will make any and all filings
required to be made on its part under the HSR Act. The Company and the Purchaser
shall furnish each other such necessary information and reasonable assistance as
the other may request in connection with its preparation of necessary filings or
submissions under the provisions of such laws.
(b) Sales Taxes. The Purchaser shall pay all real and personal
property transfer taxes and fees, if any, sales taxes, if any, and all use,
gross receipt or documentary taxes and other similar taxes, if any, imposed on
or in connection with the purchase, sale or transfer of the Purchased Assets to,
and the assumption of the Assumed Liabilities by, the Purchaser pursuant to this
Agreement. The Purchaser shall promptly reimburse the Company for any such taxes
and fees which, under applicable law, are imposed upon the Company.
(c) Cooperation. The Purchaser shall cooperate fully with the
Company, and shall provide the Company with such assistance as the Company may
reasonably request, for the purpose of facilitating the performance by the
Company of its obligations under this Agreement and the Acquisition Documents.
(d) Governmental Approvals. The Purchaser shall cooperate with the
Company (i) in promptly determining whether any governmental approvals,
authorizations, licenses, permits, consents, or other filings are required to be
or should obtained under any federal, state or local law and (ii) in promptly
applying for or submitting any such governmental approvals, authorizations,
licenses, permits, consents, or other filings, furnishing information required
in connection therewith and seeking timely to obtain such.
(e) Employees. The Purchaser will offer employment to those
current employees of the Company (as of the Closing Date) working in the
Business whose names and positions are set forth on Schedule 6.2(e) (the
"Assumed Employees"). The Purchaser will pay the Assumed Employees at wage rates
competitive in the dialysis industry within the region in which the Company
operates and will provide benefits under standard Purchaser benefit plans which
shall be comparable to those provided to the other Purchaser employees
(including healthcare benefits which do not contain any exclusions or waiting
periods for pre-existing conditions with respect to Assumed Employees' initial
enrollment). This Section 6.2(e) in no way constitutes an employment agreement
between Purchaser and the Assumed Employees as such Assumed Employees shall be
employed by the Purchaser on an "at will" basis. The Purchaser disclaims any
commitment to employ such Assumed Employees for any specific period.
(f) Investigation. In conducting its investigation of the
business, operations and legal affairs of the Company, the Purchaser shall use
its best efforts not to interfere in any manner with the business or operations
of the Company or with the performance of any of the Company's employees.
(g) Conditions. The Purchaser shall use commercially reasonable
efforts to ensure that the conditions required to be satisfied on the part of
the Purchaser are satisfied on a timely basis.
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(h) Confidentiality. The Purchaser shall continue to be bound by
its obligations under the Nondisclosure Agreement.
ARTICLE 7
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE.
The obligation of the Purchaser to purchase the Purchased Assets and
otherwise consummate the transactions that are to be consummated at the Closing
is subject to the satisfaction, as of the Scheduled Closing Time and as of the
Closing Date, of the following conditions (any of which may be waived by the
Purchaser in whole or in part):
Section 7.1 Accuracy of Representations and Warranties. The
representations and warranties of the Company set forth in Article 4 shall be
accurate in all material respects as of the Scheduled Closing Time and as of the
Closing Date, except to the extent that (a) any of such representations and
warranties refers specifically to a date other than the Scheduled Closing Time
or the Closing Date in which event such representation and warranty shall be
accurate as of such date, (b) the accuracy of any of such representations and
warranties is affected by any of the transactions contemplated by this Agreement
or the Acquisition Documents, and (c) any such representation and warranty is
modified in a Disclosure Schedule revised as of the Closing Date (which
Disclosure Schedule shall be accurate as of the Closing Date) delivered to the
Purchaser at least five calendar days prior to the Scheduled Closing Time, to
which modifications the Purchaser shall have been deemed to have consented;
provided the facts or circumstances described or referred to in such
modifications have not had nor would reasonably be expected to have a Material
Adverse Effect.
Section 7.2 Performance. The Company shall have performed, in all
material respects, all obligations required under this Agreement and the
Acquisition Documents to be performed by the Company on or before the Closing
Date.
Section 7.3 Governmental Consents. The Company shall have received all
other consents, approvals, authorizations and waivers required to be obtained by
the Company from all Governmental Entities with jurisdiction over the Company in
connection with the transactions contemplated by this Agreement and the
Acquisition Documents and the operation of the Purchased Assets, except where
failure to obtain such consents, approvals, authorizations or waivers will not
have a Material Adverse Effect.
Section 7.4 Third Party Consents. To the extent permitted by Law, the
Purchaser shall have received all other consents, approvals, authorizations and
waivers from Persons necessary to the assignment and transfer of the Purchased
Assets set forth in Schedule 7.4, except where failure to obtain such consents,
approval, authorizations or waivers will not have a Material Adverse Effect.
Notwithstanding the foregoing, (i) the Company shall have obtained the consent
to the assignment of the Company's real property leases to the Purchaser from
each of the lessors under such leases, and (ii) the Company shall have obtained
the consents necessary to (a) the assignment of all of the Company's medical
director agreements to Purchaser, (b) the extension for a period of seven (7)
years from the date hereof of the terms of the Company's medical director
agreements in a manner mutually acceptable to the Company and the Purchaser, and
(c) the elimination of those provisions from such medical director agreements as
they relate to the transfer of patients.
Section 7.5 Additional Documents. The Purchaser shall have received the
following documents:
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(a) an opinion letter from Stradling, Yocca, Carlson & Rauth,
dated the Closing Date, in a form reasonably acceptable to the Purchaser;
(b) each of the Acquisition Documents shall have been executed and
delivered by the parties thereto; and
(c) such other documents as the Purchaser may reasonably request
in good faith for the purpose of (i) evidencing the accuracy of any
representation or warranty made by the Company, (ii) evidencing the compliance
by the Company with, or the performance by the Company of, any covenant or
obligation set forth in this Agreement or any of the Acquisition Documents,
(iii) evidencing the satisfaction of any condition set forth in this Section 7,
or (iv) otherwise facilitating the consummation or performance of any of the
transactions contemplated by this Agreement or any of the Acquisition Documents.
Section 7.6 No Injunction. There shall not be in effect, at the
Closing, any injunction or other binding order of any Governmental Entity having
jurisdiction over the Purchaser that prohibits the consummation of the
transactions contemplated by this Agreement and the Acquisition Documents.
ARTICLE 8
CONDITIONS TO OBLIGATION OF THE COMPANY TO CLOSE.
The obligation of the Company to sell the Purchased Assets to the
Purchaser and otherwise consummate the transactions that are to be consummated
at the Closing is subject to the satisfaction, as of the Scheduled Closing Time
and as of the Closing Date, of the following conditions (any of which may be
waived by the Company in whole or in part):
Section 8.1 Accuracy of Representations and Warranties. The
representations and warranties of the Purchaser set forth in Section 5 shall be
accurate in all material respects as of the Scheduled Closing Time and as of the
Closing Date.
Section 8.2 Performance. The Purchaser shall have performed, in all
material respects, all obligations required by this Agreement and the
Acquisition Documents to be performed by the Purchaser on or before the Closing
Date.
Section 8.3 No Injunction. There shall not be in effect, at the
Closing, any injunction or other binding order of any Governmental Entity having
jurisdiction over the Company that prohibits the consummation of the
transactions contemplated by this Agreement and the Acquisition Documents.
Section 8.4 Equityholder Approval; Attorney General Consent. The
Company shall have received the consent and approval of the Owners to the
transactions contemplated by this Agreement and the Acquisition Documents, and
Satellite Dialysis Centers, Inc. shall have received written notification from
the Office of the California Attorney General that it does not oppose or object
to the participation by Satellite Dialysis Centers, Inc. in the Acquisition and
the transactions contemplated by the Agreement. In the case of Satellite
Dialysis Centers, Inc. (in its capacity as an Owner and not as Agent), it is
expressly understood and agreed that its consent and approval is subject to the
fiduciary obligations of its board of trustees consistent with its charitable
purpose. The parties agree that such consent and approval by the board of
trustees and receipt of approval from the Office of the California Attorney
General may only be waived by Satellite Dialysis Centers, Inc. in its sole and
absolute discretion.
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Section 8.5 Governmental Consents. To the extent permitted by Law, the
Company shall have received all other consents, approvals, authorizations and
waivers required to be obtained from all federal, state, municipal and other
governmental authorities with jurisdiction over the Company in connection with,
and as a condition to, the transactions contemplated by this Agreement and the
Acquisition Documents and the operation of the Purchased Assets, except where
failure to obtain such consents, approvals, authorizations or waivers will not
have a Material Adverse Effect.
Section 8.6 Third Party Consents. The Company shall have received all
other consents, approvals, authorizations and waivers from Persons necessary to
the assignment and transfer of the Purchased Assets, except where failure to
obtain such consents, approvals, authorizations or waivers will not have a
Material Adverse Effect.
Section 8.7 Additional Documents. The Company shall have received the
following documents:
(a) an opinion letter from Duane, Morris & Heckscher, dated the
Closing Date, in a form reasonably acceptable to the Company;
(b) each of the Acquisition Documents shall have been executed and
delivered by the parties thereto; and
(c) such other documents as the Company may reasonably request in
good faith for the purpose of (i) evidencing the accuracy of any representation
or warranty made by the Purchaser, (ii) evidencing the compliance by the
Purchaser with, or the performance by the Purchaser of, any covenant or
obligation set forth in this Agreement or any of the Acquisition Documents,
(iii) evidencing the satisfaction of any condition set forth in this Section 8,
or (iv) otherwise facilitating the consummation or performance of any of the
transactions contemplated by this Agreement or any of the Acquisition Documents.
ARTICLE 9
TERMINATION OF AGREEMENT.
Section 9.1 Right to Terminate Agreement. This Agreement may be
terminated prior to the Closing:
(a) by the mutual agreement of the Company and the Purchaser;
(b) by the Purchaser at any time after the Termination Date, if
any condition set forth in Section 7 shall not have been satisfied or waived; or
(c) by the Company at any time after the Termination Date, if any
condition set forth in Section 8 shall not have been
satisfied or waived.
Section 9.2 Effect of Termination. Upon the termination of this
Agreement pursuant to Section 9.1:
(a) The Purchaser shall promptly cause to be returned to the
Company all documents and information obtained in connection with this Agreement
and the transactions contemplated by this Agreement and all documents and
information obtained in connection with the
15.
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Purchaser's investigation of the Company's business, operations and legal
affairs, including any copies made by the Purchaser or any of the Purchaser's
Associates of any such documents or information; and
(b) neither party hereto shall have any obligation or liability
to the other party hereto, except that (i) the Purchaser and the Company shall
have the obligations set forth in the Memorandum, and (ii) the Purchaser and the
Company shall remain bound by the provisions of the Nondisclosure Agreement,
this Section 9.2 and Article 11.
ARTICLE 10
INDEMNIFICATION AND RELATED MATTERS.
Section 10.1 Indemnification by the Company. Subject to the limitations
set forth in this Article 10 and elsewhere in this Agreement, the Company shall
indemnify the Purchaser against any Damages that the Purchaser actually incurs
during the one-year period commencing on the Closing Date which arise from,
occur as a result of or in connection with (a) any breach by the Company of any
representation, warranty or covenant of the Company set forth in this Agreement
or any of the Acquisition Documents or (b) any liability that arises from or
relates to (i) the Excluded Assets or (ii) the Excluded Liabilities.
Section 10.2 Indemnification by the Purchaser. Subject to the
limitations set forth in this Article 10 and elsewhere in this Agreement, the
Purchaser shall indemnify the Company and the Owners against any Damages that
the Company actually incurs during the one-year period commencing on the Closing
Date which arise from, occur as a result of or in connection with (a) any breach
by the Purchaser of any representation, warranty or covenant of the Purchaser
set forth in this Agreement or any of the Acquisition Documents, or (b) any
liability that arises from or relates to (i) the operation of the Purchased
Assets after the Closing, and (ii) the Assumed Liabilities.
Section 10.3 Expiration of Representations, Warranties and Covenants.
Except for the covenants set forth in Section 6.2(b) (sales taxes), the
covenants set forth in Article 6 shall terminate and expire, and shall cease to
be of any force or effect, on the Closing Date, and all liability of the parties
hereto with respect to such covenants shall thereupon be extinguished. Except as
set forth in the immediately preceding sentence, all of the representations,
warranties, covenants and obligations of the Company and the Purchaser set forth
in this Agreement and any of the Acquisition Documents shall terminate and
expire, and shall cease to be of any force or effect, at 2:00 p.m. (California
time) on the first anniversary of the Closing Date, and all liability of the
Company or the Purchaser with respect thereto (including their respective
obligations under Section 10.1 or Section 10.2, as the case may be) shall
thereupon be extinguished; provided, that if, prior to such first anniversary,
either party shall have duly delivered a Claim Notice in conformity with all of
the applicable procedures set forth in Section 10.8, then the specific
indemnification claim set forth in such Claim Notice shall survive such first
anniversary (and shall not be extinguished thereby).
Section 10.4 Deductible Amount. Without limiting the effect of any of
the other limitations set forth herein, neither the Purchaser nor the Company
shall be required to make any indemnification payment hereunder with respect to
any breach of any of their respective representations, warranties, covenants and
obligations, except to the extent that the cumulative amount of the Damages
actually incurred by the party to be indemnified as a result of all such
breaches of such representations, warranties, covenants and obligations actually
exceeds the Deductible Amount; and each party hereto shall only be required to
pay, and shall only be liable for, the amount by which the cumulative amount of
the Damages actually incurred by the party to be indemnified as a result of all
such breaches of such representations, warranties, covenants
16.
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and obligations actually exceeds the Deductible Amount. The "Deductible Amount"
shall be an amount equal to one-half percent (0.5%) of the Purchase Price.
Notwithstanding the foregoing, claims for indemnification relating to (i) the
Excluded Liabilities (including, without limitation, taxes of the Company
described in such definition and Overpayments) and (ii) (a) the Assumed
Liabilities and (b) the operation of the Purchased Assets after the Closing,
shall not be subject to the Deductible Amount.
Section 10.5 Maximum Liability. The total amount of the payments that
either the Company or the Purchaser, as the case may be, shall be required to
make under or in connection with this Agreement or any of the Acquisition
Documents pursuant to such party's indemnification obligations shall be limited
in the aggregate to a maximum of ten percent (10%) of the Purchase Price, and
neither party's respective cumulative liability shall exceed such amount.
Section 10.6 Knowledge of Breach. For purposes of this Article 10,
neither party hereto shall be deemed to have breached any representation or
warranty if the other party had, on or prior to the Closing Date, Knowledge of
the breach of, or of any facts or circumstances constituting or resulting in a
breach of, such representation or warranty.
Section 10.7 No Implied Representations. The Purchaser and the Company
acknowledge that, except as expressly provided in Articles 4 and 5, neither
party hereto, and none of the Associates of either party hereto, has made or is
making any representations or warranties whatsoever, implied or otherwise.
Section 10.8 Indemnification Claims. If either party hereto (the
"Claimant") wishes to assert an indemnification claim against the other party
hereto, the Claimant shall deliver to the other party a written notice (a "Claim
Notice") setting forth:
(a) the specific representation, warranty or covenant alleged to
have been breached by such other party, or the specific liability to have been
incurred;
(b) a detailed description of the facts and circumstances giving
rise to the alleged breach of such representation, warranty or covenant, or
incurrence of such liability; and
(c) a detailed description of, and a reasonable estimate of the
total amount of, the Damages actually incurred or expected to be incurred by the
Claimant as a direct result of such alleged breach.
Notwithstanding anything to the contrary contained in this Agreement, Claimant
shall not be permitted to deliver any Claim Notice to the other party (and shall
not be entitled to assert any indemnification claim set forth in any Claim
Notice) unless:
(i) the indemnification claim set forth in such Claim Notice
shall have arisen from a bona fide lawsuit or other bona fide legal
proceeding that was instituted by a third party against Claimant or the
Company prior to the delivery of such Claim Notice to the other party;
or
(ii) Claimant shall have provided evidence in reasonable detail
demonstrating to the other party, before the delivery of such Claim
Notice, that Claimant has therefore actually incurred, or is reasonably
likely to incur, Damages as a result of the alleged breach described in
such Claim Notice.
17.
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Any Claim Notice that is delivered to the Purchaser or the Company in
contravention of the prohibition set forth in the preceding sentence shall be
deemed not to have been "duly delivered" for purposes of Section 10.3 and shall
be of no force or effect.
Section 10.9 Defense of Third Party Actions. If either party hereto
(the "Indemnitee") receives notice or otherwise obtains knowledge of any Matter
or any threatened Matter that may give rise to an indemnification claim against
the other party hereto (the "Indemnifying Party"), then the Indemnitee shall
promptly deliver to the Indemnifying Party a written notice describing such
Matter in reasonable detail; provided, that for the sole purpose of determining
whether a Matter or threatened Matter may give rise to an indemnification claim
against the Indemnifying Party within the meaning of this sentence, the
limitation set forth in Section 10.4 shall not be taken into account. The timely
delivery of such written notice by the Indemnitee to the Indemnifying Party
shall be a condition precedent to any liability on the part of the Indemnifying
Party under this Section 10 with respect to such Matter. The Indemnifying Party
shall have the right, at its option, to assume the defense of any such Matter
with its own counsel reasonably satisfactory to the Indemnitee. If the
Indemnifying Party elects to assume the defense of any such Matter, then:
(a) notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay or otherwise
indemnify the Indemnitee against any attorneys' fees or other expenses incurred
on behalf of the Indemnitee in connection with such Matter following the
Indemnifying Party's election to assume the defense of such Matter;
(b) the Indemnitee shall make available to the Indemnifying Party
all books, records and other documents and materials that are under the direct
or indirect control of the Indemnitee and that the Indemnifying Party considers
necessary or desirable for the defense of such Matter;
(c) the Indemnitee shall fully cooperate as reasonably
requested by the Indemnifying Party in the defense of such Matter and execute
such documents and take such other actions as the Indemnifying Party may
reasonably request for the purpose of facilitating the defense of, or any
settlement, compromise or adjustment relating to, such Matter;
(d) the Indemnitee shall not admit any liability with respect
to such Matter; and
(e) the Indemnifying Party shall not settle, adjust or
compromise such Matter without the prior written consent or approval of the
Indemnitee.
If the Indemnifying Party elects not to assume the defense of such Matter, then
the Indemnitee shall proceed diligently to defend such Matter with the
assistance of counsel satisfactory to the Indemnifying Party; provided, that the
Indemnitee shall not settle, adjust or compromise such Matter, or admit any
liability with respect to such Matter, without the prior written consent of the
Indemnifying Party.
Section 10.10 Subrogation. To the extent that either party hereto (the
"Indemnitor") makes or is required to make any indemnification payment to the
other party hereto (the "Indemnified Party"), the Indemnitor shall be entitled
to exercise, and shall be subrogated to, any rights and remedies (including
rights of indemnity, rights of contribution and other rights of recovery) that
the Indemnified Party or any of the Indemnified Party's Associates may have
against any other Person with respect to any Damages, circumstances or Matter to
which such indemnification payment is directly or indirectly related. The
Indemnified Party shall permit the Indemnitor to use the name of the Indemnified
Party and the names of
18.
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the Indemnified Party's Associates in any transaction or in any proceeding or
other Matter involving any of such rights or remedies; and the Indemnified Party
shall take such actions as the Indemnitor may reasonably request for the purpose
of enabling the Indemnitor to perfect or exercise the Indemnitor's right of
subrogation hereunder.
Section 10.11 Exclusivity. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article 10 shall be the sole and exclusive right and remedy exercisable by such
party with respect to any breach by the other party hereto of any
representation, warranty, covenant or obligation. Without limiting the
generality of the foregoing, no Indemnitee shall have the right to withhold and
deduct any sum that may be owed to such Indemnitee from any amount otherwise
payable by such Indemnitee to the Indemnifying Party.
Section 10.12 Accounts Receivable. In the event the Company receives
any payment that relates to accounts receivable generated from services rendered
by the Business after the Closing Date, the Company shall promptly transmit
these funds to the Purchaser. In the event the Purchaser receives any payment
that related to accounts receivable generated from services rendered by the
Business on or before the Closing Date, the Purchaser shall promptly transmit
these funds to the Company.
Section 10.13 Tax Matters. Each party will provide the other such
assistance as may reasonably be requested in connection with the preparation of
any reimbursement-related audit, any tax return, any audit or other examination
by any taxing authority, or any judicial or administrative proceedings relating
to liability for taxes, and each will retain and provide the other with any
records or information which may be relevant to such return, audit or
examination, proceedings or determination. The party requesting assistance
hereunder shall reimburse the other party for reasonable expenses incurred in
providing such assistance. Any information obtained pursuant to this Section or
pursuant to any other Section hereof providing for the sharing of information or
the review of any tax return or other schedule relating to taxes shall be kept
confidential by the Parties and not disclosed to any Person.
Section 10.14 Tail Insurance. The Company shall use commercially
reasonable efforts to maintain in force and effect for five years from the
Closing Date the Tail Insurance Coverage relating back five years from the
Closing Date. The "Tail Insurance Coverage" shall be health care services
professional liability coverage with The Doctors Company or such other
financially sound and reputable insurance company or association selected by the
Company with limits of liability of $1,000,000 per loss.
ARTICLE 11
MISCELLANEOUS PROVISIONS.
Section 11.1 Time of Essence. Time is of the essence with respect to
this Agreement.
Section 11.2 Compliance with Laws. Each party shall execute such
agreements and other documents, and shall take such other actions, as the other
may reasonably request (prior to, at or after the Closing) for the purpose of
ensuring that the transactions contemplated by this Agreement are carried out in
full compliance with the provisions of all applicable laws and regulations.
Section 11.3 Publicity. No press release, notice to any third party or
other publicity concerning the transactions contemplated by this Agreement or
any of the Acquisition Documents shall be issued, given or otherwise
disseminated without the prior written consent of the Agent and the Purchaser,
which will not be unreasonably withheld or delayed; provided, that (a) without
the approval of the Purchaser, the Agent
19.
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shall be entitled to make disclosures regarding the transactions contemplated
hereby (i) to the Office of the California Attorney General and (ii) as may be
necessary to effect the transactions contemplated hereby, and (b) either party
may make such disclosures as may be contemplated herein or as may be and to the
extent required by applicable law.
Section 11.4 Access of the Company to Books and Records. At all times
after the Closing Date, the Purchaser shall give the Company and the Company's
Associates reasonable access to the books and records of the Company to inspect
and copy such books and records.
Section 11.5 Governing Law. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflicts of law).
Section 11.6 Venue and Jurisdiction. If any legal proceeding or other
legal action relating to this Agreement is brought or otherwise initiated, the
venue therefor shall be in San Francisco, California, which shall be deemed to
be a convenient forum. The Purchaser and the Company hereby expressly and
irrevocably consent and submit to the jurisdiction of the courts in San
Francisco, California.
Section 11.7 Notices. All notices, consents and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given and duly delivered when (i) delivered by hand or (ii) when received by the
addressee, if sent by certified mail, return receipt requested, by Express Mail,
Federal Express or other express delivery service (receipt requested), in each
case, at the appropriate addresses as set forth below (or to such other address
as a party may designate as to itself by notice to the other parties):
if to the Purchaser:
Renal Treatment Centers - West, Inc.
1180 W. Swedesford Road, Bldg. 2, Ste. 300
Berwyn, PA 19312
Attention: Thomas J. Karl
Vice President, Secretary and General Counsel
with a copy (not constituting notice) to:
Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, PA 19103
Attention: Jeffrey S. Henderson, Esq.
if to the Company:
California Kidney Centers, Inpatient Services, LLC
Nephrology Associates
4361 Latham Street
Riverside, CA 92501
Attention: John Robertson, M.D.
20.
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with a copy (not constituting notice) to:
Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Attention: Ben A. Frydman
Satellite Dialysis Centers, Inc.
345 Convention Way, Suite B
Redwood City, CA 94063-1402
Attention: Marc Branson
Chief Financial Officer
and
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Brian C. Cunningham
Section 11.8 Table of Contents and Headings. The table of contents of
this Agreement and the underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
Section 11.9 Assignment. Neither party hereto may assign any of its
rights or delegate any of its obligations under this Agreement to any other
Person without the prior written consent of the other party hereto; provided,
that the Company may, prior to or after the Closing, assign to any Person its
right to receive all or any portion of the amount payable to the Company under
Section 3.1.
Section 11.10 Parties in Interest. Nothing in this Agreement is
intended to provide any rights or remedies to any Person (including any employee
or creditor of the Company) other than the parties hereto.
Section 11.11 Severability. In the event that any provision of this
Agreement, or the application of such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
Section 11.12 Entire Agreement. This Agreement, the Memorandum, the
other Acquisition Documents and the Nondisclosure Agreement set forth the entire
understanding of the Purchaser and the Company and supersede all other
agreements and understandings between the Purchaser and the Company relating to
the subject matter hereof and thereof.
Section 11.13 Expenses. Each of the parties shall be responsible for
and pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement.
21.
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Section 11.14 Waiver. No failure on the part of either party hereto to
exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of either party hereto in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a waiver thereof; and
no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy.
Section 11.15 Amendments. This Agreement may not be amended, modified,
altered or supplemented except by means of a written instrument executed on
behalf of both the Purchaser and the Company.
Section 11.16 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be as original and all of
which, when taken together, will be deemed to constitute one and the same.
Section 11.17 Waiver of Bulk Transfer Laws. To the extent applicable,
the Purchaser and the Company waive compliance with the provisions of Division 6
of the Uniform Commercial Code of the State of California and the provisions of
any other applicable laws relating to bulk transfers of assets.
Section 11.18 Post-Signing Procedure. The parties are executing this
agreement in advance of finalizing the terms of one or more Exhibits, prior to
the delivery of certain parts of the Disclosure Schedule that may qualify the
representations and warranties herein set forth, and prior to the Purchaser's
completion and analysis of its due diligence investigation.
(a) The Company shall be responsible for preparing all Parts of the
Disclosure Schedule other than as specifically agreed. The Company shall deliver
a proposed Disclosure Schedule for review by the Purchaser within seven (7) days
of the date of this Agreement. The Disclosure Schedule shall be deemed accepted
by the Purchaser within five (5) business days after delivery thereof unless the
Purchaser notifies the Company of any objections. If the Purchaser determines in
good faith that the Disclosure Schedule reveals information that had not been
previously known by or disclosed to the Purchaser, and would have in the
Purchaser's reasonable judgment a Material Adverse Effect, then the Purchaser
will immediately notify the Company of such information (but within such
five-day period), and the parties shall in good faith use commercially
reasonable efforts to eliminate, waive or resolve any problem. If,
notwithstanding such efforts, such problem cannot be eliminated, waived or
resolved, either the Company or the Purchaser may elect to terminate this
Agreement pursuant to the terms of Section 9.1(b) or 9.1(c), as the case may be.
(b) The Purchaser shall promptly complete its final due diligence
investigation of the Company by October 5, 1997.
Section 11.19 Interpretation of Agreement.
(a) Each party hereto acknowledges that it has participated in the
drafting of this Agreement, and any applicable rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in connection with the construction or interpretation of this
Agreement.
(b) Whenever required by the context hereof, the singular number shall
include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders.
22.
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(c) As used in this Agreement, the words "include" and "including," and
variations thereof, shall not be deemed to be terms of limitation, and shall be
deemed to be followed by the words "without limitation."
(d) References herein to "Articles," "Sections" and
"Exhibits" are intended to refer to Sections of and Exhibits to this
Agreement.
Section 11.20 Commercially Reasonable Efforts. Throughout this
Agreement and the other Acquisition Documents, subject to Section 1.2,
"commercially reasonable efforts" of a Person shall mean the efforts that a
prudent Person using ordinary business practice and judgment consistent with
industry practice and desiring to achieve a particular result would use in order
to obtain such result, which efforts may include, among other things, the
expenditure of funds; provided, that such efforts shall not require a Person to
(i) expend funds other than for the payment of reasonable and customary costs
and expenses of employees, legal counsel, consultants, representatives or agents
of such Person or (ii) institute litigation or arbitration proceedings as a part
of its efforts.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
CALIFORNIA KIDNEY CENTERS,
INPATIENT SERVICES, LLC
By: Satellite Dialysis Centers, Inc.
By: /s/ Marc Branson
---------------------------
Name: Marc Branson
Title: Chief Financial Officer
RENAL TREATMENT CENTERS-CALIFORNIA, INC.
By: /s/ Robert L. Mayer, Jr.
----------------------------
Name: Robert L. Mayer, Jr.
Title: Chairman, President and Chief
Executive Officer
ASSET PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
DEFINED TERMS
For purposes of this Agreement (including the Disclosure Schedule):
"Agreement" shall mean the Asset Purchase Agreement to which this
Exhibit A is attached.
"Acquisition" means the acquisition by the Purchaser of the Purchased
Assets.
"Acquisition Documents" shall have meaning specified in Section 4.2.
"Acquisition Transaction" shall mean any transaction involving:
(a) the sale or other disposition of all or any portion of the
Company's business or assets (other than in the ordinary course of business);
(b) the issuance, sale or other disposition of any Equity
Securities of the Company; or
(c) any merger, consolidation, business combination, share
exchange, reorganization or similar transaction involving the Company.
"Affiliate" means a Person that directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with, specified Person.
"Agent" shall have the meaning specified in the Memorandum.
"Associates" of a Person shall include:
(a) such Person's affiliates, stockholders, directors, officers,
employees, agents, attorneys, accountants and representatives; and
(b) all stockholders, directors, officers, employees, agents,
attorneys, accountants and representatives of each of such Person's affiliates.
"Assumed Contracts" shall have the meaning specified in Section 1.1(f).
"Assumed Liabilities" shall have the meaning specified in Section 2.1.
"Audited Financial Statements" shall mean the audited balance sheet of
the Company as of December 31, 1996, and such related audited statement of
operations of the Company for the period then ended, including the notes
thereto, accompanied by the report of Frank Rimmerman & Co. thereon.
"Business" shall have the meaning specified in the Recitals.
"Claim Notice" shall have the meaning specified in Section 10.8.
"Claimant" shall have the meaning specified in Section 10.8.
1.
<PAGE>
"Closing" shall have the meaning specified in Section 3.3.
"Closing Date" shall mean the time and date as of which the Closing
actually takes place.
"Company" shall mean California Kidney Centers, Inpatient Services,
LLC, a California limited liability company.
"Damages" shall mean out-of-pocket losses and damages; provided, that
for purposes of computing the amount of Damages incurred by any Person, there
shall be deducted an amount equal to the amount of any insurance proceeds,
indemnification payments, contribution payments or reimbursements directly or
indirectly received by such Person or any of such Person's affiliates in
connection with such Damages or the circumstances giving rise thereto.
"Deductible Amount" shall have the meaning specified in Section 10.4.
"Disclosure Schedule" shall mean that certain Disclosure Schedule
delivered together with the Agreement, which shall be arranged in parts to
correspond with the sections and subsections of the Agreement and each
disclosure set forth therein shall be deemed to modify each and every
representation, warranty and covenant of the Company set forth in the Agreement
as it pertains to such representation, warranty or covenant. The contents of
each of the contracts and other documents referred to in the Disclosure Schedule
shall be deemed to be incorporated and referred to in the Disclosure Schedule as
though set forth in full therein.
"Encumbrance" shall mean any encumbrance, lien, mortgage, pledge, lease
or noncontingent charge.
"Equity Securities" means any capital stock or other equity interest,
or securities convertible into or exchangeable for capital stock or other equity
interest, or any other rights, warrants or options to acquire any of the
foregoing securities.
"ESRD Patients" has the meaning specified in the Recitals.
"Excluded Assets" shall mean (i) all of the Company's cash balances,
cash equivalents and accounts receivable, (ii) the Company's corporate franchise
and related indicia, (iii) the consideration delivered to the Company pursuant
to and all rights arising under this Agreement or any of the Acquisition
Documents, (iv) the Company's tax returns, refunds and tax records, (v) all
insurance policies and surety bonds of the Company, (vi) all items of prepaid
expenses, deposits and other similar sums to which the Company may become
entitled to a refund, (vii) all payroll processing agreements, (viii) all
vending service agreements, including, without limitation, the Cold Drink
Equipment Agreement entered into by Dialysis Systems, LLC, and (ix) any and all
administrative service agreements between the Company and Satellite Dialysis
Centers, Inc.
"Excluded Liabilities" shall mean (i) any and all of the Company's
Closing transaction fees and expenses, including, without limitation, the
Company's financial advisory, accounting and legal fees and expenses, (ii)
subject to Sections 6.1(e) and 6.2(e), obligations relating to the Company's
employees, including, without limitation, accrued salaries and wages,
obligations under the Company's employee benefit plans, and retention bonuses
and severance obligations payable to employees of the Company, through the
Closing Date as a result of the transactions contemplated by this Agreement and
the other Acquisition Documents, (iii) any and all federal and state income
taxes payable by the Company as a result of the transactions contemplated by
this Agreement and the Acquisition Documents, (iv) the
2.
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Company's federal, state and local taxes for any period prior to the Closing
accrued through the Closing Date, (v) any liability arising out of or relating
to overpayments, malpractice, fraud and violations of applicable federal and
state fraud and abuse, anti-kickback and Stark laws occurring prior to Closing
Date, or (vi) any liability or obligation of the Company that is not expressly
assumed by the Purchaser herein.
"Financial Statements" shall mean the Audited Financial Statements and
the Unaudited Financial Statements.
"GAAP" shall mean generally accepted accounting principles, applied on
a basis consistent with the basis on which the applicable financial statements
were prepared.
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government or any quasi-governmental authority
or self-regulatory organization (such as the New York Stock Exchange, Inc.),
whether federal, state or local.
"HCFA" shall have the meaning specified in Section 4.10(b).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and the rules promulgated thereunder.
"Indemnified Party" shall have the meaning specified in Section 10.10.
"Indemnifying Party" shall have the meaning specified in Section 10.9.
"Indemnitee" shall have the meaning specified in Section 10.9.
"Indemnitor" shall have the meaning specified in Section 10.10.
"Knowledge," to the best knowledge of, to which a Person is aware,
known to a Person, or any variation thereof shall mean the actual knowledge of
such Person without having made independent investigation in connection with
this Agreement. For the Company, Knowledge shall be the actual knowledge of Mark
Burke and Mark Branson.
"Laws" shall have the meaning specified in Section 4.10(a).
"Material Adverse Effect" shall mean any occurrence, event or
condition, either individually or in the aggregate, having a material adverse
effect on the business operations or financial condition of the Company, or the
Purchased Assets, taken together as a whole.
"Material Contract" shall have the meaning specified in Section 4.7.
"Matter" shall mean any claim, demand, dispute, action, suit,
examination, audit, proceeding, investigation, inquiry or other similar matter.
"Medicaid" means that means-tested entitlement program under Title XIX
of the Social Security Act that provides federal grants to states for medical
insurance based on specific eligibility criteria, as interpreted by the
appropriate Governmental Entities prior to the date hereof.
3.
<PAGE>
"Medical Reimbursement Programs" means the Medicare, Medicaid programs
and any other health care program operated by or serviced in whole or in part by
any federal, state or local government, each as interpreted by the appropriate
Governmental Entities prior to date hereof.
"Medicare" means that government-sponsored entitlement program under
Title XVIII of the Social Security Act that provides for a health insurance
program for eligible elderly and disabled individuals, as interpreted by the
appropriate Governmental Entities prior to the date hereof.
"Memorandum" means that certain Memorandum of Understanding of even
date herewith by and among the Purchaser, California Kidney Centers, California
Kidney Centers, Inpatient Services, LLC, California Kidney Centers, Inpatient
Services, LLC, Dialysis Systems, Inpatient Services, LLC, Dialysis Systems, LLC
and Satellite Dialysis Centers, Inc., solely as agent for the selling parties
thereto.
"Noncompetition Agreement" shall have the meaning specified in Section
3.4(e).
"Nondisclosure Agreement" shall mean that certain Nondisclosure
Agreement, dated May 27, 1997, between the Purchaser and Satellite Dialysis
Centers, Inc., on behalf of itself and as agent for the Company and the Owners.
"Overpayments" shall have the meaning specified in Section 4.10(a).
"Owner" shall mean each holder of Equity Securities of the Company.
"Permitted Encumbrances" shall mean (i) those encumbrances resulting
from taxes that have not yet become due and delinquent, (ii) minor encumbrances
that do not materially detract from the value of the real property interests
subject thereto or materially impair their operations, (iii) zoning laws and
other use restrictions of public record, (iv) encumbrances that arise or have
otherwise arisen in the ordinary course of business, (v) restrictions arising
under all Laws, and (vi) those encumbrances described in Part 4.5 of the
Disclosure Schedule.
"Person" shall mean any individual, corporation, association, general
partnership, limited partnership, venture, trust, association, firm,
organization, company, business, entity, union, society, government (or
political subdivision thereof) or governmental agency, authority or
instrumentality.
"Physical Assets" shall have the meaning specified in Section 4.5.
"Purchase Price" shall have the meaning specified in Section 3.1.
"Purchased Assets" shall have the meaning specified in the Section 1.1.
"Purchaser" shall mean Renal Treatment Centers - West, Inc., a Delaware
corporation/Renal Treatment Centers - California, Inc., a Delaware corporation.
"Purchaser Material Adverse Effect" shall have the meaning specified in
Section 5.1.
"Proprietary Rights" shall have the meaning specified in Section 4.8.
"Registered Patients" shall mean patients who have completed and mailed
Health Care Financing Administration Form 2728 indicating that they are
registered patients of one of the Sellers' facilities.
4.
<PAGE>
"Scheduled Closing Time" shall mean 2:00 p.m. (California time) on
October 31, 1997 or such time and date as may be postponed by the mutual
agreement of the parties hereto.
"Statement Date" December 31, 1996.
"Termination Date" shall mean the later of (i) December 31, 1997 and
(ii) seven (7) days after receipt of all consents, approvals, authorizations and
waivers of all Governmental Entities required to be obtained under this
Agreement.
"Unaudited Financial Statements" shall mean the unaudited balance sheet
of the Company as of June 30, 1997, and such related statement of operations of
the Company for the period then ended prepared by the Company.
5.
<PAGE>
Exhibit 2.4
----------
ASSET PURCHASE AGREEMENT
By And Between
Dialysis Systems, LLC
and
Renal Treatment Centers - West, Inc.
Dated As Of October 6, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
Article 1. Purchase And Sale Of Assets........................... 1
Section 1.1 Assets to be Transferred.............................. 1
Section 1.2 Assumed Contracts..................................... 2
Article 2. Assumption Of Liabilities............................. 2
Section 2.1 Liabilities to be Assumed............................. 2
Section 2.2 Liabilities Not to be Assumed......................... 3
Article 3. Payment of Purchase Price; Closing.................... 3
Section 3.1 Purchase Price........................................ 3
Section 3.2 Payment of Purchase Price............................. 3
Section 3.3 Closing............................................... 3
Section 3.4 Items to be Delivered at the Closing by the Company ... 3
Section 3.5 Items to be Delivered at the Closing by the Purchaser.. 4
Section 3.6 Prorations............................................ 4
Article 4. Representations and Warranties of the Company......... 4
Section 4.1 Formation and Existence............................... 4
Section 4.2 Power and Authority................................... 5
Section 4.3 Conflicts............................................. 5
Section 4.4 Financial Statements.................................. 5
Section 4.5 Title to and Condition of Assets...................... 5
Section 4.6 Subsidiaries and Partnerships......................... 6
Section 4.7 Contracts............................................. 6
Section 4.8 Proprietary Rights.................................... 6
Section 4.9 Sufficiency of Purchased Assets....................... 6
Section 4.10 Compliance With Laws................................. 6
Section 4.11 Litigation........................................... 7
Section 4.12 Labor Matters........................................ 7
Section 4.13 Liabilities.......................................... 7
Section 4.14 Environmental........................................ 8
Section 4.15 Brokers' Fees........................................ 8
Section 4.16 Required Filings and Consents........................ 8
Section 4.17 Patients............................................. 8
Section 4.18 Physicians........................................... 8
Section 4.19 Medicare Certification; State Licensure.............. 8
Section 4.20 Ownership............................................ 9
Section 4.21 Insurance............................................ 9
Article 5. Representations and Warranties of the Purchaser....... 9
Section 5.1 Corporate Existence................................... 9
Section 5.2 Corporate Power and Authority......................... 9
Section 5.3 Conflicts............................................. 9
Section 5.4 Litigation........................................... 10
Section 5.5 Brokers' Fees........................................ 10
i.
<PAGE>
TABLE OF CONTENTS
PAGE
Section 5.6 Financing............................................ 10
Section 5.7 Compliance With Laws................................. 10
Article 6. Covenants of the Company And the Purchaser........... 10
Section 6.1 Company Covenants.................................... 10
Section 6.2 Purchaser Covenants.................................. 12
Article 7. Conditions to Obligation of Purchaser to Close....... 13
Section 7.1 Accuracy of Representations and Warranties........... 13
Section 7.2 Performance.......................................... 13
Section 7.3 Governmental Consents................................ 13
Section 7.4 Third Party Consents................................. 13
Section 7.5 Additional Documents................................. 14
Section 7.6 No Injunction........................................ 14
Article 8. Conditions to Obligation of the Company to Close..... 14
Section 8.1 Accuracy of Representations and Warranties........... 14
Section 8.2 Performance.......................................... 14
Section 8.3 No Injunction........................................ 14
Section 8.4 Equityholder Approval; Attorney General Consent...... 14
Section 8.5 Governmental Consents................................ 15
Section 8.6 Third Party Consents................................. 15
Section 8.7 Additional Documents................................. 15
Article 9. Termination of Agreement............................. 15
Section 9.1 Right to Terminate Agreement......................... 15
Section 9.2 Effect of Termination................................ 15
Article 10. Indemnification and Related Matters.................. 16
Section 10.1 Indemnification by the Company...................... 16
Section 10.2 Indemnification by the Purchaser.................... 16
Section 10.3 Expiration of Representations,
Warranties and Covenants......................... 16
Section 10.4 Deductible Amount................................... 16
Section 10.5 Maximum Liability................................... 17
Section 10.6 Knowledge of Breach................................. 17
Section 10.7 No Implied Representations.......................... 17
Section 10.8 Indemnification Claims.............................. 17
Section 10.9 Defense of Third Party Actions...................... 18
Section 10.10 Subrogation........................................ 18
Section 10.11 Exclusivity........................................ 19
Section 10.12 Accounts Receivable................................ 19
Section 10.13 Tax Matters........................................ 19
Section 10.14 Tail Insurance..................................... 19
Article 11. Miscellaneous Provisions........................... 19
ii
<PAGE>
TABLE OF CONTENTS
PAGE
Section 11.1 Time of Essence..................................... 19
Section 11.2 Compliance with Laws................................ 19
Section 11.3 Publicity........................................... 19
Section 11.4 Access of the Company to Books and Records.......... 20
Section 11.5 Governing Law....................................... 20
Section 11.6 Venue and Jurisdiction.............................. 20
Section 11.7 Notices............................................. 20
Section 11.8 Table of Contents and Headings...................... 21
Section 11.9 Assignment.......................................... 21
Section 11.10 Parties in Interest................................ 21
Section 11.11 Severability....................................... 21
Section 11.12 Entire Agreement................................... 21
Section 11.13 Expenses........................................... 21
Section 11.14 Waiver............................................. 22
Section 11.15 Amendments......................................... 22
Section 11.16 Counterparts....................................... 22
Section 11.17 Waiver of Bulk Transfer Laws....................... 22
Section 11.18 Post-Signing Procedure............................. 22
Section 11.19 Interpretation of Agreement........................ 22
Section 11.20 Commercially Reasonable Efforts.................... 23
iii
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") is entered into as of
October 6, 1997, by and between DIALYSIS SYSTEMS, LLC, a Delaware limited
liability company (the "Company") and RENAL TREATMENT CENTERS-WEST, INC., a
Delaware corporation (the "Purchaser"). Certain capitalized terms used in this
Agreement are defined in Exhibit A.
Recitals
A. The Company provides (i) outpatient dialysis services to end stage renal
disease patients ("ESRD Patients") at Medicare certified outpatient hemodialysis
facilities owned by the Company, (ii) home dialysis supplies and support
services and (iii) acute inpatient dialysis services at local hospitals in Las
Vegas, Nevada under contract (collectively, the "Business").
B. The Purchaser and its Affiliates are experienced in the ownership,
management and operations of hemodialysis facilities and inpatient dialysis
services.
C. The Purchaser desires to purchase from the Company, and the Company
desires to sell to the Purchaser, substantially all of the assets of the Company
relating to the Business.
Agreement
Now Therefore, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties, intending to be legally bound, agree as follows:
Article 1
Purchase And Sale Of Assets.
Section 1.1 ASSETS TO BE TRANSFERRED. Subject to the terms and conditions
of this Agreement, on the Closing Date the Company shall sell, transfer, convey,
assign, and deliver to the Purchaser, and the Purchaser shall purchase and
accept from the Company, all of the assets, rights, claims and contracts (of
every kind and nature, character and description, whether real, personal or
mixed, whether tangible or intangible, whether accrued, contingent or otherwise,
wherever situated) owned by the Company and used in the conduct of the Business,
except the Excluded Assets, (the "Purchased Assets"). The Purchased Assets
shall include, without limitation, the following other than Excluded Assets:
(a) FIXTURES. All fixtures and improvements to any real property in
which the Company has a leasehold interest used in the conduct of the Business.
(b) PERSONAL ASSETS. All tangible personal property, including
without limitation, all equipment, materials, dialysis machines, dialysis
chairs, home dialysis equipment, computers and related hardware, telecopy and
photocopy machines and telecommunications equipment used in the conduct of the
Business as more particularly described in Part 4.5(a) of the Disclosure
Schedule.
(c) INVENTORY. All inventory of usable goods, including all medical
supplies and other current assets used in the conduct of the Business, together
with any additions thereto
1.
<PAGE>
and subject to any reductions therefrom received, ordered or in transit by the
Company operating the Business in the ordinary course after the date hereof
through the Closing Date.
(d) PROPRIETARY RIGHTS. All Proprietary Rights used in the
conduct of the Business.
(e) GOODWILL. All of the goodwill of the Business.
(f) CONTRACTS. All contracts, contractual rights, and other
written agreements of the Company, including, without limitation, all payor
agreements, supply agreements, medical director agreements, license agreements,
consulting agreements, real estate leases and acute dialysis service agreements
used in the conduct of the Business (the "Assumed Contracts").
(g) LICENSES; PERMITS. To the extent permitted by Law, all
licenses, permits, certificates and approvals of the Company used in the conduct
of the Business. The Company agrees to use commercially reasonable efforts to
cause any license, permits, certificates or approvals assignable with the
consent of a Governmental Entity to be assigned to the Purchaser before the
Closing Date, and, if not assigned or transferred by the Closing Date, to be
assigned or transferred thereafter.
Section 1.2 ASSUMED CONTRACTS. To the extent that any Assumed Contract
for which assignment is provided herein is not assignable without the consent of
another party, this Agreement shall not constitute an assignment or an attempted
assignment thereof if such assignment or attempted assignment would constitute a
breach thereof. The Company and the Purchaser agree to use commercially
reasonable efforts (without any requirement on the part of the Purchaser or the
Company to pay any money or agree to any change in the terms of any such Assumed
Contract) to obtain the consent of such other party to the assignment of any
such Assumed Contract to the Purchaser in all cases in which such consent is or
may be required for such assignment. If any such consent shall not be obtained,
the Company agrees to cooperate with the Purchaser in any reasonable arrangement
designed to provide for the Purchaser the benefits intended to be assigned to
the Purchaser under the relevant Assumed Contract, including enforcement at the
cost and for the account of the Purchaser of any and all rights of the Company
against the other party thereto arising out of the breach or cancellation
thereof by such other party or otherwise. If and to the extent that such
arrangement cannot be made, the Purchaser, upon notice to the Company, shall
have no obligation pursuant to Section 2.1 or otherwise with respect to any such
Assumed Contract and any such Assumed Contract shall not be deemed to be a
Purchased Asset hereunder.
Article 2
ASSUMPTION OF LIABILITIES.
Section 2.1 LIABILITIES TO BE ASSUMED Subject to the terms and conditions
of this Agreement, on the Closing Date, the Purchaser shall assume and agree to
perform and discharge to the extent indicated below the following, and only the
following, specific liabilities and obligations of the Company (collectively the
"Assumed Liabilities"):
(a) CONTRACTUAL LIABILITIES. The Company's liabilities and
obligations arising from and after the Closing Date under and pursuant to the
Assumed Contracts.
2.
<PAGE>
(b) LIABILITIES UNDER PERMITS AND LICENSES. The Company's
obligations arising from and after the Closing Date under any permits or
licenses listed in Part 4.10(b) of the Disclosure Schedule and assigned to the
Purchaser at or after the Closing.
(b) H-S-R FILING. All fees incurred by the parties in connection
with the filing under the HSR Act.
SECTION 2.2 LIABILITIES NOT TO BE ASSUMED. Except as and to the extent
specifically set forth in Section 2.1, the Purchaser is not assuming any debts,
liabilities, obligations or contracts of the Company and all such debts,
liabilities, obligations and contracts shall be and remain the responsibility of
the Company.
ARTICLE 3
PAYMENT OF PURCHASE PRICE; CLOSING.
Section 3.1 PURCHASE PRICE. The purchase price (the "Purchase Price") for
the Purchased Assets shall be:
(a) the assumption of the Assumed Liabilities;
plus
(b) the sum of Twenty-Nine Million Six Hundred Thirty-Seven
Dollars ($29,637,000) in cash.
Section 3.2 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be paid
by the Purchaser as follows:
(a) At the Closing, the Purchaser shall deliver to the Company such
documents and instruments as are reasonably required to evidence the assumption
of the Assumed Liabilities.
(b) At the Closing, the Purchaser shall deliver to the Company in
cash the sum of the amount required to be paid in Section 3.1.(b).
SECTION 3.3 CLOSING. The closing of the Acquisition (the "Closing") is
contemplated to take place on or before the Scheduled Closing Time, and shall
take place at the offices of Cooley Godward llp, and shall occur within five (5)
days after the last to occur of, (a) approval of the Acquisition and the
transactions contemplated by the Agreement by the Office of the California
Attorney General, (b) the termination of the applicable waiting period under the
HSR Act, and (c) upon satisfaction of the conditions set forth herein, or at
such other place, time and/or date as may be jointly designated by the Company
and the Purchaser.
SECTION 3.4 ITEMS TO BE DELIVERED AT THE CLOSING BY THE COMPANY. At the
Closing, the Company shall deliver or cause to be delivered to the Purchaser:
(a) Bill of Sale and Assignment, in substantially the form of
Exhibit B.
(b) Instruments of transfer in the form customarily used in
commercial transactions in the area in which the personal property is located
sufficient to transfer each personal
3.
<PAGE>
property interest owned by the Company not otherwise transferred by the Bill of
Sale referred to in Section 3.4(a).
(c) Such other instruments of transfer necessary or appropriate
to transfer to and vest in the Purchaser all of the Company right, title and
interest in and to the Purchased Assets, including all necessary consents of
third parties.
(d) The opinions, certificates, consents and other documents
referred to herein as then deliverable by the Company.
(e) Noncompetition Agreement or Agreements, substantially in the
form of Exhibit C (the "Noncompetition Agreement").
(f) The Company and the Purchaser shall complete and deliver a
statement of the allocation of purchase price in substantially the form of
Exhibit E.
SECTION 3.5 ITEMS TO BE DELIVERED AT THE CLOSING BY THE PURCHASER. At the
Closing, the Purchaser shall deliver to the Company:
(a) The cash portion of the Purchase Price.
(b) An Assumption Agreement, in substantially the form of
Exhibit D.
(c) The opinions, certificates, consents and other documents
referred to herein as then deliverable by the Purchaser.
SECTION 3.6 PRORATIONS. Except as otherwise set forth herein, at and as
of the Closing Date, the Purchaser and the Company shall proportionately
allocate (i) real property taxes and assessments for each of the Company's
dialysis facilities, (ii) rents and other payments, including, without
limitation, CAM charges, under the real property leases of the Company paid in
advance of the Closing Date, (iii) utility and sewer charges paid in advance of
the Closing Date, (iv) payments under the Assumed Contracts paid in advance of
the Closing Date and (v) fees for transferable licenses and permits. All
deposits under the Company's real property leases and all utilities and other
deposits shall be remitted to the Company, or in lieu of such remittance, the
amount of such deposits shall be added to the Purchase Price and paid over to
the Company by the Purchaser. In the event the parties are unable to
proportionately allocate such amounts and other operating expenses under this
Section 3.6, whether paid in advance or payable subsequent to the Closing, the
parties agree to pro rate such amounts as of the Closing Date. On the Closing
Date, or as soon as practicable thereafter, the Company and Purchaser shall
complete and deliver a statement of adjustments in substantially the form of
Exhibit F setting forth the various allocations described in this Section 3.6.
Any party owing funds to the other party shall remit such amounts as soon as
practicable, but in any event within 30 days after demand therefor.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Subject to the limitations set forth in Article 10 and elsewhere in this
Agreement, to the best of its Knowledge, the Company hereby represents and
warrants to the Purchaser that, except as set forth on the Disclosure Schedule,
the following are accurate in all material respects:
4.
<PAGE>
Section 4.1 FORMATION AND EXISTENCE. The Company is a limited liability
company duly formed, validly existing and in good standing under the laws of the
State of Delaware. The Company has full power to carry on its business as now
being conducted and to own and operate the property and assets now owned and
operated by it, and is duly qualified to transact business and is in good
standing in each jurisdiction where the ownership of its properties or the
conduct of its business requires such qualification and the failure to be so
qualified will have a Material Adverse Effect.
SECTION 4.2 POWER AND AUTHORITY. The Company has all requisite power and
authority to execute and deliver this Agreement and each other agreement,
document, or instrument or certificate contemplated by this Agreement to be
executed by the Company in connection with the consummation of the transactions
contemplated hereby (together with this Agreement, the "Acquisition Documents"),
and to consummate the transactions contemplated hereby and thereby. This
Agreement and each of the other Acquisition Documents will be at or prior to the
Closing, duly and validly authorized, executed and delivered by the Company and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each of the other
Acquisition Documents when so executed and delivered will constitute, legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
SECTION 4.3 CONFLICTS. The execution and delivery by the Company of this
Agreement and the other Acquisition Documents, the consummation of the
transactions contemplated hereby or thereby or compliance by the Company with
any of the provisions hereof or thereof (i) will not violate any provision of
the partnership agreement/operating agreement of the Company; (ii) subject to
obtaining the consents referred to in Part 4.3 of the Disclosure Schedule, will
not conflict with, violate, result in the breach or termination of, or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company is a party or
by which its properties or assets are bound; (iii) will not violate any statute,
rule, regulation, order or decree of any Governmental Entity by which the
Company is bound; or (iv) will not result in the creation of any encumbrance
upon the Purchased Assets except, in case of clauses (ii) and (iii), for such
conflicts, violations, breaches or defaults as will not have a Material Adverse
Effect.
SECTION 4.4 FINANCIAL STATEMENTS. The Company has furnished the Purchaser
with the Financial Statements. Except as set forth therein, the Financial
Statements fairly present, in all material respects, the financial condition and
results of operations, as applicable, of the Company as of the dates and for the
periods indicated thereon prepared in accordance with GAAP; provided, that the
Unaudited Financial Statements are subject to normal recurring year-end
adjustments, none of which are reasonably expected to have a Material Adverse
Effect, and do not contain all footnotes required under GAAP.
Section 4.5 TITLE TO AND CONDITION OF ASSETS.
(a) MARKETABLE TITLE. The Company has good and merchantable title to
all of its tangible assets used in the operations of the Business ("Physical
Assets") or has valid leasehold interests in all leased real property and
Physical Assets listed thereon as leased by the Company, except such as shall
have been disposed of as obsolete or in the ordinary course of business since
the date of Part 4.5(a) of the Disclosure Schedule. At Closing, the Purchaser
shall receive good and merchantable title to the Purchased Assets free of any
Encumbrances except for Permitted Encumbrances.
5.
<PAGE>
(b) CONDITION. All of the Physical Assets are in good operating
condition and repair, have been maintained consistent with the standards
generally followed in the industry and applicable legal standards.
Section 4.6 SUBSIDIARIES AND PARTNERSHIPS. Except as set forth on Part
4.6 of the Disclosure Schedule, the Company has no subsidiaries or investments
in other corporations, partnerships or joint ventures.
SECTION 4.7 CONTRACTS. Part 4.7(a) of the Disclosure Schedule lists all
written agreements to which the Company is a party or to which the Company, or
any of its properties is subject or by which any thereof is bound that is deemed
a Material Contract under this Agreement. As used in this Agreement, the term
"Material Contract" shall mean each written agreement that (a) after December
31, 1996 obligates the Company to pay an amount of $50,000 or more, (b) has an
unexpired term as of the date hereof in excess of one year, (c) contains a
covenant not to compete or otherwise significantly restricts the Business of the
Company, (d) provides for the extension of credit, (e) limits the ability of the
Company to conduct its Business, including as to manner or place, (f)
constitutes a collective bargaining agreement or provides for severance benefits
to any officer, director or employee, (g) represents a written agreement with a
third party payor, including but not limited to a provider agreement under a
Medical Reimbursement Program, (h) represents a written agreement with a
physician who provides service to the Company, (i) involves the providing of
acute dialysis services, (j) provides for a leasehold in real property used in
the operations of the Business, or (k) was not made in the ordinary course of
business consistent with past practice. Part 4.7(a) of the Disclosure Schedule
also identifies each written agreement of the Company in which its officers or
directors (or any person, firm or corporation affiliated with such persons) have
a material interest. Except as set forth on Part 4.7(a) of the Disclosure
Schedule, each Material Contract is a legal, valid and binding agreement, and
none of the Material Contracts is in default by its terms or has been canceled
by the other party, and the Company has not received any claim of default under
any such Material Contract, except where such failure, default or claim of
default would not have a Material Adverse Effect. Part 4.7(b) of the Disclosure
Schedule lists as of the date hereof all of the agreements and contracts of the
Company used in the operation of the Business.
SECTION 4.8 PROPRIETARY RIGHTS. Part 4.8 of the Disclosure Schedule sets
forth all patents, trademarks, trade names, service marks, copyrights, and
pending applications therefor, software (other than third-party "off-the-shelf"
software), and intellectual property and other proprietary rights, the loss of
which would reasonably be likely to have a Material Adverse Effect (the
"Proprietary Rights"). Except as disclosed on Part 4.8 of the Disclosure
Schedule, the Company is not bound by or a party to any options, licenses or
agreements of any kind with respect to the Proprietary Rights except those that
will not have a Material Adverse Effect. Except as disclosed on Part 4.8 of the
Disclosure Schedule, the Company has not been informed of any claims or suits
pending or threatened against the Company claiming an infringement by the
Company of any patents, copyrights, licenses, trademarks, service marks or trade
names of others.
SECTION 4.9 SUFFICIENCY OF PURCHASED ASSETS. Except as set forth on Part
4.9 of Disclosure Schedule, the Purchased Assets, both tangible and intangible,
are (and as of the Closing will be) sufficient for the operation of the Business
of the Company as currently conducted.
Section 4.10 COMPLIANCE WITH LAWS.
(a) COMPLIANCE. The Company is in compliance with all laws, rules,
regulations, orders, judgments, ordinances or decrees of any Governmental Entity
applicable to the
6.
<PAGE>
Business (collectively, "Laws") (including, without limitation, Laws in respect
of overpayments, refunds, discounts or adjustments in connection with Medical
Reimbursement Programs ("Overpayments")), the non-compliance with which would
have a Material Adverse Effect. Except as set forth in Part 4.10 of the
Disclosure Schedule the Company has not received notice of any violation or
alleged violation of, nor is the Company subject to any liability (whether
accrued, absolute, contingent, direct or indirect) for past or continuing
violation of, any Laws in connection with the Company's use of the Purchased
Assets which would have a Material Adverse Effect.
(b) LICENSES AND PERMITS.
(i) The Company has all licenses, permits, approvals,
authorizations and consents of all governmental and regulatory authorities and
all certification organizations required for the operation of the Business of
the Company as currently conducted. All such licenses, permits, approvals,
authorizations and consents are described in Part 4.10 of the Disclosure
Schedule, are in full force and effect and except as specifically indicated in
Part 4.10 of the Disclosure Schedule are assignable to the Purchaser in
accordance with the terms hereof.
(ii) Except as set forth in Part 4.10 of the Disclosure
Schedule, the Company has been in compliance with all such permits and licenses,
approvals, authorizations and consents. The Company is not the subject of any
actual or threatened investigation of disciplinary action by the California
Board of Health, the Health Care Financing Administration ("HCFA"), California
Department of Health Services or the Office of Inspector General of the United
States Department of Health and Human Services.
SECTION 4.11 LITIGATION. Except as set forth in Part 4.11 of the
Disclosure Schedule, there is no litigation, proceeding or investigation pending
or threatened, by or against the Company before any Governmental Entity that
would (i) prohibit or restrain the ability of the Company to enter into this
Agreement or to consummate the transactions contemplated hereby or (ii) have a
Material Adverse Effect.
SECTION 4.12 LABOR MATTERS. Part 4.12 of the Disclosure Schedule lists
the collective bargaining agreements or other labor union contracts and employee
benefit plans applicable to employees which are employed by the Company, and the
Company is as of the date of this Agreement in full compliance with the terms
and conditions of such agreements and contracts, except where the failure to be
in compliance would not have a Material Adverse Effect. Except as set forth on
Part 4.12 of the Disclosure Schedule (i) there are no charges or allegations of
unfair labor practices pending or threatened under Federal or state labor laws;
(ii) there are no pending arbitration matters or grievance procedures under any
of the agreements listed in Part 4.12 of the Disclosure Schedule; (iii) there
are no facts or conditions existing which upon the giving of notice, or lapse of
time, will result in a breach under any collective bargaining agreement or under
any of the other foregoing agreements, which will have a Material Adverse
Effect; and (iv) there is no pending or threatened labor dispute, strike or work
stoppage which will have a Material Adverse Effect.
SECTION 4.13 LIABILITIES. Other than as set forth in Part 4.13 of the
Disclosure Schedule or as reflected in the Financial Statements, there are no
liabilities or contingent liabilities of a nature required to be reflected in
the Financial Statements or the notes thereto affecting any of the Purchased
Assets, except current liabilities incurred in the ordinary course of business
subsequent to the Statement Date which will not have a Material Adverse Effect.
7.
<PAGE>
SECTION 4.14 ENVIRONMENTAL. All applicable federal, state and local laws
relating to pollution, storage, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic, hazardous or petroleum-based
substances or wastes ("Waste") into the environment (including, without
limitation, ambient air, surface water, ground water, land surface or subsurface
strata) or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Waste including, without
limitation, the Clean Water Act, the Clean Air Act, the Resource Conservation
and Recovery Act, the Toxic Substances Control Act and the Comprehensive
Environmental Response Compensation Liability Act ("CERCLA"), as amended, and
their state and local counterparts, are herein collectively referred to as the
"Environmental Laws." Except as set forth in Part 4.14 of the Disclosure
Schedule, the Company is in compliance in all material respects with all
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the Environmental Laws. There
is no civil, criminal or administrative action, suit, demand, claim, hearing,
notice of violation, official proceeding, notice or demand letter pending or
threatened against the Company relating in any way to the Environmental Laws.
SECTION 4.15 BROKERS' FEES.' Except for the consideration payable to
Hambrecht & Quist, which shall be the sole responsibility and obligation of the
Company, neither the Company nor any of the Subsidiaries has incurred any
liability for brokerage fees, finders' fees, agents' commissions or other
similar forms of compensation in connection with this Agreement and the
transactions contemplated hereby.
SECTION 4.16 REQUIRED FILINGS AND CONSENTS. Except as set forth on Part
4.16 of the Disclosure Schedule, the execution and delivery of this Agreement by
the Company does not, and the performance of this Agreement by the Company will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign, except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, will not
prevent the Company from performing its obligations under this Agreement, and
will not have a Material Adverse Effect.
SECTION 4.17 PATIENTS. Part 4.17 of the Disclosure Schedule lists, as of
the last treatment date prior to the date hereof, all Registered Patients (by
patient code) for which the Company provides either in-center treatment or home
dialysis support services. The Company makes no representation or warranty as
to which, if any, of the Registered Patients listed on Part 4.17 of the
Disclosure Schedule will continue to receive services from the Business
subsequent to such last treatment date.
SECTION 4.18 PHYSICIANS. Part 4.18 of the Disclosure Schedule lists all
physicians or groups of physicians admitting patients to the Company's dialysis
facilities indicating the number of Registered Patients admitted by each such
physician or group of physicians. The Company makes no representation or
warranty as to which, if any, physicians listed on Part 4.18 of the Disclosure
Schedule will continue to admit or keep patients at the Company's dialysis
facilities subsequent to the date hereof.
SECTION 4.19 MEDICARE CERTIFICATION; STATE LICENSURE. Each of the
Company's dialysis facilities are certified under the conditions of coverage and
participation in the federal Medicare program as an end stage renal disease
facility providing the end stage renal disease services indicated on Part 4.19
of the Disclosure Schedule. The operating certificate issued by California
Department of Health Services and the Medicare certificates of the Company's
dialysis facilities are in full force and effect and no violation of the
conditions and standards of coverage, participation or certification exists.
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SECTION 4.20 OWNERSHIP. Part 4.20 of the Disclosure Schedule is a
complete and accurate list of all beneficial owners of an equity interest in the
Company, and, in the case of any beneficial owner who is not a natural person,
all beneficial owners of an equity interest therein.
SECTION 4.21 INSURANCE. Except as set forth in Part 4.21 of the
Disclosure Schedule, for the five (5) year period prior to the date of this
Agreement, the Company has maintained adequate insurance for the Business and
the Purchased Assets with respect to risks normally insured against by similar
businesses.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Subject to the limitations set forth in Article 10 and elsewhere in this
Agreement, to the best of its Knowledge, the Purchaser hereby represents and
warrants to the Company that the following are accurate in all material
respects:
Section 5.1 CORPORATE EXISTENCE. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power to carry on its
business as now being conducted and to own and operate the property and assets
now owned and operated by it, and is duly qualified to transact business and is
in good standing in each jurisdiction where the ownership of its properties or
the conduct of its business requires such qualification and the failure to be so
qualified would have a material adverse effect on the business, operations or
financial condition of the Purchaser (a "Purchaser Material Adverse Effect").
SECTION 5.2 CORPORATE POWER AND AUTHORITY. The Purchaser has all
requisite corporate power and authority to execute and deliver this Agreement
and the other Acquisition Documents and to consummate the transactions
contemplated hereby and thereby. All corporate action necessary to authorize
the execution, delivery and performance of this Agreement and each of the other
Acquisition Documents has been duly taken by the Purchaser. This Agreement has
been, and each of the Acquisition Documents will be at or prior to the Closing,
duly and validly executed and delivered by the Purchaser and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each of the Acquisition Documents when so
executed and delivered will constitute, legal, valid and binding obligations of
the Purchaser, enforceable against the Purchaser in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
SECTION 5.3 CONFLICTS. Neither the execution and delivery by the
Purchaser of this Agreement and the other Acquisition Documents, the
consummation of the transactions contemplated hereby or thereby, or compliance
by the Purchaser with any of the provisions hereof or thereof will (i) violate
any provision of the certificate of incorporation or bylaws of the Purchaser;
(ii) conflict with, violate, result in the breach or termination of, or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Purchaser is a party or
by which its respective properties or assets are bound; or (iii) violate any
statute, rule, regulation, order or decree of any Governmental Entity by which
the Purchaser is bound except, in case of clauses (ii) and (iii), for such
conflicts, violations, breaches or defaults as will not have a Purchaser
Material Adverse Effect.
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SECTION 5.4 LITIGATION. There is no litigation, proceeding or
investigation pending or, to the Purchaser's knowledge, threatened, by or
against the Purchaser before any Governmental Entity that would prohibit or
restrain the ability of the Purchaser to enter into this Agreement or to
consummate the transactions contemplated hereby.
SECTION 5.5 BROKERS' FEES.' The Purchaser has not incurred any liability
for brokerage fees, finders' fees, agents' commissions or other similar forms of
compensation in connection with this Agreement and the transactions
contemplated.
SECTION 5.6 FINANCING. The Purchaser has available all of the funds
necessary to perform its obligations hereunder and under the other Acquisition
Documents.
SECTION 5.7 COMPLIANCE WITH LAWS. The Purchaser is in compliance with all
laws, regulations, orders, judgments, ordinances or decrees of any Governmental
Entity applicable to the business of the Purchaser, the non-compliance with
which would have a Purchaser Material Adverse Effect. The Purchaser has not
received notice of any violation or alleged violation of, nor are any of them
subject to any liability (whether accrued, absolute, contingent, direct or
indirect) for past or continuing violation of, any laws, regulations, orders,
judgments, ordinances or decrees of any Governmental Entity applicable to the
business of the Purchaser.
ARTICLE 6
COVENANTS OF THE COMPANY AND THE PURCHASER.
SECTION 6.1 COMPANY COVENANTS. The Company covenants that from the date
of this Agreement until the Closing (the "Pre-Closing Period"):
(a) CONDUCT OF BUSINESS IN ORDINARY COURSE. Except as disclosed on
Part 6.1(a) of the Disclosure Schedule or as contemplated by this Agreement or
any other Acquisition Document or as may be necessary to carry out the
transactions contemplated by this Agreement or any other Acquisition Document,
the Company will carry on its business in the ordinary course, and it shall not
make or institute any unusual or novel methods of purchase, sale, lease,
management, accounting or operation that will vary materially from those methods
used by it prior to the date of this Agreement. The Company will not sell,
lease or dispose of, or agree to sell, lease or dispose of, any of the assets or
properties of the Company other than in the ordinary course of business, or
pursuant to any existing plan, agreement or practice. The Company will carry on
its business diligently and in the same manner as heretofore and will continue
to see patients and will not make or institute any adverse changes in its method
of purchase, medical treatment, management, accounting or operation.
(b) PRESERVATION OF BUSINESS AND RELATIONSHIPS. The Company will use
commercially reasonable efforts to preserve its business intact and to maintain
its present material relationships with patients, creditors, suppliers, lessors,
licensors, employees and others having business relationships with it or them.
(c) THE PURCHASER'S ACCESS TO PREMISES AND INFORMATION. The
Purchaser and its Associates shall have reasonable access during normal business
hours to all properties, books, accounts, records, contracts and documents of or
relating to the Company.
(d) GOVERNMENTAL APPROVALS. The Company shall cooperate with the
Purchaser (i) in promptly determining whether any governmental approvals,
authorizations, licenses,
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permits, consents, or other filings are required to be or should obtained under
any federal, state or local law and (ii) in promptly applying for or submitting
any such governmental approvals, authorizations, licenses, permits, consents, or
other filings, furnishing information required in connection therewith and
seeking timely to obtain such. The Company will make any and all filings
required to be made on its part under the HSR Act.
(e) EMPLOYEES; EMPLOYEE BENEFITS MATTERS. The Company shall fully
compensate its employees for any accrued vacation pay through the effectiveness
of the Closing. The Company shall cause interests of Assumed Employees of the
Company in its 401(k) plan to become distributable pursuant to Internal Revenue
Code Section 401(k)(10)(A) and any amounts distributed to such employees may be
rolled over pursuant to Internal Revenue Code Section 402 to a comparable plan
maintained by the Purchaser.
(f) NO NEGOTIATION. The Company shall ensure that, during the Pre-
Closing Period, neither the Company, the Owners nor any of the Company's
Representatives directly or indirectly:
(i) solicits or encourages the initiation of any inquiry, proposal or
offer from any Person (other than the Purchaser) relating to any Acquisition
Transaction; or
(ii) subject to Section 11.3, participates in any discussions or
negotiations with, or provides any non-public information to, any Person (other
than the Purchaser) relating to any Acquisition Transaction.
(g) MEDICAL DIRECTOR AGREEMENTS. The Company will use commercially
reasonable efforts to (i) extend existing medical director agreements of the
Company for a period of seven (7) years from the date hereof; (ii) assign to
Purchaser all existing medical director agreements of the Company; and (iii)
eliminate those provisions of each such agreement as they relate to the
transfers of patients.
(h) CONSENTS; REAL PROPERTY LEASES. The Company will use
commercially reasonable efforts to obtain all consents required to be obtained
(from creditors, licensors, lessors and other Persons) in connection with the
transactions contemplated hereby, including, without limitation, consents to the
assignment of the Company's acute dialysis services agreements and the Company's
real property leases. In each instance in which (i) the term of any of the
Company's real property leases does not extend for, or (ii) extension options
under such leases do not provide for, a remaining term of at least seven (7)
years from the date hereof, the Company will use commercially reasonable efforts
to extend the remaining terms of such leases for a minimum of seven (7) years
from the date hereof.
(i) COOPERATION. The Company shall cooperate fully with the
Purchaser, and shall provide the Purchaser with such assistance as the Purchaser
may reasonably request, for the purpose of facilitating the performance by the
Purchaser of its obligations under this Agreement and the Acquisition Documents.
(j) CONDITIONS. The Company shall use commercially reasonable
efforts to ensure that the conditions required to be satisfied on the part of
the Company are satisfied on a timely basis.
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(k) CONFIDENTIALITY. The Company shall continue to be bound by
its obligations under the Nondisclosure Agreement.
SECTION 6.2 PURCHASER COVENANTS. The Purchaser covenants during the Pre-
Closing Period:
(a) CERTAIN FILINGS. The Purchaser will make any and all filings
required to be made on its part under the HSR Act. The Company and the
Purchaser shall furnish each other such necessary information and reasonable
assistance as the other may request in connection with its preparation of
necessary filings or submissions under the provisions of such laws.
(b) SALES TAXES. The Purchaser shall pay all real and personal
property transfer taxes and fees, if any, sales taxes, if any, and all use,
gross receipt or documentary taxes and other similar taxes, if any, imposed on
or in connection with the purchase, sale or transfer of the Purchased Assets to,
and the assumption of the Assumed Liabilities by, the Purchaser pursuant to this
Agreement. The Purchaser shall promptly reimburse the Company for any such
taxes and fees which, under applicable law, are imposed upon the Company.
(c) COOPERATION. The Purchaser shall cooperate fully with the
Company, and shall provide the Company with such assistance as the Company may
reasonably request, for the purpose of facilitating the performance by the
Company of its obligations under this Agreement and the Acquisition Documents.
(d) GOVERNMENTAL APPROVALS. The Purchaser shall cooperate with the
Company (i) in promptly determining whether any governmental approvals,
authorizations, licenses, permits, consents, or other filings are required to be
or should obtained under any federal, state or local law and (ii) in promptly
applying for or submitting any such governmental approvals, authorizations,
licenses, permits, consents, or other filings, furnishing information required
in connection therewith and seeking timely to obtain such.
(e) EMPLOYEES. The Purchaser will offer employment to those current
employees of the Company (as of the Closing Date) working in the Business whose
names and positions are set forth on Schedule 6.2(e) (the "Assumed Employees").
The Purchaser will pay the Assumed Employees at wage rates competitive in the
dialysis industry within the region in which the Company operates and will
provide benefits under standard Purchaser benefit plans which shall be
comparable to those provided to the other Purchaser employees (including
healthcare benefits which do not contain any exclusions or waiting periods for
pre-existing conditions with respect to Assumed Employees' initial enrollment).
This Section 6.2(e) in no way constitutes an employment agreement between
Purchaser and the Assumed Employees as such Assumed Employees shall be employed
by the Purchaser on an "at will" basis. The Purchaser disclaims any commitment
to employ such Assumed Employees for any specific period.
(f) INVESTIGATION. In conducting its investigation of the business,
operations and legal affairs of the Company, the Purchaser shall use its best
efforts not to interfere in any manner with the business or operations of the
Company or with the performance of any of the Company's employees.
(g) CONDITIONS. The Purchaser shall use commercially reasonable
efforts to ensure that the conditions required to be satisfied on the part of
the Purchaser are satisfied on a timely basis.
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(h) CONFIDENTIALITY. The Purchaser shall continue to be bound
by its obligations under the Nondisclosure Agreement.
ARTICLE 7
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE.
The obligation of the Purchaser to purchase the Purchased Assets and
otherwise consummate the transactions that are to be consummated at the Closing
is subject to the satisfaction, as of the Scheduled Closing Time and as of the
Closing Date, of the following conditions (any of which may be waived by the
Purchaser in whole or in part):
SECTION 7.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company set forth in Article 4 shall be
accurate in all material respects as of the Scheduled Closing Time and as of the
Closing Date, except to the extent that (a) any of such representations and
warranties refers specifically to a date other than the Scheduled Closing Time
or the Closing Date in which event such representation and warranty shall be
accurate as of such date, (b) the accuracy of any of such representations and
warranties is affected by any of the transactions contemplated by this Agreement
or the Acquisition Documents, and (c) any such representation and warranty is
modified in a Disclosure Schedule revised as of the Closing Date (which
Disclosure Schedule shall be accurate as of the Closing Date) delivered to the
Purchaser at least five calendar days prior to the Scheduled Closing Time, to
which modifications the Purchaser shall have been deemed to have consented;
provided the facts or circumstances described or referred to in such
modifications have not had nor would reasonably be expected to have a Material
Adverse Effect.
Section 7.2 PERFORMANCE. The Company shall have performed, in all
material respects, all obligations required under this Agreement and the
Acquisition Documents to be performed by the Company on or before the Closing
Date.
Section 7.3 GOVERNMENTAL CONSENTS. The Company shall have received all
other consents, approvals, authorizations and waivers required to be obtained by
the Company from all Governmental Entities with jurisdiction over the Company in
connection with the transactions contemplated by this Agreement and the
Acquisition Documents and the operation of the Purchased Assets, except where
failure to obtain such consents, approvals, authorizations or waivers will not
have a Material Adverse Effect.
SECTION 7.4 THIRD PARTY CONSENTS. To the extent permitted by Law, the
Purchaser shall have received all other consents, approvals, authorizations and
waivers from Persons necessary to the assignment and transfer of the Purchased
Assets set forth in Schedule 7.4, except where failure to obtain such consents,
approval, authorizations or waivers will not have a Material Adverse Effect.
Notwithstanding the foregoing, (i) the Company shall have obtained the consent
to the assignment of the Company's real property leases to the Purchaser from
each of the lessors under such leases, and (ii) the Company shall have obtained
the consents necessary to (a) the assignment of all of the Company's medical
director agreements to Purchaser, (b) the extension for a period of seven (7)
years from the date hereof of the terms of the Company's medical director
agreements in a manner mutually acceptable to the Company and the Purchaser with
the following Persons: Marvin J. Bernstein, M.D., Neville Pokroy, M.D., Larry M.
Lehrner, M.D., Robert W. Merrell, M.D., Marc Leiserowitz, M.D., and Joseph P.
Snyder, M.D., and (c) the elimination of those provisions from such medical
director agreements as they relate to the transfer of patients.
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SECTION 7.5 ADDITIONAL DOCUMENTS. The Purchaser shall have received the
following documents:
(a) an opinion letter from Woodburn & Wedge, dated the Closing
Date, in a form reasonably acceptable to the Purchaser;
(b) each of the Acquisition Documents shall have been executed
and delivered by the parties thereto; and
(c) such other documents as the Purchaser may reasonably request
in good faith for the purpose of (i) evidencing the accuracy of any
representation or warranty made by the Company, (ii) evidencing the compliance
by the Company with, or the performance by the Company of, any covenant or
obligation set forth in this Agreement or any of the Acquisition Documents,
(iii) evidencing the satisfaction of any condition set forth in this Section 7,
or (iv) otherwise facilitating the consummation or performance of any of the
transactions contemplated by this Agreement or any of the Acquisition Documents.
Section 7.6 NO INJUNCTION. There shall not be in effect, at the Closing,
any injunction or other binding order of any Governmental Entity having
jurisdiction over the Purchaser that prohibits the consummation of the
transactions contemplated by this Agreement and the Acquisition Documents.
ARTICLE 8
CONDITIONS TO OBLIGATION OF THE COMPANY TO CLOSE.
The obligation of the Company to sell the Purchased Assets to the Purchaser
and otherwise consummate the transactions that are to be consummated at the
Closing is subject to the satisfaction, as of the Scheduled Closing Time and as
of the Closing Date, of the following conditions (any of which may be waived by
the Company in whole or in part):
Section 8.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Purchaser set forth in Section 5 shall be
accurate in all material respects as of the Scheduled Closing Time and as of the
Closing Date.
Section 8.2 PERFORMANCE. The Purchaser shall have performed, in all
material respects, all obligations required by this Agreement and the
Acquisition Documents to be performed by the Purchaser on or before the Closing
Date.
Section 8.3 NO INJUNCTION. There shall not be in effect, at the Closing,
any injunction or other binding order of any Governmental Entity having
jurisdiction over the Company that prohibits the consummation of the
transactions contemplated by this Agreement and the Acquisition Documents.
Section 8.4 EQUITYHOLDER APPROVAL; ATTORNEY GENERAL CONSENT. The Company
shall have received the consent and approval of the Owners to the transactions
contemplated by this Agreement and the Acquisition Documents, and Satellite
Dialysis Centers, Inc. shall have received written notification from the Office
of the California Attorney General that it does not oppose or object to the
participation by Satellite Dialysis Centers, Inc. in the Acquisition and the
transactions contemplated by the Agreement. In the case of Satellite Dialysis
Centers, Inc. (in its capacity as an Owner and not as Agent), it is expressly
understood and agreed that its consent and approval is subject to the fiduciary
obligations of its board of trustees consistent with its charitable purpose.
The parties agree that such consent and approval by the
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board of trustees and receipt of approval from the Office of the California
Attorney General may only be waived by Satellite Dialysis Centers, Inc. in its
sole and absolute discretion.
Section 8.5 GOVERNMENTAL CONSENTS. To the extent permitted by Law, the
Company shall have received all other consents, approvals, authorizations and
waivers required to be obtained from all federal, state, municipal and other
governmental authorities with jurisdiction over the Company in connection with,
and as a condition to, the transactions contemplated by this Agreement and the
Acquisition Documents and the operation of the Purchased Assets, except where
failure to obtain such consents, approvals, authorizations or waivers will not
have a Material Adverse Effect.
SECTION 8.6 THIRD PARTY CONSENTS. The Company shall have received all
other consents, approvals, authorizations and waivers from Persons necessary to
the assignment and transfer of the Purchased Assets, except where failure to
obtain such consents, approvals, authorizations or waivers will not have a
Material Adverse Effect.
SECTION 8.7 ADDITIONAL DOCUMENTS. The Company shall have received the
following documents:
(a) an opinion letter from Duane, Morris & Heckscher, dated the
Closing Date, in a form reasonably acceptable to the Company;
(b) each of the Acquisition Documents shall have been executed
and delivered by the parties thereto; and
(c) such other documents as the Company may reasonably request in
good faith for the purpose of (i) evidencing the accuracy of any representation
or warranty made by the Purchaser, (ii) evidencing the compliance by the
Purchaser with, or the performance by the Purchaser of, any covenant or
obligation set forth in this Agreement or any of the Acquisition Documents,
(iii) evidencing the satisfaction of any condition set forth in this Section 8,
or (iv) otherwise facilitating the consummation or performance of any of the
transactions contemplated by this Agreement or any of the Acquisition Documents.
ARTICLE 9
TERMINATION OF AGREEMENT.
Section 9.1 RIGHT TO TERMINATE AGREEMENT. This Agreement may be
terminated prior to the Closing:
(a) by the mutual agreement of the Company and the Purchaser;
(b) by the Purchaser at any time after the Termination Date, if any
condition set forth in Section 7 shall not have been satisfied or waived; or
(c) by the Company at any time after the Termination Date, if any
condition set forth in Section 8 shall not have been satisfied or waived.
SECTION 9.2 EFFECT OF TERMINATION. Upon the termination of this Agreement
pursuant to Section 9.1:
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(a) The Purchaser shall promptly cause to be returned to the Company
all documents and information obtained in connection with this Agreement and the
transactions contemplated by this Agreement and all documents and information
obtained in connection with the Purchaser's investigation of the Company's
business, operations and legal affairs, including any copies made by the
Purchaser or any of the Purchaser's Associates of any such documents or
information; and
(b) neither party hereto shall have any obligation or liability to
the other party hereto, except that (i) the Purchaser and the Company shall have
the obligations set forth in the Memorandum, and (ii) the Purchaser and the
Company shall remain bound by the provisions of the Nondisclosure Agreement,
this Section 9.2 and Article 11.
ARTICLE 10
INDEMNIFICATION AND RELATED MATTERS.
Section 10.1 INDEMNIFICATION BY THE COMPANY. Subject to the limitations
set forth in this Article 10 and elsewhere in this Agreement, the Company shall
indemnify the Purchaser against any Damages that the Purchaser actually incurs
during the one-year period commencing on the Closing Date which arise from,
occur as a result of or in connection with (a) any breach by the Company of any
representation, warranty or covenant of the Company set forth in this Agreement
or any of the Acquisition Documents or (b) any liability that arises from or
relates to (i) the Excluded Assets or (ii) the Excluded Liabilities.
Section 10.2 INDEMNIFICATION BY THE PURCHASER. Subject to the limitations
set forth in this Article 10 and elsewhere in this Agreement, the Purchaser
shall indemnify the Company and the Owners against any Damages that the Company
actually incurs during the one-year period commencing on the Closing Date which
arise from, occur as a result of or in connection with (a) any breach by the
Purchaser of any representation, warranty or covenant of the Purchaser set forth
in this Agreement or any of the Acquisition Documents, or (b) any liability that
arises from or relates to (i) the operation of the Purchased Assets after the
Closing, and (ii) the Assumed Liabilities.
SECTION 10.3 EXPIRATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Except for the covenants set forth in Section 6.2(b) (sales taxes), the
covenants set forth in Article 6 shall terminate and expire, and shall cease to
be of any force or effect, on the Closing Date, and all liability of the parties
hereto with respect to such covenants shall thereupon be extinguished. Except
as set forth in the immediately preceding sentence, all of the representations,
warranties, covenants and obligations of the Company and the Purchaser set forth
in this Agreement and any of the Acquisition Documents shall terminate and
expire, and shall cease to be of any force or effect, at 2:00 p.m. (California
time) on the first anniversary of the Closing Date, and all liability of the
Company or the Purchaser with respect thereto (including their respective
obligations under Section 10.1 or Section 10.2, as the case may be) shall
thereupon be extinguished; provided, that if, prior to such first anniversary,
either party shall have duly delivered a Claim Notice in conformity with all of
the applicable procedures set forth in Section 10.8, then the specific
indemnification claim set forth in such Claim Notice shall survive such first
anniversary (and shall not be extinguished thereby).
Section 10.4 DEDUCTIBLE AMOUNT. Without limiting the effect of any of the
other limitations set forth herein, neither the Purchaser nor the Company shall
be required to make any indemnification payment hereunder with respect to any
breach of any of their respective representations, warranties, covenants and
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obligations, except to the extent that the cumulative amount of the Damages
actually incurred by the party to be indemnified as a result of all such
breaches of such representations, warranties, covenants and obligations actually
exceeds the Deductible Amount; and each party hereto shall only be required to
pay, and shall only be liable for, the amount by which the cumulative amount of
the Damages actually incurred by the party to be indemnified as a result of all
such breaches of such representations, warranties, covenants and obligations
actually exceeds the Deductible Amount. The "Deductible Amount" shall be an
amount equal to one-half percent (0.5%) of the Purchase Price. Notwithstanding
the foregoing, claims for indemnification relating to (i) the Excluded
Liabilities (including, without limitation, taxes of the Company described in
such definition and Overpayments) and (ii) (a) the Assumed Liabilities and (b)
the operation of the Purchased Assets after the Closing, shall not be subject to
the Deductible Amount.
Section 10.5 MAXIMUM LIABILITY. The total amount of the payments that
either the Company or the Purchaser, as the case may be, shall be required to
make under or in connection with this Agreement or any of the Acquisition
Documents pursuant to such party's indemnification obligations shall be limited
in the aggregate to a maximum of ten percent (10%) of the Purchase Price, and
neither party's respective cumulative liability shall exceed such amount.
Section 10.6 KNOWLEDGE OF BREACH. For purposes of this Article 10,
neither party hereto shall be deemed to have breached any representation or
warranty if the other party had, on or prior to the Closing Date, Knowledge of
the breach of, or of any facts or circumstances constituting or resulting in a
breach of, such representation or warranty.
Section 10.7 NO IMPLIED REPRESENTATIONS. The Purchaser and the Company
acknowledge that, except as expressly provided in Articles 4 and 5, neither
party hereto, and none of the Associates of either party hereto, has made or is
making any representations or warranties whatsoever, implied or otherwise.
Section 10.8 INDEMNIFICATION CLAIMS. If either party hereto (the
"Claimant") wishes to assert an indemnification claim against the other party
hereto, the Claimant shall deliver to the other party a written notice (a "Claim
Notice") setting forth:
(a) the specific representation, warranty or covenant alleged to have
been breached by such other party, or the specific liability to have been
incurred;
(b) a detailed description of the facts and circumstances giving rise
to the alleged breach of such representation, warranty or covenant, or
incurrence of such liability; and
(c) a detailed description of, and a reasonable estimate of the total
amount of, the Damages actually incurred or expected to be incurred by the
Claimant as a direct result of such alleged breach.
Notwithstanding anything to the contrary contained in this Agreement, Claimant
shall not be permitted to deliver any Claim Notice to the other party (and shall
not be entitled to assert any indemnification claim set forth in any Claim
Notice) unless:
(i) the indemnification claim set forth in such Claim Notice
shall have arisen from a bona fide lawsuit or other bona fide legal proceeding
that was instituted by a third party against Claimant or the Company prior to
the delivery of such Claim Notice to the other party; or
(ii) Claimant shall have provided evidence in reasonable
detail demonstrating to the other party, before the delivery of such Claim
Notice, that Claimant has therefore actually incurred, or is reasonably likely
to incur, Damages as a result of the alleged breach described in such Claim
Notice.
17.
<PAGE>
Any Claim Notice that is delivered to the Purchaser or the Company in
contravention of the prohibition set forth in the preceding sentence shall be
deemed not to have been "duly delivered" for purposes of Section 10.3 and shall
be of no force or effect.
Section 10.9 DEFENSE OF THIRD PARTY ACTIONS. If either party hereto (the
"Indemnitee") receives notice or otherwise obtains knowledge of any Matter or
any threatened Matter that may give rise to an indemnification claim against the
other party hereto (the "Indemnifying Party"), then the Indemnitee shall
promptly deliver to the Indemnifying Party a written notice describing such
Matter in reasonable detail; provided, that for the sole purpose of determining
whether a Matter or threatened Matter may give rise to an indemnification claim
against the Indemnifying Party within the meaning of this sentence, the
limitation set forth in Section 10.4 shall not be taken into account. The
timely delivery of such written notice by the Indemnitee to the Indemnifying
Party shall be a condition precedent to any liability on the part of the
Indemnifying Party under this Section 10 with respect to such Matter. The
Indemnifying Party shall have the right, at its option, to assume the defense of
any such Matter with its own counsel reasonably satisfactory to the Indemnitee.
If the Indemnifying Party elects to assume the defense of any such Matter, then:
(a) notwithstanding anything to the contrary contained in this
Agreement, the Indemnifying Party shall not be required to pay or otherwise
indemnify the Indemnitee against any attorneys' fees or other expenses incurred
on behalf of the Indemnitee in connection with such Matter following the
Indemnifying Party's election to assume the defense of such Matter;
(b) the Indemnitee shall make available to the Indemnifying Party all
books, records and other documents and materials that are under the direct or
indirect control of the Indemnitee and that the Indemnifying Party considers
necessary or desirable for the defense of such Matter;
(c) the Indemnitee shall fully cooperate as reasonably requested by
the Indemnifying Party in the defense of such Matter and execute such documents
and take such other actions as the Indemnifying Party may reasonably request for
the purpose of facilitating the defense of, or any settlement, compromise or
adjustment relating to, such Matter;
(d) the Indemnitee shall not admit any liability with respect to
such Matter; and
(e) the Indemnifying Party shall not settle, adjust or compromise
such Matter without the prior written consent or approval of the Indemnitee.
If the Indemnifying Party elects not to assume the defense of such Matter, then
the Indemnitee shall proceed diligently to defend such Matter with the
assistance of counsel satisfactory to the Indemnifying Party; provided, that the
Indemnitee shall not settle, adjust or compromise such Matter, or admit any
liability with respect to such Matter, without the prior written consent of the
Indemnifying Party.
Section 10.10 SUBROGATION. To the extent that either party hereto (the
"Indemnitor") makes or is required to make any indemnification payment to the
other party hereto (the "Indemnified Party"), the Indemnitor shall be entitled
to exercise, and shall be subrogated to, any rights and remedies (including
rights of indemnity, rights of contribution and other rights of recovery) that
the Indemnified Party or any of the Indemnified Party's Associates may have
against any other Person with respect to any Damages, circumstances or Matter to
which such indemnification payment is directly or indirectly related. The
Indemnified Party shall permit the Indemnitor to use the name of the Indemnified
Party and the names of
18.
<PAGE>
the Indemnified Party's Associates in any transaction or in any proceeding or
other Matter involving any of such rights or remedies; and the Indemnified Party
shall take such actions as the Indemnitor may reasonably request for the purpose
of enabling the Indemnitor to perfect or exercise the Indemnitor's right of
subrogation hereunder.
Section 10.11 EXCLUSIVITY. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article 10 shall be the sole and exclusive right and remedy exercisable by such
party with respect to any breach by the other party hereto of any
representation, warranty, covenant or obligation. Without limiting the
generality of the foregoing, no Indemnitee shall have the right to withhold and
deduct any sum that may be owed to such Indemnitee from any amount otherwise
payable by such Indemnitee to the Indemnifying Party.
SECTION 10.12 ACCOUNTS RECEIVABLE. In the event the Company receives any
payment that relates to accounts receivable generated from services rendered by
the Business after the Closing Date, the Company shall promptly transmit these
funds to the Purchaser. In the event the Purchaser receives any payment that
related to accounts receivable generated from services rendered by the Business
on or before the Closing Date, the Purchaser shall promptly transmit these funds
to the Company.
SECTION 10.13 TAX MATTERS. Each party will provide the other such
assistance as may reasonably be requested in connection with the preparation of
any reimbursement-related audit, any tax return, any audit or other examination
by any taxing authority, or any judicial or administrative proceedings relating
to liability for taxes, and each will retain and provide the other with any
records or information which may be relevant to such return, audit or
examination, proceedings or determination. The party requesting assistance
hereunder shall reimburse the other party for reasonable expenses incurred in
providing such assistance. Any information obtained pursuant to this Section or
pursuant to any other Section hereof providing for the sharing of information or
the review of any tax return or other schedule relating to taxes shall be kept
confidential by the Parties and not disclosed to any Person.
SECTION 10.14 TAIL INSURANCE. The Company shall use commercially
reasonable efforts to maintain in force and effect for five years from the
Closing Date the Tail Insurance Coverage relating back five years from the
Closing Date. The "Tail Insurance Coverage" shall be health care services
professional liability coverage with The Doctors Company or such other
financially sound and reputable insurance company or association selected by the
Company with limits of liability of $1,000,000 per loss.
ARTICLE 11
MISCELLANEOUS PROVISIONS.
Section 11.1 TIME OF ESSENCE. Time is of the essence with respect to this
Agreement.
Section 11.2 COMPLIANCE WITH LAWS. Each party shall execute such
agreements and other documents, and shall take such other actions, as the other
may reasonably request (prior to, at or after the Closing) for the purpose of
ensuring that the transactions contemplated by this Agreement are carried out in
full compliance with the provisions of all applicable laws and regulations.
Section 11.3 PUBLICITY. No press release, notice to any third party or
other publicity concerning the transactions contemplated by this Agreement or
any of the Acquisition Documents shall be issued, given or otherwise
disseminated without the prior written consent of the Agent and the Purchaser,
which will not be unreasonably withheld or delayed; provided, that (a) without
the approval of the Purchaser, the Agent
19.
<PAGE>
shall be entitled to make disclosures regarding the transactions contemplated
hereby (i) to the Office of the California Attorney General and (ii) as may be
necessary to effect the transactions contemplated hereby, and (b) either party
may make such disclosures as may be contemplated herein or as may be and to the
extent required by applicable law.
Section 11.4 ACCESS OF THE COMPANY TO BOOKS AND RECORDS. At all times
after the Closing Date, the Purchaser shall give the Company and the Company's
Associates reasonable access to the books and records of the Company to inspect
and copy such books and records.
Section 11.5 GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflicts of law).
Section 11.6 VENUE AND JURISDICTION. If any legal proceeding or other
legal action relating to this Agreement is brought or otherwise initiated, the
venue therefor shall be in San Francisco, California, which shall be deemed to
be a convenient forum. The Purchaser and the Company hereby expressly and
irrevocably consent and submit to the jurisdiction of the courts in San
Francisco, California.
SECTION 11.7 NOTICES. All notices, consents and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given and duly delivered when (i) delivered by hand or (ii) when received by the
addressee, if sent by certified mail, return receipt requested, by Express Mail,
Federal Express or other express delivery service (receipt requested), in each
case, at the appropriate addresses as set forth below (or to such other address
as a party may designate as to itself by notice to the other parties):
IF TO THE PURCHASER:
Renal Treatment Centers - West, Inc.
1180 W. Swedesford Road, Bldg. 2, Ste. 300
Berwyn, PA 19312
Attention: Thomas J. Karl
Vice President, Secretary and General Counsel
WITH A COPY (NOT CONSTITUTING NOTICE) TO:
Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, PA 19103
Attention: Jeffrey S. Henderson, Esq.
IF TO THE COMPANY:
Dialysis Systems, LLC
500 South Rancho Road, Suite 12
Las Vegas, NV 89106
Attention: Larry Lehrner, M.D.
20.
<PAGE>
WITH A COPY (NOT CONSTITUTING NOTICE) TO:
Woodburn & Wedge
One East First Street, suite 1600
Reno, NV 89501
Attention: Gregg Barnard, Esq.
Satellite Dialysis Centers, Inc.
345 Convention Way, Suite B
Redwood City, CA 94063-1402
Attention: Marc Branson
Chief Financial Officer
and
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Brian C. Cunningham
Section 11.8 TABLE OF CONTENTS AND HEADINGS. The table of contents of
this Agreement and the underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
Section 11.9 ASSIGNMENT. Neither party hereto may assign any of its
rights or delegate any of its obligations under this Agreement to any other
Person without the prior written consent of the other party hereto; provided,
that the Company may, prior to or after the Closing, assign to any Person its
right to receive all or any portion of the amount payable to the Company under
Section 3.1.
Section 11.10 PARTIES IN INTEREST. Nothing in this Agreement is intended
to provide any rights or remedies to any Person (including any employee or
creditor of the Company) other than the parties hereto.
Section 11.11 SEVERABILITY. In the event that any provision of this
Agreement, or the application of such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
Section 11.12 ENTIRE AGREEMENT. This Agreement, the Memorandum, the other
Acquisition Documents and the Nondisclosure Agreement set forth the entire
understanding of the Purchaser and the Company and supersede all other
agreements and understandings between the Purchaser and the Company relating to
the subject matter hereof and thereof.
Section 11.13 EXPENSES. Each of the parties shall be responsible for and
pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement.
21.
<PAGE>
SECTION 11.14 WAIVER. No failure on the part of either party hereto to
exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of either party hereto in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a waiver thereof; and
no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy.
Section 11.15 AMENDMENTS. This Agreement may not be amended, modified,
altered or supplemented except by means of a written instrument executed on
behalf of both the Purchaser and the Company.
Section 11.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be as original and all of which,
when taken together, will be deemed to constitute one and the same.
SECTION 11.17 WAIVER OF BULK TRANSFER LAWS. To the extent applicable, the
Purchaser and the Company waive compliance with the provisions of Division 6 of
the Uniform Commercial Code of the State of California and the provisions of any
other applicable laws relating to bulk transfers of assets.
SECTION 11.18 POST-SIGNING PROCEDURE. The parties are executing this
agreement in advance of finalizing the terms of one or more Exhibits, prior to
the delivery of certain parts of the Disclosure Schedule that may qualify the
representations and warranties herein set forth, and prior to the Purchaser's
completion and analysis of its due diligence investigation.
(a) The Company shall be responsible for preparing all Parts of the
Disclosure Schedule other than as specifically agreed. The Company shall deliver
a proposed Disclosure Schedule for review by the Purchaser within seven (7) days
of the date of this Agreement. The Disclosure Schedule shall be deemed accepted
by the Purchaser within five (5) business days after delivery thereof unless the
Purchaser notifies the Company of any objections. If the Purchaser determines in
good faith that the Disclosure Schedule reveals information that had not been
previously known by or disclosed to the Purchaser, and would have in the
Purchaser's reasonable judgment a Material Adverse Effect, then the Purchaser
will immediately notify the Company of such information (but within such five-
day period), and the parties shall in good faith use commercially reasonable
efforts to eliminate, waive or resolve any problem. If, notwithstanding such
efforts, such problem cannot be eliminated, waived or resolved, either the
Company or the Purchaser may elect to terminate this Agreement pursuant to the
terms of Section 9.1(b) or 9.1(c), as the case may be.
(b) The Purchaser shall promptly complete its final due diligence
investigation of the Company by October 5, 1997.
SECTION 11.19 INTERPRETATION OF AGREEMENT.
(a) Each party hereto acknowledges that it has participated in the
drafting of this Agreement, and any applicable rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in connection with the construction or interpretation of this
Agreement.
(b) Whenever required by the context hereof, the singular number
shall include the plural, and vice versa; the masculine gender shall include the
feminine and neuter genders; and the neuter gender shall include the masculine
and feminine genders.
22.
<PAGE>
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, and shall
be deemed to be followed by the words "without limitation."
(d) References herein to "Articles," "Sections" and "Exhibits" are
intended to refer to Sections of and Exhibits to this Agreement.
SECTION 11.20 COMMERCIALLY REASONABLE EFFORTS. Throughout this Agreement
and the other Acquisition Documents, subject to Section 1.2, "commercially
reasonable efforts" of a Person shall mean the efforts that a prudent Person
using ordinary business practice and judgment consistent with industry practice
and desiring to achieve a particular result would use in order to obtain such
result, which efforts may include, among other things, the expenditure of funds;
provided, that such efforts shall not require a Person to (i) expend funds other
than for the payment of reasonable and customary costs and expenses of
employees, legal counsel, consultants, representatives or agents of such Person
or (ii) institute litigation or arbitration proceedings as a part of its
efforts.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
DIALYSIS SYSTEMS, LLC
By: Dialysis Systems, Inc.
By: /s/ L.M. Lehrner, M.D.
---------------------
Name: L.M. Lehrner
Title:
RENAL TREATMENT CENTERS-WEST, INC.
By: /s/ Robert L. Mayer, Jr.
------------------------
Name: Robert L. Mayer, Jr.
Title: Chairman, President
and CEO
ASSET PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
Defined Terms
For purposes of this Agreement (including the Disclosure Schedule):
"AGREEMENT" shall mean the Asset Purchase Agreement to which this Exhibit A
is attached.
"ACQUISITION" means the acquisition by the Purchaser of the Purchased
Assets.
"ACQUISITION DOCUMENTS" shall have meaning specified in Section 4.2.
"ACQUISITION TRANSACTION" shall mean any transaction involving:
(a) the sale or other disposition of all or any portion of the
Company's business or assets (other than in the ordinary course of
business);
(b) the issuance, sale or other disposition of any Equity Securities
of the Company; or
(c) any merger, consolidation, business combination, share exchange,
reorganization or similar transaction involving the Company.
"AFFILIATE" means a Person that directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with,
specified Person.
"Agent" shall have the meaning specified in the Memorandum.
"ASSOCIATES" of a Person shall include:
(a) such Person's affiliates, stockholders, directors, officers,
employees, agents, attorneys, accountants and representatives; and
(b) all stockholders, directors, officers, employees, agents,
attorneys, accountants and representatives of each of such Person's affiliates.
"ASSUMED CONTRACTS" shall have the meaning specified in Section 1.1(f).
"ASSUMED LIABILITIES" shall have the meaning specified in Section 2.1.
"AUDITED FINANCIAL STATEMENTS" shall mean the audited balance sheet of the
Company as of December 31, 1996, and such related audited statement of
operations of the Company for the period then ended, including the notes
thereto, accompanied by the report of Frank Rimmerman & Co. thereon.
"BUSINESS" shall have the meaning specified in the Recitals.
"CLAIM NOTICE" shall have the meaning specified in Section 10.8.
"CLAIMANT" shall have the meaning specified in Section 10.8.
1.
<PAGE>
"CLOSING" shall have the meaning specified in Section 3.3.
"CLOSING DATE" shall mean the time and date as of which the Closing
actually takes place.
"COMPANY" shall mean Dialysis Systems, LLC, a Delaware limited liability
company.
"DAMAGES" shall mean out-of-pocket losses and damages; provided, that for
purposes of computing the amount of Damages incurred by any Person, there shall
be deducted an amount equal to the amount of any insurance proceeds,
indemnification payments, contribution payments or reimbursements directly or
indirectly received by such Person or any of such Person's affiliates in
connection with such Damages or the circumstances giving rise thereto.
"DEDUCTIBLE AMOUNT" shall have the meaning specified in Section 10.4.
"DISCLOSURE SCHEDULE" shall mean that certain Disclosure Schedule delivered
together with the Agreement, which shall be arranged in parts to correspond with
the sections and subsections of the Agreement and each disclosure set forth
therein shall be deemed to modify each and every representation, warranty and
covenant of the Company set forth in the Agreement as it pertains to such
representation, warranty or covenant. The contents of each of the contracts and
other documents referred to in the Disclosure Schedule shall be deemed to be
incorporated and referred to in the Disclosure Schedule as though set forth in
full therein.
"ENCUMBRANCE" shall mean any encumbrance, lien, mortgage, pledge, lease or
noncontingent charge.
"EQUITY SECURITIES" means any capital stock or other equity interest, or
securities convertible into or exchangeable for capital stock or other equity
interest, or any other rights, warrants or options to acquire any of the
foregoing securities.
"ESRD PATIENTS" has the meaning specified in the Recitals.
"EXCLUDED ASSETS" shall mean (i) all of the Company's cash balances, cash
equivalents and accounts receivable, (ii) the Company's corporate franchise and
related indicia, (iii) the consideration delivered to the Company pursuant to
and all rights arising under this Agreement or any of the Acquisition Documents,
(iv) the Company's tax returns, refunds and tax records, (v) all insurance
policies and surety bonds of the Company, (vi) all items of prepaid expenses,
deposits and other similar sums to which the Company may become entitled to a
refund, (vii) all payroll processing agreements, (viii) all vending service
agreements, including, without limitation, the Cold Drink Equipment Agreement
entered into by Dialysis Systems, LLC, and (ix) any and all administrative
service agreements between the Company and Satellite Dialysis Centers, Inc.
"EXCLUDED LIABILITIES" shall mean (i) any and all of the Company's Closing
transaction fees and expenses, including, without limitation, the Company's
financial advisory, accounting and legal fees and expenses, (ii) subject to
Sections 6.1(e) and 6.2(e), obligations relating to the Company's employees,
including, without limitation, accrued salaries and wages, obligations under the
Company's employee benefit plans, and retention bonuses and severance
obligations payable to employees of the Company, through the Closing Date as a
result of the transactions contemplated by this Agreement and the other
Acquisition Documents, (iii) any and all federal and state income taxes payable
by the Company as a result of the transactions contemplated by this Agreement
and the Acquisition Documents, (iv) the Company's federal, state and local taxes
for any period prior to the Closing accrued through the Closing
2.
<PAGE>
Date, (v) any liability arising out of or relating to overpayments, malpractice,
fraud and violations of applicable federal and state fraud and abuse, anti-
kickback and Stark laws occurring prior to Closing Date, or (vi) any liability
or obligation of the Company that is not expressly assumed by the Purchaser
herein.
"FINANCIAL STATEMENTS" shall mean the Audited Financial Statements and the
Unaudited Financial Statements.
"GAAP" shall mean generally accepted accounting principles, applied on a
basis consistent with the basis on which the applicable financial statements
were prepared.
"GOVERNMENTAL ENTITY" means any government or any agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government or any quasi-governmental authority or
self-regulatory organization (such as the New York Stock Exchange, Inc.),
whether federal, state or local.
"HCFA" shall have the meaning specified in Section 4.10(b).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the rules promulgated thereunder.
"INDEMNIFIED PARTY" shall have the meaning specified in Section 10.10.
"INDEMNIFYING PARTY" shall have the meaning specified in Section 10.9.
"INDEMNITEE" shall have the meaning specified in Section 10.9.
"INDEMNITOR" shall have the meaning specified in Section 10.10.
"KNOWLEDGE," to the best knowledge of, to which a Person is aware, known to
a Person, or any variation thereof shall mean the actual knowledge of such
Person without having made independent investigation in connection with this
Agreement. For the Company, Knowledge shall be the actual knowledge of Larry M.
Lehrner, M.D., Alan Busby, M.D., Mark Burke and Marc Branson.
"LAWS" shall have the meaning specified in Section 4.10(a).
"MATERIAL ADVERSE EFFECT" shall mean any occurrence, event or condition,
either individually or in the aggregate, having a material adverse effect on the
business operations or financial condition of the Company, or the Purchased
Assets, taken together as a whole.
"MATERIAL CONTRACT" shall have the meaning specified in Section 4.7.
"MATTER" shall mean any claim, demand, dispute, action, suit, examination,
audit, proceeding, investigation, inquiry or other similar matter.
"MEDICAID" means that means-tested entitlement program under Title XIX of
the Social Security Act that provides federal grants to states for medical
insurance based on specific eligibility criteria, as interpreted by the
appropriate Governmental Entities prior to the date hereof.
3.
<PAGE>
"MEDICAL REIMBURSEMENT PROGRAMS" means the Medicare, Medicaid programs and
any other health care program operated by or serviced in whole or in part by any
federal, state or local government, each as interpreted by the appropriate
Governmental Entities prior to date hereof.
"MEDICARE" means that government-sponsored entitlement program under Title
XVIII of the Social Security Act that provides for a health insurance program
for eligible elderly and disabled individuals, as interpreted by the appropriate
Governmental Entities prior to the date hereof.
"MEMORANDUM" means that certain Memorandum of Understanding of even date
herewith by and among the Purchaser, California Kidney Centers, California
Kidney Centers, Inpatient Services, LLC, California Kidney Centers, Orange, LLC,
Dialysis Systems, Inpatient Services, LLC, Dialysis Systems, LLC and Satellite
Dialysis Centers, Inc., solely as agent for the selling parties thereto.
"NONCOMPETITION AGREEMENT" shall have the meaning specified in Section
3.4(e).
"NONDISCLOSURE AGREEMENT" shall mean that certain Nondisclosure Agreement,
dated May 27, 1997, between the Purchaser and Satellite Dialysis Centers, Inc.,
on behalf of itself and as agent for the Company and the Owners.
"OVERPAYMENTS" shall have the meaning specified in Section 4.10(a).
"OWNER" shall mean each holder of Equity Securities of the Company.
"PERMITTED ENCUMBRANCES" shall mean (i) those encumbrances resulting from
taxes that have not yet become due and delinquent, (ii) minor encumbrances that
do not materially detract from the value of the real property interests subject
thereto or materially impair their operations, (iii) zoning laws and other use
restrictions of public record, (iv) encumbrances that arise or have otherwise
arisen in the ordinary course of business, (v) restrictions arising under all
Laws, and (vi) those encumbrances described in Part 4.5 of the Disclosure
Schedule.
"PERSON" shall mean any individual, corporation, association, general
partnership, limited partnership, venture, trust, association, firm,
organization, company, business, entity, union, society, government (or
political subdivision thereof) or governmental agency, authority or
instrumentality.
"PHYSICAL ASSETS" shall have the meaning specified in Section 4.5.
"PURCHASE PRICE" shall have the meaning specified in Section 3.1.
"PURCHASED ASSETS" shall have the meaning specified in the Section 1.1.
"PURCHASER" shall mean Renal Treatment Centers - West, Inc., a Delaware
corporation/Renal Treatment Centers - California, Inc., a Delaware corporation.
"PURCHASER MATERIAL ADVERSE EFFECT" shall have the meaning specified in
Section 5.1.
"PROPRIETARY RIGHTS" shall have the meaning specified in Section 4.8.
"REGISTERED PATIENTS" shall mean patients who have completed and mailed
Health Care Financing Administration Form 2728 indicating that they are
registered patients of one of the Sellers' facilities.
4.
<PAGE>
"SCHEDULED CLOSING TIME" shall mean 2:00 p.m. (California time) on October
31, 1997 or such time and date as may be postponed by the mutual agreement of
the parties hereto.
"STATEMENT DATE" December 31, 1996.
"TERMINATION DATE" shall mean the later of (i) December 31, 1997 and (ii)
seven (7) days after receipt of all consents, approvals, authorizations and
waivers of all Governmental Entities required to be obtained under this
Agreement.
"UNAUDITED FINANCIAL STATEMENTS" shall mean the unaudited balance sheet of
the Company as of June 30, 1997, and such related statement of operations of the
Company for the period then ended prepared by the Company.
5.
<PAGE>
Exhibits:
Exhibit A Defined Terms
Exhibit B Bill of Sale and Assignment
Exhibit C Noncompetition Agreement
Exhibit D Assumption Agreement
Exhibit E Allocation of Purchase Price
Exhibit F Statement of Adjustments
Schedules:
Disclosure Schedule
Schedule 6.2(e) Assumed Employees
<PAGE>
Exhibit 2.5
-----------
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
DIALYSIS SYSTEMS, INPATIENT SERVICES, LLC
and
RENAL TREATMENT CENTERS - WEST, INC.
DATED AS OF OCTOBER 6, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1. PURCHASE AND SALE OF ASSETS............................ 1
Section 1.1 Assets to be Transferred............................... 1
Section 1.2 Assumed Contracts...................................... 2
ARTICLE 2. ASSUMPTION OF LIABILITIES.............................. 2
Section 2.1 Liabilities to be Assumed.............................. 2
Section 2.2 Liabilities Not to be Assumed.......................... 3
ARTICLE 3. PAYMENT OF PURCHASE PRICE; CLOSING .................... 3
Section 3.1 Purchase Price......................................... 3
Section 3.2 Payment of Purchase Price.............................. 3
Section 3.3 Closing................................................ 3
Section 3.4 Items to be Delivered at the Closing by the Company.... 3
Section 3.5 Items to be Delivered at the Closing by the Purchaser.. 4
Section 3.6 Prorations............................................. 4
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......... 4
Section 4.1 Formation and Existence................................ 4
Section 4.2 Power and Authority.................................... 5
Section 4.3 Conflicts.............................................. 5
Section 4.4 Financial Statements................................... 5
Section 4.5 Title to and Condition of Assets....................... 5
Section 4.6 Subsidiaries and Partnerships.......................... 6
Section 4.7 Contracts.............................................. 6
Section 4.8 Proprietary Rights..................................... 6
Section 4.9 Sufficiency of Purchased Assets........................ 6
Section 4.10 Compliance With Laws.................................. 6
Section 4.11 Litigation............................................ 7
Section 4.12 Labor Matters......................................... 7
Section 4.13 Liabilities........................................... 7
Section 4.14 Environmental......................................... 8
Section 4.15 Brokers' Fees......................................... 8
Section 4.16 Required Filings and Consents......................... 8
Section 4.17 Patients.............................................. 8
Section 4.18 Physicians............................................ 8
Section 4.19 Medicare Certification; State Licensure............... 8
Section 4.20 Ownership............................................. 9
Section 4.21 Insurance............................................. 9
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER........ 9
Section 5.1 Corporate Existence.................................... 9
Section 5.2 Corporate Power and Authority.......................... 9
Section 5.3 Conflicts.............................................. 9
Section 5.4 Litigation............................................. 10
Section 5.5 Brokers' Fees.......................................... 10
i
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TABLE OF CONTENTS
PAGE
Section 5.6 Financing.............................................. 10
Section 5.7 Compliance With Laws................................... 10
ARTICLE 6. COVENANTS OF THE COMPANY AND THE PURCHASER............. 10
Section 6.1 Company Covenants...................................... 10
Section 6.2 Purchaser Covenants.................................... 12
ARTICLE 7. CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE......... 13
Section 7.1 Accuracy of Representations and Warranties............. 13
Section 7.2 Performance............................................ 13
Section 7.3 Governmental Consents.................................. 13
Section 7.4 Third Party Consents................................... 13
Section 7.5 Additional Documents................................... 14
Section 7.6 No Injunction.......................................... 14
ARTICLE 8. CONDITIONS TO OBLIGATION OF THE COMPANY TO CLOSE....... 14
Section 8.1 Accuracy of Representations and Warranties............. 14
Section 8.2 Performance............................................ 14
Section 8.3 No Injunction.......................................... 14
Section 8.4 Equityholder Approval; Attorney General Consent........ 14
Section 8.5 Governmental Consents.................................. 15
Section 8.6 Third Party Consents................................... 15
Section 8.7 Additional Documents................................... 15
ARTICLE 9. TERMINATION OF AGREEMENT............................... 15
Section 9.1 Right to Terminate Agreement........................... 15
Section 9.2 Effect of Termination.................................. 15
ARTICLE 10. INDEMNIFICATION AND RELATED MATTERS.................... 16
Section 10.1 Indemnification by the Company........................ 16
Section 10.2 Indemnification by the Purchaser...................... 16
Section 10.3 Expiration of Representations,
Warranties and Covenants.............................. 16
Section 10.4 Deductible Amount..................................... 16
Section 10.5 Maximum Liability..................................... 17
Section 10.6 Knowledge of Breach................................... 17
Section 10.7 No Implied Representations............................ 17
Section 10.8 Indemnification Claims................................ 17
Section 10.9 Defense of Third Party Actions........................ 18
Section 10.10 Subrogation.......................................... 18
Section 10.11 Exclusivity.......................................... 19
Section 10.12 Accounts Receivable.................................. 19
Section 10.13 Tax Matters.......................................... 19
Section 10.14 Tail Insurance....................................... 19
ARTICLE 11. MISCELLANEOUS PROVISIONS............................... 19
ii
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TABLE OF CONTENTS
PAGE
Section 11.1 Time of Essence....................................... 19
Section 11.2 Compliance with Laws.................................. 19
Section 11.3 Publicity............................................. 19
Section 11.4 Access of the Company to Books and Records............ 20
Section 11.5 Governing Law......................................... 20
Section 11.6 Venue and Jurisdiction................................ 20
Section 11.7 Notices............................................... 20
Section 11.8 Table of Contents and Headings........................ 21
Section 11.9 Assignment............................................ 21
Section 11.10 Parties in Interest.................................. 21
Section 11.11 Severability......................................... 21
Section 11.12 Entire Agreement..................................... 21
Section 11.13 Expenses............................................. 21
Section 11.14 Waiver............................................... 22
Section 11.15 Amendments........................................... 22
Section 11.16 Counterparts......................................... 22
Section 11.17 Waiver of Bulk Transfer Laws......................... 22
Section 11.18 Post-Signing Procedure............................... 22
Section 11.19 Interpretation of Agreement.......................... 22
Section 11.20 Commercially Reasonable Efforts...................... 23
iii
<PAGE>
EXHIBITS:
Exhibit A Defined Terms
Exhibit B Bill of Sale and Assignment
Exhibit C Noncompetition Agreement
Exhibit D Assumption Agreement
Exhibit E Allocation of Purchase Price
Exhibit F Statement of Adjustments
SCHEDULES:
Disclosure Schedule
Schedule 6.2(e) Assumed Employees
iv.
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of
October 6, 1997, by and between DIALYSIS SYSTEMS, INPATIENT SERVICES, LLC, a
Nevada limited liability company (the "Company") and RENAL TREATMENT
CENTERS-WEST, INC., a Delaware corporation (the "Purchaser"). Certain
capitalized terms used in this Agreement are defined in Exhibit A.
RECITALS
A. The Company provides (i) outpatient dialysis services to end stage
renal disease patients ("ESRD Patients") at Medicare certified outpatient
hemodialysis facilities owned by the Company, (ii) home dialysis supplies and
support services and (iii) acute inpatient dialysis services at local hospitals
in Las Vegas, Nevada under contract (collectively, the "Business").
B. The Purchaser and its Affiliates are experienced in the ownership,
management and operations of hemodialysis facilities and inpatient dialysis
services.
C. The Purchaser desires to purchase from the Company, and the Company
desires to sell to the Purchaser, substantially all of the assets of the Company
relating to the Business.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties, intending to be legally bound, agree as follows:
ARTICLE 1
PURCHASE AND SALE OF ASSETS.
Section 1.1 Assets to be Transferred. Subject to the terms and
conditions of this Agreement, on the Closing Date the Company shall sell,
transfer, convey, assign, and deliver to the Purchaser, and the Purchaser shall
purchase and accept from the Company, all of the assets, rights, claims and
contracts (of every kind and nature, character and description, whether real,
personal or mixed, whether tangible or intangible, whether accrued, contingent
or otherwise, wherever situated) owned by the Company and used in the conduct of
the Business, except the Excluded Assets, (the "Purchased Assets"). The
Purchased Assets shall include, without limitation, the following other than
Excluded Assets:
(a) Fixtures. All fixtures and improvements to
any real property in which the Company has a leasehold interest used in the
conduct of the Business.
(b) Personal Assets. All tangible personal
property, including without limitation, all equipment, materials, dialysis
machines, dialysis chairs, home dialysis equipment, computers and related
hardware, telecopy and photocopy machines and telecommunications equipment used
in the conduct of the Business as more particularly described in Part 4.5(a) of
the Disclosure Schedule.
(c) Inventory. All inventory of usable goods,
including all medical supplies and other current assets used in the conduct of
the Business, together with any additions thereto
1.
<PAGE>
and subject to any reductions therefrom received, ordered or in transit by the
Company operating the Business in the ordinary course after the date hereof
through the Closing Date.
(d) Proprietary Rights. All Proprietary Rights used
in the conduct of the Business.
(e) Goodwill. All of the goodwill of the Business.
(f) Contracts. All contracts, contractual rights, and
other written agreements of the Company, including, without limitation, all
payor agreements, supply agreements, medical director agreements, license
agreements, consulting agreements, real estate leases and acute dialysis service
agreements used in the conduct of the Business (the "Assumed Contracts").
(g) Licenses; Permits. To the extent permitted by
Law, all licenses, permits, certificates and approvals of the Company used
in the conduct of the Business. The Company agrees to use commercially
reasonable efforts to cause any license, permits, certificates or approvals
assignable with the consent of a Governmental Entity to be assigned to the
Purchaser before the Closing Date, and, if not assigned or transferred by the
Closing Date, to be assigned or transferred thereafter.
Section 1.2 Assumed Contracts. To the extent that any Assumed Contract
for which assignment is provided herein is not assignable without the consent of
another party, this Agreement shall not constitute an assignment or an attempted
assignment thereof if such assignment or attempted assignment would constitute a
breach thereof. The Company and the Purchaser agree to use commercially
reasonable efforts (without any requirement on the part of the Purchaser or the
Company to pay any money or agree to any change in the terms of any such Assumed
Contract) to obtain the consent of such other party to the assignment of any
such Assumed Contract to the Purchaser in all cases in which such consent is or
may be required for such assignment. If any such consent shall not be obtained,
the Company agrees to cooperate with the Purchaser in any reasonable arrangement
designed to provide for the Purchaser the benefits intended to be assigned to
the Purchaser under the relevant Assumed Contract, including enforcement at the
cost and for the account of the Purchaser of any and all rights of the Company
against the other party thereto arising out of the breach or cancellation
thereof by such other party or otherwise. If and to the extent that such
arrangement cannot be made, the Purchaser, upon notice to the Company, shall
have no obligation pursuant to Section 2.1 or otherwise with respect to any such
Assumed Contract and any such Assumed Contract shall not be deemed to be a
Purchased Asset hereunder.
ARTICLE 2
ASSUMPTION OF LIABILITIES.
Section 2.1 Liabilities to be Assumed Subject to the terms and
conditions of this Agreement, on the Closing Date, the Purchaser shall assume
and agree to perform and discharge to the extent indicated below the following,
and only the following, specific liabilities and obligations of the Company
(collectively the "Assumed Liabilities"):
(a) Contractual Liabilities. The Company's
liabilities and obligations arising from and after the Closing Date under and
pursuant to the Assumed Contracts.
2.
<PAGE>
(b) Liabilities Under Permits and Licenses. The
Company's obligations arising from and after the Closing Date under any
permits or licenses listed in Part 4.10(b) of the Disclosure Schedule and
assigned to the Purchaser at or after the Closing.
(c) H-S-R Filing. All fees incurred by the parties
in connection with the filing under the HSR Act.
Section 2.2 Liabilities Not to be Assumed. Except as and to the extent
specifically set forth in Section 2.1, the Purchaser is not assuming any debts,
liabilities, obligations or contracts of the Company and all such debts,
liabilities, obligations and contracts shall be and remain the responsibility of
the Company.
ARTICLE 3
PAYMENT OF PURCHASE PRICE; CLOSING.
Section 3.1 Purchase Price. The purchase price (the "Purchase
Price") for the Purchased Assets shall be:
(a) the assumption of the Assumed Liabilities;
plus
(b) the sum of Two Million Six Hundred Ninety Two
Dollars ($2,692,000) in cash.
Section 3.2 Payment of Purchase Price. The Purchase Price shall
be paid by the Purchaser as follows:
(a) At the Closing, the Purchaser shall deliver to
the Company such documents and instruments as are reasonably required to
evidence the assumption of the Assumed Liabilities.
(b) At the Closing, the Purchaser shall deliver to
the Company in cash the sum of the amount required to be paid in Section
3.1.(b).
Section 3.3 Closing. The closing of the Acquisition (the "Closing") is
contemplated to take place on or before the Scheduled Closing Time, and shall
take place at the offices of Cooley Godward LLP, and shall occur within five (5)
days after the last to occur of, (a) approval of the Acquisition and the
transactions contemplated by the Agreement by the Office of the California
Attorney General, (b) the termination of the applicable waiting period under the
HSR Act, and (c) upon satisfaction of the conditions set forth herein, or at
such other place, time and/or date as may be jointly designated by the Company
and the Purchaser.
Section 3.4 Items to be Delivered at the Closing by the Company. At
the Closing, the Company shall deliver or cause to be delivered to the
Purchaser:
(a) Bill of Sale and Assignment, in substantially
the form of Exhibit B.
(b) Instruments of transfer in the form customarily
used in commercial transactions in the area in which the personal property is
located sufficient to transfer each personal
3.
<PAGE>
property interest owned by the Company not otherwise transferred by the Bill of
Sale referred to in Section 3.4(a).
(c) Such other instruments of transfer necessary or
appropriate to transfer to and vest in the Purchaser all of the Company
right, title and interest in and to the Purchased Assets, including all
necessary consents of third parties.
(d) The opinions, certificates, consents and other
documents referred to herein as then deliverable by the Company.
(e) Noncompetition Agreement or Agreements,
substantially in the form of Exhibit C (the "Noncompetition Agreement").
(f) The Company and the Purchaser shall complete and
deliver a statement of the allocation of purchase price in substantially the
form of Exhibit E.
Section 3.5 Items to be Delivered at the Closing by the
Purchaser. At the Closing, the Purchaser shall deliver to the Company:
(a) The cash portion of the Purchase Price.
(b) An Assumption Agreement, in substantially the
form of Exhibit D.
(c) The opinions, certificates, consents and other
documents referred to herein as then deliverable by the Purchaser.
Section 3.6 Prorations. Except as otherwise set forth herein, at and as
of the Closing Date, the Purchaser and the Company shall proportionately
allocate (i) real property taxes and assessments for each of the Company's
dialysis facilities, (ii) rents and other payments, including, without
limitation, CAM charges, under the real property leases of the Company paid in
advance of the Closing Date, (iii) utility and sewer charges paid in advance of
the Closing Date, (iv) payments under the Assumed Contracts paid in advance of
the Closing Date and (v) fees for transferable licenses and permits. All
deposits under the Company's real property leases and all utilities and other
deposits shall be remitted to the Company, or in lieu of such remittance, the
amount of such deposits shall be added to the Purchase Price and paid over to
the Company by the Purchaser. In the event the parties are unable to
proportionately allocate such amounts and other operating expenses under this
Section 3.6, whether paid in advance or payable subsequent to the Closing, the
parties agree to pro rate such amounts as of the Closing Date. On the Closing
Date, or as soon as practicable thereafter, the Company and Purchaser shall
complete and deliver a statement of adjustments in substantially the form of
Exhibit F setting forth the various allocations described in this Section 3.6.
Any party owing funds to the other party shall remit such amounts as soon as
practicable, but in any event within 30 days after demand therefor.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Subject to the limitations set forth in Article 10 and elsewhere in
this Agreement, to the best of its Knowledge, the Company hereby represents and
warrants to the Purchaser that, except as set forth on the Disclosure Schedule,
the following are accurate in all material respects:
4.
<PAGE>
Section 4.1 Formation and Existence. The Company is a limited liability
company duly formed, validly existing and in good standing under the laws of the
State of Nevada. The Company has full power to carry on its business as now
being conducted and to own and operate the property and assets now owned and
operated by it, and is duly qualified to transact business and is in good
standing in each jurisdiction where the ownership of its properties or the
conduct of its business requires such qualification and the failure to be so
qualified will have a Material Adverse Effect.
Section 4.2 Power and Authority. The Company has all requisite power
and authority to execute and deliver this Agreement and each other agreement,
document, or instrument or certificate contemplated by this Agreement to be
executed by the Company in connection with the consummation of the transactions
contemplated hereby (together with this Agreement, the "Acquisition Documents"),
and to consummate the transactions contemplated hereby and thereby. This
Agreement and each of the other Acquisition Documents will be at or prior to the
Closing, duly and validly authorized, executed and delivered by the Company and
(assuming the due authorization, execution and delivery by the other parties
hereto and thereto) this Agreement constitutes, and each of the other
Acquisition Documents when so executed and delivered will constitute, legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).
Section 4.3 Conflicts. The execution and delivery by the Company of
this Agreement and the other Acquisition Documents, the consummation of the
transactions contemplated hereby or thereby or compliance by the Company with
any of the provisions hereof or thereof (i) will not violate any provision of
the partnership agreement/operating agreement of the Company; (ii) subject to
obtaining the consents referred to in Part 4.3 of the Disclosure Schedule, will
not conflict with, violate, result in the breach or termination of, or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Company is a party or
by which its properties or assets are bound; (iii) will not violate any statute,
rule, regulation, order or decree of any Governmental Entity by which the
Company is bound; or (iv) will not result in the creation of any encumbrance
upon the Purchased Assets except, in case of clauses (ii) and (iii), for such
conflicts, violations, breaches or defaults as will not have a Material Adverse
Effect.
Section 4.4 Financial Statements. The Company has furnished the
Purchaser with the Financial Statements. Except as set forth therein, the
Financial Statements fairly present, in all material respects, the financial
condition and results of operations, as applicable, of the Company as of the
dates and for the periods indicated thereon prepared in accordance with GAAP;
provided, that the Unaudited Financial Statements are subject to normal
recurring year-end adjustments, none of which are reasonably expected to have a
Material Adverse Effect, and do not contain all footnotes required under GAAP.
Section 4.5 Title to and Condition of Assets.
(a) Marketable Title. The Company has good and
merchantable title to all of its tangible assets used in the operations of the
Business ("Physical Assets") or has valid leasehold interests in all leased real
property and Physical Assets listed thereon as leased by the Company, except
such as shall have been disposed of as obsolete or in the ordinary course of
business since the date of Part 4.5(a) of the Disclosure Schedule. At Closing,
the Purchaser shall receive good and merchantable title to the Purchased Assets
free of any Encumbrances except for Permitted Encumbrances.
5.
<PAGE>
(b) Condition. All of the Physical Assets are in good
operating condition and repair, have been maintained consistent with the
standards generally followed in the industry and applicable legal standards.
Section 4.6 Subsidiaries and Partnerships. Except as set
forth on Part 4.6 of the Disclosure Schedule, the Company has no subsidiaries or
investments in other corporations, partnerships or joint ventures.
Section 4.7 Contracts. Part 4.7(a) of the Disclosure Schedule lists all
written agreements to which the Company is a party or to which the Company, or
any of its properties is subject or by which any thereof is bound that is deemed
a Material Contract under this Agreement. As used in this Agreement, the term
"Material Contract" shall mean each written agreement that (a) after December
31, 1996 obligates the Company to pay an amount of $50,000 or more, (b) has an
unexpired term as of the date hereof in excess of one year, (c) contains a
covenant not to compete or otherwise significantly restricts the Business of the
Company, (d) provides for the extension of credit, (e) limits the ability of the
Company to conduct its Business, including as to manner or place, (f)
constitutes a collective bargaining agreement or provides for severance benefits
to any officer, director or employee, (g) represents a written agreement with a
third party payor, including but not limited to a provider agreement under a
Medical Reimbursement Program, (h) represents a written agreement with a
physician who provides service to the Company, (i) involves the providing of
acute dialysis services, (j) provides for a leasehold in real property used in
the operations of the Business, or (k) was not made in the ordinary course of
business consistent with past practice. Part 4.7(a) of the Disclosure Schedule
also identifies each written agreement of the Company in which its officers or
directors (or any person, firm or corporation affiliated with such persons) have
a material interest. Except as set forth on Part 4.7(a) of the Disclosure
Schedule, each Material Contract is a legal, valid and binding agreement, and
none of the Material Contracts is in default by its terms or has been canceled
by the other party, and the Company has not received any claim of default under
any such Material Contract, except where such failure, default or claim of
default would not have a Material Adverse Effect. Part 4.7(b) of the Disclosure
Schedule lists as of the date hereof all of the agreements and contracts of the
Company used in the operation of the Business.
Section 4.8 Proprietary Rights. Part 4.8 of the Disclosure Schedule
sets forth all patents, trademarks, trade names, service marks, copyrights, and
pending applications therefor, software (other than third-party "off-the-shelf"
software), and intellectual property and other proprietary rights, the loss of
which would reasonably be likely to have a Material Adverse Effect (the
"Proprietary Rights"). Except as disclosed on Part 4.8 of the Disclosure
Schedule, the Company is not bound by or a party to any options, licenses or
agreements of any kind with respect to the Proprietary Rights except those that
will not have a Material Adverse Effect. Except as disclosed on Part 4.8 of the
Disclosure Schedule, the Company has not been informed of any claims or suits
pending or threatened against the Company claiming an infringement by the
Company of any patents, copyrights, licenses, trademarks, service marks or trade
names of others.
Section 4.9 Sufficiency of Purchased Assets. Except as set forth on
Part 4.9 of Disclosure Schedule, the Purchased Assets, both tangible and
intangible, are (and as of the Closing will be) sufficient for the operation of
the Business of the Company as currently conducted.
Section 4.10 Compliance With Laws.
(a) Compliance. The Company is in compliance with all
laws, rules, regulations, orders, judgments, ordinances or decrees of any
Governmental Entity applicable to the
6.
<PAGE>
Business (collectively, "Laws") (including, without limitation, Laws in respect
of overpayments, refunds, discounts or adjustments in connection with Medical
Reimbursement Programs ("Overpayments")), the non-compliance with which would
have a Material Adverse Effect. Except as set forth in Part 4.10 of the
Disclosure Schedule the Company has not received notice of any violation or
alleged violation of, nor is the Company subject to any liability (whether
accrued, absolute, contingent, direct or indirect) for past or continuing
violation of, any Laws in connection with the Company's use of the Purchased
Assets which would have a Material Adverse Effect.
(b) Licenses and Permits.
(i) The Company has all licenses, permits,
approvals, authorizations and consents of all governmental and regulatory
authorities and all certification organizations required for the operation of
the Business of the Company as currently conducted. All such licenses, permits,
approvals, authorizations and consents are described in Part 4.10 of the
Disclosure Schedule, are in full force and effect and except as specifically
indicated in Part 4.10 of the Disclosure Schedule are assignable to the
Purchaser in accordance with the terms hereof.
(ii) Except as set forth in Part 4.10 of the
Disclosure Schedule, the Company has been in compliance with all such permits
and licenses, approvals, authorizations and consents. The Company is not the
subject of any actual or threatened investigation of disciplinary action by the
California Board of Health, the Health Care Financing Administration ("HCFA"),
California Department of Health Services or the Office of Inspector General of
the United States Department of Health and Human Services.
Section 4.11 Litigation. Except as set forth in Part 4.11 of the
Disclosure Schedule, there is no litigation, proceeding or investigation pending
or threatened, by or against the Company before any Governmental Entity that
would (i) prohibit or restrain the ability of the Company to enter into this
Agreement or to consummate the transactions contemplated hereby or (ii) have a
Material Adverse Effect.
Section 4.12 Labor Matters. Part 4.12 of the Disclosure Schedule lists
the collective bargaining agreements or other labor union contracts and employee
benefit plans applicable to employees which are employed by the Company, and the
Company is as of the date of this Agreement in full compliance with the terms
and conditions of such agreements and contracts, except where the failure to be
in compliance would not have a Material Adverse Effect. Except as set forth on
Part 4.12 of the Disclosure Schedule (i) there are no charges or allegations of
unfair labor practices pending or threatened under Federal or state labor laws;
(ii) there are no pending arbitration matters or grievance procedures under any
of the agreements listed in Part 4.12 of the Disclosure Schedule; (iii) there
are no facts or conditions existing which upon the giving of notice, or lapse of
time, will result in a breach under any collective bargaining agreement or under
any of the other foregoing agreements, which will have a Material Adverse
Effect; and (iv) there is no pending or threatened labor dispute, strike or work
stoppage which will have a Material Adverse Effect.
Section 4.13 Liabilities. Other than as set forth in Part 4.13 of the
Disclosure Schedule or as reflected in the Financial Statements, there are no
liabilities or contingent liabilities of a nature required to be reflected in
the Financial Statements or the notes thereto affecting any of the Purchased
Assets, except current liabilities incurred in the ordinary course of business
subsequent to the Statement Date which will not have a Material Adverse Effect.
7.
<PAGE>
Section 4.14 Environmental. All applicable federal, state and local
laws relating to pollution, storage, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic, hazardous or
petroleum-based substances or wastes ("Waste") into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of Waste
including, without limitation, the Clean Water Act, the Clean Air Act, the
Resource Conservation and Recovery Act, the Toxic Substances Control Act and the
Comprehensive Environmental Response Compensation Liability Act ("CERCLA"), as
amended, and their state and local counterparts, are herein collectively
referred to as the "Environmental Laws." Except as set forth in Part 4.14 of the
Disclosure Schedule, the Company is in compliance in all material respects with
all limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws. There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice of violation, official proceeding, notice or
demand letter pending or threatened against the Company relating in any way to
the Environmental Laws.
Section 4.15 Brokers' Fees. Except for the consideration payable to
Hambrecht & Quist, which shall be the sole responsibility and obligation of the
Company, neither the Company nor any of the Subsidiaries has incurred any
liability for brokerage fees, finders' fees, agents' commissions or other
similar forms of compensation in connection with this Agreement and the
transactions contemplated hereby.
Section 4.16 Required Filings and Consents. Except as set forth on Part
4.16 of the Disclosure Schedule, the execution and delivery of this Agreement by
the Company does not, and the performance of this Agreement by the Company will
not, require any consent, approval, authorization or permit of, or filing with
or notification to, any governmental or regulatory authority, domestic or
foreign, except where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, will not
prevent the Company from performing its obligations under this Agreement, and
will not have a Material Adverse Effect.
Section 4.17 Patients. Part 4.17 of the Disclosure Schedule lists, as
of the last treatment date prior to the date hereof, all Registered Patients (by
patient code) for which the Company provides either in-center treatment or home
dialysis support services. The Company makes no representation or warranty as to
which, if any, of the Registered Patients listed on Part 4.17 of the Disclosure
Schedule will continue to receive services from the Business subsequent to such
last treatment date.
Section 4.18 Physicians. Part 4.18 of the Disclosure Schedule lists all
physicians or groups of physicians admitting patients to the Company's dialysis
facilities indicating the number of Registered Patients admitted by each such
physician or group of physicians. The Company makes no representation or
warranty as to which, if any, physicians listed on Part 4.18 of the Disclosure
Schedule will continue to admit or keep patients at the Company's dialysis
facilities subsequent to the date hereof.
Section 4.19 Medicare Certification; State Licensure. Each of the
Company's dialysis facilities are certified under the conditions of coverage and
participation in the federal Medicare program as an end stage renal disease
facility providing the end stage renal disease services indicated on Part 4.19
of the Disclosure Schedule. The operating certificate issued by California
Department of Health Services and the Medicare certificates of the Company's
dialysis facilities are in full force and effect and no violation of the
conditions and standards of coverage, participation or certification exists.
8.
<PAGE>
Section 4.20 Ownership. Part 4.20 of the Disclosure Schedule is a
complete and accurate list of all beneficial owners of an equity interest in the
Company, and, in the case of any beneficial owner who is not a natural person,
all beneficial owners of an equity interest therein.
Section 4.21 Insurance. Except as set forth in Part 4.21 of the
Disclosure Schedule, for the five (5) year period prior to the date of this
Agreement, the Company has maintained adequate insurance for the Business and
the Purchased Assets with respect to risks normally insured against by similar
businesses.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Subject to the limitations set forth in Article 10 and elsewhere in
this Agreement, to the best of its Knowledge, the Purchaser hereby represents
and warrants to the Company that the following are accurate in all material
respects:
Section 5.1 Corporate Existence. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full corporate power to carry on its
business as now being conducted and to own and operate the property and assets
now owned and operated by it, and is duly qualified to transact business and is
in good standing in each jurisdiction where the ownership of its properties or
the conduct of its business requires such qualification and the failure to be so
qualified would have a material adverse effect on the business, operations or
financial condition of the Purchaser (a "Purchaser Material Adverse Effect").
Section 5.2 Corporate Power and Authority. The Purchaser has all
requisite corporate power and authority to execute and deliver this Agreement
and the other Acquisition Documents and to consummate the transactions
contemplated hereby and thereby. All corporate action necessary to authorize the
execution, delivery and performance of this Agreement and each of the other
Acquisition Documents has been duly taken by the Purchaser. This Agreement has
been, and each of the Acquisition Documents will be at or prior to the Closing,
duly and validly executed and delivered by the Purchaser and (assuming the due
authorization, execution and delivery by the other parties hereto and thereto)
this Agreement constitutes, and each of the Acquisition Documents when so
executed and delivered will constitute, legal, valid and binding obligations of
the Purchaser, enforceable against the Purchaser in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally,
and subject, as to enforceability, to general principles of equity, including
principles of commercial reasonableness, good faith and fair dealing (regardless
of whether enforcement is sought in a proceeding at law or in equity).
Section 5.3 Conflicts. Neither the execution and delivery by the
Purchaser of this Agreement and the other Acquisition Documents, the
consummation of the transactions contemplated hereby or thereby, or compliance
by the Purchaser with any of the provisions hereof or thereof will (i) violate
any provision of the certificate of incorporation or bylaws of the Purchaser;
(ii) conflict with, violate, result in the breach or termination of, or
constitute a default under any note, bond, mortgage, indenture, license,
agreement or other instrument or obligation to which the Purchaser is a party or
by which its respective properties or assets are bound; or (iii) violate any
statute, rule, regulation, order or decree of any Governmental Entity by which
the Purchaser is bound except, in case of clauses (ii) and (iii), for such
conflicts, violations, breaches or defaults as will not have a Purchaser
Material Adverse Effect.
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Section 5.4 Litigation. There is no litigation, proceeding or
investigation pending or, to the Purchaser's knowledge, threatened, by or
against the Purchaser before any Governmental Entity that would prohibit or
restrain the ability of the Purchaser to enter into this Agreement or to
consummate the transactions contemplated hereby.
Section 5.5 Brokers' Fees. The Purchaser has not incurred any liability
for brokerage fees, finders' fees, agents' commissions or other similar forms of
compensation in connection with this Agreement and the transactions
contemplated.
Section 5.6 Financing. The Purchaser has available all of the
funds necessary to perform its obligations hereunder and under the other
Acquisition Documents.
Section 5.7 Compliance With Laws. The Purchaser is in compliance with
all laws, regulations, orders, judgments, ordinances or decrees of any
Governmental Entity applicable to the business of the Purchaser, the
non-compliance with which would have a Purchaser Material Adverse Effect. The
Purchaser has not received notice of any violation or alleged violation of, nor
are any of them subject to any liability (whether accrued, absolute, contingent,
direct or indirect) for past or continuing violation of, any laws, regulations,
orders, judgments, ordinances or decrees of any Governmental Entity applicable
to the business of the Purchaser.
ARTICLE 6
COVENANTS OF THE COMPANY AND THE PURCHASER.
Section 6.1 Company Covenants. The Company covenants that from
the date of this Agreement until the Closing (the "Pre-Closing Period"):
(a) Conduct of Business in Ordinary Course.
Except as disclosed on Part 6.1(a) of the Disclosure Schedule or as contemplated
by this Agreement or any other Acquisition Document or as may be necessary to
carry out the transactions contemplated by this Agreement or any other
Acquisition Document, the Company will carry on its business in the ordinary
course, and it shall not make or institute any unusual or novel methods of
purchase, sale, lease, management, accounting or operation that will vary
materially from those methods used by it prior to the date of this Agreement.
The Company will not sell, lease or dispose of, or agree to sell, lease or
dispose of, any of the assets or properties of the Company other than in the
ordinary course of business, or pursuant to any existing plan, agreement or
practice. The Company will carry on its business diligently and in the same
manner as heretofore and will continue to see patients and will not make or
institute any adverse changes in its method of purchase, medical treatment,
management, accounting or operation.
(b) Preservation of Business and Relationships. The
Company will use commercially reasonable efforts to preserve its business intact
and to maintain its present material relationships with patients, creditors,
suppliers, lessors, licensors, employees and others having business
relationships with it or them.
(c) The Purchaser's Access to Premises and
Information. The Purchaser and its Associates shall have reasonable access
during
normal business hours to all properties, books, accounts, records, contracts and
documents of or relating to the Company.
(d) Governmental Approvals. The Company shall
cooperate with the Purchaser (i) in promptly determining whether any
governmental approvals, authorizations, licenses,
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permits, consents, or other filings are required to be or should obtained under
any federal, state or local law and (ii) in promptly applying for or submitting
any such governmental approvals, authorizations, licenses, permits, consents, or
other filings, furnishing information required in connection therewith and
seeking timely to obtain such. The Company will make any and all filings
required to be made on its part under the HSR Act.
(e) Employees; Employee Benefits Matters. The
Company shall fully compensate its employees for any accrued vacation pay
through the effectiveness of the Closing. The Company shall cause interests of
Assumed Employees of the Company in its 401(k) plan to become distributable
pursuant to Internal Revenue Code Section 401(k)(10)(A) and any amounts
distributed to such employees may be rolled over pursuant to Internal Revenue
Code Section 402 to a comparable plan maintained by the Purchaser.
(f) No Negotiation. The Company shall ensure that,
during the Pre-Closing Period, neither the Company, the Owners nor any of the
Company's Representatives directly or indirectly:
(i) solicits or encourages the
initiation of any inquiry, proposal or offer from any Person (other than the
Purchaser) relating to any Acquisition Transaction; or
(ii) subject to Section 11.3, participates
in any discussions or negotiations with, or provides any non-public information
to, any Person (other than the Purchaser) relating to any Acquisition
Transaction.
(g) Medical Director Agreements. The Company
will use commercially reasonable efforts to (i) extend existing medical director
agreements of the Company for a period of seven (7) years from the date hereof;
(ii) assign to Purchaser all existing medical director agreements of the
Company; and (iii) eliminate those provisions of each such agreement as they
relate to the transfers of patients.
(h) Consents; Real Property Leases. The Company
will use commercially reasonable efforts to obtain all consents required to be
obtained (from creditors, licensors, lessors and other Persons) in connection
with the transactions contemplated hereby, including, without limitation,
consents to the assignment of the Company's acute dialysis services agreements
and the Company's real property leases. In each instance in which (i) the term
of any of the Company's real property leases does not extend for, or (ii)
extension options under such leases do not provide for, a remaining term of at
least seven (7) years from the date hereof, the Company will use commercially
reasonable efforts to extend the remaining terms of such leases for a minimum of
seven (7) years from the date hereof.
(i) Cooperation. The Company shall cooperate fully
with the Purchaser, and shall provide the Purchaser with such assistance
as the Purchaser may reasonably request, for the purpose of facilitating the
performance by the Purchaser of its obligations under this Agreement and the
Acquisition Documents.
(j) Conditions. The Company shall use commercially
reasonable efforts to ensure that the conditions required to be satisfied
on the part of the Company are satisfied on a timely basis.
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(k) Confidentiality. The Company shall continue to be
bound by its obligations under the Nondisclosure Agreement.
Section 6.2 Purchaser Covenants. The Purchaser covenants during
the Pre-Closing Period:
(a) Certain Filings. The Purchaser will make any
and all filings required to be made on its part under the HSR Act. The Company
and the Purchaser shall furnish each other such necessary information and
reasonable assistance as the other may request in connection with its
preparation of necessary filings or submissions under the provisions of such
laws.
(b) Sales Taxes. The Purchaser shall pay all real
and personal property transfer taxes and fees, if any, sales taxes, if any, and
all use, gross receipt or documentary taxes and other similar taxes, if any,
imposed on or in connection with the purchase, sale or transfer of the Purchased
Assets to, and the assumption of the Assumed Liabilities by, the Purchaser
pursuant to this Agreement. The Purchaser shall promptly reimburse the Company
for any such taxes and fees which, under applicable law, are imposed upon the
Company.
(c) Cooperation. The Purchaser shall cooperate fully
with the Company, and shall provide the Company with such assistance as
the Company may reasonably request, for the purpose of facilitating the
performance by the Company of its obligations under this Agreement and the
Acquisition Documents.
(d) Governmental Approvals. The Purchaser shall
cooperate with the Company (i) in promptly determining whether any governmental
approvals, authorizations, licenses, permits, consents, or other filings are
required to be or should obtained under any federal, state or local law and (ii)
in promptly applying for or submitting any such governmental approvals,
authorizations, licenses, permits, consents, or other filings, furnishing
information required in connection therewith and seeking timely to obtain such.
(e) Employees. The Purchaser will offer employment to
those current employees of the Company (as of the Closing Date)
working in the Business whose names and positions are set forth on Schedule
6.2(e) (the "Assumed Employees"). The Purchaser will pay the Assumed Employees
at wage rates competitive in the dialysis industry within the region in which
the Company operates and will provide benefits under standard Purchaser benefit
plans which shall be comparable to those provided to the other Purchaser
employees (including healthcare benefits which do not contain any exclusions or
waiting periods for pre-existing conditions with respect to Assumed Employees'
initial enrollment). This Section 6.2(e) in no way constitutes an employment
agreement between Purchaser and the Assumed Employees as such Assumed Employees
shall be employed by the Purchaser on an "at will" basis. The Purchaser
disclaims any commitment to employ such Assumed Employees for any specific
period.
(f) Investigation. In conducting its investigation of
the business, operations and legal affairs of the Company, the Purchaser shall
use its best efforts not to interfere in any manner with the business or
operations of the Company or with the performance of any of the Company's
employees.
(g) Conditions. The Purchaser shall use commercially
reasonable efforts to ensure that the conditions required to be
satisfied on the part of the Purchaser are satisfied on a timely basis.
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(h) Confidentiality. The Purchaser shall continue to
be bound by its obligations under the Nondisclosure Agreement.
ARTICLE 7
CONDITIONS TO OBLIGATION OF PURCHASER TO CLOSE.
The obligation of the Purchaser to purchase the Purchased Assets and
otherwise consummate the transactions that are to be consummated at the Closing
is subject to the satisfaction, as of the Scheduled Closing Time and as of the
Closing Date, of the following conditions (any of which may be waived by the
Purchaser in whole or in part):
Section 7.1 Accuracy of Representations and Warranties. The
representations and warranties of the Company set forth in Article 4 shall be
accurate in all material respects as of the Scheduled Closing Time and as of the
Closing Date, except to the extent that (a) any of such representations and
warranties refers specifically to a date other than the Scheduled Closing Time
or the Closing Date in which event such representation and warranty shall be
accurate as of such date, (b) the accuracy of any of such representations and
warranties is affected by any of the transactions contemplated by this Agreement
or the Acquisition Documents, and (c) any such representation and warranty is
modified in a Disclosure Schedule revised as of the Closing Date (which
Disclosure Schedule shall be accurate as of the Closing Date) delivered to the
Purchaser at least five calendar days prior to the Scheduled Closing Time, to
which modifications the Purchaser shall have been deemed to have consented;
provided the facts or circumstances described or referred to in such
modifications have not had nor would reasonably be expected to have a Material
Adverse Effect.
Section 7.2 Performance. The Company shall have performed, in all
material respects, all obligations required under this Agreement and the
Acquisition Documents to be performed by the Company on or before the Closing
Date.
Section 7.3 Governmental Consents. The Company shall have received all
other consents, approvals, authorizations and waivers required to be obtained by
the Company from all Governmental Entities with jurisdiction over the Company in
connection with the transactions contemplated by this Agreement and the
Acquisition Documents and the operation of the Purchased Assets, except where
failure to obtain such consents, approvals, authorizations or waivers will not
have a Material Adverse Effect.
Section 7.4 Third Party Consents. To the extent permitted by Law, the
Purchaser shall have received all other consents, approvals, authorizations and
waivers from Persons necessary to the assignment and transfer of the Purchased
Assets set forth in Schedule 7.4, except where failure to obtain such consents,
approval, authorizations or waivers will not have a Material Adverse Effect.
Notwithstanding the foregoing, (i) the Company shall have obtained the consent
to the assignment of the Company's real property leases to the Purchaser from
each of the lessors under such leases, and (ii) the Company shall have obtained
the consents necessary to (a) the assignment of all of the Company's medical
director agreements to Purchaser, (b) the extension for a period of seven (7)
years from the date hereof of the terms of the Company's medical director
agreements in a manner mutually acceptable to the Company and the Purchaser, and
(c) the elimination of those provisions from such medical director agreements as
they relate to the transfer of patients.
Section 7.5 Additional Documents. The Purchaser shall have
received the following documents:
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(a) an opinion letter from Woodburn & Wedge, dated
the Closing Date, in a form reasonably acceptable to the Purchaser;
(b) each of the Acquisition Documents shall have been
executed and delivered by the parties thereto; and
(c) such other documents as the Purchaser may
reasonably request in good faith for the purpose of (i) evidencing the accuracy
of any representation or warranty made by the Company, (ii) evidencing the
compliance by the Company with, or the performance by the Company of, any
covenant or obligation set forth in this Agreement or any of the Acquisition
Documents, (iii) evidencing the satisfaction of any condition set forth in this
Section 7, or (iv) otherwise facilitating the consummation or performance of any
of the transactions contemplated by this Agreement or any of the Acquisition
Documents.
Section 7.6 No Injunction. There shall not be in effect, at the
Closing, any injunction or other binding order of any Governmental Entity having
jurisdiction over the Purchaser that prohibits the consummation of the
transactions contemplated by this Agreement and the Acquisition Documents.
ARTICLE 8
CONDITIONS TO OBLIGATION OF THE COMPANY TO CLOSE.
The obligation of the Company to sell the Purchased Assets to the
Purchaser and otherwise consummate the transactions that are to be consummated
at the Closing is subject to the satisfaction, as of the Scheduled Closing Time
and as of the Closing Date, of the following conditions (any of which may be
waived by the Company in whole or in part):
Section 8.1 Accuracy of Representations and Warranties. The
representations and warranties of the Purchaser set forth in Section 5 shall be
accurate in all material respects as of the Scheduled Closing Time and as of the
Closing Date.
Section 8.2 Performance. The Purchaser shall have performed, in all
material respects, all obligations required by this Agreement and the
Acquisition Documents to be performed by the Purchaser on or before the Closing
Date.
Section 8.3 No Injunction. There shall not be in effect, at the
Closing, any injunction or other binding order of any Governmental Entity having
jurisdiction over the Company that prohibits the consummation of the
transactions contemplated by this Agreement and the Acquisition Documents.
Section 8.4 Equityholder Approval; Attorney General Consent. The
Company shall have received the consent and approval of the Owners to the
transactions contemplated by this Agreement and the Acquisition Documents, and
Satellite Dialysis Centers, Inc. shall have received written notification from
the Office of the California Attorney General that it does not oppose or object
to the participation by Satellite Dialysis Centers, Inc. in the Acquisition and
the transactions contemplated by the Agreement. In the case of Satellite
Dialysis Centers, Inc. (in its capacity as an Owner and not as Agent), it is
expressly understood and agreed that its consent and approval is subject to the
fiduciary obligations of its board of trustees consistent with its charitable
purpose. The parties agree that such consent and approval by the board of
trustees and receipt of approval from the Office of the California Attorney
General may only be waived by Satellite Dialysis Centers, Inc. in its sole and
absolute discretion.
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Section 8.5 Governmental Consents. To the extent permitted by Law, the
Company shall have received all other consents, approvals, authorizations and
waivers required to be obtained from all federal, state, municipal and other
governmental authorities with jurisdiction over the Company in connection with,
and as a condition to, the transactions contemplated by this Agreement and the
Acquisition Documents and the operation of the Purchased Assets, except where
failure to obtain such consents, approvals, authorizations or waivers will not
have a Material Adverse Effect.
Section 8.6 Third Party Consents. The Company shall have received all
other consents, approvals, authorizations and waivers from Persons necessary to
the assignment and transfer of the Purchased Assets, except where failure to
obtain such consents, approvals, authorizations or waivers will not have a
Material Adverse Effect.
Section 8.7 Additional Documents. The Company shall have received
the following documents:
(a) an opinion letter from Duane, Morris & Heckscher,
dated the Closing Date, in a form reasonably acceptable to the Company;
(b) each of the Acquisition Documents shall have been
executed and delivered by the parties thereto; and
(c) such other documents as the Company may
reasonably request in good faith for the purpose of (i) evidencing the accuracy
of any representation or warranty made by the Purchaser, (ii) evidencing the
compliance by the Purchaser with, or the performance by the Purchaser of, any
covenant or obligation set forth in this Agreement or any of the Acquisition
Documents, (iii) evidencing the satisfaction of any condition set forth in this
Section 8, or (iv) otherwise facilitating the consummation or performance of any
of the transactions contemplated by this Agreement or any of the Acquisition
Documents.
ARTICLE 9
TERMINATION OF AGREEMENT.
Section 9.1 Right to Terminate Agreement. This Agreement may be
terminated prior to the Closing:
(a) by the mutual agreement of the Company and
the Purchaser;
(b) by the Purchaser at any time after the
Termination Date, if any condition set forth in Section 7 shall not have been
satisfied or waived; or
(c) by the Company at any time after the
Termination Date, if any condition set forth in Section 8 shall not have been
satisfied or waived.
Section 9.2 Effect of Termination. Upon the termination of this
Agreement pursuant to Section 9.1:
(a) The Purchaser shall promptly cause to be
returned to the Company all documents and information obtained in connection
with this Agreement and the transactions contemplated by this Agreement and all
documents and information obtained in connection with the
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Purchaser's investigation of the Company's business, operations and legal
affairs, including any copies made by the Purchaser or any of the Purchaser's
Associates of any such documents or information; and
(b) neither party hereto shall have any obligation or
liability to the other party hereto, except that (i) the Purchaser and
the Company shall have the obligations set forth in the Memorandum, and (ii) the
Purchaser and the Company shall remain bound by the provisions of the
Nondisclosure Agreement, this Section 9.2 and Article 11.
ARTICLE 10
INDEMNIFICATION AND RELATED MATTERS.
Section 10.1 Indemnification by the Company. Subject to the limitations
set forth in this Article 10 and elsewhere in this Agreement, the Company shall
indemnify the Purchaser against any Damages that the Purchaser actually incurs
during the one-year period commencing on the Closing Date which arise from,
occur as a result of or in connection with (a) any breach by the Company of any
representation, warranty or covenant of the Company set forth in this Agreement
or any of the Acquisition Documents or (b) any liability that arises from or
relates to (i) the Excluded Assets or (ii) the Excluded Liabilities.
Section 10.2 Indemnification by the Purchaser. Subject to the
limitations set forth in this Article 10 and elsewhere in this Agreement, the
Purchaser shall indemnify the Company and the Owners against any Damages that
the Company actually incurs during the one-year period commencing on the Closing
Date which arise from, occur as a result of or in connection with (a) any breach
by the Purchaser of any representation, warranty or covenant of the Purchaser
set forth in this Agreement or any of the Acquisition Documents, or (b) any
liability that arises from or relates to (i) the operation of the Purchased
Assets after the Closing, and (ii) the Assumed Liabilities.
Section 10.3 Expiration of Representations, Warranties and Covenants.
Except for the covenants set forth in Section 6.2(b) (sales taxes), the
covenants set forth in Article 6 shall terminate and expire, and shall cease to
be of any force or effect, on the Closing Date, and all liability of the parties
hereto with respect to such covenants shall thereupon be extinguished. Except as
set forth in the immediately preceding sentence, all of the representations,
warranties, covenants and obligations of the Company and the Purchaser set forth
in this Agreement and any of the Acquisition Documents shall terminate and
expire, and shall cease to be of any force or effect, at 2:00 p.m. (California
time) on the first anniversary of the Closing Date, and all liability of the
Company or the Purchaser with respect thereto (including their respective
obligations under Section 10.1 or Section 10.2, as the case may be) shall
thereupon be extinguished; provided, that if, prior to such first anniversary,
either party shall have duly delivered a Claim Notice in conformity with all of
the applicable procedures set forth in Section 10.8, then the specific
indemnification claim set forth in such Claim Notice shall survive such first
anniversary (and shall not be extinguished thereby).
Section 10.4 Deductible Amount. Without limiting the effect of any of
the other limitations set forth herein, neither the Purchaser nor the Company
shall be required to make any indemnification payment hereunder with respect to
any breach of any of their respective representations, warranties, covenants and
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obligations, except to the extent that the cumulative amount of the Damages
actually incurred by the party to be indemnified as a result of all such
breaches of such representations, warranties, covenants and obligations actually
exceeds the Deductible Amount; and each party hereto shall only be required to
pay, and shall only be liable for, the amount by which the cumulative amount of
the Damages actually incurred by the party to be indemnified as a result of all
such breaches of such representations, warranties, covenants and obligations
actually exceeds the Deductible Amount. The "Deductible Amount" shall be an
amount equal to one-half percent (0.5%) of the Purchase Price. Notwithstanding
the foregoing, claims for indemnification relating to (i) the Excluded
Liabilities (including, without limitation, taxes of the Company described in
such definition and Overpayments) and (ii) (a) the Assumed Liabilities and (b)
the operation of the Purchased Assets after the Closing, shall not be subject to
the Deductible Amount.
Section 10.5 Maximum Liability. The total amount of the payments that
either the Company or the Purchaser, as the case may be, shall be required to
make under or in connection with this Agreement or any of the Acquisition
Documents pursuant to such party's indemnification obligations shall be limited
in the aggregate to a maximum of ten percent (10%) of the Purchase Price, and
neither party's respective cumulative liability shall exceed such amount.
Section 10.6 Knowledge of Breach. For purposes of this Article 10,
neither party hereto shall be deemed to have breached any representation or
warranty if the other party had, on or prior to the Closing Date, Knowledge of
the breach of, or of any facts or circumstances constituting or resulting in a
breach of, such representation or warranty.
Section 10.7 No Implied Representations. The Purchaser and the Company
acknowledge that, except as expressly provided in Articles 4 and 5, neither
party hereto, and none of the Associates of either party hereto, has made or is
making any representations or warranties whatsoever, implied or otherwise.
Section 10.8 Indemnification Claims. If either party hereto (the
"Claimant") wishes to assert an indemnification claim against the other party
hereto, the Claimant shall deliver to the other party a written notice (a "Claim
Notice") setting forth:
(a) the specific representation, warranty or
covenant alleged to have been breached by such other party, or the specific
liability to have been incurred;
(b) a detailed description of the facts and
circumstances giving rise to the alleged breach of such representation, warranty
or covenant, or incurrence of such liability; and
(c) a detailed description of, and a reasonable
estimate of the total amount of, the Damages actually incurred or expected to
be incurred by the Claimant as a direct result of such alleged breach.
Notwithstanding anything to the contrary contained in this Agreement, Claimant
shall not be permitted to deliver any Claim Notice to the other party (and shall
not be entitled to assert any indemnification claim set forth in any Claim
Notice) unless:
(i) the indemnification claim set forth in
such Claim Notice shall have arisen from a bona fide lawsuit or other bona
fide legal proceeding that was instituted by a third party against Claimant or
the Company prior to the delivery of such Claim Notice to the other party; or
(ii) Claimant shall have provided evidence
in reasonable detail demonstrating to the other party, before the delivery
of such Claim Notice, that Claimant has therefore actually incurred, or is
reasonably likely to incur, Damages as a result of the alleged breach described
in such Claim Notice.
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Any Claim Notice that is delivered to the Purchaser or the Company in
contravention of the prohibition set forth in the preceding sentence shall be
deemed not to have been "duly delivered" for purposes of Section 10.3 and shall
be of no force or effect.
Section 10.9 Defense of Third Party Actions. If either party hereto
(the "Indemnitee") receives notice or otherwise obtains knowledge of any Matter
or any threatened Matter that may give rise to an indemnification claim against
the other party hereto (the "Indemnifying Party"), then the Indemnitee shall
promptly deliver to the Indemnifying Party a written notice describing such
Matter in reasonable detail; provided, that for the sole purpose of determining
whether a Matter or threatened Matter may give rise to an indemnification claim
against the Indemnifying Party within the meaning of this sentence, the
limitation set forth in Section 10.4 shall not be taken into account. The timely
delivery of such written notice by the Indemnitee to the Indemnifying Party
shall be a condition precedent to any liability on the part of the Indemnifying
Party under this Section 10 with respect to such Matter. The Indemnifying Party
shall have the right, at its option, to assume the defense of any such Matter
with its own counsel reasonably satisfactory to the Indemnitee. If the
Indemnifying Party elects to assume the defense of any such Matter, then:
(a) notwithstanding anything to the contrary
contained in this Agreement, the Indemnifying Party shall not be required to pay
or otherwise indemnify the Indemnitee against any attorneys' fees or other
expenses incurred on behalf of the Indemnitee in connection with such Matter
following the Indemnifying Party's election to assume the defense of such
Matter;
(b) the Indemnitee shall make available to the
Indemnifying Party all books, records and other documents and materials that
are under the direct or indirect control of the Indemnitee and that the
Indemnifying Party considers necessary or desirable for the defense of such
Matter;
(c) the Indemnitee shall fully cooperate as
reasonably requested by the Indemnifying Party in the defense of such Matter and
execute such documents and take such other actions as the Indemnifying Party may
reasonably request for the purpose of facilitating the defense of, or any
settlement, compromise or adjustment relating to, such Matter;
(d) the Indemnitee shall not admit any liability with
respect to such Matter; and
(e) the Indemnifying Party shall not settle, adjust
or compromise such Matter without the prior written consent or approval
of the Indemnitee.
If the Indemnifying Party elects not to assume the defense of such Matter, then
the Indemnitee shall proceed diligently to defend such Matter with the
assistance of counsel satisfactory to the Indemnifying Party; provided, that the
Indemnitee shall not settle, adjust or compromise such Matter, or admit any
liability with respect to such Matter, without the prior written consent of the
Indemnifying Party.
Section 10.10 Subrogation. To the extent that either party hereto (the
"Indemnitor") makes or is required to make any indemnification payment to the
other party hereto (the "Indemnified Party"), the Indemnitor shall be entitled
to exercise, and shall be subrogated to, any rights and remedies (including
rights of indemnity, rights of contribution and other rights of recovery) that
the Indemnified Party or any of the Indemnified Party's Associates may have
against any other Person with respect to any Damages, circumstances or Matter to
which such indemnification payment is directly or indirectly related. The
Indemnified Party shall permit the Indemnitor to use the name of the Indemnified
Party and the names of
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the Indemnified Party's Associates in any transaction or in any proceeding or
other Matter involving any of such rights or remedies; and the Indemnified Party
shall take such actions as the Indemnitor may reasonably request for the purpose
of enabling the Indemnitor to perfect or exercise the Indemnitor's right of
subrogation hereunder.
Section 10.11 Exclusivity. The right of each party hereto to assert
indemnification claims and receive indemnification payments pursuant to this
Article 10 shall be the sole and exclusive right and remedy exercisable by such
party with respect to any breach by the other party hereto of any
representation, warranty, covenant or obligation. Without limiting the
generality of the foregoing, no Indemnitee shall have the right to withhold and
deduct any sum that may be owed to such Indemnitee from any amount otherwise
payable by such Indemnitee to the Indemnifying Party.
Section 10.12 Accounts Receivable. In the event the Company receives
any payment that relates to accounts receivable generated from services rendered
by the Business after the Closing Date, the Company shall promptly transmit
these funds to the Purchaser. In the event the Purchaser receives any payment
that related to accounts receivable generated from services rendered by the
Business on or before the Closing Date, the Purchaser shall promptly transmit
these funds to the Company.
Section 10.13 Tax Matters. Each party will provide the other such
assistance as may reasonably be requested in connection with the preparation of
any reimbursement-related audit, any tax return, any audit or other examination
by any taxing authority, or any judicial or administrative proceedings relating
to liability for taxes, and each will retain and provide the other with any
records or information which may be relevant to such return, audit or
examination, proceedings or determination. The party requesting assistance
hereunder shall reimburse the other party for reasonable expenses incurred in
providing such assistance. Any information obtained pursuant to this Section or
pursuant to any other Section hereof providing for the sharing of information or
the review of any tax return or other schedule relating to taxes shall be kept
confidential by the Parties and not disclosed to any Person.
Section 10.14 Tail Insurance. The Company shall use commercially
reasonable efforts to maintain in force and effect for five years from the
Closing Date the Tail Insurance Coverage relating back five years from the
Closing Date. The "Tail Insurance Coverage" shall be health care services
professional liability coverage with The Doctors Company or such other
financially sound and reputable insurance company or association selected by the
Company with limits of liability of $1,000,000 per loss.
ARTICLE 11
MISCELLANEOUS PROVISIONS.
Section 11.1 Time of Essence. Time is of the essence with respect
to this Agreement.
Section 11.2 Compliance with Laws. Each party shall execute such
agreements and other documents, and shall take such other actions, as the other
may reasonably request (prior to, at or after the Closing) for the purpose of
ensuring that the transactions contemplated by this Agreement are carried out in
full compliance with the provisions of all applicable laws and regulations.
Section 11.3 Publicity. No press release, notice to any third party or
other publicity concerning the transactions contemplated by this Agreement or
any of the Acquisition Documents shall be issued, given or otherwise
disseminated without the prior written consent of the Agent and the Purchaser,
which will not be unreasonably withheld or delayed; provided, that (a) without
the approval of the Purchaser, the Agent
19.
<PAGE>
shall be entitled to make disclosures regarding the transactions contemplated
hereby (i) to the Office of the California Attorney General and (ii) as may be
necessary to effect the transactions contemplated hereby, and (b) either party
may make such disclosures as may be contemplated herein or as may be and to the
extent required by applicable law.
Section 11.4 Access of the Company to Books and Records. At all times
after the Closing Date, the Purchaser shall give the Company and the Company's
Associates reasonable access to the books and records of the Company to inspect
and copy such books and records.
Section 11.5 Governing Law. This Agreement shall be construed in
accordance with, and governed in all respects by, the laws of the State of
California (without giving effect to principles of conflicts of law).
Section 11.6 Venue and Jurisdiction. If any legal proceeding or other
legal action relating to this Agreement is brought or otherwise initiated, the
venue therefor shall be in San Francisco, California, which shall be deemed to
be a convenient forum. The Purchaser and the Company hereby expressly and
irrevocably consent and submit to the jurisdiction of the courts in San
Francisco, California.
Section 11.7 Notices. All notices, consents and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given and duly delivered when (i) delivered by hand or (ii) when received by the
addressee, if sent by certified mail, return receipt requested, by Express Mail,
Federal Express or other express delivery service (receipt requested), in each
case, at the appropriate addresses as set forth below (or to such other address
as a party may designate as to itself by notice to the other parties):
if to the Purchaser:
Renal Treatment Centers - West, Inc.
1180 W. Swedesford Road, Bldg. 2, Ste. 300
Berwyn, PA 19312
Attention: Thomas J. Karl
Vice President, Secretary and General Counsel
with a copy (not constituting notice) to:
Duane, Morris & Heckscher
4200 One Liberty Place
Philadelphia, PA 19103
Attention: Jeffrey S. Henderson, Esq.
if to the Company:
Dialysis Systems, Inpatient Services, LLC
500 South Rancho Road, Suite 12
Las Vegas, NV 89106
Attention: Larry Lehrner, M.D.
20.
<PAGE>
with a copy (not constituting notice) to:
Woodburn & Wedge
One East First Street, suite 1600
Reno, NV 89501
Attention: Gregg Barnard, Esq.
Satellite Dialysis Centers, Inc.
345 Convention Way, Suite B
Redwood City, CA 94063-1402
Attention: Marc Branson
Chief Financial Officer
and
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Brian C. Cunningham
Section 11.8 Table of Contents and Headings. The table of contents of
this Agreement and the underlined headings contained in this Agreement are for
convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
Section 11.9 Assignment. Neither party hereto may assign any of its
rights or delegate any of its obligations under this Agreement to any other
Person without the prior written consent of the other party hereto; provided,
that the Company may, prior to or after the Closing, assign to any Person its
right to receive all or any portion of the amount payable to the Company under
Section 3.1.
Section 11.10 Parties in Interest. Nothing in this Agreement is
intended to provide any rights or remedies to any Person (including any employee
or creditor of the Company) other than the parties hereto.
Section 11.11 Severability. In the event that any provision of this
Agreement, or the application of such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
Section 11.12 Entire Agreement. This Agreement, the Memorandum, the
other Acquisition Documents and the Nondisclosure Agreement set forth the entire
understanding of the Purchaser and the Company and supersede all other
agreements and understandings between the Purchaser and the Company relating to
the subject matter hereof and thereof.
Section 11.13 Expenses. Each of the parties shall be responsible for
and pay all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement.
21.
<PAGE>
Section 11.14 Waiver. No failure on the part of either party hereto to
exercise any power, right, privilege or remedy under this Agreement, and no
delay on the part of either party hereto in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a waiver thereof; and
no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or further exercise thereof or of any other power,
right, privilege or remedy.
Section 11.15 Amendments. This Agreement may not be amended, modified,
altered or supplemented except by means of a written instrument executed on
behalf of both the Purchaser and the Company.
Section 11.16 Counterparts. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be as original and all of
which, when taken together, will be deemed to constitute one and the same.
Section 11.17 Waiver of Bulk Transfer Laws. To the extent applicable,
the Purchaser and the Company waive compliance with the provisions of Division 6
of the Uniform Commercial Code of the State of California and the provisions of
any other applicable laws relating to bulk transfers of assets.
Section 11.18 Post-Signing Procedure. The parties are executing this
agreement in advance of finalizing the terms of one or more Exhibits, prior to
the delivery of certain parts of the Disclosure Schedule that may qualify the
representations and warranties herein set forth, and prior to the Purchaser's
completion and analysis of its due diligence investigation.
(a) The Company shall be responsible for preparing
all Parts of the Disclosure Schedule other than as specifically agreed.
The Company shall deliver a proposed Disclosure Schedule for review by the
Purchaser within seven (7) days of the date of this Agreement. The Disclosure
Schedule shall be deemed accepted by the Purchaser within five (5) business days
after delivery thereof unless the Purchaser notifies the Company of any
objections. If the Purchaser determines in good faith that the Disclosure
Schedule reveals information that had not been previously known by or disclosed
to the Purchaser, and would have in the Purchaser's reasonable judgment a
Material Adverse Effect, then the Purchaser will immediately notify the Company
of such information (but within such five-day period), and the parties shall in
good faith use commercially reasonable efforts to eliminate, waive or resolve
any problem. If, notwithstanding such efforts, such problem cannot be
eliminated, waived or resolved, either the Company or the Purchaser may elect to
terminate this Agreement pursuant to the terms of Section 9.1(b) or 9.1(c), as
the case may be.
(b) The Purchaser shall promptly complete its final
due diligence investigation of the Company by October 5, 1997.
Section 11.19 Interpretation of Agreement.
(a) Each party hereto acknowledges that it has
participated in the drafting of this Agreement, and any applicable rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not be applied in connection with the construction or
interpretation of this Agreement.
(b) Whenever required by the context hereof, the
singular number shall include the plural, and vice versa; the masculine gender
shall include the feminine and neuter genders; and the neuter gender shall
include the masculine and feminine genders.
22.
<PAGE>
(c) As used in this Agreement, the words "include" and
"including," and variations thereof, shall not be deemed to be terms of
limitation, and shall be deemed to be followed by the words "without
limitation."
(d) References herein to "Articles," "Sections" and
"Exhibits" are intended to refer to Sections of and Exhibits to this
Agreement.
Section 11.20 Commercially Reasonable Efforts. Throughout this
Agreement and the other Acquisition Documents, subject to Section 1.2,
"commercially reasonable efforts" of a Person shall mean the efforts that a
prudent Person using ordinary business practice and judgment consistent with
industry practice and desiring to achieve a particular result would use in order
to obtain such result, which efforts may include, among other things, the
expenditure of funds; provided, that such efforts shall not require a Person to
(i) expend funds other than for the payment of reasonable and customary costs
and expenses of employees, legal counsel, consultants, representatives or agents
of such Person or (ii) institute litigation or arbitration proceedings as a part
of its efforts.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
23.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
DIALYSIS SYSTEMS, INPATIENT SERVICES, LLC
By: Satellite Dialysis Centers, Inc.
By: /s/ Marc Branson
---------------------
Name: Marc Branson
Title: Chief Financial Officer
RENAL TREATMENT CENTERS-WEST, INC.
By: /s/ Robert L. Mayer, Jr.
--------------------------
Name: Robert L. Mayer, Jr.
Title: Chairman, President and CEO
ASSET PURCHASE AGREEMENT
<PAGE>
EXHIBIT A
DEFINED TERMS
For purposes of this Agreement (including the Disclosure Schedule):
"Agreement" shall mean the Asset Purchase Agreement to which this
Exhibit A is attached.
"Acquisition" means the acquisition by the Purchaser of the Purchased
Assets.
"Acquisition Documents" shall have meaning specified in Section 4.2.
"Acquisition Transaction" shall mean any transaction involving:
(a) the sale or other disposition of all or
any portion of the Company's business or assets (other than in the ordinary
course of business);
(b) the issuance, sale or other disposition of
any Equity Securities of the Company; or
(c) any merger, consolidation, business combination,
share exchange, reorganization or similar transaction involving the
Company.
"Affiliate" means a Person that directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with, specified Person.
"Agent" shall have the meaning specified in the Memorandum.
"Associates" of a Person shall include:
(a) such Person's affiliates, stockholders, directors,
officers, employees, agents, attorneys, accountants and representatives; and
(b) all stockholders, directors, officers, employees, agents,
attorneys, accountants and representatives of each of such Person's affiliates.
"Assumed Contracts" shall have the meaning specified in Section 1.1(f).
"Assumed Liabilities" shall have the meaning specified in Section 2.1.
"Audited Financial Statements" shall mean the audited balance sheet of
the Company as of December 31, 1996, and such related audited statement of
operations of the Company for the period then ended, including the notes
thereto, accompanied by the report of Frank Rimmerman & Co. thereon.
"Business" shall have the meaning specified in the Recitals.
"Claim Notice" shall have the meaning specified in Section 10.8.
"Claimant" shall have the meaning specified in Section 10.8.
1.
<PAGE>
"Closing" shall have the meaning specified in Section 3.3.
"Closing Date" shall mean the time and date as of which the Closing
actually takes place.
"Company" shall mean Dialysis Systems, Inpatient Services, LLC, a
Nevada limited liability company.
"Damages" shall mean out-of-pocket losses and damages; provided, that
for purposes of computing the amount of Damages incurred by any Person, there
shall be deducted an amount equal to the amount of any insurance proceeds,
indemnification payments, contribution payments or reimbursements directly or
indirectly received by such Person or any of such Person's affiliates in
connection with such Damages or the circumstances giving rise thereto.
"Deductible Amount" shall have the meaning specified in Section 10.4.
"Disclosure Schedule" shall mean that certain Disclosure Schedule
delivered together with the Agreement, which shall be arranged in parts to
correspond with the sections and subsections of the Agreement and each
disclosure set forth therein shall be deemed to modify each and every
representation, warranty and covenant of the Company set forth in the Agreement
as it pertains to such representation, warranty or covenant. The contents of
each of the contracts and other documents referred to in the Disclosure Schedule
shall be deemed to be incorporated and referred to in the Disclosure Schedule as
though set forth in full therein.
"Encumbrance" shall mean any encumbrance, lien, mortgage, pledge, lease
or noncontingent charge.
"Equity Securities" means any capital stock or other equity interest,
or securities convertible into or exchangeable for capital stock or other equity
interest, or any other rights, warrants or options to acquire any of the
foregoing securities.
"ESRD Patients" has the meaning specified in the Recitals.
"Excluded Assets" shall mean (i) all of the Company's cash balances,
cash equivalents and accounts receivable, (ii) the Company's corporate franchise
and related indicia, (iii) the consideration delivered to the Company pursuant
to and all rights arising under this Agreement or any of the Acquisition
Documents, (iv) the Company's tax returns, refunds and tax records, (v) all
insurance policies and surety bonds of the Company, (vi) all items of prepaid
expenses, deposits and other similar sums to which the Company may become
entitled to a refund, (vii) all payroll processing agreements, (viii) all
vending service agreements, including, without limitation, the Cold Drink
Equipment Agreement entered into by Dialysis Systems, LLC, and (ix) any and all
administrative service agreements between the Company and Satellite Dialysis
Centers, Inc.
"Excluded Liabilities" shall mean (i) any and all of the Company's
Closing transaction fees and expenses, including, without limitation, the
Company's financial advisory, accounting and legal fees and expenses, (ii)
subject to Sections 6.1(e) and 6.2(e), obligations relating to the Company's
employees, including, without limitation, accrued salaries and wages,
obligations under the Company's employee benefit plans, and retention bonuses
and severance obligations payable to employees of the Company, through the
Closing Date as a result of the transactions contemplated by this Agreement and
the other Acquisition Documents, (iii) any and all federal and state income
taxes payable by the Company as a result of the transactions contemplated by
this Agreement and the Acquisition Documents, (iv) the
2.
<PAGE>
Company's federal, state and local taxes for any period prior to the Closing
accrued through the Closing Date, (v) any liability arising out of or relating
to overpayments, malpractice, fraud and violations of applicable federal and
state fraud and abuse, anti-kickback and Stark laws occurring prior to Closing
Date, or (vi) any liability or obligation of the Company that is not expressly
assumed by the Purchaser herein.
"Financial Statements" shall mean the Audited Financial Statements and
the Unaudited Financial Statements.
"GAAP" shall mean generally accepted accounting principles, applied on
a basis consistent with the basis on which the applicable financial statements
were prepared.
"Governmental Entity" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government or any quasi-governmental authority
or self-regulatory organization (such as the New York Stock Exchange, Inc.),
whether federal, state or local.
"HCFA" shall have the meaning specified in Section 4.10(b).
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and the rules promulgated thereunder.
"Indemnified Party" shall have the meaning specified in Section 10.10.
"Indemnifying Party" shall have the meaning specified in Section 10.9.
"Indemnitee" shall have the meaning specified in Section 10.9.
"Indemnitor" shall have the meaning specified in Section 10.10.
"Knowledge," to the best knowledge of, to which a Person is aware,
known to a Person, or any variation thereof shall mean the actual knowledge of
such Person without having made independent investigation in connection with
this Agreement. For the Company, Knowledge shall be the actual knowledge of Mark
Burke, Marc Branson and Alan Busby, M.D..
"Laws" shall have the meaning specified in Section 4.10(a).
"Material Adverse Effect" shall mean any occurrence, event or
condition, either individually or in the aggregate, having a material adverse
effect on the business operations or financial condition of the Company, or the
Purchased Assets, taken together as a whole.
"Material Contract" shall have the meaning specified in Section 4.7.
"Matter" shall mean any claim, demand, dispute, action, suit,
examination, audit, proceeding, investigation, inquiry or other similar matter.
"Medicaid" means that means-tested entitlement program under Title XIX
of the Social Security Act that provides federal grants to states for medical
insurance based on specific eligibility criteria, as interpreted by the
appropriate Governmental Entities prior to the date hereof.
3.
<PAGE>
"Medical Reimbursement Programs" means the Medicare, Medicaid programs
and any other health care program operated by or serviced in whole or in part by
any federal, state or local government, each as interpreted by the appropriate
Governmental Entities prior to date hereof.
"Medicare" means that government-sponsored entitlement program under
Title XVIII of the Social Security Act that provides for a health insurance
program for eligible elderly and disabled individuals, as interpreted by the
appropriate Governmental Entities prior to the date hereof.
"Memorandum" means that certain Memorandum of Understanding of even
date herewith by and among the Purchaser, California Kidney Centers, California
Kidney Centers, Inpatient Services, LLC, California Kidney Centers, Orange, LLC,
Dialysis Systems, Inpatient Services, LLC, Dialysis Systems, LLC and Satellite
Dialysis Centers, Inc., solely as agent for the selling parties thereto.
"Noncompetition Agreement" shall have the meaning specified in
Section 3.4(e).
"Nondisclosure Agreement" shall mean that certain Nondisclosure
Agreement, dated May 27, 1997, between the Purchaser and Satellite Dialysis
Centers, Inc., on behalf of itself and as agent for the Company and the Owners.
"Overpayments" shall have the meaning specified in Section 4.10(a).
"Owner" shall mean each holder of Equity Securities of the Company.
"Permitted Encumbrances" shall mean (i) those encumbrances resulting
from taxes that have not yet become due and delinquent, (ii) minor encumbrances
that do not materially detract from the value of the real property interests
subject thereto or materially impair their operations, (iii) zoning laws and
other use restrictions of public record, (iv) encumbrances that arise or have
otherwise arisen in the ordinary course of business, (v) restrictions arising
under all Laws, and (vi) those encumbrances described in Part 4.5 of the
Disclosure Schedule.
"Person" shall mean any individual, corporation, association, general
partnership, limited partnership, venture, trust, association, firm,
organization, company, business, entity, union, society, government (or
political subdivision thereof) or governmental agency, authority or
instrumentality.
"Physical Assets" shall have the meaning specified in Section 4.5.
"Purchase Price" shall have the meaning specified in Section 3.1.
"Purchased Assets" shall have the meaning specified in the Section 1.1.
"Purchaser" shall mean Renal Treatment Centers - West, Inc., a
Delaware corporation/Renal Treatment Centers - California, Inc., a Delaware
corporation.
"Purchaser Material Adverse Effect" shall have the meaning specified in
Section 5.1.
"Proprietary Rights" shall have the meaning specified in Section 4.8.
"Registered Patients" shall mean patients who have completed and mailed
Health Care Financing Administration Form 2728 indicating that they are
registered patients of one of the Sellers' facilities.
4.
<PAGE>
"Scheduled Closing Time" shall mean 2:00 p.m. (California time) on
October 31, 1997 or such time and date as may be postponed by the mutual
agreement of the parties hereto.
"Statement Date" December 31, 1996.
"Termination Date" shall mean the later of (i) December 31, 1997 and
(ii) seven (7) days after receipt of all consents, approvals, authorizations and
waivers of all Governmental Entities required to be obtained under this
Agreement.
"Unaudited Financial Statements" shall mean the unaudited balance sheet
of the Company as of June 30, 1997, and such related statement of operations of
the Company for the period then ended prepared by the Company.
5.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS'
--------------------------------
We consent to the incorporation by reference in the registration statements of
Renal Treatment Centers, Inc. and Subsidiaries (the "Company") on Form S-8 (File
Nos. 33-85750, 33-94262, 333-25875 and 333-28913) and Form S-3 (File Nos. 33-
88418, 33-93060, 33-96828, 333-3716, 333-10839, 333-10841 and 333-21281) of our
report dated September 24, 1997 on our audits of the combined financial
statements of Satellite Affiliated Companies as of December 31, 1996 and 1995
and for the years then ended, which report is included in this form 8-K.
/s/Frank, Rimerman & Co. LLP
----------------------------
Frank, Rimerman & Co., LLP
October 9, 1997
Menlo Park, California
<PAGE>
Exhibit 99.1
News
- --------------------------------------------------------------------------------
RENAL TREATMENT CENTERS, INC.
FOR IMMEDIATE RELEASE
Contact: Ronald H. Rodgers, Jr.
Vice President - Finance and
Chief Financial Officer
610-644-4796
RENAL TREATMENT CENTERS TO ACQUIRE 12 DIALYSIS FACILITIES
IN SOUTHERN CALIFORNIA AND NEVADA
---------------------------------
COMPANY ALSO ANNOUNCES INCREASE IN ITS CREDIT FACILITY
AND OTHER TRANSACTIONS
Berwyn, Pennsylvania (October 7, 1997) - Renal Treatment Centers, Inc. (NYSE:
RXT) today announced that it has entered into definitive agreements to acquire
substantially all of the assets of 12 end-stage renal disease outpatient
dialysis centers and related acute care programs from California Kidney Centers;
California Kidney Centers, Orange, LLC; Dialysis Systems, LLC; California Kidney
Centers, Inpatient Services, LLC; and Dialysis Systems, Inpatient Services, LLC.
Ten of the outpatient dialysis centers are located in southern California and
two of the centers are located in Las Vegas, Nevada. The 12 outpatient dialysis
centers currently provide treatments to approximately 1,460 patients, including
transient patient equivalents. The acute care programs provide approximately
13,700 treatments annually at 29 hospitals in the service areas of the
outpatient dialysis centers.
The transaction is expected to be completed in November 1997, subject to
receipt of required regulatory approvals, including those required under the
Hart-Scott-Rodino Antitrust Improvements Act and the approval of the Attorney
General of the State of California, and certain other contingencies. The
acquisition would be accounted for as a purchase. The terms of the transaction
were not disclosed.
Robert L. Mayer, Jr., chairman, president and chief executive officer of
Renal Treatment Centers, Inc., said, "This acquisition is a very important
transaction for our company for several reasons. In terms of the number of
dialysis centers and acute care agreements, it will be our largest acquisition
to date. The terms of the acquisition are consistent with the Company's
strategic practices. In addition, the integration of these centers into our
operations will enable us to substantially expand our service
<PAGE>
areas into the southern California and Las Vegas markets. The acquisition will
also be consistent with the Company's philosophy of developing regional clusters
of dialysis centers, as we will be acquiring existing clusters in southern
California and Las Vegas. Also, we are very impressed with the quality of care
provided in the facilities and the high level of professionalism and competency
of the staff working in these centers."
The Company also announced the following transactions:
The Company's credit facility through a consortium of banks has been
increased from $200 million to $350 million, effective September 26, 1997.
The Company intends to use the additional borrowing capacity to support the
Company's acquisition and development activities and general working
capital requirements.
Effective September 1, 1997, the Company acquired substantially all of the
assets of Kidney Care, Inc., which operated an end-stage renal disease
outpatient dialysis center in Macon, Georgia, serving approximately 80
patients and operating 21 treatment stations.
Effective October 1, 1997, the Company acquired all of the outstanding
stock of Tomball Dialysis, Inc., which operated an end-stage renal disease
outpatient dialysis center in Tomball, Texas, serving approximately 54
patients and operating 13 treatment stations.
As of October 1, 1997, the Company's clinical laboratory, located in Las
Vegas, Nevada, has been fully licensed, and the laboratory will begin
testing patient samples in December 1997.
This press release contains forward-looking statements. The Company
cautions that a number of factors, including those expressed in its Annual
Report on Form 10-K for the year ended December 31, 1996, and unforeseen changes
in economic conditions in the United States and Argentina, could cause actual
results to differ materially from those expressed in any forward-looking
statements. Furthermore, there can be no assurance that the transactions
described in the first paragraph above will be completed.
Renal Treatment Centers, Inc. provides dialysis treatments and ancillary
services to patients suffering from chronic kidney failure, primarily in its
freestanding outpatient dialysis treatment centers or in the patient's home.
With the addition of the above centers, the Company will operate a total of 168
dialysis centers in 23 states, the District of Columbia and the Republic of
Argentina. In these centers, the Company will be providing dialysis services
for approximately 12,025 patients. The Company will also provide inpatient
dialysis services to over 125 hospitals.
