SUN HEALTHCARE GROUP INC
8-K, 1996-08-30
SKILLED NURSING CARE FACILITIES
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 8-K

                       PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934





                                 Date of Report
                (Date of earliest event reported):  August 15, 1996


                            SUN HEALTHCARE GROUP, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)



                   Delaware              1-12040              85-0410612
- --------------------------------------------------------------------------------
          State or other jurisdiction   Commission            IRS Employer
               of incorporation         File Number        Identification No.


                                101 Sun Lane, N.E.
                           Albuquerque, New Mexico 87109
                     ----------------------------------------
                     (Address of Principal Executive Offices)


                         Registrant's Telephone Number,
                       Including Area Code:  (505) 821-3355


               This Current Report on Form 8-K consists of __ pages.


<PAGE>


ITEM 2.  ACQUISITION OR DISPOSITION OF ASSETS.

          On August 15, 1996, a wholly owned subsidiary of Sun Healthcare 
Group, Inc. ("Sun") purchased certain accounts receivable, inventory, and 
fixed assets and assumed liabilities under certain contracts and leases 
from BDO Dunwoody Limited, in its capacity as Court appointed Receiver and 
Manager of International Managed Health Care, Inc. for $4,175,000 Canadian 
Dollars ($3,051,000 U.S. Dollars as of August 15, 1996).  On that date, 
International Managed Health Care, Inc. operated multi-disciplinary 
rehabilitation facilities providing physical treatment and psychological and 
vocational rehabilitation therapy services.

          The above acquisition was financed by borrowings under Sun's 
revolving line of credit with NationsBank of Texas, N.A. as administrative 
lender.

ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS.

          As of the date of this report, it is impracticable to provide the
required financial statements and pro forma financial information for the
acquisition described above as required by the Securities and Exchange
Commission rules and regulations.  The Company intends to file such required
financial statements and pro forma financial information as an amendment to this
Form 8-K as soon as practicable, but not later than sixty days after the report
on Form 8-K must be filed.

ITEM 7(C).  EXHIBITS.

Exhibit 2.1  Agreement of purchase and sale between BDO Dunwoody 
Limited, in its capacity as Court appointed Receiver and Manager of 
International Managed Health Care, Inc. and Columbia Centre for 
Rehabilitation, Inc.

Exhibit 2.2  Agreement amending agreement of purchase and sale 
between BDO Dunwoody Limited, in its capacity as Court appointed Receiver and 
Manager of International Managed Health Care, Inc. and Columbia Centre for 
Rehabilitation, Inc.

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                                   SIGNATURES


          Pursuant to the requirements of the Securities Exchange Act of 1934,
Sun Healthcare Group, Inc. has duly caused this Current Report to be signed on
its behalf by the undersigned hereunto duly authorized.



Dated:  August 29, 1996                     SUN HEALTHCARE GROUP, INC.

                                           /s/ Robert D. Woltil*
                                          ------------------------------------
                                          Robert D. Woltil
                                          Senior Vice-President of Financial
                                          Services and Chief Financial Officer

* Signing on the behalf of the Registrant and as principal financial officer.

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                            AGREEMENT OF PURCHASE AND SALE


    THIS AGREEMENT made this 1st day of August, 1996

B E T W E E N:

                   BDO DUNWOODY LIMITED, in its capacity as Court appointed
                   Receiver and Manager of International Managed Health Care
                   Inc.

                   (hereinafter called the "RECEIVER")

                                                               OF THE FIRST PART

                                        -and-

                   COLUMBIA CENTRE FOR REHABILITATION INC.,  a corporation
                   incorporated under the laws of Ontario

                   (hereinafter called the "PURCHASER")

                                                              OF THE SECOND PART

RECITALS:

A.  In an order of Mr. Justice Blair of the Ontario Court (General Division)
(the "COURT") dated June 7, 1996, as amended on July 9, 1996 (collectively, the
"INITIAL ORDER"), the Receiver was appointed as receiver and manager of the
undertaking, property and assets of International Managed Health Care Inc. (the
"DEBTOR");

B.  Under paragraph 6 of the Initial Order, the Receiver is authorized and
empowered to enter into agreements respecting the sale of the assets, property
and undertaking of the Debtor, subject to the approval of the Court;

C.  Subject to the terms and provisions of this Agreement, the Receiver has
agreed to sell and the Purchaser has agreed to purchase certain assets of the
Debtor.

    NOW THEREFORE in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:

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                                        - 2 -

                                      ARTICLE 1
                                    INTERPRETATION

1.1 DEFINITIONS

    The following terms set out herein in initial capital letters shall have
the meanings assigned below:

    "ACCOUNTS RECEIVABLE" means the Assets referred to in paragraph (e) of
    Schedule B;

    "ALLOCATED ACCOUNTS RECEIVABLE" has the meaning set out in subsection
    2.8(a);

    "ANNIVERSARY DATE" has the meaning set out in subsection 2.8(a);

    "APPROVAL ORDER" means an order of the Court approving this Agreement and
    the completion of the Transaction, authorizing and directing the Receiver,
    without personal liability, to enter into and perform this Agreement, close
    the Transaction upon the terms and conditions contained in this Agreement
    and obtain the Vesting Order;

    "A/R AMOUNT" has the meaning set out in section 2.4;

    "ASSETS" means the property and assets listed on Schedule B but does not
    include any Excluded Assets;

    "BUSINESS DAY" means any day other than a Saturday, Sunday or statutory
    holiday;

    "CLOSING" means the completion of the Transaction on the next Business Day
    following the Escrow Closing Date upon the delivery of the items referred
    to in section 6.3;

    "CONSENTS" means any consents or certificates required of contracting
    parties or third persons in respect of the conveyance of the full benefit
    of any Contracts or Leases;

    "CONTRACTS" means all written contracts and agreements, leases of personal
    property, licenses, undertakings and engagements of any nature listed in
    Schedule D;

    "DEPOSIT" has the meaning set out in subsection 2.5(a)(i);

    EMPLOYMENT INFORMATION" means the Debtor's information and records relating
    to each of the Debtor's employees (including without limitation job
    description, salary, benefits, payroll and vacation records and length of
    employment) and independent contractors, including in written, printed,
    electronic or computer print out form;

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                                        - 3 -

    "ENCUMBRANCE" means any lien, security interest, mortgage, charge, pledge,
    competing claim, encumbrance or interest of any nature;

    "ESCROW CLOSING" means the delivery by the Receiver to the Purchaser of the
    items referred to in section 6.2 and the delivery by the Purchaser to the
    Receiver of the items referred to in section 6.3, which deliveries shall
    occur on the Escrow Closing Date;

    "ESCROW CLOSING DATE" means August 15, 1996, or such other date agreed to
    by the parties hereto in writing;

    "EXCLUDED ASSETS" means any property or assets listed on Schedule C;

    "FINANCIAL INFORMATION" means the Debtor's financial, accounting and
    corporate books, records, operating data, supplier lists, ledgers and other
    financial information, including in written, printed, electronic or
    computer print out form, other than Employment Information or Patient
    Information, relating or arising from the business of the Debtor carried on
    at the Leased Premises and any other leased premises or locations of the
    Debtor (other than the Oshawa Clinic);

    "FIXED ASSETS" means the Assets referred to in paragraphs (c), (d) and (h)
    of Schedule B;

    "GOODWILL" means the Assets referred to in paragraphs (f) and (g) of
    Schedule B;

    "LEASED PREMISES" means those certain leasehold interests in real property
    used by the Debtor in its business and listed on Schedule A;

    "LEASEHOLD SAVINGS" means the present value of the following amounts,
    discounted at the Prime Rate, determined as at the Escrow Closing, plus 1%:

      (i)     the amount by which any base, additional or other rentals or
              payments payable to any landlord under any New Lease is less than
              any such amounts payable under any Old Lease of the same Leased
              Premises; plus

     (ii)     any tenant inducements or other amounts payable by the Landlord
              under any such New Lease or any Old Lease, including without
              limitation the $250,000 tenant inducement (the "MOHAWK TI")
              relating to the Leased Premises identified in paragraph (d) on
              Schedule A (the "MOHAWK PREMISES") (provided that such Mohawk TI
              is received by the Purchaser);

<PAGE>

    provided that (a) in the event that the Purchaser negotiates a New Lease
    whereby the Purchaser will lease less space from the applicable landlord
    than the amount of space leased under the Old Lease, any reduction in
    rental obligations resulting therefrom shall not be deemed to be Leasehold
    Savings, and (b) any reduction in rental obligations under any Old Lease or
    New Lease in respect of any extension or renewal term of any Old Lease or
    New Lease shall not be deemed to be Leasehold Savings. Notwithstanding the
    proviso in paragraph (a), if the Purchaser does not receive the Mohawk TI,
    then any reduction in rental obligations resulting from the leasing of less
    space in the Mohawk Premises shall be included in the Leasehold Savings;

    "LEASES" means those leases and subleases of Leased Premises which are
    listed on Schedule A;

    "NEW LEASE" has the meaning set out in subsection 2.9(a);

    "NOTICE" has the meaning set out in section 7.8;

    "OFFER FORM" means the form of offer to purchase assets of the Debtor
    executed by the Purchaser and delivered to the Receiver;

    "OLD LEASE" has the meaning set out in subsection 2.9(a);

    "OSHAWA CLINIC" means the premises of the Debtor located at 212 King
    Street, Oshawa;

    "OTHER INFORMATION" means all information other than Financial Information,
    Employment Information or Patient Information;

    "PATIENT INFORMATION" means lists, charts, files, logs, reports and records
    relating to Patients, including in written, printed, electronic or computer
    print out form;

    "PATIENTS" means patients of the Debtor;

    "PRIME RATE" means the rate of interest per annum (based on a 365 day year)
    established and reported by The Toronto-Dominion Bank to The Bank of Canada
    from time to time as a reference rate of interest for the determination of
    interest rates that The Toronto-Dominion Bank charges to customers of
    varying degrees of creditworthiness in Canada for Canadian dollar
    commercial loans made by The Toronto-Dominion Bank in Canada;

    "PURCHASE PRICE" has the meaning set out in section 2.4;

    "RECEIVER'S LEASEHOLD SAVINGS" means fifty percent (50%) of the Leasehold
    Savings;

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                                        - 4 -

    "REQUISITION DATE" means August 12, 1996, unless such date is varied by the
    mutual agreement of both the Receiver and the Purchaser;

    "RETAINED EMPLOYEES" has the meaning set out in subsection 3.2(a);

    "TRANSACTION" means the purchase and sale of the Assets contemplated
    hereunder;

    "TAXES" has the meaning set out in subsection 2.7(a); and

    "VESTING ORDER" means an order of the Court vesting as of Closing the
    Assets in the Purchaser free and clear of any right, title or interest of
    the Debtor and of any Encumbrance of any other person listed in the order,
    such Vesting Order to be in form and substance satisfactory to the
    Purchaser and the Receiver.

1.2 HEADINGS

    The division of this Agreement into articles, sections, subsections and
schedules and the insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation hereof.  The terms "THIS
AGREEMENT", "HEREOF", "HEREIN", "HERETO" and similar expressions refer to this
Agreement and not to any particular article, section, subsection or schedule or
other portion hereof.  Unless something in the subject matter or context is
inconsistent herewith, references herein to recitals, articles, sections,
subsections and schedules are to recitals, articles, sections, subsections and
schedules of this Agreement.

1.3 REFERENCES

    Any reference in this Agreement to a statute includes such statute, all
regulations made thereunder and all amendments to such statute or regulations in
force from time to time.  References to persons means any individual,
corporation, partnership, joint venture, trust, unincorporated organization,
government or any agency or instrumentality thereof, including the Crown, or any
other juridical entity howsoever designated or constituted.

1.4 SCHEDULES

    The following schedules are attached to and form part of this Agreement:

                   Schedule A -   Leased Premises
                   Schedule B -   Assets
                   Schedule C -   Excluded Assets
                   Schedule D -   Contracts
                   Schedule E -   Procedures regarding Employees and
                                  Independent Contractors

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                                        - 6 -

                                      ARTICLE 2
                             PURCHASE AND SALE OF ASSETS

2.1 PURCHASE AND SALE

    Subject to the terms and conditions hereof, the Receiver hereby agrees to
sell and the Purchaser agrees to purchase on Closing all of the right, title and
interest of the Debtor in and to the Assets.


2.2 ASSIGNMENT OF CONTRACTS

    Nothing in this Agreement shall be construed as an attempt to convey any
interest in a Contract or Lease which is not assignable in whole or in part
without a Consent, unless such Consent shall have been given; provided that in
cases where a legal assignment is prohibited by law or by the terms of the
Contract but an equitable assignment is not so prohibited, the Vesting Order
shall vest the beneficial interest of the Debtor in the Contract to the fullest
extent permitted by law or by the terms of the Contract in question. The failure
to obtain any Consent with respect to a Contract prior to the Closing shall not
entitle the Purchaser to terminate or rescind this Agreement or otherwise not
complete the Transaction, nor to any abatement of the Purchase Price.

2.3 ASSUMPTION OF LIABILITIES

(a) On Closing, the Purchaser shall assume:

    (i)       all liabilities under the Contracts and Leases accruing due or to
              be performed from and after the Closing but not before the
              Closing;

    (ii)      all liabilities of the Receiver in respect of the yellow page
              advertising for the business of the Debtor carried on at the
              Leased Premises, from and after the Closing but not before the
              Closing; and

    (iii)     all liabilities in respect of the Retained Employees earned by or
              accruing due to them, other than those obligations for which the
              Receiver is responsible under subsection 3.2(c),

    (collectively, the "LIABILITIES").

(b) The Purchaser shall indemnify and save harmless the Receiver from and
against all claims, demands, losses, damages, costs, charges and expenses
against, suffered by or incurred by the Receiver at any time in respect of the
Liabilities.

<PAGE>

                                        - 7 -

2.4 PURCHASE PRICE

(a) The purchase price of the Assets, inclusive of all Taxes, is $4,175,000,
plus the amount of the Allocated Accounts Receivable, if any, and the Receiver's
Leasehold Savings, if any, (collectively the "PURCHASE PRICE"), subject to the
adjustments set out in section 2.6, of which $4,175,000 of the Purchase Price
shall be allocated in the following manner unless the Receiver and the Purchaser
agree in writing to another allocation prior to Closing:

         Fixed Assets             $1,000,000
         Goodwill                 $1,225,000
         Accounts Receivable      $1,950,000 (the "A/R AMOUNT").

Should there be any Allocated Accounts Receivable, the amount thereof shall form
part of the Purchase Price and shall be allocated to Accounts Receivable. Should
there be any Receiver's Leasehold Savings, the amount thereof shall form part of
the Purchase Price and shall be allocated to Leases.

(b) The amounts allocated to Goodwill and Fixed Assets shall be reduced on a
proportionate basis by the amounts of any Taxes actually exigible in respect of
the Goodwill and Fixed Assets.  The total amount of the Receiver's Leasehold
Savings, if any, shall be allocated to the Purchase Price as contemplated in
subsection 2.4(a), provided that (i) such amount shall be deemed to include all
Taxes exigible in connection with such increase to the Purchase Price, (ii) the
Purchaser and the Receiver shall adjust the Purchase Price, acting reasonably,
as contemplated by subsection 2.4(a) based on any such increase to the Purchase
Price, and (iii) the amount allocated to Leases shall be reduced by the amount
of any Taxes actually exigible in respect of the Leases.

2.5 PAYMENT OF PURCHASE PRICE AND DEPOSIT

(a) The Purchaser shall pay the Purchase Price to the Receiver as follows:

    (i)       the Receiver acknowledges the receipt from the Purchaser pursuant
              to the Offer Form of a bank draft payable to the Receiver in an
              amount of $610,000 (the "DEPOSIT", which term shall include any
              interest earned thereon);

    (ii)      the amount of the Receiver's Leasehold Savings, if any, by
              certified cheque or bank draft, on Closing, provided that to the
              extent that any Leasehold Savings are comprised of a lump sum
              payment to the Purchaser, the Purchaser shall pay to the Receiver
              the Receiver's Leasehold Savings in respect thereof promptly upon
              receipt by the Purchaser of such lump sum payment;

    (iii)     subject to the adjustments provided for in section 2.6, the
              balance of the Purchase Price, by certified cheque or bank draft,
              on Closing; and

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                                        - 8 -

    (iv)      the Allocated Accounts' Receivable Amount, by certified cheque or
              bank draft, in the manner and at the times contemplated in
              section 2.8.

(b) The Receiver shall hold the Deposit in trust in an interest bearing trust
account pending the Closing or the failure of the Closing to occur as
contemplated in sections 2.5(c), 2.5(d), 2.10, 2.11, 3.2(b), 3.3, 5.1(b) or 5.4.
On the Closing, the Deposit shall be applied to the Purchase Price.

(c) If the Closing does not occur for any reason as a result of the non-
fulfilment or non-satisfaction by the Purchaser of any of the obligations or
covenants of the Purchaser contained herein, or the non-satisfaction of the
conditions contained in section 5.2, then the Deposit shall be forfeited and may
be retained by the Receiver as liquidated damages, and the Purchaser shall not
be liable to the Receiver for any other losses or damages, direct or indirect,
which the Receiver may suffer or incur as a result of the Closing failing to
occur.

(d) If the Closing does not occur because of the non-fulfilment or non-
satisfaction by the Receiver of any of the obligations or covenants of the
Receiver contained herein, or because the conditions of the Closing contained in
sections 5.1 or 5.3 have not been satisfied or performed prior to the Closing,
then the Deposit shall be returned to the Purchaser and neither the Receiver nor
the Debtor shall be liable to the Purchaser for any losses or damages
whatsoever, direct or indirect, which the Purchaser may suffer or incur as a
result of the Closing failing to occur.

2.6 ADJUSTMENTS

(a) The following adjustments to the Purchase Price shall be made on Closing:

    (i)       any base and additional rents payable under, or any security or
              other deposits held in respect of, any Lease, and for any public
              utilities, municipal realty taxes, water rates, prepaid items and
              other similar items in respect of which the Receiver or the
              Debtor has paid for any period following the Closing;

    (ii)      in the event that the aggregate amount of the Accounts Receivable
              as at Closing is greater or less than $3,550,000, such
              calculation to be agreed upon by each of the Purchaser and the
              Receiver, acting reasonably, then the Purchase Price shall be
              adjusted by the amount of the difference, such that where the
              aggregate amount of the Accounts Receivable is greater than
              $3,550,000, the Purchaser shall pay the amount by which it is
              greater to the Receiver on Closing by certified cheque or bank
              draft, and where the aggregate amount is less than $3,550,000,
              the Purchase Price shall be adjusted in favour of the Purchaser
              by the amount by which it is less.

(b) The date of Closing shall be for the Purchaser's account.  Any adjustments
that cannot be finally determined on Closing shall be reasonably estimated by
the Receiver on the


<PAGE>

                                        - 9 -

Escrow Closing Date based on the amounts paid or payable to Closing and
readjusted on Closing and thereafter as soon as possible after the actual amount
thereof has been finally determined.

(c) If the Receiver collects any Accounts Receivable between the date of
execution of this Agreement and Closing, the Receiver shall retain such Accounts
Receivable for its own account and such collected Accounts Receivable shall be
deemed to be Excluded Assets.

2.7 TAXES

(a) The Purchase Price shall include any and all taxes, duties, registration
charges or other like charges upon and in connection with the conveyance and
transfer of the Assets to the Purchaser, including any provincial retail sales
and federal goods and services taxes exigible in respect of the Transaction
(collectively the "TAXES"), which the Receiver shall remit to the appropriate
governmental authorities to the extent any Taxes are payable.

(b) The Purchaser shall from time to time execute such agreements, instruments,
certificates, elections or other documents as shall be required by the Receiver,
acting reasonably, so as to reduce the amount of Taxes exigible on Closing,
provided that the structure of the transaction shall not be altered.

(c) The Purchaser and the Receiver shall, at the option of the Purchaser,
jointly complete and file an election under section 22 of the INCOME TAX ACT
(Canada) in respect of the purchase of the Accounts Receivable.

2.8 ACCOUNTS RECEIVABLE

(a) Between the Closing and the first anniversary of the date of Closing (the
"ANNIVERSARY DATE"), the Purchaser shall use its best efforts to collect the
unpaid Accounts Receivable. The Purchaser shall pay to the Receiver an amount
equal to fifty percent (50%) of the proceeds of any Accounts Receivable
collected to the Anniversary Date in excess of the A/R Amount (such amount
referred to herein as the "ALLOCATED ACCOUNTS RECEIVABLE"). On or before the
seventh (7th) day of each calendar month (commencing on the seventh (7th) day of
the month after the month in which the Closing occurs), the Purchaser shall
deliver to the Receiver a statement setting out the Accounts Receivable
collected by the Purchaser during the immediately preceding month, together
with, if applicable,  a certified cheque or bank draft payable to the Receiver
for any portion of the Allocated Accounts Receivable collected during that
immediately preceding month. On the Anniversary Date, the Purchaser shall pay to
the Receiver any unpaid portion of the Allocated Accounts Receivable.

(b) Between the Closing and the Anniversary Date, a representative of the
Receiver, or a representative of a secured creditor of the Debtor designated by
the Receiver, shall be entitled to participate in the collections of the
Accounts Receivable, and such representative and the Purchaser shall cooperate
and assist each other to the extent reasonably possible in

<PAGE>

                                        - 10 -

such collections.  The Receiver or any such secured creditor from time to time,
acting reasonably and at its own cost and expense, shall be entitled to audit
the collections by the Purchaser of the Accounts Receivable and the steps taken
by the Purchaser to collect the Accounts Receivable, and the Purchaser shall
grant reasonable access to the Receiver or such secured creditor to the
premises, books, records, employees and officers of the Purchaser in order to
allow it to perform such audit. The Purchaser hereby authorizes and directs such
persons to provide the Receiver or such secured creditor with any information or
documentation in their possession or control relating to the Accounts
Receivable, provided that the Receiver or any such secured creditor shall
provide five (5) days prior notice to the Purchaser of its intention to audit
the collections of the Accounts Receivable by the Purchaser or to discuss such
collections with any employees or officers of the Purchaser and provided further
that the Receiver and such secured creditors shall act reasonably in connection
with the length of time and number of times which the Receiver or such secured
creditors meet with such employees or officers of the Purchaser.

(c) The Receiver shall have no right, title or interest in the proceeds of any
Accounts Receivable collected after the Anniversary Date.

(d) In the event that the Receiver collects any proceeds from the Accounts
Receivable after the Closing, the Receiver shall deliver to the Purchaser a
statement setting out the particulars of the proceeds of the Accounts Receivable
collected by the Receiver during the immediately preceding month (such statement
to be delivered to the Purchaser on or before the fifth (5th) Business Day of
each month) and the Receiver shall deliver to the Purchaser with each such
statement a certified cheque or bank draft payable to the Purchaser for the
total amount of such proceeds. If at any time after the Closing, the total
amount of  (i) the proceeds of the Accounts Receivable collected by the
Purchaser and (ii) any amount paid by the Receiver to the Purchaser as
contemplated by this section 2.8(d) equals or exceeds the A/R Amount, then from
and after such time until the Anniversary Date, the Receiver shall only be
obligated to pay to the Purchaser an amount equal to fifty percent (50%) of the
proceeds of the Accounts Receivable so collected by the Receiver and any amounts
so paid by the Receiver to the Purchaser shall be deemed to be Allocated
Accounts Receivable and such amounts shall be allocated to Accounts Receivable
in respect of the allocation of the Purchase Price.

2.9 LEASEHOLD SAVINGS

(a) Between the date of the execution of this Agreement and Closing, the
Purchaser shall be entitled to contact and negotiate with the landlords of the
Leased Premises in order to obtain Consents and, at the Purchaser's option, to
renegotiate the terms of the Leases (for the purposes of this section, "OLD
LEASE" means an existing Lease between the Debtor and the landlord of a Leased
Premises and "NEW LEASE" means any Lease as amended by the Purchaser and such
landlord or any new lease negotiated with such landlord and entered into between
the Purchaser and such landlord (such New Lease to take effect only if the
Transaction is completed)).  The Receiver shall be entitled to participate with
and assist the Purchaser in such negotiations, and the Purchaser shall keep the
Receiver fully informed with

<PAGE>

                                        - 11 -

respect to the progress and results thereof and provide the Receiver with any
documents relating thereto in the possession or control of the Purchaser.

(b) The Purchaser shall pay to the Receiver the Receiver's Leasehold Savings in
the manner contemplated in subsection 2.5(a)(ii).

(c) The failure to obtain any Leasehold Savings shall not entitle the Purchaser
to terminate or rescind this Agreement or to otherwise not complete the
Transaction, nor to any abatement of the Purchase Price.

2.10  TITLE

    The Purchaser shall be allowed, at its expense, until the Requisition Date
to satisfy itself that on Closing it will acquire title to the Assets free of
any Encumbrance.  If the Receiver shall through any cause be unable or unwilling
to answer or comply with any valid requisition or objection which the Purchaser
will not waive, this Agreement shall be at an end (notwithstanding any
intervening negotiations or litigation or any attempt to remove or comply with
the same) and the Deposit shall be returned to the Purchaser but without any
other compensation.  The Receiver shall not be required to furnish or produce
any abstract, deed, declaration or other document or evidence of title except
those in its possession.

2.11  RISK

    The Assets shall be and remain at the risk of the Receiver until Closing.
If, prior to Closing, the Assets shall be substantially damaged or destroyed by
fire or other casualty, or if a substantial portion of the Assets are lost due
to theft, then either the Receiver or the Purchaser shall have the option of
declining to complete the Transaction.  Such option shall be exercised within
seven (7) days after written notification to the Purchaser by the Receiver of
the occurrence of the loss or damage in which event this Agreement shall be
terminated automatically and the Purchaser shall be entitled only to a return of
the Deposit but without any other compensation.  If such option is not exercised
by the Receiver or the Purchaser, they shall complete the Transaction and the
proceeds of insurance referable to such loss or damage shall be vested in the
Purchaser on Closing pursuant to the Vesting Order, and the Receiver shall (i)
pay over to the Purchaser after Closing any proceeds of insurance received by
the Purchaser forthwith after the Receiver's receipt thereof and (ii) use its
best efforts to assist the Purchaser in the collection of such insurance
proceeds, provided that the Receiver shall not required to expend any moneys in
such efforts.  Where any loss or damage is not substantial (the determination of
whether any loss or damage is or is not substantial is to be made jointly by the
Purchaser and the Receiver, acting reasonably), the Transaction shall be
completed and the proceeds of insurance referable to such loss or damage shall
be vested in the Purchaser on Closing, and the Receiver shall (i) pay over to
the Purchaser after Closing any proceeds of insurance received by the Purchaser
forthwith after the Receiver's receipt thereof and (ii) use its best efforts to
assist the Purchaser in the collection of such insurance

<PAGE>

proceeds, provided that the Receiver shall not be required to expend any moneys
in such efforts.

                                      ARTICLE 3
                                      COVENANTS

3.1 COVENANTS OF THE RECEIVER

(a) Between the date this Agreement is entered into and Closing, the Receiver
hereby agrees to:

    (i)       permit the Purchaser and its representatives, between the date of
              execution of this Agreement and Closing, without undue
              interference with the ordinary course of the Debtor's business
              and upon reasonable notice to the Receiver, to have reasonable
              access to the Leased Premises any of the Debtor's other leased
              premises or locations (except for the Oshawa Clinic) and to the
              Debtor's employees and independent contractors (except for the
              Oshawa Clinic), during normal business hours;

    (ii)      make available for review by the Purchaser or its representatives
              Financial Information and Other Information in the Receiver's
              possession or control with respect to the Assets;

    (iii)     cooperate with and use reasonable efforts to assist the Purchaser
              in obtaining Consents to the conveyance to the Purchaser of the
              full benefit of all Contracts and Leases, provided that the
              Receiver shall be under no obligation to obtain the Consents and
              shall not be required to expend any amounts to obtain the
              Consents;

    (iv)      conduct the business of the Debtor at the Leased Premises in the
              ordinary and normal course, consistent with past practice,
              service and business policies and not, without the prior written
              consent of the Purchaser, enter into any transaction other than
              in the normal course of business;

    (v)       continue in force all policies of insurance maintained by the
              Receiver in respect of the business of the Debtor;

    (vi)      not dispose of or encumber any of the Assets prior to Closing,
              except by way of receiver's certificates issued pursuant to the
              Initial Order to Liberty Mutual Insurance Company or The Toronto-
              Dominion Bank;

    (vii)     provide the Purchaser with Employment Information as soon as
              possible subsequent to the execution of this Agreement, to the
              extent that such information and records are in the possession or
              control of the Receiver; and

<PAGE>

                                        - 13 -

    (viii)    not negotiate with any other prospective purchaser of the
              Debtor's assets and not to permit any other prospective purchaser
              to have access to the books and records of the Debtor or the
              Leased Premises.

(b) Subsequent to Closing, the Receiver hereby agrees to:

    (i)       for a period of one (1) year subsequent to Closing, give the
              Purchaser reasonable access to Financial Information and
              Employment Information in the possession or control of the
              Receiver; and

    (ii)      provide access to the Purchaser for seven (7) days after the
              Closing to any premises of the Debtor in the possession and
              control of the Receiver where any Assets are located to permit
              the Purchaser to obtain possession of and remove such Assets from
              such premises.

    The access referred to in subsection 3.2(b)(ii) shall be without any cost
to the Purchaser.  Such access shall be entirely at the risk of the Purchaser
and the Purchaser shall restore each premises to which it has had access to the
condition it was in prior to the Purchaser attending thereat and shall indemnify
and save harmless the Receiver from any loss, damages or injury to such premises
resulting from the Purchaser's access to such premises, from the Purchaser's
failure to restore such premises, or from any loss, damages or injury caused by
the removal by the Purchaser of Assets from such premises.

3.2 COVENANTS OF THE PURCHASER

(a) Between the execution of this Agreement and August 9, 1996, the Purchaser
shall use its best efforts to interview all employees of the Debtor, in
accordance with the procedures set out in Schedule E.  The Purchaser shall by no
later than 5:00 p.m. on August 9, 1996 inform the Receiver in writing of which
such employees the Purchaser intends to offer employment conditional upon
Closing.  Upon Closing, the Purchaser shall offer employment to such employees
effective as of and conditional upon Closing, upon substantially the same terms
and conditions of employment as applied prior to Closing except as to any
consequences of a change in control of the Debtor's business (those employees
who accept such offers being referred to herein as the "RETAINED EMPLOYEES").
Nothing in this section shall limit the ability of the Purchaser to terminate
the employment of any Retained Employees who accept such offers of employment or
to subsequently change the terms of their employment at any time and for any
reason, provided that the Purchaser, and not the Receiver or the Debtor, shall
be responsible for all costs, including vacation pay, termination pay, severance
pay and damages for wrongful dismissal associated with the termination of any
such Retained Employees, and in this respect, the Purchaser agrees that it is
the successor employer of the Retained Employees for the purposes of the
EMPLOYMENT STANDARDS ACT (Ontario) and any other related legislation.

<PAGE>

                                        - 14 -

(b) In the event that the Purchaser intends to offer employment, in accordance
with the procedures set out in section 3.2(a), to less than sixty (60) employees
of the Debtor, the Receiver shall be entitled to terminate this Agreement.  Upon
any such termination the Receiver shall return the Deposit to the Purchaser, and
neither the Receiver (or the Debtor) nor the Purchaser shall be liable to the
other for any loss or damages, direct or indirect, which the other may incur or
suffer as a result thereof.

(c) The sole responsibility of the Receiver to the Retained Employees shall be
in respect of any salary, wages, bonuses, commissions and other benefits (other
than vacation pay) earned by the Retained Employees in respect of any period of
temporary employment during the operation of the Debtor's business subsequent to
the Initial Order and prior to Closing.

(d) Between the execution of this Agreement and August 9, 1996, the Purchaser
shall use its best efforts to interview all independent contractors of the
Debtor, in accordance with the procedures set out in Schedule E.  The Purchaser
shall by no later than 5:00 p.m. on August 9, 1996 inform the Receiver in
writing of which such independent contractors the Purchaser intends to offer to
engage following Closing, and the terms and conditions upon which the Purchaser
is prepared to engage such independent contractors.

(e) In the event that the Closing does not occur, the Purchaser shall not
employ or engage any persons who as of the Initial Order were employees or
independent contractors of the Debtor, for a period of three (3) months from
August 16, 1996.

(f) The Purchaser undertakes and agrees to deliver to each of the Patients,
promptly following Closing, letters (in form and content agreeable to the
Receiver, acting reasonably) advising the Patients of the Transaction and the
Closing and informing the Patients that they are entitled to require that the
Patient Information relating to them be returned to them upon their requesting
the Purchaser to do so. In the event that a Patient requests the Purchaser to
deliver to such Patient the Patient Information relating to him or her, then the
Purchaser shall promptly deliver to such Patient such Patient Information.

3.3 APPLICATION FOR THE APPROVAL ORDER

    The Receiver shall use its best efforts to obtain the Approval Order by, on
or before August 15, 1996.  If the Court does not grant the Approval Order and
the Receiver gives notice to the Purchaser that the Receiver does not intend to
appeal such decision and is terminating this Agreement, then this Agreement
shall be terminated and the Receiver shall return the Deposit to the Purchaser,
and neither the Receiver nor the Debtor shall be liable to the Purchaser for any
loss or damages, direct or indirect, which the Purchaser may incur or suffer as
a result thereof.

                                      ARTICLE 4
                            REPRESENTATIONS AND WARRANTIES

<PAGE>

                                        - 15 -

4.1 REPRESENTATIONS AND WARRANTIES OF THE RECEIVER

    The Receiver hereby represents and warrants to the Purchaser as follows and
acknowledges that the Purchaser is relying on such representations and
warranties in entering into this Agreement and in completing the Closing:

(a) the Receiver is not and will not be on Closing a non-resident of Canada
within the meaning of Section 116 of the INCOME TAX ACT (Canada);

(b) the Receiver has been duly appointed as Receiver and Manager under and
pursuant to the Initial Order and, subject to the Receiver obtaining the
Approval Order and the Vesting Order, the Receiver has the full power, authority
and right to enter into and perform this Agreement and complete the Closing;

(c) subject to the Receiver obtaining the Approval Order, this Agreement
constitutes a valid and legally binding obligation of the Receiver;

(d) the Receiver has done no act to encumber or dispose of the Assets, other
than pursuant to receiver's certificates issued to Liberty Mutual Insurance
Company and The Toronto-Dominion Bank pursuant to the Initial Order; and

(e) the Debtor is registered under Part IX of the EXCISE TAX ACT (Canada) with
registration number 893803361RT.

4.2 AS IS, WHERE IS

    The Purchaser hereby acknowledges to and agrees with the Receiver that,
subject to section 4.1, the Purchaser in purchasing the Assets has conducted and
relied entirely upon its own investigations and inspections, has satisfied
itself with respect to the Assets and all matters and things connected with or
related to the Assets, is purchasing the Assets on an "as is, where is" basis,
has accepted the Assets in their present state and condition, and acknowledges,
except as expressly set out in section 4.1, that the Receiver has neither made
nor given any representations, warranties, covenants, conditions, statements,
promises, express or implied, statutory or otherwise, of any kind whatsoever,
including without limiting the generality of the foregoing, with respect to or
in any way related to:

(a) the title, quality, quantity, merchantability, fitness for any purpose,
state, condition,  location, transferability or assignability of all or any of
the Assets;

(b) the existence, validity, registration, enforceability or priority of any
Encumbrances,  claims or demands of whatsoever nature or kind affecting or in
any way related to all or any of the Assets; and

<PAGE>

                                        - 16 -

(c) the accuracy of any information, descriptions of the Assets, records or
data furnished to the Purchaser by the Receiver or its representatives or
solicitors.

4.3 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

    The Purchaser hereby represents and warrants to the Receiver as follows and
acknowledges that the Receiver is relying on such representations and warranties
in entering into this Agreement and in completing the Closing:

(a) the Purchaser is a corporation duly incorporated and existing under the
laws of its incorporating jurisdiction;

(b) the Purchaser has the full right, power and authority to enter into and
perform this Agreement and to complete the Closing, upon the terms and
conditions contained in this Agreement;

(c) the execution, delivery and performance by the Purchaser of this Agreement
and the consummation of the Transaction have been duly authorized and this
Agreement constitutes a legal, valid and binding obligation of the Purchaser
enforceable against it in accordance with its terms; and

(d) the Purchaser is a "non-Canadian" within the meaning of the INVESTMENT
CANADA ACT (Canada) but the Transaction is not reviewable thereunder.

                                      ARTICLE 5
                              CONDITIONS OF THE CLOSING

5.1 CONDITIONS IN FAVOUR OF THE PURCHASER

    The obligation of the Purchaser to complete the Transaction is subject to
the satisfaction of the following conditions, which conditions are for the
exclusive benefit of the Purchaser and may be waived in whole or in part by the
Purchaser in its sole discretion:

    (i)       subject to section 2.10, title to the Assets being free from any
              Encumbrance;

    (ii)      the Purchaser shall have received Consents with respect to all of
              the Leases as of Closing;

    (iii)     at least forty (40) of the Debtor's employees or independent
              contractors who are offered employment or to be engaged by the
              Purchaser shall have accepted such offers;

    (iv)      the Receiver's representations and warranties set forth in
              section 4.1 shall be true and correct as of the Closing;

<PAGE>

                                        - 17 -

    (v)       no material adverse change shall have occurred to the business of
              the Debtor between the date of execution of this Agreement and
              Closing, such determination to be made by the Purchaser, acting
              reasonably; and

    (vi)      the Receiver shall have complied fully with all covenants to be
              performed by it as of Closing.

5.2 CONDITIONS IN FAVOUR OF THE RECEIVER

    The obligation of the Receiver to complete the Transaction is subject to
the satisfaction of the following conditions, which conditions are for the
exclusive benefit of the Receiver and may be waived in whole or in part by the
Receiver in its sole discretion:

(a) the Purchaser's representations and warranties set forth in section 4.2
shall be true and correct as of the Closing; and

(b) the Purchaser shall have complied fully with all covenants to be performed
by it as of Closing.

5.3 MUTUAL CONDITIONS

    The obligation of each of the Receiver and the Purchaser to complete the
Transaction is subject to the satisfaction of the following conditions
precedent, which are for the mutual benefit of the Receiver and Purchaser and
may not be waived:

(a) the Receiver shall have obtained the Approval Order;

(b) the Receiver shall have obtained the Vesting Order; and

(c) no injunction or other order shall be outstanding which would enjoin,
restrict or prohibit the Transaction.

<PAGE>

                                        - 18 -

5.4 NON-FULFILMENT OF CONDITIONS

    In the event that the Closing does not occur by reason of the non-
fulfilment or non-satisfaction of any of the conditions contained in sections
5.1 and 5.3, then this Agreement shall be deemed to be terminated and as
contemplated in section 2.5(d) the Purchaser's rights shall be limited to the
return of the Deposit, and neither the Receiver (or the Debtor) nor the
Purchaser shall be liable to the other for any loss or damages, direct or
indirect, which the other may incur or suffer as a result of the failure of the
Closing to occur.

                                      ARTICLE 6
                                 CLOSING ARRANGEMENTS

6.1 PLACE OF CLOSING

    Unless otherwise agreed to by the parties hereto in writing, the Escrow
Closing and the Closing shall occur  at the offices of Gowling, Strathy &
Henderson at Suite 4900, Commerce Court West, Toronto, Ontario, and the Escrow
Closing shall occur at 12:00 o'clock noon on the Escrow Closing Date and the
Closing shall occur at 12:00 o'clock noon on the next Business Day thereafter.

6.2 DELIVERIES AT THE ESCROW CLOSING

(a) At the Escrow Closing, the Receiver shall deliver to the Purchaser the
following:

    (i)       a notarial copy of the Initial Order;

    (ii)      a notarial copy of the Approval Order;

    (iii)     a certificate of the Receiver certifying that, except as
              disclosed in the certificate, the Receiver has not been served
              with any notice of appeal with respect to the Initial Order or
              the Approval Order, or any notice of any application, motion or
              proceeding seeking to set aside or vary the Initial Order or the
              Approval Order or to enjoin, restrict or prohibit the
              Transaction;

    (iv)      such deeds or instruments of conveyance, transfer or assignment
              as the Receiver considers in its discretion necessary; and

    (v)       a joint direction from the Receiver and the Purchaser directing
              third parties to make all payments of all Accounts Receivable
              payable to the Purchaser.

(b) At the Escrow Closing, the Purchaser shall deliver to the Receiver the
following:

<PAGE>

                                        - 19 -

    (i)       a certified cheque or bank draft, drawn upon or issued by a bank
              or other financial institution acceptable to the Receiver, for
              the amounts payable to the Receiver on Closing pursuant to
              section 2.5(a); and

    (ii)      certificates of exemption, elections or other documents with
              respect to any Taxes, which certificates, elections or other
              documents which the Receiver may request, acting reasonably, must
              be in form and substance satisfactory to the Receiver, acting
              reasonably.

(c) Upon the delivery of the items referred to in subsections 6.2(a) and
6.2(b), such items shall be held by the solicitors for the recipient thereof in
escrow pending the Closing.

6.3 FINAL CLOSING

(a) At the Closing:

    (i)       the Receiver shall deliver to the Purchaser the Vesting Order;

    (ii)      the Receiver or the Purchaser shall deliver to the other a
              certified cheque or bank draft, payable to the other, for the net
              amount of any re-adjustments to the Purchase Price pursuant to
              section 2.6;

    (iii)     the Receiver shall deliver to the Purchaser possession of the
              Leased Premises (and any Assets located thereon shall be deemed
              to be delivered to the Purchaser) and shall grant to the
              Purchaser the access referred to in subsection 3.1(b) in order to
              allow the Purchaser to take possession of any Assets located on
              any of the Debtor's premises in the Receiver's possession or
              control; and

    (iv)      the Receiver shall deliver to the Purchaser the Patient
              Information, the Employment Information relating to Retained
              Employees and independent contractors of the Debtor retained by
              the Purchaser, and the Other Information.

(b) Upon the delivery of the items referred to in subsection 6.3(a):

    (i)       the items delivered pursuant to sections 6.2 shall be released
              from escrow; and

    (ii)      and the Closing shall be deemed to have occurred.

6.4 POSSESSION OF AND TITLE TO THE ASSETS

    The Receiver shall remain in possession of the Assets until Closing.  In no
event shall title to the Assets pass to the Purchaser until the Vesting Order
has been delivered to the Purchaser.

<PAGE>

                                        - 20 -


6.5 TENDER

    Any tender of documents or money hereunder may be made upon the Receiver or
the Purchaser or their respective solicitors on the Escrow Closing Date.  Any
tender of money shall be made by certified cheque drawn on or bank draft issued
by a Canadian chartered bank or trust company.

                                      ARTICLE 7
                                    MISCELLANEOUS

7.1 COMPLETE AGREEMENT AND AMENDMENTS

    This Agreement represents the entire agreement between the parties
pertaining to the subject matter hereof and supersedes any prior written or oral
agreements, arrangements, understandings, negotiations and discussions.  There
are no agreements, arrangements, understandings or representations between the
parties in connection with the subject matter hereof except as specifically set
forth herein.  This Agreement may not be amended except by a subsequent written
agreement executed by the parties hereto.  No waiver of any provision of this
Agreement shall be effective unless in writing and executed by the party to be
bound thereby.

7.2 CAPACITY OF THE RECEIVER

    In entering into and completing this Agreement and the Transaction, the
Receiver is acting in its capacity as Receiver and Manager of the undertaking,
property and assets of the Debtor and not in its personal capacity and shall
have no personal liability under or arising from this Agreement.

7.3 GOVERNING LAW

    This Agreement shall be governed by the laws of the Province of Ontario and
the parties agree that any disputes or claims arising out of this Agreement
shall be adjudicated in the Courts of the Province of Ontario.

7.4 SUCCESSORS AND ASSIGNS

    This Agreement shall be binding upon and shall enure to the benefit of the
respective successors and assigns of the parties;  provided that the Purchaser
may not assign its rights or obligations hereunder without the written consent
of the Receiver.

<PAGE>

                                        - 21 -

7.5 CURRENCY

    All dollar amounts specified herein and all payments to be made hereunder
or otherwise shall mean and refer to the coin and currency of Canada recognized
from time to time as legal tender in Canada.

7.6 SURVIVAL OF CERTAIN PROVISIONS

    Notwithstanding any other provision of this Agreement, sections 2.3, 2.4,
2.5, 2.6, 2.7, 2.8, 2.9, 2.10, 2.11, 3.1, 3.2, 3.3, 4.1, 4.2, 4.3, 5.4, 6.5  and
article 7 shall survive the termination of this Agreement and the Closing.

7.7 FURTHER ASSURANCES

    Each party shall from time to time after the Closing take such action and
execute such documents, instruments and further assurances as the other party
may from time to time reasonably require in order to give effect to this
Agreement, at the sole expense of the party requesting such documents,
instruments and further assurances (which shall include the reasonable
professional fees and disbursements of the party providing such documents,
instruments and further assurances, including without limitation the legal
expenses of such party on a solicitor and client basis).

7.8 NOTICE

    Any demand, notice or communication ("NOTICE") given or required to be
given to any of the parties hereto shall be in writing and may be delivered,
mailed by registered prepaid mail, except during an actual or threatened postal
disruption, or sent by facsimile, and shall be conclusively deemed to have been
duly given hereunder, if delivered, mailed or faxed to the addresses or
facsimile numbers, as the case may be, set forth hereafter, or to such other
addresses or facsimile numbers, as the case may be, of which the party receiving
the Notice has given notice to the other parties in the manner prescribed in
this section:

(a) in the case of delivery, when the Notice is delivered to the party
receiving the Notice, provided that the Notice is delivered on a Business Day,
or on the next Business Day after the Notice was delivered, if the Notice was
not delivered on a Business Day;

(b) in the case of sending by registered mail, at 11:00 a.m. in the forenoon
(Toronto, Ontario time) the fifth Business Day after the Notice was deposited in
a governmental public post box or with a governmental post office;

(c) in the case of sending by facsimile, three (3) hours after the Notice was
sent by facsimile, provided that the Notice is sent on a Business Day, and
provided that it is sent by facsimile on or before 2:00 p.m. (Toronto, Ontario
time) or on the next Business Day after

<PAGE>

                                        - 22 -

the Notice was sent, if the Notice was not sent on a Business Day or it was sent
on a Business Day after 2:00 p.m. (Toronto, Ontario time),

and if addressed as follows:

    TO THE RECEIVER

    BDO Dunwoody Limited
    Royal Bank Plaza, South Tower
    32nd Floor
    P.O. Box 33
    Toronto, Ontario
    M5J 2J9

    Facsimile Number:  (416) 865-0904
    Attention:  Mr. Peter W. Aykroyd, CA, CFE, CIP

    WITH A COPY TO THE RECEIVER'S SOLICITORS

    Gowling, Strathy & Henderson
    Barristers & Solicitors
    Suite 4900
    Commerce Court West
    Toronto, Ontario
    M5L 1J3

    Facsimile Number:   (416) 862-7661
    Attention:          Mr. Leslie A. Wittlin

    TO THE PURCHASER

    Columbia Centre for Rehabilitation Inc.
    20 Eglinton Avenue West
    Suite 1007
    Toronto, Ontario
    M4R 1K8

    Facsimile Number:   (416) 485-1692
    Attention:          Mr. William H. Brown

<PAGE>

                                        - 23 -

    WITH A COPY TO THE PURCHASER'S SOLICITORS

    Fraser & Beatty
    Barristers & Solicitors
    1 First Canadian Place
    P.O. Box 100
    Toronto, Ontario
    M5X 1B2

    Facsimile Number:   (416) 863-4592
    Attention:          Mr. Michael Wunder

7.9 TIME OF THE ESSENCE

    Time shall be the essence of this Agreement.

7.10  CONFIDENTIALITY

    The Purchaser agrees to hold all information and documentation received
from the Receiver confidential pending Closing, and any Patient Information
confidential both before and after Closing.  If the Closing does not take place,
the Purchaser shall return to the Receiver all information and documentation
received by the Purchaser, including any documentary information created by the
Purchaser from such information and documentation.  Both before and after
Closing, the Receiver may issue news releases to the media and letters to the
Debtor's employees in respect of the Transaction, provided that the Receiver
obtains the prior written consent of the Purchaser, acting reasonably, to the
form and substance of such releases and letters.  The Purchaser may issue a news
release to the media in respect of the Transaction provided that the Purchaser
obtains the prior written consent of the Receiver, acting reasonably, to the
form and substance of such release.

7.11  PROFESSIONAL FEES AND DISBURSEMENTS

     The Purchaser and the Receiver shall each bear their own costs,
professional fees and disbursements incurred in respect of the Transaction,
including without limitation with respect to the Leasehold Savings.

7.12  COUNTERPARTS

    This Agreement may be executed in several counterparts and all counterparts
when taken together shall comprise one and the same instrument, and facsimile
copies of signatures shall be treated as originals for all purposes.  This
Agreement may be executed by the parties hereto by facsimile transmission,
provided that as soon as possible after such execution the party executing this
Agreement by facsimile transmission shall deliver to the other party an executed
original thereof.

<PAGE>


                                        - 24 -

    DATED at Toronto this 1st day of August, 1996.


                                  BDO DUNWOODY LIMITED, as Court-Appointed
                                  Receiver and Manager of International Managed
                                  Health Care Inc.


                                  By _____________________________________
                                  Name: Hassan Jaffer
                                  Title: Senior Vice President

                                  COLUMBIA CENTRE FOR
                                  REHABILITATION INC.


                                  By ______________________________________
                                  Name: William H. Brown
                                  Title: President, Chief Executive Officer

<PAGE>

                                        - 25 -

                                      SCHEDULE A
                                   LEASED PREMISES


The Leased Premises consist of the following:

    (a)  425 Bloor Street East, Toronto

    (b)  1A-60 Bristol Road East, Mississauga

    (c)  3813 Sheppard Avenue East, Scarborough

    (d)  210 Mohawk Road East, Hamilton

Note:    The Purchaser may amend this schedule prior to August 9, 1996.

<PAGE>

                                        - 26 -


                                      SCHEDULE B
                                        ASSETS

    The Assets consist of the following and no other property or assets:

    (a)  the full benefit of the Contracts referred to in Schedule D;

    (b)  the Debtor's leasehold and subleasehold interests in and to the Leased
         Premises, all right, title and interest of the Debtor and benefits of
         the Debtor to and under the Leases;

    (c)  all machinery, equipment, computer hardware and software, handling
         equipment, furniture, furnishings and accessories and supplies of all
         kinds of the Debtor used in connection with the Debtor's business at
         the Leased Premises and at any other location of the Debtor other than
         the Oshawa Clinic, together with any leasehold improvements located
         therein;

    (d)  the inventory and stock in trade of the Debtor at the Leased Premises
         and any other location of the Debtor other than the Oshawa Clinic;

    (e)  the trade accounts receivable and work in progress of the Debtor
         arising from the business of the Debtor carried on at the Leased
         Premises and at any other location of the Debtor other than the Oshawa
         Clinic;

    (f)  the goodwill of the business of the Debtor together with the exclusive
         right of the Purchaser to represent itself as carrying on business in
         continuation of and in succession to the Debtor and the right to use
         any words indicating that the business is so carried on, including the
         exclusive right to use the name "International Managed Health Care"
         (and any and all predecessor names);

    (g)  except for any intellectual property listed in Schedule C as Excluded
         Assets, all registered intellectual property of the Debtor in respect
         of the Debtor's business comprising without limitation, copyrights,
         patents, registered trade-marks, registered trade-names, registered
         business names, registered trade styles and other registered business
         identifiers, and including without limitation the trademark "Road to
         Recovery";

    (h)  all licenses of software, computer programs, application software,
         hardware/software maintenance support agreements and other
         documentation related thereto; and

<PAGE>

                                        - 27 -

    (i)  any motor vehicles in which the Debtor has an interest (except for any
         vehicles referred to an Schedule C which form part of the Excluded
         Assets).

Note:    The Purchaser and the Receiver may amend this schedule by mutual
         agreement prior to the Closing.


<PAGE>

                                        - 28 -

                                      SCHEDULE C
                                   EXCLUDED ASSETS

    All property and assets of the Debtor not included in the Assets are
specifically excluded from and do not form part of the Assets and are referred
to herein as Excluded Assets.  Without limiting the generality of the forgoing,
the Excluded Assets include the following:

    (a)  any securities or investments (whether marketable or otherwise)
         including the shares of any affiliated or subsidiary company of the
         Debtor;

    (b)  the Oshawa Clinic's accounts receivable and all non-trade accounts
         receivable including, but not limited to, amounts receivable from any
         employee, officer, director or shareholder of the Debtor;

    (c)  any other property and assets at or associated with the Oshawa Clinic;

    (d)  any taxes recoverable, tax refunds or like receipts;

    (e)  any affiliated corporation or subsidiary balances receivable including
         notes, advances or like amounts due to the Debtor;

    (f)  any cash or cash equivalent on hand or in any bank account of the
         Debtor or held by the Receiver in respect of the Debtor;

    (g)  except with respect to the Leased Premises, any prepaid expenses,
         deposits with utilities or landlords, parking card deposits or other
         like prepaid amounts or deposits;

    (h)  any intangible assets that are incapable of assignment;

    (i)  assets, including Patient Information and any equipment or furniture
         that it is exclusive to the Debtor's operations and activities
         relating to "Fit To Be Free Weight Loss" and/or the name and rights
         associated with "Fit To Be Free Weight Loss" and/or any similar or
         associated name or derivatives thereof;

    (j)  any and all golf club memberships or similar memberships in any other
         clubs or associations and/or the rights (including any contractual
         rights) thereto as well as any sports tickets and/or the associated
         rights thereto;

    (k)  any contractual rights, contracts and/or agreements or any other
         assets of any kind whatsoever, whether or not they are recorded in the
         accounts and records of the Debtor, unless specifically included in
         Schedules B or D hereto;

<PAGE>


                                        - 29 -

    (l)  the trade name "Care Management Network", and any trademarks,
         tradenames, patents or similar assets that are not registered, which
         are pending, or in the course of application;

    (m)  project Life Executive Program (unless arrangements satisfactory to
         Liberty Canada Holdings Ltd. and the Receiver in their absolute
         discretion are made for its continuation by Purchaser);

    (n)  any insurance policies owned by the Debtor or of which the Debtor is
         the beneficiary;

    (o)  leases in respect of the following properties:

         (i)       340 College Street, Toronto;
         (ii)      304 Victoria Avenue North, Hamilton;
         (iii)     5255 Yonge Street, Suite 500, North York;
         (iv)      120 Eglinton Avenue East, Suite 401, Toronto;
         (v)       615 Davis Drive, Suite 200, Newmarket;

    (p)  Commcorp Financial Services Inc. leases in respect of a 1994 Dodge
         Shadow and a 1995 Jeep Cherokee; and

    (q)  any Patient Information which Patients request the Purchaser return to
         such Patients.


Note:    The Purchaser and the Receiver may amend this schedule by mutual
         agreement prior to the Closing.


<PAGE>

                                        - 30 -

                                      SCHEDULE D
                                      CONTRACTS

The following is a list of the Contracts:

    (a)  an oral contract for the use of the Neuropage technological system;

    (b)  the contract for the yellow pages advertising of the Debtor.





Note:    The Purchaser and the Receiver may amend this schedule by mutual
         agreement prior to the Closing.

<PAGE>

                                        - 31 -


                                      SCHEDULE E
                            PROCEDURES REGARDING EMPLOYEES
                             AND INDEPENDENT CONTRACTORS

1.  The Purchaser shall arrange all meetings with employees and any independent
    contractors through the Receiver and the Program Directors.

2.  The Purchaser shall not indicate to any employee or independent contractor
    whether they will or will not have a position with or be engaged by the
    Purchaser after Closing.

3.  The Purchaser shall not contact any employees or independent contractors at
    the Oshawa clinic.

4.  The Purchaser shall provide to the Receiver by no later than 5:00 p.m. on
    August 9, 1996 a list of the Debtor's employees and independent contractors
    who the Purchaser intends to offer employment to or offer to engage.

4.  All offers of employment or engagement by the Purchaser shall be in writing
    and shall be delivered by the Receiver.  The Purchaser shall deliver such
    offers to the Receiver by no later than 9:00 a.m. on August 12, 1996. The
    Receiver shall deliver such offers to the employees that day. The offers
    shall provide that the employees must deliver written acceptances to the
    Receiver within twenty-four (24) hours of the date of the offer (failing
    which the employee shall be deemed to have rejected such offer). The
    Receiver shall forthwith upon receipt and in any event on or prior to the
    Closing deliver to the Purchaser original acceptances.



<PAGE>

                                  AGREEMENT AMENDING
                            AGREEMENT OF PURCHASE AND SALE


    THIS AGREEMENT made this 13th day of August, 1996

B E T W E E N:

                   BDO DUNWOODY LIMITED, in its capacity as Court appointed
                   Receiver and Manager of International Managed Health Care
                   Inc.

                   (hereinafter called the "RECEIVER")

                                                               OF THE FIRST PART

                                        -and-

                   COLUMBIA CENTRE FOR REHABILITATION INC.,  a corporation
                   incorporated under the laws of Ontario

                   (hereinafter called the "PURCHASER")

                                                              OF THE SECOND PART

RECITALS:

A.  In an order of Mr. Justice Blair of the Ontario Court (General Division)
(the "COURT") dated June 7, 1996, as amended on July 9, 1996 (collectively, the
"INITIAL ORDER"), the Receiver was appointed as receiver and manager of the
undertaking, property and assets of International Managed Health Care Inc. (the
"DEBTOR");

B.  Under paragraph 6 of the Initial Order, the Receiver is authorized and
empowered to enter into agreements respecting the sale of the assets, property
and undertaking of the Debtor, subject to the approval of the Court;

C.  The Receiver has agreed to sell and the Purchaser has agreed to purchase
certain assets of the Debtor pursuant to an agreement of purchase and sale dated
August 1, 1996 (the "AGREEMENT");

D.  The Receiver and the Purchaser have agreed to amend the schedules to the
Agreement.

    NOW THEREFORE in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:


<PAGE>

                                     - 2 -

1.  Schedule A of the Agreement is hereby amended to add the following Leased
Premises:

    a.   120 Eglinton Avenue East, Toronto, Ontario M4P 1E2.

2.  Schedule C of the Agreement is hereby amended to add the following Excluded
Assets:

    a.   all lease agreements between the Debtor and Newcour Credit Group Inc.,
         numbered as 13843, 15025, 15026 and 15027;

    b.   lease agreements among the Debtor and Commcorp numbered as nos.
         498084, 632539, 634161, 637504, 644265, 640562, 648208 (formerly
         660287) and 661474;

    c.   lease agreements among the Debtor and Neopost Leasing of Canada Inc.
         numbered as nos. 9303701, 9502713, 9502714, 9501702 and 9506710;

    d.   any agreements between the Debtor and City Water International Inc.;

    e.   any agreements between the Debtor and National Guardian Securities
         Corp., now known as Security Link from Ameritech; and

    f.   any agreements between the Debtor and Canadian Security Network for
         monitoring.

3.  Schedule D of the Agreement is hereby amended to add the following
Contracts:

    a.   lease agreements between the Debtor and Commcorp Financial Services
         Inc. numbered as nos.  639913, 649490, 649489, 620320, 661475 and
         671046;

    b.   lease agreements between the Debtor and Neopost Leasing of Canada Inc.
         numbered as nos. 9404715, 9602708, 9411704 and 9508709;

4.  This amending agreement may be executed in several counterparts and all
counterparts when taken together shall comprise one and the same instrument, and
facsimile copies of signatures shall be treated as originals for all purposes.
This amending agreement may be


<PAGE>
                                     - 3 -

executed by the parties hereto by facsimile transmission, provided that as soon
as possible after such execution the party executing this amending agreement by
facsimile transmission shall deliver to the other party an executed original
thereof.

    DATED at Toronto this 13th day of August, 1996.


                             BDO DUNWOODY LIMITED, as Court-Appointed Receiver
                             and Manager of International Managed Health Care
                             Inc.


                             By
                                ---------------------------------------------
                             Name: Hassan Jaffer
                             Title: Senior Vice President

                             COLUMBIA CENTRE FOR REHABILITATION INC.


                             By
                                ---------------------------------------------
                             Name: William H. Brown
                             Title: President, Chief Executive Officer


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