<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-22178
ARBOR HEALTH CARE COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 34-1469604
(State of incorporation) (IRS Employer
Identification No.)
1100 SHAWNEE ROAD, P. O. BOX 840, LIMA, OHIO 45802-0840
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (419) 227-3000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Shares of Registrant's Common Stock, $.03 par value, outstanding as of the close
of business on October 31, 1997 -- 6,938,784.
1
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I -- FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Consolidated Balance Sheets .....................................................................3
Consolidated Statements of Income ...............................................................4
Consolidated Statements of Cash Flows ...........................................................5
Notes to Interim Consolidated Financial Statements ..............................................6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations ...................................................7
Forward-Looking Statements .....................................................................11
PART II -- OTHER INFORMATION
Item 1 Legal Proceedings..............................................................................12
Item 2 Changes in Securities..........................................................................12
Item 3 Defaults Upon Senior Securities................................................................12
Item 4 Submission of Matters to a Vote of Security Holders............................................12
Item 5 Other Information..............................................................................12
Item 6 Exhibits and Reports on Form 8-K...............................................................13
</TABLE>
2
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARBOR HEALTH CARE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except for share data)
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1996 1997
---------- ----------
ASSETS (Note 1)
<S> <C> <C>
Current assets
Cash and cash equivalents ................................................ $ 5,761 $ 6,781
Accounts receivable, less allowances of $1,948 and
$2,099, respectively ................................................. 44,019 50,676
Supply inventories ....................................................... 2,963 3,839
Other current assets ..................................................... 3,503 3,620
Deferred income taxes .................................................... 1,972 2,218
---------- ----------
Total current assets ......................................................... 58,218 67,134
Property and equipment
Land and improvements .................................................... 25,337 25,418
Buildings and improvements ............................................... 95,017 95,825
Equipment and furnishings ................................................ 40,477 44,119
Leasehold improvements ................................................... 5,970 7,524
Construction in process .................................................. 2,599 11,825
---------- ----------
169,400 184,711
Less allowances for depreciation and amortization ........................ 33,564 40,108
---------- ----------
Total property and equipment ................................................. 135,836 144,603
Other assets
Goodwill, less amortization of $926 and $1,582, respectively ............. 13,034 20,124
Deferred costs, less amortization of $3,475 and $3,407, respectively ..... 2,205 1,718
Sundry ................................................................... 181 316
---------- ----------
Total other assets ........................................................... 15,420 22,158
---------- ----------
$ 209,474 $ 233,895
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable ............................................................ $ 4,526 $ -
Accounts payable ......................................................... 11,121 12,252
Accrued payroll and related items ........................................ 11,522 14,837
Other liabilities ........................................................ 13,465 16,780
Current maturities of long-term obligations .............................. 3,162 4,940
---------- ----------
Total current liabilities .................................................... 43,796 48,809
Long-term obligations, less current maturities ............................... 94,643 103,720
Deferred income taxes ........................................................ 5,019 6,264
Stockholders' equity
Preferred stock, $.01 par value, Authorized - 2,000,000 shares
None issued or outstanding - -
Series A Junior Participating Cumulative Preferred stock, $.01 par value,
Authorized - 10,000 shares, None issued or outstanding - -
Common stock, $.03 par value, Authorized - 20,000,000 shares
Issued and outstanding -- 6,904,054 and 6,937,427 shares, respectively 207 208
Additional paid-in capital ............................................... 30,300 30,827
Retained earnings ........................................................ 35,509 44,067
---------- ----------
Total stockholders' equity ................................................... 66,016 75,102
---------- ----------
$ 209,474 $ 233,895
========== ==========
</TABLE>
See accompanying notes
3
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ARBOR HEALTH CARE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(In thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
---------------------- ----------------------
1996 1997 1996 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues
Subacute care ................... $ 29,165 $ 32,144 $ 82,971 $ 94,623
Basic care ...................... 21,110 21,113 62,722 63,901
Pharmacy and other .............. 5,686 8,118 15,385 22,680
--------- --------- --------- ---------
Total net revenues ................ 55,961 61,375 161,078 181,204
Expenses
Operating ....................... 43,578 47,624 127,011 141,614
General corporate ............... 2,430 2,573 7,123 8,081
Operating lease rental .......... 1,157 1,150 3,410 3,292
Net interest .................... 1,884 2,022 5,161 6,106
Depreciation and amortization ... 2,216 2,710 6,498 7,928
--------- --------- --------- ---------
Total expenses .................... 51,265 56,079 149,203 167,021
Other expense (income)
Loss on disposal of property .... 315 61 498 306
Interest and sundry ............. (32) (62) (130) (174)
--------- --------- --------- ---------
Total other expense (income) ...... 283 (1) 368 132
--------- --------- --------- ---------
Income before income taxes ........ 4,413 5,297 11,507 14,051
Income taxes ...................... 1,723 2,049 4,551 5,493
--------- --------- --------- ---------
Net income ........................ $ 2,690 $ 3,248 $ 6,956 $ 8,558
========= ========= ========= =========
Net income per share .............. $ 0.39 $ 0.46 $ 1.00 $ 1.22
========= ========= ========= =========
Weighted average shares outstanding 6,954 7,090 6,970 7,035
========= ========= ========= =========
</TABLE>
See accompanying notes
4
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ARBOR HEALTH CARE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
----------------------------
1996 1997
-------- --------
<S> <C> <C>
Operating activities
Net income ............................................ $ 6,956 $ 8,558
Adjustments to reconcile net income to net cash
provided by operating activities
Provision for depreciation .......................... 5,432 6,670
Amortization ........................................ 1,304 1,435
Provision for deferred income taxes ................. 1,534 999
Provision for losses on accounts receivable ......... 1,447 2,285
Loss on disposal of property ........................ 498 305
Changes in operating assets and liabilities
Accounts receivable ................................ (5,770) (7,816)
Supply inventories ................................. (71) (668)
Other current assets ............................... (1,257) (1,076)
Deferred costs ..................................... (850) (262)
Accounts payable ................................... (3,960) 874
Accrued payroll and related items .................. 2,927 3,189
Other liabilities (income tax payments of $4,766 and
$3,857, respectively) ............................ 1,521 3,151
-------- --------
Net cash provided by operating activities .............. 9,711 17,644
Investing activities
Expenditures for property and equipment ............... (18,417) (14,010)
Cash paid to acquire businessess, net of cash received (6,775) (5,514)
Sundry and other ...................................... 38 (105)
-------- --------
Net cash used in investing activities .................. (25,154) (19,629)
Financing activities
Net repayments under line of credit agreements
to finance development projects and acquisitions ..... (5,214) (1,076)
Net borrowings (repayments) of working capital
under line of credit agreements ...................... (2,827) (4,526)
Borrowings on long-term obligations ................... 27,000 11,750
Repayments of long-term obligations ................... (6,014) (3,603)
Deferred financing costs .............................. (759) (68)
Issuance of stock ..................................... 64 528
-------- --------
Net cash provided by financing activities .............. 12,250 3,005
-------- --------
Net decrease in cash and cash equivalents .............. (3,193) 1,020
Cash and cash equivalents at beginning of period ....... 6,394 5,761
-------- --------
Cash and cash equivalents at end of period ............. $ 3,201 $ 6,781
======== ========
</TABLE>
See accompanying notes
5
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ARBOR HEALTH CARE COMPANY AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
The consolidated balance sheet of Arbor Health Care Company and subsidiaries
(the "Company") at December 31, 1996 has been derived from the audited
consolidated financial statements at that date. The consolidated balance sheet
of the Company at September 30, 1997, and the consolidated statements of income
and cash flows for the periods ended September 30, 1997 and 1996, have been
prepared by the Company, without audit, in accordance with the rules and
regulations of the Securities and Exchange Commission. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary to fairly present the financial position, results of operations and
cash flows at September 30, 1997 and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the year ended December 31, 1996. The results of operations and cash
flows for the period ended September 30, 1997 are not necessarily indicative of
the operating results or cash flows for the full year.
2. NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has issued Statement No. 128,
Earnings per Share, which is required to be adopted for financial statements
issued for periods ending after December 15, 1997. At that time, the Company
will be required to change the method currently used to compute earnings per
share and to restate all prior periods. Under the new requirements for
calculating basic earnings per share, the dilutive effect of stock options will
be excluded. The impact of Statement No. 128 on the calculation of earnings per
share is not expected to be material. In addition, the FASB has issued Statement
No. 129 (Disclosure of Information about Capital Structure), Statement No. 130
(Reporting Comprehensive Income), and Statement No. 131 (Disclosures about
Segments of an Enterprise and Related Information), which are not anticipated to
have a material effect on the Company.
3. PENDING MERGER
On September 29, 1997, the Company entered into a definitive merger agreement
with Extendicare Inc. ("Extendicare") pursuant to which Extendicare, through an
indirect wholly-owned United States subsidiary, commenced a tender offer for
any and all of the Company's outstanding shares at a price of $45.00 per share
in cash. Under the merger agreement, the tender offer will be followed by a
merger in which shares of the Company not purchased in the tender offer will be
converted into the right to receive cash in the amount of $45.00 per share. As a
result of the merger, the Company will become an indirect subsidiary of
Extendicare.
Extendicare's tender offer commenced on October 3, 1997 and has been extended
through November 25, 1997; however, Extendicare may further extend the
expiration of the tender offer, as specified under the terms of the agreement.
All regulatory approvals have been received except from the Ohio State Board of
Pharmacy and the West Virginia Health Care Authority, which are expected to be
received by November 21, 1997. For additional information regarding the merger
agreement, refer to Extendicare's Schedule 14D-1 filed October 3, 1997, and
amended on October 30, 1997; and the Company's Schedule 14D-9 filed October 6,
1997.
4. ACQUISITIONS
The Company acquired all of the assets of seven outpatient rehabilitation
centers in the Jacksonville, Florida area and one Comprehensive Outpatient
Rehabilitation Facility ("CORF") in St. Augustine, Florida effective September
1, 1997 and July 15, 1997, respectively. Effective August 1, 1997, the Company
acquired all of the outstanding stock of an institutional pharmacy in the
Detroit, Michigan area. The combined purchase price of these acquisitions was
$5.4 million, including $1.4 million in seller financing. Combined additional
consideration of up to $1.5 million may be required for the Jacksonville,
Florida area rehabilitation centers and Detroit, Michigan area pharmacy if
certain earnings targets are attained through December 31, 1999 and December
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31, 2001, respectively. The Company entered into an operating lease agreement,
effective September 1, 1997, for a 116-bed nursing facility in Ohio. These
acquisitions and the leased facility generated approximately $10.6 million in
combined 1996 revenues.
Effective January 1, 1997, the Company acquired substantially all of the assets
and assumed certain liabilities of Adult Services Unlimited, Inc. ("ASUI") and
Health Poconos, Inc. ("HPI") for approximately $3.2 million, including $1.7
million in seller financing. ASUI and HPI are CORFs in the northeastern
Pennsylvania market. In 1996, the two facilities had combined revenues of
approximately $2.8 million.
On September 19, 1996, the Company acquired Arbors at Waterville, a 100-bed
Center that it has operated under an operating lease agreement since 1989. The
Company financed a portion of the $5.8 million purchase with $4.6 million from
its acquisition/development lines of credit. Raymond James Financial, Inc.
("RJFI") owns two subsidiaries that are the controlling partners in a
partnership that is the general partner in a partnership that owned the Center.
A director of the Company is an officer, director and major stockholder of RJFI.
Effective June 30, 1996, the Company acquired all of the outstanding stock of
Poly-Stat Supply Corporation and Poly-Stat Computer Applications, Inc. The
Poly-Stat businesses provide medical supplies and Medicare billing services to
nursing homes. The purchase price of approximately $1.2 million for the
Poly-Stat businesses included $1.0 million in cash and $0.2 million in
promissory notes. In addition, the Company must make a $1.0 million contingent
payment if certain earnings targets are attained through December 31, 2000.
The 1997 and 1996 acquisitions have been accounted for as purchases and results
of operations are included from the dates of acquisition. The 1997 purchase
prices which included approximately $5,578,000 paid in cash, seller-financed
debt of approximately $3,050,000 and debt assumed of approximately $772,000 were
allocated primarily to goodwill ($7,742,000), working capital ($904,000) and
property and equipment ($754,000). The 1996 purchase prices which included
approximately $6,753,000 paid in cash, seller-financed debt of approximately
$193,000 and debt assumed of approximately $157,000 were allocated primarily to
property and equipment ($5,006,000), goodwill ($1,834,000) and working capital
($263,000). The pro forma unaudited results of operations for the nine months
ended September 30, 1997 and 1996, assuming the purchases had been consummated
as of January 1, 1996, are not materially different from the reported results of
operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was formed in 1985 and first offered its Common Stock to
public investors in August, 1993. As more fully described in the Annual Report
on Form 10-K for the year ended December 31, 1996, the Company provides subacute
and basic health care services to patients at its licensed nursing centers
("Centers"), operates four institutional pharmacies and provides rehabilitative
services at ten outpatient rehabilitation centers. The Company's growth strategy
includes the development of new Centers with subacute units, increasing the
proportion of managed care patients and pursuing strategic acquisition
opportunities in selected markets. During 1996, the Company opened a 36-bed
addition to an existing Center in the first quarter, a 79-bed Center in April, a
116-bed Center in August and a 120-bed Center in late December. The Company
acquired two businesses that provide medical supplies and Medicare billing
services and purchased a 100-bed Center previously operated under a lease
agreement effective June, 1996 and September, 1996, respectively. Effective
January 1, 1997, the Company acquired two Comprehensive Outpatient
Rehabilitation Facilities ("CORFs") that service the northeastern Pennsylvania
market. The Company acquired one CORF and seven outpatient rehabilitation
centers that service northeast Florida, effective July 15, 1997 and September 1,
1997, respectively. The Company acquired a Detroit, Michigan area institutional
pharmacy effective August 1, 1997. The Company entered into an operating lease
agreement, effective September 1, 1997, for a 116-bed licensed nursing facility
in Ohio. As of September 30, 1997, the Company operated 3,696 beds in its 31
Centers located in five states. The Company's institutional pharmacies, located
in Ohio, Florida and Michigan, service 250 non-affiliated facilities and 30 of
the Company's Centers. The Company's ten outpatient rehabilitation centers
service over 7,000 patients annually. Refer to Note 4 of the Notes to Interim
Consolidated Financial Statements.
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RESULTS OF OPERATIONS
The following tables set forth elements of net revenue for the periods
presented:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
------------------------------- ------------------------------
1996 1997 1996 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Services Provided as Percentage of
Total Net Revenue:
Subacute Care (1) 52.1% 52.4% 51.5% 52.2%
Basic Care 37.8 34.4 38.9 35.3
Pharmacy and Other (2) 10.1 13.2 9.6 12.5
------------ ------------ ------------ ------------
Total 100.0% 100.0% 100.0% 100.0%
============ ============ ============ ============
Payor Type as Percentage of
Total Net Revenue:
Private (3) 34.0% 36.0% 33.1% 36.0%
Medicare 33.8 29.7 35.4 32.0
Medicaid 32.2 34.3 31.5 32.0
------------ ------------ ------------ ------------
Total 100.0% 100.0% 100.0% 100.0%
============ ============ ============ ============
Payor Type as Percentage of
Subacute Care Net Revenue:
Private (3) 27.3% 27.9% 25.0% 28.5%
Medicare 61.4 52.8 64.9 57.1
Medicaid 11.3 19.3 10.1 14.4
------------ ------------ ------------ ------------
Total 100.0% 100.0% 100.0% 100.0%
============ ============ ============ ============
Payor Type as Percentage of
Basic Care Net Revenue:
Private (3) 40.6% 41.6% 41.6% 41.4%
Medicaid 59.4 58.4 58.4 58.6
------------ ------------ ------------ ------------
Total 100.0% 100.0% 100.0% 100.0%
============ ============ ============ ============
Payor Type as Percentage of
Pharmacy and Other Net Revenue:
Private (3) 43.7% 53.2% 41.9% 52.8%
Medicare 17.8 15.6 20.4 17.1
Medicaid 38.5 31.2 37.7 30.1
------------ ------------ ------------ ------------
Total 100.0% 100.0% 100.0% 100.0%
============ ============ ============ ============
</TABLE>
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The following tables set forth certain operating data for the periods presented:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30 ENDED SEPTEMBER 30
-------------------------------- -------------------------------
1996 1997 1996 1997
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Number of Licensed Beds (end of period):
Subacute Care 1,117 1,193 1,117 1,193
Basic Care 2,341 2,503 2,341 2,503
------------- ------------- ------------ -------------
Total 3,458 3,696 3,458 3,696
============= ============= ============ =============
Average Number of Licensed Beds:
Subacute Care 1,069 1,188 1,005 1,206
Basic Care 2,350 2,431 2,335 2,387
------------- ------------- ------------ -------------
Total 3,419 3,619 3,340 3,593
============= ============= ============ =============
Average Occupancy (4):
Subacute Care 78.3% 86.1% 81.2% 83.1%
Basic Care 93.6 95.4 92.6 94.7
Total Occupancy 88.8 92.4 89.2 90.8
Subacute Census Mix Percentage:
Private (3) 27.0% 28.1% 22.9% 28.0%
Medicare 61.9 52.1 66.8 56.6
Medicaid 11.1 19.8 10.3 15.4
------------- ------------- ------------ -------------
Total 100.0% 100.0% 100.0% 100.0%
============= ============= ============ =============
- ------------------------------------
<FN>
(1) Subacute care revenue includes all room and board, nursing, therapies
and medical supplies provided to patients in the Company's subacute
units and pharmacy charges for all Arbor patients.
(2) Pharmacy and other revenues includes institutional pharmacy sales made
to non-related facilities and their residents and outpatient
rehabilitation clinic revenue.
(3) Private includes reimbursement and patient days applicable to
individuals, HMOs, PPOs, indemnity insurers and other charge-based
sources.
(4) Represents total billed patient days divided by total available days.
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Total net revenues for the three months ended September 30, 1997 of
$61.4 million, increased $5.4 million, or 9.7%, from the three months ended
September 30, 1996. Internal growth generated 62% of the increase and the
balance resulted from 1997 acquisitions. Revenues from Start-Up Centers
(developed Centers in operation for less than 24 months as of the period
reported upon) provided 97% of the internal growth. Total occupancy increased to
92.4% from 88.8% in the comparable period of the prior year due to improved
occupancy in both Mature Centers (Centers in operation for 24 months or more as
of the period reported upon) and Start-Up Centers. Subacute care revenues
increased $3.0 million, or 10.2%, due to more beds and improved occupancy ($5.6
million), partially offset by lower average rates ($2.6 million). The decrease
in subacute rates is due to changes in payor mix and the Company's
cost-reduction measures. Managed care patients accounted for a higher percentage
of the total subacute patients serviced, 20.1% in the current period compared to
16.9% for the quarter ended September 30, 1996. Lower costs of providing
therapies, pharmaceuticals and medical supplies ("Ancillaries") in Mature
Centers, as discussed below, reduced Medicare rates from the comparable period
in 1996, as Medicare revenues are based upon Center specific costs. Basic care
revenues remained relatively flat due to more beds and improved occupancy
offset by decreased rates due to the Company's cost-reduction efforts. Pharmacy
and other, primarily outpatient, revenues increased $2.4 million, or 42.8%, due
to the 1997 acquisitions ($1.8 million) and increased sales volume ($0.6
million).
Operating expenses, for the three months ended September 30, 1997 of
$47.6 million increased $4.0 million, or 9.3%, over the comparable period in
1996. As a percent of revenue, operating costs decreased to 77.6% from 77.9% for
the comparable period in the prior year. Approximately 97% of the increase in
operating costs was due to Start-Up Centers and 1997 acquisitions. The remainder
of the increase was attributable to an increase in pharmacy operating costs.
Compensation expenses for Center staff of $22.4 million, which are included in
operating expenses, increased by $2.1 million, or 10.3%. Start-Up
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Centers accounted for $1.4 million of the increase. The cost of providing
Ancillaries increased $1.4 million due to Start-Up Centers, the 1996 and 1997
acquisitions and costs associated with increased pharmacy sales offset in part
by reduced costs at Mature Centers. Mature Center Ancillary Services costs
decreased 11.6% when compared to the same period in the prior year due to
Company efforts in converting therapy to in-house programs rather than
purchasing from contract therapy providers. All other costs in Mature and
Start-Up Centers increased $.5 million.
Ownership costs increased $.6 million, or 11.9%, primarily due to
Start-Up Centers and the 1997 acquisitions.
Net income increased by $.6 million, or 20.7%, primarily as a result of
the foregoing factors.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Total net revenues for the nine months ended September 30, 1997 of
$181.2 million increased $20.1 million, or 12.5%, from the nine months ended
September 30, 1996. Internal growth generated 76% of the increase and the
balance resulted from 1996 and 1997 acquisitions. Revenues from Start-Up Centers
provided 87% of the internal growth. Total occupancy increased to 90.8% from
89.2% in the comparable period of the prior year due to improved occupancy in
both Mature and Start-Up Centers. Subacute care revenues increased $11.7
million, or 14.0%, due to more beds and improved occupancy ($17.4 million)
partially offset by lower average rates ($5.7 million). The decrease in subacute
rates is due to a change in payor mix and the Company's cost-reduction efforts,
as described below. Managed care patients accounted for 19.2% of the total
subacute patients serviced compared to 12.8% for the nine months ended September
30, 1996. Basic care revenues increased $1.2 million, or 1.9%, due to more beds
and improved occupancy ($1.9 million) offset by decreased rates resulting from
lower operating costs ($0.7 million). Pharmacy and other, primarily outpatient,
revenues increased $7.3 million, or 47.4%, due to the 1996 and 1997 acquisitions
($4.6 million) and increased sales volume ($2.7 million).
Operating expenses for the nine months ended September 30, 1997 of
$141.6 million increased $14.6 million, or 11.5%, over the comparable period in
1996. As a percent of revenue, operating costs decreased to 78.2% from 78.9% for
the comparable period in the prior year. Approximately 97% of the increase in
operating costs was due to Start-Up Centers and 1996 and 1997 acquisitions. The
remainder of the net increase was due to an increase in pharmacy operating costs
offset by a decrease in Mature Center costs. Compensation expenses for Center
staff of $65.4 million increased by $6.0 million, or 10.1%. Start-Up Centers
accounted for $5.4 million of the increase. The cost of providing Ancillaries
increased $5.8 million due to Start-Up Centers, the 1996 and 1997 acquisitions
and costs associated with increased pharmacy sales offset in part by reduced
costs at Mature Centers. Mature Center Ancillary Services costs decreased 9.3%
when compared to the same period in the prior year as a result of Company
efforts in converting therapy to in-house programs rather than purchasing from
contract therapy providers. All other costs in Mature and Start-Up Centers
increased $2.8 million.
General corporate expenses increased $1.0 million, or 13.4%, due to
costs incurred to support internal growth and pursue strategic acquisitions.
Ownership costs increased $2.3 million, or 15.0%, primarily due to
Start-Up Centers and the 1997 acquisitions.
Net income increased by $1.6 million, or 23%, primarily as a result of
the foregoing factors.
LIQUIDITY AND CAPITAL RESOURCES
The Company's growth during the last two years has been financed with
cash from operating and financing activities. Cash from operating activities
primarily has been provided by net income from operations. Non-cash expense
items included in net income and increases in other current liabilities offset
increased accounts receivable primarily associated with 1997 acquisitions,
Start-Up Centers, and increased managed care revenues. Also, in the comparable
period in 1996, payments of accounts payable accounted for the use of operating
cash. Net borrowings on long-term obligations have been the source of cash from
financing activities for the nine month periods ended September 30, 1997 and
1996. Expenditures for investing activities primarily have been for the
development of new Centers and renovations to the existing Centers.
Additionally, in 1997, expenditures were made for the acquisition of three
CORFs and seven outpatient rehabilitation centers and an institutional pharmacy.
10
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At September 30, 1997, the Company had working capital of $18.3 million
compared to $14.4 million at December 31, 1996. Increased accounts receivable
offset by a decrease in notes payable accounted for the majority of the working
capital increase. The number of days of net revenues in net receivables for the
quarter increased to 76 days at September 30, 1997 compared to 70 days at
December 31, 1996. The increase in receivables is due to 1997 acquisitions,
Start-Up Centers and increased managed care revenues.
The Company has revolving credit facilities ("Credit Facilities") with
four banks that are renewable annually. These Credit Facilities provide working
capital, letters of credit, and acquisition and development financing of $9.0
million, $4.4 million and $51.5 million, respectively. As of September 30, 1997,
$2.7 million of letters of credit were outstanding, and $41.1 million of
acquisition and development lines had been committed. The annual rates charged
by the banks vary. Interest rates on the working capital lines range from London
Interbank Offered Rates ("LIBOR") plus 1.5% to prime and on the
acquisition/development facilities from LIBOR plus 1.75% to LIBOR plus 2.0%.
Annual fees of 1.0% to 1.5% are charged by the banks issuing letters of credit
under these facilities.
Long term obligations, including current maturities, which provide
funds for financing Centers and acquisitions, totaled approximately $108.7
million at September 30, 1997. These obligations are for varying amounts and for
terms that expire at varying times over the next 19 years. Interest rates on
outstanding obligations ranged from 3.81% to 10.75% at September 30, 1997. The
Company has been successful in obtaining permanent financing but uses its Credit
Facilities as interim sources of financing when appropriate.
The Company has various ongoing needs for capital, including (i)
working capital for operations; (ii) capital expenditures for its Centers or
other facilities; and (iii) capital expenditures for the development of new
Centers and potential acquisitions. During the remainder of 1997, the Company
expects to utilize approximately $9.3 million for the development of four
Centers and an addition to an existing Center; $1.3 million for Center
renovations; $1.9 million for other routine capital expenditures; and
approximately $3.0 million for acquisitions. The Company currently holds eight
Certificate of Need ("CON") approvals for 791 beds, which will be utilized to
open the above mentioned Centers and addition in 1998 and three centers in 1999.
The Company anticipates 1998 revenues from the new facility development to be
approximately $18.0 to $20.0 million based upon historical fill-up rates and the
current construction schedule. The cost of these projects range from $6.0 to
$7.5 million per 120-bed Center. Two of the CON approvals for 240 beds, which
are scheduled to open in 1999, have been appealed by other providers and,
therefore, are not yet final. Management believes when all sources of capital
are considered, including cash to be generated by operating activities, Credit
Facilities likely to be available, and other financing activities to be
undertaken, that sufficient capital resources will be available to carry out
anticipated undertakings during the next 12 to 24 months.
On September 29, 1997, the Company entered into a definitive merger
agreement with Extendicare Inc. ("Extendicare") pursuant to which Extendicare,
through an indirect wholly-owned United States subsidiary, commenced a tender
offer for any and all of the Company's outstanding shares at a price of $45.00
per share in cash. Under the merger agreement, the tender offer will be followed
by a merger in which shares of the Company not purchased in the tender offer
will be converted into the right to receive cash in the amount of $45.00 per
share. As a result of the merger, the Company will become an indirect subsidiary
of Extendicare. Upon consummation of the merger, Management believes that the
majority of the Company's outstanding debt will be refinanced by Extendicare's
lending institution.
Extendicare's tender offer commenced on October 3, 1997 and has been
extended through November 25, 1997; however, Extendicare may further extend the
expiration of the tender offer, as specified under the terms of the agreement.
All regulatory approvals have been received except from the Ohio State Board of
Pharmacy and the West Virginia Health Care Authority, which are expected to be
received by November 21, 1997. For additional information regarding the merger
agreement, refer to Extendicare's Schedule 14D-1 filed October 3, 1997, and
amended on October 30, 1997; and the Company's Schedule 14D-9 filed October 6,
1997.
FORWARD-LOOKING STATEMENTS
Certain oral statements made by management from time to time and
certain statements contained herein that are not historical facts are
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934 and because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Forward-looking statements,
including those in "Management's Discussion and Analysis of Financial Condition
and Results of Operations" are statements regarding the intent, belief or
current expectations, estimates or projections of the
11
<PAGE> 12
Company, its Directors or its Officers about the Company and the industry in
which it operates, and assumptions made by management, and include among other
items, (i) the Company's strategies regarding growth, including its intention to
develop additional Centers and to make acquisitions of Centers, pharmacies and
other related businesses; (ii) the Company's ability to continue to control
costs and to meet its liquidity and other financing needs; (iii) the Company's
ability to respond to changes in regulations; and (iv) the Company's ability to
earn additional revenues from managed care organizations and other payors and
its implementation of a business strategy in furtherance of achieving such
additional revenues. Although the Company believes that its expectations are
based on reasonable assumptions, it can give no assurance that the anticipated
results will occur.
Important factors that could cause the actual results to differ
materially from those in the forward- looking statements include, among other
items, (i) conditions in the capital markets, including the interest rate
environment and the availability of capital; (ii) changes in or failure to
comply with government regulations; (iii) changes in the competitive marketplace
that could affect the Company's revenue and/or cost bases, such as increased
competition, lack of qualified nursing, management or other personnel and
increased labor costs; and (iv) enactment of health care reform measures by
Congress and/or state legislatures, particularly in Ohio or Florida where most
of the Company's Centers are located.
Budget legislation recently passed by Congress has targeted the
Medicare program for reductions in spending growth of approximately $9.2 billion
for skilled nursing facilities over the next five years, primarily through the
implementation of a Medicare prospective payment program for skilled and
subacute services. The Medicare prospective rate, which reimburses for routine,
ancillary and capital costs, will be a blended rate based on 1995 facility costs
adjusted by an inflation factor and a national rate. The national rate is
subject to adjustment for case mix (acuity) and variation in geographic labor
costs. In January 1999, the initial year of a four year phase-in period, the
prospective rate will be based on 75% facility costs and 25% national rate. In
2000, the prospective rate will be based on 50% facility costs and 50% national
rate and so on until the year 2002 when the prospective rate will be 100%
national rate. Currently, the Company derives approximately 32% of its revenue
from Medicare. Additionally, the Congressional Budget Office has revised
economic projections which include Medicaid cuts of $2.4 billion to Medicaid
long term care providers over the next five years. Currently, the Company
derives approximately 32% of its revenues from Medicaid. Management believes
that in the initial year of the phase-in period of Medicare prospective payment,
the Company's reimbursement rates should not be lower than current rates and
could possibly be higher. However, until the rates are ultimately determined
under the prospective payment system, the Company will not be able to determine
the exact nature or long term financial impact of the legislative changes. The
Company can give no assurance that payments under such programs in the future
will remain at a level comparable to the present level or be sufficient to cover
the costs allocable to serving its Medicare and Medicaid patients. Concern about
the potential effects of the budget legislation has contributed to the
volatility of prices of securities of companies in health care and related
industries. See "Item 1. Business - Sources of Revenue" and "-Government
Regulation - Government Reimbursement Programs" included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
------------------
None
Item 2. Changes in Securities.
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other Information
-----------------
None
12
<PAGE> 13
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
3.1 Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1
of the Company's Registration Statement on Form S-3 (File No. 33-93470) filed June 14, 1995
under the Securities Act of 1933).
3.2 Restated bylaws of the Company (incorporated by reference to Exhibit 3.2 of the Company's
Registration Statement on Form S-3 (File No. 33-93470) filed June 14, 1995 under the Securities
Act of 1933).
4.1 Loan Agreement dated July 11, 1997 between the Company and The Provident Bank.
4.2 Promissory Note dated June 30, 1997 between the Company and The Provident Bank (incorporated by
reference to Exhibit 4.1 of the Company's 10-Q for the quarter ended June 30, 1997 which
Exhibit was omitted from the Exhibit Index of said Form 10-Q).
4.3 Demand Note dated June 2, 1997 between The Druggist, Inc. and National City Bank, Columbus
(incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the quarter ended June 30,
1997, which Exhibit was referred to as Exhibit 4.1 in the Exhibit Index of said Form 10-Q).
4.4 Promissory Note dated June 2, 1997 between The Druggist, Inc. and National City Bank of
Columbus (incorporated by reference to Exhibit 4.3 of the Company's 10-Q for the quarter ended
June 30, 1997, which Exhibit was referred to as Exhibit 4.2 in the Exhibit Index of said Form
10-Q).
4.5 Third Amendment to Amended and Restated Loan Agreement dated March 28, 1997 between the Company
and Bank One, Lima, NA. (incorporated by reference to Exhibit 4.1 of the Company's 10-Q for the
quarter ended March 31, 1997).
4.6 Revolving Credit Note dated March 28, 1997 between the Company and Bank One, Lima, NA
(incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the quarter ended March 31,
1997).
4.7 Time Note dated March 10, 1997 between the Company and Capital Bank, NA (incorporated by
reference to Exhibit 4.3 of the Company's 10-Q for the quarter ended March 31, 1997).
4.8 Term Loan Agreement dated January 15, 1997 between the Company and Capital Bank, NA
(incorporated by reference to Exhibit 4.4 of the Company's 10-Q for the quarter ended March 31,
1997).
4.9 Open End Mortgage dated January 15, 1997 between the Company and Capital Bank, NA (incorporated
by reference to Exhibit 4.5 of the Company's 10-Q for the quarter ended March 31, 1997).
4.10 Second Amendment to Amended and Restated Loan Agreement dated December 30, 1996 between the
Company and Bank One, Lima, NA (incorporated by reference to Exhibit 4.1 of the Company's 10-K
for the year ended December 31, 1996).
4.11 Loan Agreement dated August 9, 1996 between the Company and The Provident Bank (incorporated by
reference to Exhibit 4.2 of the Company's 10-K for the year ended December 31, 1996).
4.12 Second Amended and Restated Revolving Credit and Term Loan Agreement dated June 28, 1996
between the Company and KeyBank National Association, fka Society National Bank (incorporated
by reference to Exhibit 4.1 of the Company's 10-Q for the quarter ended June 30, 1996).
4.13 Loan Agreement extension letter dated April 11, 1996 between the Company and The Fifth Third
Bank (incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the quarter ended June
30, 1996).
4.14 Promissory Note dated February 15, 1996 between the Company and Capital One Funding Corporation
(incorporated by reference to Exhibit 4.1 of the Company's 10-Q for the quarter ended March 31,
1996).
4.15 Reimbursement Agreement dated February 12, 1996 between the Company and Bank One, Kentucky,
N.A. (incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the quarter ended
March 31, 1996).
4.16 Open-End Mortgage and Security Agreement dated February 12, 1996 between the Company and Bank
One, Kentucky, N.A. (incorporated by reference to Exhibit 4.3 of the Company's 10-Q for the
quarter ended March 31, 1996).
4.17 Mortgage and Security Agreements (5) dated February 12, 1996 between the Company and Bank One,
Kentucky, N.A. (incorporated by reference to Exhibit 4.4 of the Company's 10-Q for the quarter
ended March 31, 1996).
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.18 Assignments of Leases and Rents (6) dated February 12, 1996 between the Company and Bank One,
Kentucky, N.A. (incorporated by reference to Exhibit 4.5 of the Company's 10-Q for the quarter
ended March 31, 1996).
4.19 Guaranty Agreement dated February 12, 1996 between the Company and Bank One, Kentucky, N.A.
(incorporated by reference to Exhibit 4.6 of the Company's 10-Q for the quarter ended March 31,
1996).
4.20 Contingent Guaranty Agreement dated February 12, 1996 between the Company and Bank One,
Kentucky, N.A. (incorporated by reference to Exhibit 4.7 of the Company's 10-Q for the quarter
ended March 31, 1996).
4.21 Working Capital Line of Credit extension letter dated March 31, 1996 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.8 of the Company's 10-Q for the
quarter ended March 31, 1996).
4.22 Letter of Credit extension letter dated March 31, 1996 between the Company and Society National
Bank (incorporated by reference to Exhibit 4.9 of the Company's 10-Q for the quarter ended
March 31, 1996).
4.23 Acquisition and Development Revolving Credit Facility extension letter dated March 31, 1996
between the Company and Society National Bank (incorporated by reference to Exhibit 4.10 of the
Company's 10- Q for the quarter ended March 31, 1996).
4.24 Second Amendment to Amended and Restated Revolving Credit and Term Loan Agreement dated
February 9, 1996 between the Company and Society National Bank (incorporated by reference to Exhibit
4.11 of the Company's 10-Q for the quarter ended March 31, 1996).
4.25 Amendment to Amended and Restated Loan Agreement dated February 1, 1996 between the Company
and Bank One, Lima, N.A. (incorporated by reference to Exhibit 4.12 of the Company's 10-Q for the
quarter ended March 31, 1996).
4.26 Acquisition and Development Revolving Credit Facility extension letter dated March 31, 1996
between the Company and Society National Bank (incorporated by reference to Exhibit 4.1 of the
Company's 10-K for the year ended December 31, 1995).
4.27 Working Capital Line of Credit extension letter dated December 21, 1995 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.2 of the Company's 10-K for the
year ended December 31, 1995).
4.28 Letter of Credit extension letter dated December 21, 1995 between the Company and Society
National Bank (incorporated by reference to Exhibit 4.3 of the Company's 10-K for the year
ended December 31, 1995).
4.29 Second Amended and Restated Demand Promissory Note dated December 28, 1995 between the Company
and Society National Bank (incorporated by reference to Exhibit 4.4 of the Company's 10-K for
the year ended December 31, 1995).
4.30 Amended and Restated Revolving Credit and Term Loan Agreement dated June 1, 1995 between the
Company and Society National Bank (incorporated by reference to Exhibit 4.5 of the Company's
10-K for the year ended December 31, 1995).
4.31 Amendment to Loan Agreement dated September 14, 1995 between the Company and The Provident Bank
(incorporated by reference to Exhibit 4.1 of the Company's 10-Q for the quarter ended September
30, 1995).
4.32 Acquisition and Development Revolving Credit Facility extension letter dated August 31, 1995
between the Company and Society National Bank (incorporated by reference to Exhibit 4.2 of the
Company's 10-Q for the quarter ended September 30, 1995).
4.33 Working Capital Line of Credit extension letter dated August 31, 1995 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.3 of the Company's 10-Q for the
quarter ended September 30, 1995).
4.34 Letter of Credit extension letter dated August 31, 1995 between the Company and Society
National Bank (incorporated by reference to Exhibit 4.4 of the Company's 10-Q for the quarter
ended September 30, 1995).
4.35 Loan Agreement dated August 1, 1995 between the Company and The Provident Bank (incorporated by
reference to Exhibit 4.5 of the Company's 10-Q for the quarter ended September 30, 1995).
4.36 Amended and Restated Loan Agreement dated August 1, 1995 between the Company and Bank One,
Lima, NA (incorporated by reference to Exhibit 4.6 of the Company's 10-Q for the quarter ended
September 30, 1995).
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.37 Amendment to Amended and Restated Revolving Credit and Term Loan Agreement dated June 30, 1995
between the Company and Society National Bank (incorporated by reference to Exhibit 4.1 of the
Company's 10-Q for the quarter ended June 30, 1995).
4.38 Amendment to Loan Agreement dated June 30, 1995 between the Company and The Provident Bank
(incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the quarter ended June 30,
1995).
4.39 Amendment to Loan Agreement dated June 29, 1995 between the Company and Bank One (incorporated
by reference to Exhibit 4.3 of the Company's 10-Q for the quarter ended June 30, 1995).
4.40 Amendment to Loan Agreement dated June 30, 1995 between the Company and The Fifth Third Bank
(incorporated by reference to Exhibit 4.4 of the Company's 10-Q for the quarter ended June 30,
1995).
4.41 Acquisition and Development Revolving Credit Facility extension letter dated June 1, 1995
between the Company and Society National Bank (incorporated by reference to Exhibit 4.5 of the
Company's 10-Q for the quarter ended June 30, 1995).
4.42 Working Capital Line of Credit extension letter dated June 1, 1995 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.6 of the Company's 10-Q for the
quarter ended June 30, 1995).
4.43 Letter of Credit extension letter dated June 1, 1995 between the Company and Society National
Bank (incorporated by reference to Exhibit 4.7 of the Company's 10-Q for the quarter ended June
30, 1995).
4.44 Loan Agreement amendment dated May 31, 1995 between the Company and Bank One (incorporated by
reference to Exhibit 4.8 of the Company's 10-Q for the quarter ended June 30, 1995).
4.45 Loan Agreement extension letter dated May 29, 1995 between the Company and The Provident Bank
(incorporated by reference to Exhibit 4.9 of the Company's 10-Q for the quarter ended June 30,
1995).
4.46 Loan Agreement extension letter dated March 22, 1995 between the Company and The Provident Bank
(incorporated by reference to Exhibit 4.1 of the Company's 10-Q for the quarter ended March 31,
1995).
4.47 Line of Credit for Letters of Credit Agreement dated November 10, 1994 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.1 of the Company's 10-K for the
year ended December 31, 1994).
4.48 Loan Agreement extension letter dated September 16, 1994 between the Company and The Provident
Bank (incorporated by reference to Exhibit 4.1 of the Company's 10-Q for the quarter ended
September 30, 1994).
4.49 Acquisition and Development Revolving Credit Facility extension letter dated August 31, 1994
between the Company and Society National Bank (incorporated by reference to Exhibit 4.2 of the
Company's 10- Q for the quarter ended September 30, 1994).
4.50 Working Capital Line of Credit extension letter dated August 31, 1994 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.3 of the Company's 10-Q for the
quarter ended September 30, 1994).
4.51 Letter of Credit extension letter dated August 31, 1994 between the Company and Society
National Bank (incorporated by reference to Exhibit 4.4 of the Company's 10-Q for the quarter
ended September 30, 1994).
4.52 Loan Agreement amendment dated September 15, 1994 between the Company and Bank One
(incorporated by reference to Exhibit 4.5 of the Company's 10-Q for the quarter ended September
30, 1994).
4.53 Revolving Credit and Term Loan Agreement dated April 11, 1994 between the Company and The Fifth
Third Bank (incorporated by reference to Exhibit 4.1 of the Company's 10-Q for the quarter
ended June 30, 1994).
4.54 Loan Agreement extension letter dated May 25, 1994 between the Company and The Provident Bank
(incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the quarter ended June 30,
1994).
4.55 Acquisition and Development Revolving Credit Facility extension letter dated May 18, 1994
between the Company and Society National Bank (incorporated by reference to Exhibit 4.3 of the
Company's 10- Q for the quarter ended June 30, 1994).
4.56 Acquisition and Development Revolving Credit Facility extension letter dated July 31, 1994
between the Company and Society National Bank (incorporated by reference to Exhibit 4.4 of the
Company's 10- Q for the quarter ended June 30, 1994).
4.57 Working Capital Line of Credit extension letter dated May 16, 1994 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.5 of the Company's 10-Q for the
quarter ended June 30, 1994).
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.58 Working Capital Line of Credit extension letter dated July 31, 1994 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.6 of the Company's 10-Q for the
quarter ended June 30, 1994).
4.59 Letter of Credit extension dated May 18, 1994 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.7 of the Company's 10-Q for the quarter ended June 30,
1994).
4.60 Letter of Credit extension letter dated July 31, 1994 between the Company and Society National
Bank (incorporated by reference to Exhibit 4.8 of the Company's 10-Q for the quarter ended June
30, 1994).
4.61 Loan Agreement dated December 21, 1993 between the Company and Bank One, Lima, NA (incorporated
by reference to Exhibit 4.1 of the Company's 10-K for the year ended December 31, 1993).
4.62 Revolving Credit and Term Loan Agreement dated August 11, 1993 between the Company and The
Provident Bank (incorporated by reference to Exhibit 4.1 of the Company's 10-Q for the quarter
ended September 30, 1993).
4.63 Revolving Credit and Term Loan Agreement dated September 30, 1993 between the Company and
Society Bank & Trust (incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the
quarter ended September 30, 1993).
4.64 Revolving Credit and Term Loan Agreement dated June 30, 1992 between the Company and Society
Bank & Trust (incorporated by reference to Exhibit 4.3 of the Company's Registration Statement
on Form S-1 (File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
4.65 Line of Credit Agreement dated June 22, 1993 between the Company and Society Bank & Trust
(incorporated by reference to Exhibit 4.4 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
4.66 Loan Agreement between the Company and The Provident Bank dated September 9, 1992 (incorporated
by reference to Exhibit 4.5 of the Company's Registration Statement on Form S-1 (File No.
33-65080) filed June 25, 1993 under the Securities Act of 1933).
4.67 Loan Agreement between the Company and Bank One, Lima, NA dated December 7, 1992 (incorporated
by reference to Exhibit 4.6 of the Company's Registration Statement on Form S-1 (File No.
33-65080) filed June 25, 1933 under the Securities Act of 1933).
4.68 Commitment Letter dated May 28, 1993 from Bank One, Lima, NA, accepted by the Company June 7,
1993 (incorporated by reference to Exhibit 4.7 of the Company's Registration Statement on Form
S-1 (File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
4.69 Mortgage and Security Agreement between the Company and Southtrust Bank of Alabama, National
Association, dated September 29, 1992 (incorporated by reference to Exhibit 4.8 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the
Securities Act of 1933).
4.70 Commitment Letter dated as of May 30, 1993, from Society Bank & Trust for revolving credit
facility, accepted by the Company June 22, 1993 (incorporated by reference to Exhibit 4.9 of
the Company's Registration Statement on Form S-1 (File No. 33-65080) filed July 9, 1993 under
the Securities Act of 1933).
4.71 Commitment Letter dated as of July 1, 1993, from The Provident Bank, informing the Company of
reaffirmation of line of credit (incorporated by reference to Exhibit 4.10 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed July 9, 1993 under the Securities
Act of 1933). (The Company is not filing any instrument with respect to long-term debt that
does not exceed 10 percent of the total assets of the Company, and the Company agrees to
furnish a copy of any such instrument to the Commission upon request).
10.1 Asset Purchase Agreement dated September 10, 1997 between the Company; and Barnes E. Sale, III,
Don J. Hunter, Arthur J. Collier, James E. Harrison and David A. Shelton, owners of all the
outstanding capital stock of Jacksonville Group, Inc.; Robert M. Weldon, Arthur J. Collier and
Dan W. Weldon, owners of all the outstanding capital stock of Center for Sports Physical
Therapy, Inc.; Don J. Hunter, owner of all the outstanding capital stock of Jacksonville
Rehabilitation Center, Inc.
10.2 Share Purchase Agreement dated July 31, 1997 between the Company and Paulette Najarian-Knight
and Paulette Najarian-Knight Trustee of Paulette Najarian-Knight Charitable Trust.
10.3 Lease Agreement dated July 23, 1997 between the Company and Pinecrest Care Center.
10.4 Asset Purchase Agreement dated July 15, 1997 between the Company and Total Living Care of St.
Augustine, Inc. and Tony J. Marchio.
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.5+ Amendment No. 1 to Arbor Health Care Company 1995 Stock Option Plan (incorporated by reference
to Exhibit 10.1 of the Company's 10-Q f or the quarter ended June 30, 1997).
10.6+ Arbor Health Care Company Employee Stock Purchase Plan (incorporated by reference to the
Company's Proxy Statement dated April 18, 1997).
10.7 Share Purchase Agreement dated December 16, 1996 between the Company and Diane S. Bartoli, sole
shareholder of Adult Services Unlimited, Inc. and Health Poconos, Inc. (incorporated by
reference to Exhibit 10.1 of the Company's 10-K for the year ended December 31, 1996).
10.8+ Key Executive Termination Payment Plan dated June 1, 1996 (incorporated by reference to Exhibit
10.2 of the Company's 10-K for the year ended December 31, 1996)
10.9+ Description of 1996 Bonus Plans for Named Executive Officers (incorporated by reference to
Exhibit 10.3 of the Company's 10-K for the year ended December 31, 1996).
10.10 Purchase and Sale Agreement dated September 19, 1996 between the Company and Cumberland
Healthcare, L.P. I-C. (incorporated by reference to Exhibit 10.1 of the Company's 10-Q for the
quarter ended September 30, 1996).
10.11 Share Purchase Agreement dated June 30, 1996 between the Company and Robert Q. Baker, sole
shareholder of Poly-Stat Supply Corporation(incorporated by reference to Exhibit 10.1 of the
Company's 10-Q for the quarter ended June 30, 1996).
10.12 Share Purchase Agreement dated June 30, 1996 between the Company and Robert Q. Baker and
Richard E. Moon, shareholders of Poly-Stat Computer Applications, Inc (incorporated by
reference to Exhibit 10.2 of the Company's 10-Q for the quarter ended June 30, 1996).
10.13 Second Amendment to Lease Agreement dated March 18, 1996 between the Company and V & V
Properties (incorporated by reference to Exhibit 10.1 of the Company's 10-Q for the quarter
ended March 31, 1996).
10.14+ Arbor Health Care Company 1996 Stock Option Plan for Non-Employee Directors (incorporated by
reference to the Company's Proxy Statement dated April 8, 1996).
10.15+ Description of 1995 Bonus Plans for Named Executive Officers (incorporated by reference to
Exhibit 10.1 of the Company's 10-K for the year ended December 31, 1995).
10.16 Asset Purchase Agreement dated April 28, 1995 between the Company and Fairlawn Associates
Limited Partnership (incorporated by reference to Exhibit 10.1 of the Company's 10-Q for the
quarter ended June 30, 1995).
10.17 Amendment to Asset Purchase Agreement dated June 1, 1995 between the Company and Fairlawn
Associates Limited Partnership (incorporated by reference to Exhibit 10.2 of the Company's 10-Q
for the quarter ended June 30, 1995).
10.18 Agreement of Merger dated June 30, 1995 between the Company, Green Tree Pharmacy, Inc., Allan
K. Vrable and The Druggist, Inc. (incorporated by reference to Exhibit 10.3 of the Company's
10-Q for the quarter ended June 30, 1995).
10.19 Addendum to Agreement of Merger dated June 30, 1995 between the Company, Green Tree Pharmacy,
Inc., Allan K. Vrable and The Druggist, Inc. (incorporated by reference to Exhibit 10.4 of the
Company's 10-Q for the quarter ended June 30, 1995).
10.20 Share Purchase Agreement dated June 30, 1995 between the Company and Allan K. Vrable, sole
shareholder of Alternacare Plus Enterprises, Inc. (incorporated by reference to Exhibit 10.5 of
the Company's 10-Q for the quarter ended June 30, 1995).
10.21+ Employment Agreement dated June 30, 1995 between the Company and Allan K. Vrable (incorporated
by reference to Exhibit 10.6 of the Company's 10-Q for the quarter ended June 30, 1995).
10.22+ Arbor Health Care Company 1995 Stock Option Plan (incorporated by reference to the Company's
Proxy Statement dated April 24, 1995)
10.23 Share Purchase Agreement dated June 30, 1994 between the Company and the Stockholders of Bay
Geriatric Pharmacy, Inc. and Home Care Pharmacy, Inc. of Florida (incorporated by reference to
Exhibit 10.1 of the Company's 10-K for the year ended December 31, 1994).
10.24 Lease Agreement between Highland Oaks Associates, LTD., and Bay Geriatric Pharmacy, dated May
23, 1991 (incorporated by reference to Exhibit 10.2 of the Company's 10-K for the year ended
December 31, 1994).
10.25 Lease Agreement between FGHP Properties, Limited Partnership and Home Care Pharmacy, Inc. of
Florida, dated March 24, 1993 (incorporated by reference to Exhibit 10.3 of the Company's 10-K
for the year ended December 31, 1994).
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.26 First Amendment to lease between the Company and Semi Cane Investments, Inc., as Successor in
Interest to Great Western Bank dated June 17, 1994 (incorporated by reference to Exhibit 10.4
of the Company's 10-K for the year ended December 31, 1994).
10.27 First Amendment to Lease Agreement dated March 11, 1994 between the Company and V & V
Properties (incorporated by reference to Exhibit 10.5 of the Company's 10-K for the year ended
December 31, 1994).
10.28 Management Agreement between the Company and Fairlawn Nursing Home and Assisted Living, Inc.
dated June 9, 1986, and amendments thereto dated June 13, 1986, October 1, 1990, and January 1,
1993 (incorporated by reference to Exhibit 10.1 of the Company's Registration Statement on Form
S-1 (File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.29 Lease Agreement between the Company and V & V Properties, dated June 2, 1988 (incorporated by
reference to Exhibit 10.2 of the Company's Registration Statement on Form S-1 (File No.
33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.30 Operating Lease between the Company and Health Care Property Investors, Inc., dated January 31,
1986, as amended September 11, 1991 (incorporated by reference to Exhibit 10.3 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the Securities
Act of 1933).
10.31 Business Property Lease between the Company and Office World, Inc. dated July 1, 1992
(incorporated by reference to Exhibit 10.4 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.32 Lease Agreement between the Company and Great Western Bank, dated July 1, 1992 (incorporated by
reference to Exhibit 10.5 of the Company's Registration Statement on Form S-1 (File No.
33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.33 Operating Lease between the Company and Health Care Property Investors, Inc., dated January 31,
1986, as amended September 11, 1991 (incorporated by reference to Exhibit 10.6 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the Securities
Act of 1933).
10.34 Office Lease between the Company and NFI MetroCenter II Associates dated November 15, 1992
(incorporated by reference to Exhibit 10.7 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.35 Lease Agreement between the Company and Marie Antoinette Partners, dated April 2, 1986
(incorporated by reference to Exhibit 10.8 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.36 Facility Lease by and between the Company and Cumberland Healthcare, L.P., I-C, dated February
1, 1989, as amended November 15, 1991 (incorporated by reference to Exhibit 10.9 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the
Securities Act of 1933).
10.37 Lease and Security Agreement between BIP SUB I, INC. and Arbors East, Inc. dated April 1, 1991
(incorporated by reference to Exhibit 10.10 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.38 Operating Lease between the Company and Health Care Properties Investors, Inc. dated December
30, 1986 and Addendum dated March 23, 1987 (incorporated by reference to Exhibit 10.11 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the
Securities Act of 1933).
10.39+ First Amended and Restated Incentive Stock Option Plan dated November 26, 1991 (incorporated by
reference to Exhibit 10.12 of the Company's Registration Statement on Form S-1 (File No.
33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.40 Management Agreement dated September 28, 1989 between the Company and The Druggist, Inc., as
amended June 30, 1991 (incorporated by reference to Exhibit 10.14 of the Company's Registration
Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the Securities Act of
1933).
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.41 Assignment and Assumption of Management Agreement dated January 4, 1989 among the Company,
Fairlawn Nursing Home and Assisted Living, Inc., and Fairlawn Associates Limited Partnership,
relating to Management Agreement previously filed as Exhibit 10.1 of the Company's Registration
Statement on Form S-1 filed on June 25, 1993 (File No. 33-65080) and incorporated by reference
herein (incorporated by reference to Exhibit 10.16 of the Company's Registration Statement on
Form S-1 (File No. 33-65080) filed July 9, 1993 under the Securities Act of 1933).
10.42+ Certificate of Amendment dated July 7, 1993, to First Amended and Restated Incentive Stock
Option Plan previously filed as Exhibit 10.12 of the Company's Registration Statement on Form
S-1 (File No. 33- 65080) and incorporated by reference herein (incorporated by reference to
Exhibit 10.17 of the Company's Registration Statement on Form S-1 (File No. 33-65080) filed
July 9, 1993 under the Securities Act of 1933).
10.43 Land Lease Agreement between the Company and the Chesapeake and Potomac Telephone Company of
West Virginia dated June 24, 1993 (incorporated by reference to Exhibit 10.18 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed July 29, 1993 under the Securities
Act of 1933).
10.44+ Form of Indemnification Agreement between the Company and its Directors and Executive Officers
(incorporated by reference to Exhibit 10.19 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed July 29, 1993 under the Securities Act of 1933).
11.1 Statement Re Computation of Net Income Per Share.
27.1 Financial Data Schedule.
</TABLE>
+Executive management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K
None
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARBOR HEALTH CARE COMPANY
(Registrant)
Date 11/6/97 By: /s/ DENNIS R. SMITH
---------- -----------------------------------------
Dennis R. Smith, Senior Vice President -
Finance and Chief Financial Officer
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
3.1* Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1
of the Company's Registration Statement on Form S-3 (File No. 33-93470) filed June 14, 1995
under the Securities Act of 1933).
3.2* Restated bylaws of the Company (incorporated by reference to Exhibit 3.2 of the Company's
Registration Statement on Form S-3 (File No. 33-93470) filed June 14, 1995 under the Securities
Act of 1933).
4.1 Loan Agreement dated July 11, 1997 between the Company and The Provident Bank.
4.2* Promissory Note dated June 30, 1997 between the Company and The Provident Bank (incorporated by
reference to Exhibit 4.1 of the Company's 10-Q for the quarter ended June 30, 1997 which
Exhibit was omitted from the Exhibit Index of said Form 10-Q).
4.3* Demand Note dated June 2, 1997 between The Druggist, Inc. and National City Bank, Columbus
(incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the quarter ended June 30,
1997, which Exhibit was referred to as Exhibit 4.1 in the Exhibit Index of said Form 10-Q).
4.4* Promissory Note dated June 2, 1997 between The Druggist, Inc. and National City Bank, Columbus
(incorporated by reference to Exhibit 4.3 of the Company's 10-Q for the quarter ended June 30,
1997, which Exhibit was referred to as Exhibit 4.2 in the Exhibit Index of said Form 10-Q).
4.5* Third Amendment to Amended and Restated Loan Agreement dated March 28, 1997 between the Company
and Bank One, Lima, NA (incorporated by reference to Exhibit 4.1 of the Company 10-Q for the
quarter ended March 31, 1997).
4.6* Revolving Credit Note dated March 28, 1997 between the Company and Bank One, Lima, NA
(incorporated by reference to Exhibit 4.2 of the Company 10-Q for the quarter ended March 31,
1997).
4.7* Time Note dated March 10, 1997 between the Company and Capital Bank, NA (incorporated by
reference to Exhibit 4.3 of the Company 10-Q for the quarter ended March 31, 1997).
4.8* Term Loan Agreement dated January 15, 1997 between the Company and Capital Bank, NA
(incorporated by reference to Exhibit 4.4 of the Company 10-Q for the quarter ended March 31,
1997).
4.9* Open End Mortgage dated January 15, 1997 between the Company and Capital Bank, NA (incorporated
by reference to Exhibit 4.5 of the Company 10-Q for the quarter ended March 31, 1997).
4.10* Second Amendment to Amended and Restated Loan Agreement dated December 30, 1996 between the
Company and Bank One, Lima, NA (incorporated by reference to Exhibit 4.1 of the Company's 10-K
for the year ended December 31, 1996).
4.11* Loan Agreement dated August 9, 1996 between the Company and The Provident Bank (incorporated by
reference to Exhibit 4.2 of the Company's 10-K for the year ended December 31, 1996).
4.12* Second Amended and Restated Revolving Credit and Term Loan Agreement dated June 28, 1996
between the Company and KeyBank National Association, fka Society National Bank (incorporated
by reference to Exhibit 4.1 of the Company's 10-Q for the quarter ended June 30, 1996).
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.13* Loan Agreement extension letter dated April 11, 1996 between the Company and The Fifth Third
Bank (incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the quarter ended June
30, 1996).
4.14* Promissory Note dated February 15, 1996 between the Company and Capital One Funding Corporation
(incorporated by reference to Exhibit 4.1 of the Company's 10-Q for the quarter ended March 31,
1996).
4.15* Reimbursement Agreement dated February 12, 1996 between the Company and Bank One, Kentucky,
N.A. (incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the quarter ended
March 31, 1996).
4.16* Open-End Mortgage and Security Agreement dated February 12, 1996 between the Company and Bank
One, Kentucky, N.A. (incorporated by reference to Exhibit 4.3 of the Company's 10-Q for the
quarter ended March 31, 1996).
4.17* Mortgage and Security Agreements (5) dated February 12, 1996 between the Company and Bank One,
Kentucky, N.A. (incorporated by reference to Exhibit 4.4 of the Company's 10-Q for the quarter
ended March 31, 1996).
4.18* Assignments of Leases and Rents (6) dated February 12, 1996 between the Company and Bank One,
Kentucky, N.A. (incorporated by reference to Exhibit 4.5 of the Company's 10-Q for the quarter
ended March 31, 1996).
4.19* Guaranty Agreement dated February 12, 1996 between the Company and Bank One, Kentucky, N.A.
(incorporated by reference to Exhibit 4.6 of the Company's 10-Q for the quarter ended March 31,
1996).
4.20* Contingent Guaranty Agreement dated February 12, 1996 between the Company and Bank One,
Kentucky, N.A. (incorporated by reference to Exhibit 4.7 of the Company's 10-Q for the quarter
ended March 31, 1996).
4.21* Working Capital Line of Credit extension letter dated March 31, 1996 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.8 of the Company's 10-Q for the
quarter ended March 31, 1996).
4.22* Letter of Credit extension letter dated March 31, 1996 between the Company and Society National
Bank (incorporated by reference to Exhibit 4.9 of the Company's 10-Q for the quarter ended
March 31, 1996).
4.23* Acquisition and Development Revolving Credit Facility extension letter dated March 31, 1996
between the Company and Society National Bank (incorporated by reference to Exhibit 4.10 of the
Company's 10- Q for the quarter ended March 31, 1996).
4.24* Second Amendment to Amended and Restated Revolving Credit and Term Loan Agreement dated
February 9, 1996 between the Company and Society National Bank (incorporated by reference to
Exhibit 4.11 of the Company's 10-Q for the quarter ended March 31, 1996).
4.25* Amendment to Amended and Restated Loan Agreement dated February 1, 1996 between the Company and
Bank One, Lima, N.A. (incorporated by reference to Exhibit 4.12 of the Company's 10-Q for the
quarter ended March 31, 1996).
4.26* Acquisition and Development Revolving Credit Facility extension letter dated March 31, 1996
between the Company and Society National Bank (incorporated by reference to Exhibit 4.1 of the
Company's 10-K for the year ended December 31, 1995).
4.27* Working Capital Line of Credit extension letter dated December 21, 1995 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.2 of the Company's 10-K for the
year ended December 31, 1995).
4.28* Letter of Credit extension letter dated December 21, 1995 between the Company and Society
National Bank (incorporated by reference to Exhibit 4.3 of the Company's 10-K for the year
ended December 31, 1995).
4.29* Second Amended and Restated Demand Promissory Note dated December 28, 1995 between the Company
and Society National Bank (incorporated by reference to Exhibit 4.4 of the Company's 10-K for
the year ended December 31, 1995).
4.30* Amended and Restated Revolving Credit and Term Loan Agreement dated June 1, 1995 between the
Company and Society National Bank (incorporated by reference to Exhibit 4.5 of the Company's
10-K for the year ended December 31, 1995).
4.31* Amendment to Loan Agreement dated September 14, 1995 between the Company and The Provident Bank
(incorporated by reference to Exhibit 4.1 of the Company's 10-Q for the quarter ended September
30, 1995).
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.32* Acquisition and Development Revolving Credit Facility extension letter dated August 31, 1995 between
the Company and Society National Bank (incorporated by reference to Exhibit 4.2 of the Company's 10-Q
for the quarter ended September 30, 1995).
4.33* Working Capital Line of Credit extension letter dated August 31, 1995 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.3 of the Company's 10-Q for the
quarter ended September 30, 1995).
4.34* Letter of Credit extension letter dated August 31, 1995 between the Company and Society
National Bank (incorporated by reference to Exhibit 4.4 of the Company's 10-Q for the quarter
ended September 30, 1995).
4.35* Loan Agreement dated August 1, 1995 between the Company and The Provident Bank (incorporated by
reference to Exhibit 4.5 of the Company's 10-Q for the quarter ended September 30, 1995).
4.36* Amended and Restated Loan Agreement dated August 1, 1995 between the Company and Bank One,
Lima, NA (incorporated by reference to Exhibit 4.6 of the Company's 10-Q for the quarter ended
September 30, 1995).
4.37* Amendment to Amended and Restated Revolving Credit and Term Loan Agreement dated June 30, 1995
between the Company and Society National Bank (incorporated by reference to Exhibit 4.1 of the
Company's 10-Q for the quarter ended June 30, 1995).
4.38* Amendment to Loan Agreement dated June 30, 1995 between the Company and The Provident Bank
(incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the quarter ended June 30,
1995).
4.39* Amendment to Loan Agreement dated June 29, 1995 between the Company and Bank One (incorporated
by reference to Exhibit 4.3 of the Company's 10-Q for the quarter ended June 30, 1995).
4.40* Amendment to Loan Agreement dated June 30, 1995 between the Company and The Fifth Third Bank
(incorporated by reference to Exhibit 4.4 of the Company's 10-Q for the quarter ended June 30,
1995).
4.41* Acquisition and Development Revolving Credit Facility extension letter dated June 1, 1995
between the Company and Society National Bank (incorporated by reference to Exhibit 4.5 of the
Company's 10-Q for the quarter ended June 30, 1995).
4.42* Working Capital Line of Credit extension letter dated June 1, 1995 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.6 of the Company's 10-Q for the
quarter ended June 30, 1995).
4.43* Letter of Credit extension letter dated June 1, 1995 between the Company and Society National
Bank (incorporated by reference to Exhibit 4.7 of the Company's 10-Q for the quarter ended June
30, 1995).
4.44* Loan Agreement amendment dated May 31, 1995 between the Company and Bank One (incorporated by
reference to Exhibit 4.8 of the Company's 10-Q for the quarter ended June 30, 1995).
4.45* Loan Agreement extension letter dated May 29, 1995 between the Company and The Provident Bank
(incorporated by reference to Exhibit 4.9 of the Company's 10-Q for the quarter ended June 30,
1995).
4.46* Loan Agreement extension letter dated March 22, 1995 between the Company and The Provident Bank
(incorporated by reference to Exhibit 4.1 of the Company's 10-Q for the quarter ended March 31,
1995).
4.47* Line of Credit for Letters of Credit Agreement dated November 10, 1994 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.1 of the Company's 10-K for the
year ended December 31, 1994).
4.48* Loan Agreement extension letter dated September 16, 1994 between the Company and The Provident
Bank (incorporated by reference to Exhibit 4.1 of the Company's 10-Q for the quarter ended
September 30, 1994).
4.49* Acquisition and Development Revolving Credit Facility extension letter dated August 31, 1994
between the Company and Society National Bank (incorporated by reference to Exhibit 4.2 of the
Company's 10- Q for the quarter ended September 30, 1994).
4.50* Working Capital Line of Credit extension letter dated August 31, 1994 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.3 of the Company's 10-Q for the
quarter ended September 30, 1994).
4.51* Letter of Credit extension letter dated August 31, 1994 between the Company and Society
National Bank (incorporated by reference to Exhibit 4.4 of the Company's 10-Q for the quarter
ended September 30, 1994).
4.52* Loan Agreement amendment dated September 15, 1994 between the Company and Bank One
(incorporated by reference to Exhibit 4.5 of the Company's 10-Q for the quarter ended September
30, 1994).
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.53* Revolving Credit and Term Loan Agreement dated April 11, 1994 between the Company and The Fifth
Third Bank (incorporated by reference to Exhibit 4.1 of the Company's 10-Q for the quarter
ended June 30, 1994).
4.54* Loan Agreement extension letter dated May 25, 1994 between the Company and The Provident Bank
(incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the quarter ended June 30,
1994).
4.55* Acquisition and Development Revolving Credit Facility extension letter dated May 18, 1994
between the Company and Society National Bank (incorporated by reference to Exhibit 4.3 of the
Company's 10- Q for the quarter ended June 30, 1994).
4.56* Acquisition and Development Revolving Credit Facility extension letter dated July 31, 1994
between the Company and Society National Bank (incorporated by reference to Exhibit 4.4 of the
Company's 10- Q for the quarter ended June 30, 1994).
4.57* Working Capital Line of Credit extension letter dated May 16, 1994 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.5 of the Company's 10-Q for the
quarter ended June 30, 1994).
4.58* Working Capital Line of Credit extension letter dated July 31, 1994 between the Company and
Society National Bank (incorporated by reference to Exhibit 4.6 of the Company's 10-Q for the
quarter ended June 30, 1994).
4.59* Letter of Credit extension dated May 18, 1994 between the Company and Society National Bank
(incorporated by reference to Exhibit 4.7 of the Company's 10-Q for the quarter ended June 30,
1994).
4.60* Letter of Credit extension letter dated July 31, 1994 between the Company and Society National
Bank (incorporated by reference to Exhibit 4.8 of the Company's 10-Q for the quarter ended June
30, 1994).
4.61* Loan Agreement dated December 21, 1993 between the Company and Bank One, Lima, NA (incorporated
by reference to Exhibit 4.1 of the Company's 10-K for the year ended December 31, 1993).
4.62* Revolving Credit and Term Loan Agreement dated August 11, 1993 between the Company and The
Provident Bank (incorporated by reference to Exhibit 4.1 of the Company's 10-Q for the quarter
ended September 30, 1993).
4.63* Revolving Credit and Term Loan Agreement dated September 30, 1993 between the Company and
Society Bank & Trust (incorporated by reference to Exhibit 4.2 of the Company's 10-Q for the
quarter ended September 30, 1993).
4.64* Revolving Credit and Term Loan Agreement dated June 30, 1992 between the Company and Society
Bank & Trust (incorporated by reference to Exhibit 4.3 of the Company's Registration Statement
on Form S-1 (File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
4.65* Line of Credit Agreement dated June 22, 1993 between the Company and Society Bank & Trust
(incorporated by reference to Exhibit 4.4 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
4.66* Loan Agreement between the Company and The Provident Bank dated September 9, 1992 (incorporated
by reference to Exhibit 4.5 of the Company's Registration Statement on Form S-1 (File No.
33-65080) filed June 25, 1993 under the Securities Act of 1933).
4.67* Loan Agreement between the Company and Bank One, Lima, NA dated December 7, 1992 (incorporated
by reference to Exhibit 4.6 of the Company's Registration Statement on Form S-1 (File No.
33-65080) filed June 25, 1933 under the Securities Act of 1933).
4.68* Commitment Letter dated May 28, 1993 from Bank One, Lima, NA, accepted by the Company June 7,
1993 (incorporated by reference to Exhibit 4.7 of the Company's Registration Statement on Form
S-1 (File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
4.69* Mortgage and Security Agreement between the Company and Southtrust Bank of Alabama, National
Association, dated September 29, 1992 (incorporated by reference to Exhibit 4.8 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the
Securities Act of 1933).
4.70* Commitment Letter dated as of May 30, 1993, from Society Bank & Trust for revolving credit
facility, accepted by the Company June 22, 1993 (incorporated by reference to Exhibit 4.9 of
the Company's Registration Statement on Form S-1 (File No. 33-65080) filed July 9, 1993 under
the Securities Act of 1933).
</TABLE>
23
<PAGE> 24
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.71* Commitment Letter dated as of July 1, 1993, from The Provident Bank, informing the Company of
reaffirmation of line of credit (incorporated by reference to Exhibit 4.10 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed July 9, 1993 under the Securities
Act of 1933). (The Company is not filing any instrument with respect to long-term debt that
does not exceed 10 percent of the total assets of the Company, and the Company agrees to
furnish a copy of any such instrument to the Commission upon request).
10.1 Asset Purchase Agreement dated September 10, 1997 between the Company; and Barnes E. Sale, III,
Don J. Hunter, Arthur J. Collier, James E. Harrison and David A. Shelton, owners of all
outstanding capital stock of Jacksonville Group, Inc.; Robert M. Weldon, Arthur J. Collier and
Dan W. Weldon, owners of all the outstanding capital stock of Center for Sports Physical
Therapy , Inc.; Don J. Hunter, owner of the outstanding capital stock of Jacksonville
Rehabilitation Center, Inc.
10.2 Share Purchase Agreement dated July 31, 1997 between the Company and Paulette Najarian-Knight
and Paulette Najarian-Knight Trustee of Paulette Najarian-Knight Charitable Trust.
10.3 Lease Agreement dated July 23, 1997 between the Company and Pinecrest Care Center.
10.4 Asset Purchase Agreement dated July 15, 1997 between the Company and Total Living Care of St.
Augustine, Inc. and Tony J. Marchio.
10.5+* Amendment No. 1 to Arbor Health Care Company 1995 Stock Option Plan.
10.6+* Arbor Health Care Company Employee Stock Purchase Plan (incorporated by reference to the
Company's Proxy Statement dated April 18, 1997).
10.7* Share Purchase Agreement dated December 16, 1996 between the Company and Diane S. Bartoli, sole
shareholder of Adult Services Unlimited, Inc. and Health Poconos, Inc. (incorporated by
reference to Exhibit 10.1 of the Company's 10-K for the year ended December 31, 1996).
10.8+* Key Executive Termination Payment Plan dated June 1, 1996 (incorporated by reference to Exhibit
10.2 of the Company's 10-K for the year ended December 31, 1996)
10.9+* Description of 1996 Bonus Plans for Named Executive Officers (incorporated by reference to
Exhibit 10.3 of the Company's 10-K for the year ended December 31, 1996).
10.10* Purchase and Sale Agreement dated September 19, 1996 between the Company and Cumberland
Healthcare, L.P. I-C. (incorporated by reference to Exhibit 10.1 of the Company's 10-Q for the
quarter ended September 30, 1996).
10.11* Share Purchase Agreement dated June 30, 1996 between the Company and Robert Q. Baker, sole
shareholder of Poly-Stat Supply Corporation(incorporated by reference to Exhibit 10.1 of the
Company's 10-Q for the quarter ended June 30, 1996).
10.12* Share Purchase Agreement dated June 30, 1996 between the Company and Robert Q. Baker and
Richard E. Moon, shareholders of Poly-Stat Computer Applications, Inc (incorporated by
reference to Exhibit 10.2 of the Company's 10-Q for the quarter ended June 30, 1996).
10.13* Second Amendment to Lease Agreement dated March 18, 1996 between the Company and V & V
Properties (incorporated by reference to Exhibit 10.1 of the Company's 10-Q for the quarter
ended March 31, 1996).
10.14+* Arbor Health Care Company 1996 Stock Option Plan for Non-Employee Directors (incorporated by
reference to the Company's Proxy Statement dated April 8, 1996).
10.15+* Description of 1995 Bonus Plans for Named Executive Officers (incorporated by reference to
Exhibit 10.1 of the Company's 10-K for the year ended December 31, 1995).
10.16* Asset Purchase Agreement dated April 28, 1995 between the Company and Fairlawn Associates
Limited Partnership (incorporated by reference to Exhibit 10.1 of the Company's 10-Q for the
quarter ended June 30, 1995).
10.17* Amendment to Asset Purchase Agreement dated June 1, 1995 between the Company and Fairlawn
Associates Limited Partnership (incorporated by reference to Exhibit 10.2 of the Company's 10-Q
for the quarter ended June 30, 1995).
10.18* Agreement of Merger dated June 30, 1995 between the Company, Green Tree Pharmacy, Inc., Allan
K. Vrable and The Druggist, Inc. (incorporated by reference to Exhibit 10.3 of the Company's
10-Q for the quarter ended June 30, 1995).
10.19* Addendum to Agreement of Merger dated June 30, 1995 between the Company, Green Tree Pharmacy,
Inc., Allan K. Vrable and The Druggist, Inc. (incorporated by reference to Exhibit 10.4 of the
Company's 10-Q for the quarter ended June 30, 1995).
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.20* Share Purchase Agreement dated June 30, 1995 between the Company and Allan K. Vrable, sole
shareholder of Alternacare Plus Enterprises, Inc. (incorporated by reference to Exhibit 10.5 of
the Company's 10-Q for the quarter ended June 30, 1995).
10.21+* Employment Agreement dated June 30, 1995 between the Company and Allan K. Vrable (incorporated
by reference to Exhibit 10.6 of the Company's 10-Q for the quarter ended June 30, 1995).
10.22+* Arbor Health Care Company 1995 Stock Option Plan (incorporated by reference to the Company's
Proxy Statement dated April 24, 1995)
10.23* Share Purchase Agreement dated June 30, 1994 between the Company and the Stockholders of Bay
Geriatric Pharmacy, Inc. and Home Care Pharmacy, Inc. of Florida (incorporated by reference to
Exhibit 10.1 of the Company's 10-K for the year ended December 31, 1994).
10.24* Lease Agreement between Highland Oaks Associates, LTD., and Bay Geriatric Pharmacy, dated May
23, 1991 (incorporated by reference to Exhibit 10.2 of the Company's 10-K for the year ended
December 31, 1994).
10.25* Lease Agreement between FGHP Properties, Limited Partnership and Home Care Pharmacy, Inc. of
Florida, dated March 24, 1993 (incorporated by reference to Exhibit 10.3 of the Company's 10-K
for the year ended December 31, 1994).
10.26* First Amendment to lease between the Company and Semi Cane Investments, Inc., as Successor in
Interest to Great Western Bank dated June 17, 1994 (incorporated by reference to Exhibit 10.4
of the Company's 10-K for the year ended December 31, 1994).
10.27* First Amendment to Lease Agreement dated March 11, 1994 between the Company and V & V
Properties (incorporated by reference to Exhibit 10.5 of the Company's 10-K for the year ended
December 31, 1994).
10.28* Management Agreement between the Company and Fairlawn Nursing Home and Assisted Living, Inc.
dated June 9, 1986, and amendments thereto dated June 13, 1986, October 1, 1990, and January 1,
1993 (incorporated by reference to Exhibit 10.1 of the Company's Registration Statement on Form
S-1 (File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.29* Lease Agreement between the Company and V & V Properties, dated June 2, 1988 (incorporated by
reference to Exhibit 10.2 of the Company's Registration Statement on Form S-1 (File No.
33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.30* Operating Lease between the Company and Health Care Property Investors, Inc., dated January 31,
1986, as amended September 11, 1991 (incorporated by reference to Exhibit 10.3 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the Securities
Act of 1933).
10.31* Business Property Lease between the Company and Office World, Inc. dated July 1, 1992
(incorporated by reference to Exhibit 10.4 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.32* Lease Agreement between the Company and Great Western Bank, dated July 1, 1992 (incorporated by
reference to Exhibit 10.5 of the Company's Registration Statement on Form S-1 (File No.
33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.33* Operating Lease between the Company and Health Care Property Investors, Inc., dated January 31,
1986, as amended September 11, 1991 (incorporated by reference to Exhibit 10.6 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the Securities
Act of 1933).
10.34* Office Lease between the Company and NFI MetroCenter II Associates dated November 15, 1992
(incorporated by reference to Exhibit 10.7 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.35* Lease Agreement between the Company and Marie Antoinette Partners, dated April 2, 1986
(incorporated by reference to Exhibit 10.8 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.36* Facility Lease by and between the Company and Cumberland Healthcare, L.P., I-C, dated February
1, 1989, as amended November 15, 1991 (incorporated by reference to Exhibit 10.9 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the
Securities Act of 1933).
10.37* Lease and Security Agreement between BIP SUB I, INC. and Arbors East, Inc. dated April 1, 1991
(incorporated by reference to Exhibit 10.10 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed June 25, 1993 under the Securities Act of 1933).
</TABLE>
25
<PAGE> 26
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
10.38* Operating Lease between the Company and Health Care Properties Investors, Inc. dated December
30, 1986 and Addendum dated March 23, 1987 (incorporated by reference to Exhibit 10.11 of the
Company's Registration Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the
Securities Act of 1933).
10.39+* First Amended and Restated Incentive Stock Option Plan dated November 26, 1991 (incorporated by
reference to Exhibit 10.12 of the Company's Registration Statement on Form S-1 (File No.
33-65080) filed June 25, 1993 under the Securities Act of 1933).
10.40* Management Agreement dated September 28, 1989 between the Company and The Druggist, Inc., as
amended June 30, 1991 (incorporated by reference to Exhibit 10.14 of the Company's Registration
Statement on Form S-1 (File No. 33-65080) filed June 25, 1993 under the Securities Act of
1933).
10.41* Assignment and Assumption of Management Agreement dated January 4, 1989 among the Company,
Fairlawn Nursing Home and Assisted Living, Inc., and Fairlawn Associates Limited Partnership,
relating to Management Agreement previously filed as Exhibit 10.1 of the Company's Registration
Statement on Form S-1 filed on June 25, 1993 (File No. 33-65080) and incorporated by reference
herein (incorporated by reference to Exhibit 10.16 of the Company's Registration Statement on
Form S-1 (File No. 33-65080) filed July 9, 1993 under the Securities Act of 1933).
10.42+* Certificate of Amendment dated July 7, 1993, to First Amended and Restated Incentive Stock
Option Plan previously filed as Exhibit 10.12 of the Company's Registration Statement on Form
S-1 (File No. 33- 65080) and incorporated by reference herein (incorporated by reference to
Exhibit 10.17 of the Company's Registration Statement on Form S-1 (File No. 33-65080) filed
July 9, 1993 under the Securities Act of 1933).
10.43* Land Lease Agreement between the Company and the Chesapeake and Potomac Telephone Company of
West Virginia dated June 24, 1993 (incorporated by reference to Exhibit 10.18 of the Company's
Registration Statement on Form S-1 (File No. 33-65080) filed July 29, 1993 under the Securities
Act of 1933).
10.44+* Form of Indemnification Agreement between the Company and its Directors and Executive Officers
(incorporated by reference to Exhibit 10.19 of the Company's Registration Statement on Form S-1
(File No. 33-65080) filed July 29, 1993 under the Securities Act of 1933).
11.1 Statement Re Computation of Net Income Per Share.
27.1 Financial Data Schedule.
</TABLE>
+Executive management contract or compensatory plan or arrangement.
26
<PAGE> 1
EXHIBIT 4.1
LOAN AGREEMENT
--------------
This Agreement, dated July 11, 1997, between ARBOR HEALTH CARE COMPANY,
a Delaware corporation, with its principal place of business at 1100 Shawnee
Road, Lima, Ohio 45802 (hereinafter called the "Company"), and THE PROVIDENT
BANK, Cincinnati, Ohio, an Ohio banking corporation with its principal place of
business at One East Fourth Street, Cincinnati, Ohio 45202 (hereinafter called
the "Bank"),
WITNESSETH
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter stated, the parties hereto agree as follows:
Section 1. General Provisions
- ------------------------------
1.1 For the period through June 30, 1999, the Bank agrees to make
available to the Company a revolving credit facility not to exceed Thirty
Million and 00/100 dollars ($30,000,000) of indebtedness of the Company to the
Bank outstanding from time to time (the "Loan"), or so much thereof as the
Company may draw upon and borrow from time to time, and the amount, terms, and
conditions of which may be adjusted from time to time under mutual consent. Each
portion of the Loan representing advances applied for the acquisition or
development of a center pursuant to Section 1.2 below is sometimes referred to
herein as the "Facility Loan." Each Facility Loan shall be evidenced by a
Promissory Note (individually and collectively referred to as the "Note") of the
Company in the form annexed hereto as Exhibit A maturing as provided therein and
bearing interest at prime + 0 Basis Points or LIBOR + 175 Basis Points. The Note
shall provide for: two years of monthly interest payments from date of note:
during the third year, monthly interest and principal payments based upon a 15
year amortization schedule; during years four through seven, substantially equal
monthly payments of principal together with interest in an amount necessary to
fully amortize the balance of the Note over a four year period. The terms and
conditions of the Note may be adjusted by mutual consent of Bank and Company.
The term, principal amount and amortization specified in this Section, may be
adjusted by Bank to reflect changes in laws and regulations subsequent to this
Agreement. The Company may at any time, or from time to time prepay the Note, in
whole or in part, without penalty.
1.2 The purpose of the Loan shall be for the acquisition, development
and refinancing by the Company of health care and retirement centers (and
leasehold interests therein), obtaining stand-by letters of credit, renovations
and capital expenditures, and providing for working capital needs. Any working
capital advanced may not exceed $5,000,000 at any one time. The Company further
understands that, with respect to advances drawn under Facility Loans, the Bank
will lend no more than ninety percent (90%) of the purchase price, development
costs, or leasehold interest of any such center. The Bank reserves the right to
<PAGE> 2
approve all terms and conditions of any loans, advance or commitment at its
reasonable discretion.
1.3 The parties agree that the Bank shall have no further obligation to
advance any additional loans to the Company under the terms of previous Loan
Agreements dated August 9, 1996, August 1, 1995, August 11, 1993, September 9,
1992, December 5, 1989, and November 7, 1990, between the Company and the Bank.
Section 2. Conditions of Commitment
- ------------------------------------
The Bank shall not be obligated to lend hereunder unless:
2.1 The representations and warranties in Section 3 shall be true on
and as of the date of each advance with the same effect as though they had been
made on and as of that date, and no Event of Default (as specified in Section 6)
and no event which with the lapse of time or the lapse of time and the giving of
notice would constitute an Event of Default, shall have occurred and be
continuing at the date of each advance.
Section 3. Representations and Warranties of the Company
- ---------------------------------------------------------
The Company represents and warrants that:
3.1 The Company is a corporation duly organized and existing under the
laws of the State of Delaware.
3.2 There is no provision in the Company's Articles of Incorporation or
By-laws, and no provision of any existing indenture, contract or agreement, to
which the Company is a part, which would be contravened by the execution and
delivery hereof or of the Note or by the performance of any of the covenants,
undertakings or actions of the Company provided for in this Agreement, except as
disclosed in Section 3.8 of this Agreement.
3.3 The financial statements of the Company, as of December 31, 1996,
copies of which have been delivered to the Bank, accurately reflect the
financial condition of the Company. There are no undisclosed contingent
liabilities of the Company. There has been no material adverse change in the
financial condition, business or operations of the Company since December 31,
1996.
3.4 No litigation or governmental proceedings are pending or, to the
knowledge of the officers of the Company, threatened against the Company which
could have a material adverse effect on its financial condition or business,
except as set forth in the opinion of the Company's counsel referred to in
Section 2.2 of the Agreement.
3.5 The Company has corporate authority to enter into this agreement
and to incur the obligations provided for herein and the Company has taken all
proper and necessary corporate action to authorize the execution and delivery of
this Agreement, the Note, and other instruments and documents provided for
herein.
<PAGE> 3
3.6 No consent or approval of or exemption by any governmental or
public body or authority is required to authorize, or is required in connection
with, the execution, delivery and performance by the Company of this Agreement
or of any Notes or other documentation in connection herewith.
3.7 The Company has good and marketable title to the properties and
assets set forth in the balance sheet of latest date referred to above, or
purported to have been acquired after said date, excepting, however, property
and assets sold or otherwise disposed of in the ordinary course of business
subsequent to said date. There are no mortgages, liens, charges, or encumbrances
of any nature whatsoever on any of the properties or assets of the Company
financed by the Bank other than those permitted by Section 5.2 hereof.
3.8 The Company is not in default in the performance, observance, or
fulfillment of any of the obligations, covenants, or conditions contained in any
evidence of indebtedness of the Company or in any lease to which the Company is
a party, and the execution and delivery of this Agreement, the consummation of
the transactions herein contemplated, in compliance with the terms and
provisions hereof and of the Note, will not, to the knowledge of the Company,
violate the provisions of any applicable law, or of any applicable order or
regulation of any governmental authority having jurisdiction of the Company and
will not conflict with or result in a breach of any of the terms, conditions or
provisions of any corporate restriction or of any agreement or instrument to
which the Company is now a party, or constitute a default thereunder, or result
in the creation or imposition of any lien, charge, or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
3.9 All plans (as the term "Plan" is defined in Section 4021(a) of the
Employee Retirement Income Security Act of 1974 as amended or supplemented from
time to time ("ERISA")), except multi-employer plans, for which the Company is
an "employer" or a "Substantial Employer" as defined in Section 3(5) and
4001a(2) of ERISA, respectively, are in compliance with ERISA and the
regulations and published interpretations thereunder. To the extent the Company
maintains any qualified defined benefit pension plan:
a. There exists no accumulated funding deficiency with respect
thereto;
b. No reportable event has occurred and is continuing with
respect thereto that requires a 30 day notice to the Pension Benefit Guaranty
Corporation ("PBGC") under Section 4043(a) of ERISA.
c. No lien has been filed or threatened to be filed by the
PBGC pursuant to Subtitle A of Title IV or ERISA, and/or Subparagraph D.
<PAGE> 4
3.10 ENVIRONMENTAL MATTERS:
(1) There have been no claims, notices, orders or
directives on environmental grounds made or delivered to, pending or served on
Company or its agents, or of which Company or its agents after due investigation
are aware, issued by a governmental department or agency having jurisdiction
over the Land and Improvements, affecting the Land and Improvements or any part
thereof or requiring any work to be done upon or about the Land and Improvements
or any part thereof, including but not limited to clean up orders; or issued or
claimed by any private agency or individual affecting the Land and Improvements
or any part thereof.
(2) To the best of Company's knowledge, there have
not been, are not now and as of the closing date, there will be no solid waste,
hazardous waste, hazardous substance, toxic substances, toxic chemicals,
pollutants or contaminants, underground storage tanks, purposeful dumps,
substances, wastes, pollutants or accidental spills in, on or about the Land the
Improvements, except for medical, biological and related hazardous wastes
disposed of by Company in the ordinary course of business, and to the best of
Company's knowledge, no solid waste, hazardous waste, hazardous substances,
pollutants, contaminants, wastes or toxic substances have ever been stored on
the Land and Improvements by Company, except for medical, biological and related
hazardous wastes disposed of by Company in the ordinary course of business.
(3) Company agrees and covenants that Bank shall not
assume any liability or obligation for loss, damage, fines, penalties, claims or
duty to clean up or dispose of wastes or materials on or relating to the Land
and Improvements regardless of any inspections of the Land and Improvements made
by the Bank prior to the consummation of this transaction or as a result of any
conveyance of title of the Land and Improvements to the Bank by foreclosure,
deed in lieu of foreclosures, or otherwise. Company agrees to remain fully
liable and shall indemnify and hold harmless Bank from any costs, expenses,
cleanup costs, waste disposal costs, litigation costs, fines, penalties,
including without limitation those costs, expenses, penalties and fines within
the meaning of the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA), the Superfund Amendments and Reauthorization Act
("SARA"), the Clean Water Act, the Clean Air Act, the Resource Conservation
Recovery Act as amended by the Hazardous and Solid Waste Amendments of 1984, the
Safe Drinking Water Act, the Toxic Substances Control Act, the Hazardous
Materials Transportation Act all as amended and other federal, state and local
environmental laws, and from other related liabilities, upon the occurrence of a
breach of any of Company's foregoing representations and warranties.
(4) As used herein, "Land and Improvements" shall
mean those health care facilities which have been or are being acquired or
developed with the proceeds of advances from the Loan.
<PAGE> 5
Section 4. Affirmative Covenants of The Company
- ------------------------------------------------
The Company agrees that, from the date hereof and so long as the Note
shall be outstanding, unless the Bank shall otherwise consent in writing:
4.1 The Company will pay when due the principal of, and the interest on
the Notes.
4.2 The Company will pay and discharge when due all taxes, assessments,
levies, and governmental charges imposed upon their properties, operations,
income, products or profits, and all lawful claims, including claims for labor,
material and supplies, which if unpaid might become a lien or charge upon the
Company's property or assets, provided, however, that the provisions of this
paragraph shall not apply to any taxes, assessments, levies or other alleged
liabilities the validity of which is being contested in good faith by
appropriate legal proceedings.
4.3 The Company will provide for the maintenance of insurance with
responsible insurers to the same extend as is usual with corporations in similar
businesses, and will provide the Bank with evidence of its fire and extended
coverage of its property, and such insurance shall provide for the payment of
loss, if any, to Bank or its assigns, as its interests may appear, and Bank may,
at its option, apply the proceeds of such insurance, in whole or in part, to the
reduction of the Company's indebtedness referred to in this Agreement.
4.4 The Company will furnish Bank:
a. Within ninety (90) days after each fiscal year of the
Company, a copy of the annual audit report of the Company prepared (on a
consolidated basis) and in conformity with generally accepted accounting
principles applied on a basis consistent with that of the preceding fiscal year,
signed by an independent Certified Public Accountant.
b. Within forty-five (45) days after each quarter except the
last quarter of each fiscal year of the Company, a copy of its unaudited
financial statement, similarly prepared, consisting of at least a balance sheet
as of the close of such quarter, a profit and loss statement and an analysis of
cash flow for such quarter and for the period from the beginning of such fiscal
year to the close of such quarter, signed by the appropriate financial officer
of the Company.
c. Such other information as may from time to time reasonably
be requested by Bank.
4.5 Inform the Bank of any litigation involving the Company, the
adverse determination of which might substantially prejudice the payment of the
Loan.
4.6 Maintain its corporate existence and comply with all valid laws and
regulations applicable thereto.
<PAGE> 6
4.7 Maintain a relationship of total debt to net worth such that at no
time will total debt be more than 4.5 times the amount of net worth. Total debt
and net worth will be defined in accordance with generally accepted accounting
principles.
4.8 Maintain current assets in an amount not less than current
liabilities. Current assets and current liabilities shall be determined in
accordance with generally accepted accounting principles.
4.9 Maintain and interest coverage ratio of at least 1.1 to 1 at each
fiscal year end. The "interest coverage ratio" means a ratio in which the
numerator is the sum of net income of the Company calculated for the twelve (12)
month period preceding the date of calculation of such coverage PLUS federal and
state taxes owed or paid by the Company PLUS interest expense PLUS the sum of
noncash expenses or allowances for such period, including, without limitation,
amortization or write down of intangible assets, depreciation, depletion, and
deferred taxes and expenses, LESS an assumed capital expenditure of $300.00 per
bed for all nursing home beds owned/leased by the Company for the applicable
period, and the denominator is the interest expense of the Company for such
period.
In calculating "net income," federal and state taxes on such income
shall be deducted, any extraordinary income shall be deducted.
4.10 Maintain a debt service coverage ratio of at least 1.15 to 1 at
each fiscal year end. The "debt service coverage ratio" means a ratio in which
the numerator is the sum of net income of the Company calculated for the twelve
(12) month period preceding the date of calculation of such coverage PLUS the
sum of noncash expenses or allowances for such period, including, without
limitation, amortization or write down of intangible assets, depreciation,
depletion, and deferred taxes and expenses, LESS any dividends paid by the
Company, and LESS an assumed capital expenditure of $300.00 per bed for all
nursing home beds owned/leased by Company for the applicable period, and the
DENOMINATOR is the sum of the current portion of the long term debt of the
Company at the end of such period.
In calculating "net income," federal and state taxes on the Company's
income shall be deducted, and any extraordinary income shall be deducted. In
calculating "long term debt", this includes all obligations (including capital
lease obligations) which are due more than one (1) year from the date as of
which the computation thereof is made, provided that for purposes of determining
the debt service coverage ratio for the Company as set forth above, any
principal "balloon" or "bullet" payments due at maturity of indebtedness will
not be included in such computation.
4.11 Maintain a net worth of at least $30,000,000 throughout the fiscal
year ending December 31, 1994, a net worth equal to $30,000,000 plus 50% of net
income of each year after December 31, 1994. In calculating net income, federal
and state taxes on the Company's income shall be deducted, and any extraordinary
income shall be deducted.
<PAGE> 7
4.12 Maintain, preserve, protect and keep its property used or useful
in the conduct of its business in good repair, working order, and condition and,
from time to time, make all necessary and proper repairs, renewals,
replacements, betterments, and improvements thereto, so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times.
4.13 Comply in all material respects with ERISA and the regulation and
published interpretations thereof. The provisions of this paragraph shall not
apply to any ERISA regulations or published interpretations, the validity of
which is being contested in good faith by appropriate legal proceedings.
4.14 Indemnify Bank for and hold Bank harmless from (including without
limit reasonable attorneys' fees and litigation expenses) any claims of whatever
nature arising out of or in any way related to this Agreement.
4.15 Company hereby covenants that it shall not encumber the property
(real property, furnishings, fixtures, and appliances located at those health
care and leasehold interests which are acquired, developed or refinanced with
the proceeds of the Term Notes) without the Bank's prior written consent.
4.16 Provide Bank with a market study prior to funding of new loan and
a third party appraisal within 90 days of funding any new loan, both of which
support the proposed development or acquisition.
Section 5. Negative Covenants of The Company
- ---------------------------------------------
The Company agrees that, from the date hereof and so long as the Note
shall be outstanding, unless the Bank shall otherwise consent in writing, it
will not:
5.1 Liquidate or dissolve or consolidate with, acquire or merge into
any other corporation, sell or otherwise dispose of any substantial part of its
assets or business, unless the surviving or resulting corporation or transferee
is subject to the obligations of Company under this Agreement (including without
limitation Section 4.7 to 4.10) and the Notes executed pursuant to this
Agreement. This Section does not prohibit a merger into or with a wholly owned
subsidiary or affiliate of Company.
5.2 Create any new liens, or encumbrances on any of the facilities
being financed by Bank pursuant to Section 1.2 hereof, except as required
hereunder and except liens being contested in good faith.
5.3 Guarantee, endorse or otherwise become surety for or upon the
obligations of others except by endorsement for deposit or collection in the
ordinary course of business and for guaranties of loans required under
management contracts in an amount not to exceed $750,000 on each management
contract, and except for other guarantees of up to $1,500,000 in aggregate.
<PAGE> 8
5.4 Create, incur, assume, become, or be liable in any manner in
respect of, any indebtedness except:
a. Indebtedness in respect of the Note;
b. Indebtedness under credit commitments including any and all
short term credit provided by banks;
c. Indebtedness incurred in the ordinary course of business;
d. Indebtedness for liens, taxes, assessments, governmental
charges, or claims to the extent that payment thereof shall not be required to
be made by the provisions hereof.
5.5 Make loans or advances of any kind to any firm, corporation, or
enterprise whatsoever, except extensions of credit in the ordinary course of
business.
Section 6. Events of Default
- -----------------------------
If any one or more of the following events, herein called "Events of
Default," shall occur and be continuing, for thirty (30) days after written
notice to the Company, the entire principal amount of the Note and accrued
unpaid interest thereon shall become due and payable upon demand by the Bank:
6.1 The Company shall default in the payment of installments of
principal or interest as required by the terms of the Note.
6.2 The Company shall default in the observance or performance of any
covenant or agreement set forth in this Agreement or in any other agreement
executed in connection with the Loan.
6.3 Any representation or warranty made by the Company herein proves
untrue in any material respect.
6.4 The Company becomes insolvent or bankrupt, or makes an assignment
for the benefit of creditors or consents to the appointment of a trustee or
receiver or voluntarily suspends the transaction of its usual business.
6.5 A trustee or receiver is appointed for all or a substantial part of
the properties of the Company without the consent of the Company and not being
discharged within 30 days.
6.6 Any failure to perform any other covenant or agreement, or to meet
any other condition required to be paid, perform, or met by any loan document or
by any other agreement or contract between the Company and Bank or any failure
to conform to any other warranty or representation contained in any loan
document or in any other agreement or contract between the Company and Bank.
<PAGE> 9
Section 7. Remedies Upon Default
- ---------------------------------
Immediately upon the occurrence of any default and continuously
thereafter until Bank waives the default in writing, at Bank's option:
7.1 The outstanding balance of the Loan and all interest accrued
thereon shall be immediately due and payable without demand, presentment of any
kind, notice of dishonor, protest, noting for protest, or other notice of any
kind, all of which are waived.
7.2 Without waiving any prior or subsequent default, Bank may either
waive or, with or without waiving, remedy any default.
7.3 Bank may exercise any remedy or right granted in any loan document
or provided by law and, in so doing, incur reasonable expenses (including
attorney's fees).
7.4 To the extent permitted by law, the Company agrees that if default
shall be made in the payment of the principal of, or interest or late charges,
if any, on the Note, when the same shall become due and payable, it will pay to
the Bank such additional amount as shall be sufficient to cover the cost and
expenses of collection, including reasonable compensation to the Bank's
attorneys.
Section 8. Miscellaneous
- -------------------------
8.1 Neither the failure nor any delay on the part of the Bank to
exercise any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right, power or
privilege preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
8.2 This Agreement shall be binding upon the Company, its successors
and assigns, and shall be binding upon the Bank and shall inure to the benefit
of the Bank and its respective successors and assigns.
8.3 This Agreement shall be construed in accordance with and governed
by the laws of the State of Ohio.
8.4 All Agreements, Representations and Warranties made herein shall
survive the delivery of the Note and the making of the Loan hereunder.
8.5 Bank and its officers, agents and attorneys shall at all reasonable
times be given free and complete access to the place of business of Company and
to its property, ledgers, records and books, provided that the Bank and its
officers, agents and attorneys shall maintain the confidentiality of any
information respecting the Company, its business or operations that they receive
or have access to pursuant to this provision.
8.6 Company hereby assumes and agrees to pay all costs incidental to
the Loan, including without limitation, recording and filing fees,
<PAGE> 10
insurance costs, reasonable fees and out-of-pocket expenses of Bank's counsel in
connection with the negotiation, preparation, execution, performance and
enforcement of this Agreement
8.7 If any provision of the Agreement or the Note is contrary to the
laws of the State of Ohio, the same shall not invalidate the other provision
thereof.
8.8 This Agreement is part and parcel of the single Agreement
consisting of this instrument and the Note executed by the Company pursuant
hereto; all of said agreement, instruments, loans and documents to be read as a
whole in determining the entire Agreement and the intent of the parties.
8.9 All notices, statements, requests and demands to or on the Company
hereunder shall be deemed to have been given when deposited in the mail,
delivered to the courier company, or a facsimile sent, addressed to Arbor Health
Care Company, 1100 Shawnee Road, Lima, OH 45805 or such other address as may be
furnished in writing by the Company to the Bank. No other method of giving
notice or furnishing such information is hereby precluded.
8.10 All notices to be given to the Bank shall be deemed to have been
given when deposited in the mail, delivered to the courier company, or facsimile
sent, addressed to The Provident Bank, One East Fourth Street, Cincinnati, Ohio
45202, Attn: Senior Commercial Loan Officer. No other method of giving notice or
furnishing such information is hereby precluded.
8.11 AS A SPECIFICALLY BARGAINED INDUCEMENT FOR THE BANK TO EXTEND
CREDIT TO THE COMPANY, THE COMPANY HEREBY WAIVES ANY AND ALL RIGHTS TO TRIAL BY
JURY IN ANY LITIGATION BETWEEN THE BANK AND THE COMPANY ARISING OUT OF THIS
AGREEMENT, THE NOTE AND/OR THE TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
THE PROVIDENT BANK ARBOR HEALTH CARE COMPANY
By: \s\Robert C. Lafkas By: \s\W. Wondolowski
---------------------------- ----------------------------
Title: VP Title: VP & Treasurer
-------------------------- ------------------------
<PAGE> 11
EXHIBIT A
PROMISSORY NOTE
$___________________ Cincinnati, Ohio ______________, 19 ____
Seven years after date of this Note set forth above, except as set forth below,
the undersigned, for value received, promises to pay to the order of The
Provident Bank, at any of its offices in Cincinnati, Ohio, the sum of
____________________________ , with interest at the rate of to vary with
Provident Bank Prime + 0 basis points or LIBOR + 1.75 basis points per annum
until maturity, and after maturity at a rate two percent greater than the stated
rate.
Principal and/or interest shall be due and payable in arrears on the monthly
anniversary of the date of this Note set forth above according to the following
schedule:
a. During the first 24 months payments of interest only.
b. During the subsequent 12 months payments of principal and interest,
based on a 15 year amortization period. The 15 year amortization period is
calculated according to a normal mortgage amortization period, and the interest
is variable and calculated monthly.
c. Followed by 4 years of substantially equal monthly payments of
principal together with interest.
If any payment of principal or interest hereunder is not paid when due, and
continues for thirty (30) days after written notice to the Company including but
not limited to the insolvency, bankruptcy, business failure, death, default in
the payment of other obligations or receivership of or concerning any maker or
indorser(s) hereof, this Note shall, at the option of its holder, become
immediately due and payable, without notice to or further consent from any of
them.
If any payment of principal or interest is not paid within 10 days of when due,
the holder at its option may charge and collect, or add to the unpaid principal
balance hereof, a late charge up to the greater of $100 or 1% of the unpaid
balance of this Note at the time of such delinquency for each such delinquency
to cover the extra expense incident to handling delinquent accounts. Interest
will be charged only upon the unpaid balance for the actual number of days
outstanding, except that there will be a minimum Finance Charge of $25.00. The
per diem interest charge hereon is one-three hundred sixtieth of the per annum
interest amount. Prime rate is that annual percentage rate of interest which is
announced by The Provident Bank from time to time, which is in effect until a
new rate is announced and which provides a base to which loan rates may be
referenced.
<PAGE> 12
The undersigned and all indorsers hereby waive presentment, demand for payment,
protest and notice, and agree and consent to the addition of persons as parties
to this obligation without notice to the undersigned, and to all extensions
and/or renewals which the holder hereof may grant. The undersigned and all
indorsers further agree to reimburse the holder for all advances, charges, costs
and expenses, including reasonable attorneys' fees, incurred or paid in
exercising any right, power or remedy conferred by this Note, or in the
enforcement thereof. If the undersigned are more than one (1), the liability of
the undersigned hereon is joint and several, and the term "undersigned," as used
herein, means any one or more of them.
This Note is issued pursuant to a certain Loan Agreement dated as of July 11,
1997 between the undersigned and The Provident Bank and is subject to the terms
and conditions of the Loan Agreement.
The undersigned hereby state(s) that the purpose of the loan evidenced by this
Note is for the development of the ______________________ project. The
provisions of this Note shall be interpreted in accordance with the laws of
Ohio.
ARBOR HEALTH CARE COMPANY
By:
---------------------------------
Title:
------------------------------
<PAGE> 1
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
ARBOR HEALTH CARE COMPANY
JACKSONVILLE THERAPY BUSINESS
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TABLE OF CONTENTS
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ARTICLE I: SALE AND PURCHASE OF ASSETS................................................... 2
1.1. Acquired Assets......................................................... 2
1.2. Inventory............................................................... 2
1.3. Assumption of Liability................................................. 2
1.4. Designated Contracts.................................................... 3
1.5. The Physical Therapy Network, Inc....................................... 3
ARTICLE II: PURCHASE PRICE............................................................... 4
2.1. Determination and Payment of Purchase Price............................. 4
2.2. Certain Adjustments to the Purchase Price............................... 5
2.3. Transfer Taxes; Prorated Items.......................................... 5
2.4. Other Prorations........................................................ 6
2.5. Allocation of Purchase Price............................................ 6
ARTICLE III: THE CLOSING................................................................. 6
3.1. Time and Place of Closing............................................... 6
3.2. Certification and Assignment of Participation Agreements................ 6
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF OWNERS
AND SELLERS.................................................... 7
4.01 Jacksonville Group, Inc................................................. 7
4.02 Center for Sports Physical Therapy, Inc................................. 7
4.03 Jacksonville Rehabilitation Center, Inc................................. 7
4.1. Organization and Standing of Sellers.................................... 7
4.2. Authority............................................................... 7
4.3. Binding Effect.......................................................... 7
4.4. Absence of Conflicting Agreements....................................... 8
4.5. Consents................................................................ 8
4.6. Schedule of Assets and Properties....................................... 8
4.7. Contracts............................................................... 8
4.8. Financial Statements.................................................... 10
4.9. Material Changes........................................................ 10
4.10. Cost Reports............................................................ 10
4.11. Licenses; Permits....................................................... 11
4.12. Title, Condition to Personal Property....................................11
4.13. Title, Condition of the Property........................................ 12
4.14. Legal Proceedings....................................................... 12
4.15. Employees............................................................... 12
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4.16. Collective Bargaining, Labor Contracts, Employment
Practices, etc.......................................................... 13
4.17. ERISA................................................................... 13
4.18. Insurance and Surety Agreements......................................... 13
4.19. Relationships........................................................... 14
4.20. Assets Comprising the Therapy Business.................................. 14
4.21. Absence of Certain Events............................................... 14
4.22. Compliance with Laws.................................................... 15
4.23. Environmental Compliance................................................ 15
4.24. Finders................................................................. 16
4.25. Tax Returns............................................................. 16
4.26. Encumbrances Created by this Agreement.................................. 17
4.27. Physical Therapists..................................................... 17
4.28. Claims and Billing...................................................... 17
4.29. Network Stock........................................................... 17
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF BUYER....................................... 17
5.1. Organization and Standing............................................... 18
5.2. Power and Authority..................................................... 18
5.3. Binding Agreement....................................................... 18
5.4. Legal Proceedings....................................................... 18
5.5. Compliance with Laws.................................................... 18
5.6. Claims and Billing...................................................... 18
5.7. Finders................................................................. 18
ARTICLE VI: INFORMATION AND RECORDS CONCERNING THE
FACILITIES....................................................................... 18
6.1. Access to Information and Records before Closing........................ 18
6.2. Maps, Plans, Surveys, etc............................................... 19
ARTICLE VII: OBLIGATIONS OF THE PARTIES UNTIL CLOSING.................................... 19
7.1. Conduct of Business Pending Closing..................................... 19
7.2. Affirmative Covenants................................................... 19
7.3. Pursuit of Consents and Approvals....................................... 20
ARTICLE VIII: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS................................. 21
8.1. Representations and Warranties.......................................... 21
8.2. Performance of Covenants................................................ 21
8.3. Delivery of Closing Certificate......................................... 21
8.4. Legal Matters........................................................... 21
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8.5. Approvals............................................................... 21
8.6. Material Change......................................................... 22
8.7. Assets Transferred at Closing........................................... 22
8.8. Possession.............................................................. 22
8.9. COBRA................................................................... 22
8.10. Authorization Documents................................................. 22
8.11. Other Documents......................................................... 22
8.12. Due Diligence Review.................................................... 22
8.13. Approval of Schedules................................................... 23
ARTICLE IX: CONDITIONS PRECEDENT TO
SELLERS' OBLIGATIONS........................................... 23
9.1. Representation and Warranties........................................... 23
9.2. Performance of Covenants................................................ 23
9.3. Delivery of Closing Certificate......................................... 23
9.4. Legal Matters........................................................... 23
9.5. Authorization Documents................................................. 23
9.6. Other Documents......................................................... 23
ARTICLE X: OBLIGATIONS OF PARTIES AFTER CLOSING.......................................... 23
10.1. Discharge of Liabilities................................................ 23
10.2. Indemnification......................................................... 24
10.3. Payment by Buyer for Expense Adjustments After Closing.................. 25
10.4. Cost Reports............................................................ 25
10.5. Covenant Not-To-Compete................................................. 25
10.6. Records................................................................. 26
10.7. Collection of Accounts Receivable....................................... 26
10.8. Employment of Existing Employees........................................ 27
10.9. Consents and Approvals.................................................. 27
10.10. Set-Off................................................................. 27
10.11. Therapy Business Books and Records...................................... 28
10.12. Designated Contracts.................................................... 28
ARTICLE XI: TERMINATION.................................................................. 28
11.1. Termination............................................................. 28
11.2. Effect of Termination................................................... 28
ARTICLE XII: CASUALTY, RISK OF LOSS...................................................... 29
12.1. Casualty, Risk of Loss.................................................. 29
ARTICLE XIII: MISCELLANEOUS PROVISIONS................................................... 29
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13.1. Survival of Representations and Warranties.............................. 29
13.2. Public Announcements.................................................... 29
13.3. Costs and Expenses...................................................... 29
13.4. Benefit and Assignment.................................................. 30
13.5. Effect and Construction of this Agreement............................... 30
13.6. Cooperation - Further Assistance........................................ 30
13.7. Notices................................................................. 30
13.8. Waiver, Discharge, etc.................................................. 31
13.9. Rights of Persons Not Parties........................................... 31
13.10. Governing Law........................................................... 31
13.11. Severability............................................................ 31
13.12. Schedules and Exhibits.................................................. 32
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made as of this 10th
day of September, 1997, by, between and among Arbor Health Care Company, a
Delaware corporation ("Buyer"); and Barnes E. Sale, III, Don J. Hunter, Arthur
J. Collier, James E. Harrison and David A. Shelton, each a resident of the state
of Florida, who together own all of the outstanding capital stock of
Jacksonville Group, Inc. (collectively, "JG Owners"); Robert M. Weldon, Arthur
J. Collier and Dan W. Weldon, each a resident of the state of Florida, who
together own all of the outstanding capital stock of Center for Sports Physical
Therapy, Inc. (collectively, "CSPT Owners"); Don J. Hunter, a resident of the
state of Florida, who owns all of the outstanding capital stock of Jacksonville
Rehabilitation Center, Inc. (collectively, "JRC Owners") (JG Owners, CSPT Owners
and JRC Owners are collectively known as "Owners"); Jacksonville Group, Inc., a
Florida corporation ("JG"); Center for Sports Physical Therapy, Inc., a Florida
corporation ("CSPT"); and Jacksonville Rehabilitation Center, Inc., a Florida
Corporation ("JRC") (collectively, JG, CSPT and JRC are referred to as "Sellers"
and individually, a "Seller").
BACKGROUND
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A. Sellers, collectively, currently own, operate and maintain the
Center for Sports Physical Therapy, Inc. d/b/a Center for Orthopaedic and Sports
Physical Therapy; Jacksonville Rehabilitation Center, Inc., d/b/a Jacksonville
Rehabilitation Center; and Jacksonville Group, Inc. d/b/a Comprehensive Physical
Therapy (collectively, the "Therapy Business").
B. JG previously has conducted its business through JG and three
Florida limited liability companies owned in part by JG. Prior to the Closing
Date, as hereafter defined, JG shall acquire substantially all of the assets of
or sell all interests in such limited liability companies (the "LC Transaction")
so that JG shall be able fully to convey all of such assets to Buyer free and
clear of all liens and encumbrances. The LC Transaction shall be described more
fully on SCHEDULE 4.9 hereto.
C. Owners own all of the issued and outstanding capital stock of
Sellers, as set forth on EXHIBIT A hereto.
D. Buyer wishes to acquire and Sellers wish to sell substantially all
of the assets of Sellers that comprise the Therapy Business in accordance with
the terms and conditions hereinafter set forth. The locations from which the
Therapy Business is operated are set forth on SCHEDULE 4.12.
E. As an inducement to Buyer to enter into the Agreement, Owners and
Sellers agree to make certain representations, warranties, agreements and
covenants, as set forth in this Agreement.
F. As an inducement to Owners and Sellers to enter into the Agreement,
Buyer agrees to make certain representations, warranties, agreements and
covenants, as set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing, and the mutual
covenants,
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agreements, representations and warranties herein contained, and other good and
valuable consideration, the receipt and adequacy of which hereby are
acknowledged, JG, CSPT, JRC, Sellers and Buyer, intending to be legally bound,
agree as follows:
ARTICLE I: SALE AND PURCHASE OF ASSETS
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1.1. ACQUIRED ASSETS. Subject to the terms and conditions of this
Agreement, at the Closing, Buyer, in reliance upon the respective covenants,
representations, warranties and agreements of the respective Owners and Sellers
contained herein, will acquire from Sellers, and Sellers will sell, assign,
transfer and convey to Buyer, substantially all of the assets, properties and
business of Sellers that comprise the Therapy Business, including without
limitation such property owned or leased by Sellers that comprises or is
directly used in connection with the Therapy Business, including without
limitation all tangible, intangible, personal or mixed property, the Inventory,
Network Stock, claims and rights under Designated Contracts, the trade names,
trademarks, service marks, patient lists and records, telephone numbers, good
will, and, to the extent permitted by law, all permits, licenses and
certificates of need, Medicare and Medicaid provider agreements and other rights
held by Sellers with respect to the ownership or operation of the Therapy
Business as the same shall exist on the Closing Date and copies all of Sellers'
books and records pertaining to the foregoing as set forth on the Schedules and
Exhibits attached hereto, and as provided to Buyer by Sellers pursuant to
Buyer's due diligence request, but excluding cash, cash equivalents, accounts
receivable, notes receivables, and tax refunds, (together, all such properties,
assets or business to be conveyed to Buyer from Sellers at the Closing hereafter
are referred to as the "Assets").
1.2. INVENTORY. Sellers have each, at its own expense, made an
inventory of the complete contents of its respective Therapy Business, and shall
promptly (but not later than ten (10) days from the date hereof) deliver such
list to Buyer (the "Inventory"). Sellers shall maintain the Inventory at its
present inventory levels through the Closing Date. The most recent Inventory is
included on SCHEDULE 4.6 hereto.
1.3. ASSUMPTION OF LIABILITY. Except as expressly provided herein
including, but not limited to Section 2.2 herein, Buyer shall not assume, nor in
any way be liable or responsible for any claims, lawsuits, liabilities,
obligations or debts of Sellers, including without limitation (i) malpractice
claims asserted by patients of the Therapy Business or any other tort claims
asserted against Sellers, claims for breach of contract, or any claims of any
kind asserted by patients, former patients, employees of Sellers or any other
party that are based on acts or omissions occurring on or before the Closing
Date; (ii) amounts due or that may become due to Medicaid and/or Medicare or any
other health care reimbursement or payment intermediary on account of health
care reimbursement cost report adjustments or other payment adjustments
attributable to any period prior to the Closing Date; (iii) any form of Medicaid
and/or Medicare or other health care reimbursement recapture, adjustment or
overpayment whatsoever with respect to any period prior to the Closing Date; and
(iv) any accounts payable, employment or other taxes, and any other obligation
or liability of Sellers to pay money whatsoever.
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Notwithstanding the provisions of the immediately preceding section, on
the Closing Date, contingent upon the consummation of the transactions
contemplated hereby, Buyer shall assume and thereafter in due course fully
satisfy those obligations arising under the Designated Contracts specified
pursuant to Section 1.4 herein and assigned by Sellers to Buyer, with respect
to, and only with respect to, performance and payments owed that become due
thereunder subsequent to the Closing Date. Liabilities and obligations under
such Designated Contracts that have accrued, or the performance of which is due,
on or prior to the Closing Date, and all liabilities and obligations under all
other Contracts shall remain the sole responsibility of Sellers.
1.4. DESIGNATED CONTRACTS.
(a) As soon as practicable after the date hereof but in no
event later than fifteen (15) days after the date hereof, Buyer shall deliver
notice in writing to Sellers designating which, if any, of the Contracts set
forth on SCHEDULE 4.7 hereto will be assigned to and assumed by Buyer (the
"Designated Contracts"). Such notice of designation will be set forth on
SCHEDULE 1.4 hereto. If within said period of time Buyer fails to so deliver
notice to Sellers, Buyer will be deemed to have designated none of the
Contracts, and Sellers will remain fully liable thereunder. To the extent Buyer
makes any such designation, Sellers shall at Closing be obligated to either: (i)
assign all of its right, title and interest under such Designated Contracts to
Buyer and Buyer shall assume the obligations accruing after Closing under such
Designated Contracts; and shall agree to indemnify and hold harmless the
respective Seller from any and all liability thereunder; or (ii) arrange for
termination of such contract and enter into a replacement therefor.
(b) Notwithstanding anything to the contrary contained herein,
unless otherwise specifically agreed in writing, Buyer is not assuming and will
not be responsible for any liabilities or obligations under the Designated
Contracts incurred on or occurring before the Closing Date; all such liabilities
and obligations remaining the sole and exclusive responsibility of Sellers
pursuant to Section 1.3 herein and shall be paid or performed on or prior to the
Closing Date.
(c) Immediately after confirmation by Buyer of the Designated
Contracts to be assigned by Sellers, Buyer and each Seller, respectively, shall
use its best efforts and shall diligently proceed to obtain any consents of any
parties necessary to permit the assignment and assumption of the Designated
Contracts. In the event that any of the Designated Contracts are not assignable,
or the parties to any such Designated Contracts fail or refuse to consent to any
assignment on or before the Closing Date, Buyer shall have no liability to
assume and shall not assume any such Designated Contracts.
1.5. THE PHYSICAL THERAPY NETWORK, INC. The acquired Assets under
Section 1.1 herein shall include one hundred percent (100%) of the issued and
outstanding shares of stock of The Physical Therapy Network, Inc., d/b/a The
Comprehensive Network (the "Network Stock"). Sellers have provided a statement
of assets, liabilities and equity for The Physician Therapy Network, Inc. as set
forth on SCHEDULE 1.5 hereto.
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ARTICLE II: PURCHASE PRICE
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2.1. DETERMINATION AND PAYMENT OF PURCHASE PRICE. The purchase price of
the Assets shall be Four Million Dollars and No Cents ($4,000,000.00), of which
One Million Dollars and No Cents ($1,000,000.00) shall be contingent upon the
performance of the Therapy Business subsequent to the Closing as set forth
herein, subject to adjustment as provided in Sections 2.2 and 2.3 herein (the
"Purchase Price"). The Purchase Price shall be payable as follows:
(a) Two Million Dollars and No Cents ($2,000,000.00) shall be
paid in cash at the Closing to Sellers in "same day" funds by wire transfer to
arrive by 2:00 p.m. to an account designated by Sellers' attorney. Any
adjustments made pursuant to Sections 2.2 and 2.3 herein shall be made against
this cash portion of the Purchase Price;
(b) One Million Dollars and No Cents ($1,000,000.00) shall be
paid at the Closing by delivery from Buyer of three (3) promissory notes, which
shall bear simple interest at the rate of eight percent (8%) per annum and be
amortized over three (3) years with equal annual installments in arrears
(collectively, the "Promissory Note"), copies of which are attached as EXHIBIT B
hereto; and
(c) One Million Dollars and No Cents ($1,000,000.00) shall be
payable on a contingent basis (the "Contingent Payments"). The Contingent
Payments shall be paid, if at all, in one (1) or two (2) installments. One (1)
payment in the amount of Five Hundred Thousand Dollars and No Cents
($500,000.00) shall be payable before March 15, 1999, if the Therapy Business
meets the Cumulative Gross Margin Target for the period from the Closing Date
through December 31, 1998, and one (1) payment in the amount of Five Hundred
Thousand Dollars and No Cents ($500,000.00) shall be payable before March 15,
2000, if the Therapy Business meets the Cumulative Gross Margin Target for the
period January 1, 1999, through December 31, 1999; or one (1) payment of One
Million Dollars and No Cents ($1,000,000.00) shall be payable before March 15,
2000, if the Therapy Business meets the Cumulative Gross Margin Target for the
period from the Closing Date through December 31, 1999 (respectively, the
"Contingency Periods"). Gross Margin is determined on an accrual basis and is
defined as net revenue derived from Therapy Business less all expenses with
respect thereto, except for: (i) amortization, depreciation and interest
associated with the acquisition of the Therapy Business; and (ii) allocation of
Buyer's general corporate overhead. For purposes hereof, upon completion of a
review by Buyer's independent auditors, the computation of Gross Margin shall be
final, binding and conclusive on the parties. Cumulative Gross Margin Targets
are as follows:
(i) Three Hundred Sixteen Thousand Dollars and
No Cents ($316,000.00) for the four (4)
months ended 12/31/97 or an amount adjusted
proportionately to the remaining period in
1997 if the Closing Date is subsequent to
September 1, 1997.
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(ii) One Million One Hundred Thirty Seven
Thousand Dollars and No Cents
($1,137,000.00) for the twelve (12) months
ended 12/31/98, and
(iii) One Million Three Hundred Sixty Five
Thousand Dollars and No Cents
($1,365,000.00) for the twelve (12) months
ended 12/31/99.
2.2. CERTAIN ADJUSTMENTS TO THE PURCHASE PRICE. In addition, at the
Closing hereunder:
(a) Sellers shall deliver to Buyer SCHEDULE 2.2(a) hereto,
effective as of the Closing Date, showing the amount of accrued holiday and
vacation pay, accrued sick pay and personal leave, and payroll taxes and
workers' compensation insurance premiums with respect therein for each of their
employees who Buyer desires to employ and who accept such employment with Buyer
as of the Closing Date. The amount of all such accrued holiday and vacation pay
and accrued sick pay and personal leave and payroll taxes and workers'
compensation insurance premiums with respect therein due for such employees as
of the Closing Date shall reduce the Purchase Price at Closing pursuant to
Subsection (c) herein.
(b) Sellers shall deliver to Buyer SCHEDULE 2.2(b) hereto
listing the amount of any prepayments received or paid by Sellers prior to
Closing on account of any goods or services to be rendered or supplied by
Sellers or to be received by Sellers and such prepayments, which Buyer receives
the benefit of shall adjust the Purchase Price at Closing pursuant to Subsection
(c) herein.
(c) The amount of any accruals calculated under Section 2.2(a)
herein and any prepayment amounts under Section 2.2(b) herein will reduce or
increase, as the case may be, the Purchase Price payable to Sellers on a
dollar-for-dollar basis, rather than be paid separately.
2.3. TRANSFER TAXES; PRORATED ITEMS. On the Closing Date, the following
adjustments and prorations shall be computed as of the Closing Date with respect
to the following taxes (unless otherwise stated herein) and the cash portion of
the Purchase Price shall be adjusted, upward or downward as appropriate, to
reflect such prorations:
(a) TRANSFER TAXES. All documentary stamps and recording fees
shall be borne by Buyer.
(b) CHARGES. All public or governmental charges against the
Assets (including charges for sewer, water, drainage or other services) assessed
for the fiscal year in which the Closing Date occurs shall be adjusted and
apportioned as of the Closing Date and paid thereafter by Buyer.
(c) SERVICES CONTRACTS, LEASES AND UTILITIES. All prepayments
made or payments due under any continuing service contracts and leases affecting
the Assets, including without limitation water, sewer, electric, gas and utility
bills, parking, garbage removal, and maintenance agreements shall be adjusted
and apportioned as of the Closing Date and such obligations thereafter shall be
assumed by Buyer.
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2.4. OTHER PRORATIONS. In the event that accurate prorations and other
adjustments cannot be made as of the Closing Date because current bills or
adjustments are not obtainable (as, for example, utility bills), the parties
shall prorate such items upon receipt of the final bill of statement, but in no
event later than sixty (60) days after Closing. Sellers shall use their best
efforts to have all utility meters read on the Closing Date so as accurately to
determine the proration of current liability bills.
2.5. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated as set forth in SCHEDULE 2.5 hereto, and the parties shall adhere to
such allocations in filing all returns to the appropriate taxing authorities.
Sellers reserve the right to approve the allocation of the Purchase Price.
ARTICLE III: THE CLOSING
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3.1. TIME AND PLACE OF CLOSING.
(a) Except as otherwise set forth herein, the closing (the
"Closing") of the purchase and sale of the Assets contemplated by this Agreement
shall take place on or before September 10, 1997, hereinafter called the
"Closing Date," but shall be effective as of September 1, 1997. Sellers shall
deliver possession of the Assets to Buyer, which shall accept the same on said
Closing Date.
(b) If prior to or on the Closing Date, Buyer has received
notice that any of the Sellers may not assign Medicare or Medicaid provider
agreements to Buyer, or if Buyer has received notice that it cannot obtain
Medicare or Medicaid reimbursement for physical therapy services rendered from
the Effective Date through the Closing Date, the Closing Date shall be postponed
until a time mutually agreed upon by Buyer and Sellers.
3.2. CERTIFICATION AND ASSIGNMENT OF PARTICIPATION AGREEMENTS . In the
event that: (i) all conditions precedent specified in Sections 8 and 9 herein
have been satisfied except for the conditions in Section 8.5 herein relating to
receipt of the Required Approvals; and (ii) Buyer has obtained assurances by all
the applicable authorized government agencies that are satisfactory to Buyer to
the effect that such governing agencies have reason to believe that the existing
certifications and provider agreement(s) will be assigned to Buyer, and that
such agency has no reason to believe that any condition existing during the
period of Sellers' operation will, if left uncorrected, prevent or delay
granting the Required Approvals to Buyer, the transactions contemplated in this
Agreement may, at Buyer's option, be closed.
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ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF OWNERS
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AND SELLERS
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4.01 JACKSONVILLE GROUP, INC. JG and JG Owners (collectively, "JG
Group"), jointly and severally, represent and warrant to Buyer the provisions
contained in this Article IV, but only to the extent that any such
representation or warranty pertains to JG Group. Each JG owner shall be liable
individually for any material breach of a representation or warranty made by him
or on his behalf, but not for any breach of a representation or warranty made by
or on behalf of any other JG Owner.
4.02 CENTER FOR SPORTS PHYSICAL THERAPY, INC. CSPT and CSPT Owners
(collectively, "CSPT Group"), jointly and severally, represent and warrant to
Buyer the provisions contained in this Article IV, but only to the extent that
any such representation or warranty pertains to CSPT Group. Each CSPT owner
shall be liable individually for any material breach of a representation or
warranty made by him or on his behalf, but not for any breach of a
representation or warranty made by or on behalf of any other CSPT Owner.
4.03 JACKSONVILLE REHABILITATION CENTER, INC. JRC and JRC Owners
(collectively, "JRC Group"), jointly and severally, represent and warrant to
Buyer the provisions contained in this Article IV, but only to the extent that
any such representation or warranty pertains to JRC Group. Each JRC owner shall
be liable individually for any material breach of a representation or warranty
made by him or on his behalf, but not for any breach of a representation or
warranty made by or on behalf of any other JRC Owner.
4.1. ORGANIZATION AND STANDING OF SELLERS. Except as provided on
SCHEDULE 4.1 hereto, Seller is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida. Copies of its
Articles of Incorporation and By-Laws and all amendments hereof to date, have
been delivered to Buyer and are complete and correct. Seller has the power and
authority to own the property and assets now owned by Seller and to conduct the
business presently being conducted by Seller. Seller is not qualified to do
business as a foreign corporations in any state, and neither the ownership of
its assets nor the conduct of its business makes such qualifications necessary.
4.2. AUTHORITY. Except as provided on SCHEDULE 4.2 hereto, Seller has
the full corporate power and authority to make, execute, deliver and perform
this Agreement including all Schedules and Exhibits herein, and the other
instruments and documents required or contemplated hereby and thereby ("Seller's
Transaction Documents"). Such execution, delivery, performance and consummation
have been duly authorized by all necessary action, corporate or otherwise, on
the part of Seller, its directors and shareholders, and all consents of holders
of indebtedness of Seller that are not being paid prior to or at the Closing
Date have been obtained.
4.3. BINDING EFFECT. This Agreement and all of the other Seller's
Transaction Documents when executed and delivered by Seller and the other
parties hereto constitute the legal valid and
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binding obligation of Seller, enforceable against Seller in accordance with its
respective terms, except as enforceability may be affected by bankruptcy,
insolvency or other legal or equitable principles affecting creditor rights,
generally.
4.4. ABSENCE OF CONFLICTING AGREEMENTS. Except as provided on SCHEDULE
4.4 hereto, neither the execution or delivery of this Agreement or any of
Seller's Transaction Documents by Seller nor the performance by Seller of the
transactions contemplated hereby and thereby, conflicts with, or constitutes a
breach of or a default under (i) Seller's Articles of Incorporation or By-Laws;
(ii) any applicable law, rule, judgment, order, writ, injunction, or decree of
any court, currently in effect; (iii) any applicable rule or regulation of any
administrative agency or other governmental authority currently in effect; or
(iv) any agreement, indenture, contract or instrument to which Seller or any
shareholder thereof is now a party or by which any of them or any of the Assets
is bound.
4.5. CONSENTS. Except as set forth in SCHEDULE 4.5 hereto, no
authorization, consent, approval, license, exemption by filing or registration
with any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary in connection with
Seller's entry into, execution, delivery and performance of this Agreement, any
of the transaction documents related herein, or for the Seller's consummation of
the transactions contemplated hereby and thereby.
4.6. SCHEDULE OF ASSETS AND PROPERTIES.
(a) Set forth in SCHEDULE 4.6 hereto are complete and accurate
lists of all the material items comprising Seller's Assets as of the date of
this Agreement as follows:
(i) All Inventory, machinery, vehicles and equipment, office
equipment, furniture and supplies owned or leased by Seller
and used in connection with the Therapy Business and any other
items of personal property that comprise or is otherwise used
by Seller in connection with the Therapy Business.
(ii) All patents, trademarks, service marks, or applications
for any of the same, copyrights, franchises, licenses,
permits, easements, rights and other authorizations, if any,
and any other item of intangible or intellectual property that
are owned, possessed or used by Seller or any person in the
operation of the Therapy Business. Neither the trade name nor
any logo used for the Therapy Business has been registered as
a service mark under any state or federal statute, and to the
best of Seller's knowledge and belief, Seller's interest
therein, if any, is fully and freely assignable by Seller.
4.7. CONTRACTS
(a) SCHEDULE 4.7 hereto sets forth a complete and correct list
of all material agreements, contracts and commitments whether written or oral,
relating to the Therapy Business or its operations or to which Seller is a party
or by which it or the Assets are bound (the "Contracts").
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Seller has delivered to Buyer true and correct copies of all Contracts. All the
information set forth on SCHEDULE 4.7 hereto with respect to the Contracts is
materially true, complete and accurate. The Contracts and commitments referred
to in this Section 4.7 were entered into and require performance in the ordinary
course of business and are in full force and effect. Seller is not in material
default under any Contract and there has not been asserted, either by or against
Seller under any Contract, any notice of default, set-off or claim of default.
To the best of Seller's knowledge and belief, the parties to the Contracts other
than Seller are not in default of any of their respective obligations under the
Contracts, and there has not occurred any event which with the passage of time
or the giving of notice (or both) would constitute a default or breach under any
Contract. All amounts payable or receivable under the Contracts are, or at the
Closing Date will be on a current basis under the terms thereof. Except as set
forth in SCHEDULE 4.7 hereto, the Contracts are assignable to Buyer without the
consent of the remaining parties therein.
(b) Except as listed on SCHEDULE 4.7 hereto, Seller is not a
party to or liable in connection with and has not granted any written or
express, oral or implied:
(i) contract, agreement or commitment for the employment or
retention of, or collective bargaining, severance or
termination agreement with, any director, officer, employee,
consultant or agent or group of employees;
(ii) profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay,
pension, retirement, hospitalization, insurance or other
similar plan, agreement or arrangement;
(iii) agreement or arrangement for the sale of any of its
assets, property or rights outside the ordinary course of
business, or requiring the consent of any party to the
transfer and assignment of any such assets, property or rights
(by sale of assets, sale of stock, merger or otherwise);
(iv) contract which contains any provisions requiring Seller
to indemnify or act for any other person or entity;
(v) agreement restricting Seller from conducting business
anywhere in the world;
(vi) partnership or joint venture contract or similar
arrangement or agreement which is likely to involve a sharing
of profits or future payments with respect to the Therapy
Business;
(vii) licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency or other similar
contract, arrangement or commitment;
(viii) agreement not made in the ordinary and normal course of
business and consistent with past practice of Seller; or
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(ix) agreement with any physician (or an immediate family
member of such physician) who has a financial relationship (as
defined in 42 U.S.C.A. ss.1395) with Seller and who makes
referrals to Seller.
4.8. FINANCIAL STATEMENTS.
(a) Seller has delivered to Buyer true and correct copies, in
all material respects, of: (i) the compiled statement of assets, liabilities and
equity of Seller at December 31, 1996, and the statements of revenues and
expenses for the fiscal year then ended, including the notes therein, which have
been compiled by the certified public accountants serving Seller, as more fully
described in their reports included therein, and (ii) the compiled monthly
statement of assets, liabilities and equity and the statements of revenues and
expenses as more fully set forth on SCHEDULE 4.8 hereto (collectively referred
to as the "Financial Statements"). The Financial Statements (including any
related notes therein) are true and correct in all material respects and present
fairly the financial condition and results of operations of Seller as, at and
for the periods therein specified and were prepared on a basis consistent with
prior periods. Seller's books of account from which the Financial Statements
were prepared accurately and fully reflect all of Seller's items of income and
expense, all of its assets and liabilities and all of its accruals.
(b) The most recent statement of assets, liabilities and
equity contained in the Financial Statements as set forth on SCHEDULE 4.8 (the
"Statement") reflects all liabilities and obligations of Seller, whether
absolute, accrued, contingent, due or otherwise as of the date thereof, and
Seller does not have any material liabilities or obligations that are not
reflected thereon, except for such current liabilities as have been incurred
since the date of the Statement in the ordinary course of business consistent
with past practice (such current liabilities hereinafter called "Current
Liabilities"). To the best of Seller's knowledge, there is no basis for the
assertion against Seller of any liability or obligation of any nature or in any
amount (other than Current Liabilities as aforesaid) not fully reflected or
reserved against in the Statement.
4.9. MATERIAL CHANGES. Except as noted on SCHEDULE 4.9 hereto, between
the date of the Statement and the date of this Agreement, there has not been any
material adverse change in the condition (financial or otherwise) of the assets,
properties or operations of Seller or the Therapy Business, or any damage or
destruction of the Therapy Business by fire or other casualty, whether or not
covered by insurance, and Seller has, and as of the Closing will have, conducted
its business only in the normal course. Seller has identified and communicated
to Buyer all material information with respect to any fact or condition that
might adversely affect the future prospects (financial or otherwise) of the
Therapy Business. Since the most recent date on the Financial Statements, there
has been no sale or disposition of the machinery and equipment reflected
therein.
4.10. COST REPORTS. Except as provided in SCHEDULE 4.10 hereto: (i)
Seller has delivered to Buyer true and correct copies of all Medicare cost
reports relating to the Facilities for the last three (3) fiscal years, if any;
(ii) to the best of the Seller's knowledge, after diligent inquiry, the
information contained in such reports is true and correct in all respects; (iii)
the Medicare cost reports have been
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audited and fully settled through the respective years set forth in SCHEDULE
4.10 hereto; (iv) and there is no dispute between Seller and such fiscal
intermediaries regarding prior cost reports other than with respect to
adjustments made in the ordinary course of business, which do not involve
amounts in excess of Ten Thousand Dollars and No Cents ($10,000.00) in the
aggregate except as disclosed on SCHEDULE 4.10 hereto.
4.11. LICENSES; PERMITS. SCHEDULE 4.11 hereto sets forth a description
of (a) each license and all other governmental or other regulatory permits and
approvals relating to the operation of the Therapy Business hereinbefore
obtained and that is now in effect and to the best of Seller's knowledge and
belief, (b) each other license, permit, easement, right or other authorization
that is necessary to operate the Therapy Business legally (collectively, the
"Licenses"). Seller has delivered to Buyer true and correct copies of all of the
Licenses listed on SCHEDULE 4.11 hereto. SCHEDULE 4.11 hereto also sets forth a
description of each accreditation of the Therapy Business, Seller has delivered
such copies to Buyer. Seller owns, possesses or has the legal right to use the
Licenses, free and clear of all liens, pledges, claims or other encumbrances of
any nature whatsoever. Seller is not in default under, nor has it received any
notice of any claim of default or any other claim or proceeding relating to any
such License. The Therapy Business is fully and completely licensed by all
appropriate authorities for Seller to carry on the business presently conducted
at the Therapy Business. Except as provided in SCHEDULE 4.11 hereto, the Therapy
Business is accredited for participation in the Florida Medicaid program and the
federal Medicare program. No shareholder, director or officer, employee or
former employee of Seller, or any other person, firm or corporation owns or has
any proprietary, financial or other interest, direct or indirect, in whole or in
part in any such License owned, possessed or used in the operation of the
Therapy Business as now operated.
4.12. TITLE, CONDITION TO PERSONAL PROPERTY.
(a) Each of Seller's property comprising the Assets is located
at the location(s) set forth in SCHEDULE 4.12 hereto. Except for the security
interests that will be discharged and released prior to or at the Closing,
Seller has good and marketable title to all such personal property, subject to
no mortgage, security interest, pledge, lien, conditional sales agreement,
lease, claim, encumbrance or charge, or restraint on transfer whatsoever, except
for landlord's lien for rent. Except as provided in SCHEDULE 4.12 hereto, no
other person has any right to the use or possession of any of such assets.
Except as set forth in SCHEDULE 4.12 hereto, during the five (5) year period
preceding the date hereof, or since the Seller's inception if more recent,
Seller has conducted its business activities only under the corporate and/or
trade names currently in use. All of such personal property comprising
equipment, improvements, furniture and other tangible personal property, whether
owned or leased, is in good operating condition and is functioning in the manner
and for the purpose for which it was intended and is in compliance with (and the
operation thereof is in compliance with) all applicable Federal, state, and
local laws, rules, and regulations, and is sufficient and suitable to enable
Buyer to operate the Therapy Business in a normal and efficient manner.
(b) No tangible personal property, except as otherwise
disclosed on Schedules attached herein, used by Seller in connection with the
operation of the Therapy Business is subject to
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a lease, conditional sale, security interest or similar arrangement that will
not be satisfied and released at the Closing.
4.13. TITLE, CONDITION OF THE PROPERTY
(a) Except as provided in SCHEDULE 4.13 hereto, Seller owns a
valid leasehold estate in the business premises used by or comprising the
Therapy Business (the "Property") at the locations described in SCHEDULE 4.12
hereto.
(b) There are no leases or other agreements of Seller as
lessor, granting any third party the right to use or occupy any of the Property
and no person, firm or entity has any ownership interest or option or right of
first refusal to acquire any ownership interest in the Property or any
building or improvements thereon.
(c) To the best of Seller's knowledge, the buildings and other
improvements comprising the Therapy Business and all of their systems, including
without limitation, the heating, ventilating and air condition systems, and the
plumbing, electrical, mechanical and drainage systems, and roof are in good
operating condition, repair and working order.
(d) Seller has not received any notice of noncompliance from
any governmental authority regarding any of the improvements constructed at the
Therapy Business or the use or occupancy thereof.
4.14. LEGAL PROCEEDINGS. Other than as set forth on SCHEDULE 4.14
hereto, there are no known disputes, claims, actions, suits or proceedings,
arbitrations or investigations, either administrative or judicial, pending,
threatened or contemplated, nor, to the best of Seller's knowledge, is there any
basis therefor, against or affecting the Therapy Business or Seller's rights
therein or Seller's ability to consummate the transactions contemplated herein,
at law or in equity or otherwise, before or by any court or governmental agency
or body, domestic or foreign, or before an arbitrator of any kind. Seller has
received no requests for information with respect to the transactions
contemplated hereby from any governmental agency.
4.15. EMPLOYEES. SCHEDULE 4.15 hereto contains a complete and correct
list of the name, position, current rate of compensation and any vacation or
holiday pay, sick pay, personal leave and any other compensation arrangements or
fringe benefits, of each current employee, consultant and agent of Seller
(together with a description of any specific arrangements or rights concerning
such persons) that are not reflected in any agreement or document referred to in
SCHEDULE 4.7 hereto. Except as provided in SCHEDULE 4.15 hereto, Seller
currently has no, and has never had any pension, profit sharing, bonus,
incentive, welfare benefit, or other plan applicable to any of the employees of
the Therapy Business. No such employee, consultant or commission agent has any
vested or unvested retirement benefits or other termination benefits, except as
described on SCHEDULE 4.15 hereto.
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4.16. COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT PRACTICES,
ETC.
(a) Except as provided in SCHEDULE 4.16(A) hereto, during the
two (2) years prior to the Closing Date, there has been no material or adverse
change in the relationship between Seller and their employees nor any strike or
labor disturbance by such employees affecting Seller's business, and there is no
indication that such a change, strike or labor disturbance is likely. Seller's
employees are not represented by any labor union or similar organization, and
Seller knows of no reason to believe that there are pending or threatened any
activities the purpose of which is to achieve such representation of all or some
of Seller's employees. There are no pending suits, actions or proceedings
against Seller relating to employees of Seller, and Seller does not know of any
threats of strikes, work stoppages or pending grievances by any such employees.
Except as set forth on SCHEDULES 4.7 or 4.15 hereto, Seller has no collective
bargaining or other labor contracts, employment contracts, pension,
profit-sharing, retirement, insurance, bonus, deferred compensation or other
employee benefit plans, agreements or arrangements with respect to such
employees. Seller is in compliance with the requirements prescribed by all
federal, state and local statutes, orders and governmental rules and regulations
applicable to any of the employee benefit plans, agreements and arrangements
(each individually, a "Plan") identified on SCHEDULES 4.7 and 4.15 hereto,
including, without limitation the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). Seller has performed all obligations required to be
performed by them under each Plan and Seller is not in default under, or
violation of, the term and conditions of any Plan. All current and prior
material documents, including all amendments therein, with respect to each Plan
have been given to the Buyer.
(b) Between the date hereof and the Closing Date, Seller shall
not enter into any contract or agreement (or negotiations in connection
therewith) with any union or other collective bargaining representative
representing any employees at the Therapy Business without the prior written
consent of Buyer.
4.17. ERISA. Seller does not maintain or make contributions to and has
not at any time in the past maintained or made contributions to any employee
benefit plan which is subject to the minimum funding standards of ERISA. Seller
does not now maintain or make contributions to and have not at any time in the
past maintained or made contributions to any multi-employer plan subject to the
terms of the Multi-employer Pension Plan Amendment Act of 1980 (the
"Multi-employer Act").
4.18. INSURANCE AND SURETY AGREEMENTS. SCHEDULE 4.18 hereto contains a
true and correct list of: (a) all policies of fire, liability and other forms of
insurance held or owned by Seller or otherwise in force and providing coverage
for the Therapy Business or the Assets (including but not limited to medical
malpractice insurance, and any state sponsored plan or program for worker's
compensation) and (b) all bonds, indemnity agreements and other agreements of
suretyship made for or held by Seller or otherwise in force and relating to the
Therapy Business or the Assets, including a brief description of the character
of the bond or agreement and the name of the surety or indemnifying party.
SCHEDULE 4.18 hereto sets forth for each such insurance policy the name of the
insurer, the amount of coverage, the type of insurance, the policy number, the
annual premium and a
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brief description of the nature of insurance included under each such policy and
of any claims made thereunder during the past two (2) years. Such policies are
owned by and payable solely to Seller, and said policies or renewals or
replacements thereof will be outstanding and duly in force at the Closing Date.
All insurance policies listed on SCHEDULE 4.18 hereto are in full force and
effect, all premiums due on or before the Closing Date have been or will be paid
on or before the Closing Date, Seller has not been advised by any of their
insurance carriers of an intention to terminate or modify any such policies, nor
has Seller failed to comply with any of the material conditions contained in any
such policies and no notice of termination or cancellation has been received
with respect to any such policy.
4.19. RELATIONSHIPS. Except as disclosed on SCHEDULE 4.19 hereto,
neither Seller nor any shareholder, director or officer thereof or any member of
such person's immediate family has, or at any time within the last two (2) years
has had, a material ownership interest in any business, corporate or otherwise,
that is a party to, or in any property that is the subject of, business
relationships or arrangements of any kind relating to the operation of the
Therapy Business by which Buyer will be bound after the Closing.
4.20. ASSETS COMPRISING THE THERAPY BUSINESS. The Assets, Contracts,
Inventory, and Licenses listed on the Schedules hereto as owned by Seller,
represent all of the real and personal property, licenses, permits and
authorizations, contracts, leases and other agreements that are necessary and
material to the operation of the Therapy Business as now operated.
4.21. ABSENCE OF CERTAIN EVENTS. Except as set forth on SCHEDULE 4.21,
any other Schedule, termination provision of Seller's managed care contracts or
assignment of leases required to comply with the transactions contemplated
hereby, since the date of the Balance Sheet, Seller has not and from the date of
the Balance Sheet to the Closing Date, Seller will not have (except for
transactions directly with Buyer):
(a) sold, assigned or transferred any of their Assets or
properties, except in the ordinary course of business consistent with past
practice;
(b) mortgaged, pledged or subjected to any lien, pledge,
mortgage, security interest, conditional sales contract or other encumbrance of
any nature whatsoever any of the Assets other than the liens, if any, of current
taxes not yet due and payable;
(c) made or suffered any amendment or termination of any
contract, commitment, instrument or agreement materially relating to the Therapy
Business;
(d) except in the ordinary course of business, consistent with
past practice, or otherwise to comply with any applicable minimum wage law,
increased the salaries or other compensation of any of their employees at the
Therapy Business, or made any increase in, or any additions to, other benefits
to which any of such employees may be entitled.
(e) discharged or satisfied any lien or encumbrance, or paid
any material liabilities,
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other than in the ordinary course of business consistent with past practice, or
failed to pay or discharge when due any liabilities, the failure to pay or
discharge that has caused or will cause any actual damage or risk of loss to
Seller or the Therapy Business;
(f) changed any of the accounting principles followed by it or
the methods of applying such principles;
(g) made or suffered any amendment or termination of any
material contract, commitment or agreement to which they are a party or by which
they are bound, or canceled, modified or waived any debt or claims held by them,
other than in the ordinary course of business consistent with past practice, or
waived any rights of substantial value, whether or not in the ordinary course of
business; or
(h) entered into any material transaction other than in the
ordinary course of business consistent with past practice.
4.22. COMPLIANCE WITH LAWS. Except as provided in SCHEDULE 4.22 hereto,
Seller has not received any claim or notice that the Therapy Business is not in
compliance with any applicable federal, state, local or other governmental laws
or ordinances, or any applicable order, rule or regulation of federal, state,
local or other governmental agency. Seller shall report to Buyer, within five
(5) days after Seller's receipt thereof, any written or oral claims or notices
that the Therapy Business is not in compliance with any of the foregoing.
4.23. ENVIRONMENTAL COMPLIANCE.
(a) At any time during Seller's possession of the Property
and, to the best of Seller's knowledge, prior to Seller's possession thereof:
(i) The Property has not been used for the disposal of any
industrial refuse or waste, including but not limited to
potentially infectious waste, blood-contaminated materials, or
other wastes generated in the course of patient treatment
(collectively "Medical Waste"), or for the processing,
manufacture, storage, handling, treatment or disposal of any
hazardous or toxic substance, material or waste.
(ii) No asbestos-containing materials have been used or
disposed of on the Property.
(iii) No machinery, equipment or fixtures containing
polychlorinated biphenyls ("PCBs") have been located on the
Property.
(iv) No storage tanks for gasoline, petroleum, or any other
substance have been located on the Property.
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(v) No toxic or hazardous substances or materials have been
located on the Property, which substances or materials, if
found on the Property, would subject the owner or occupant of
the Property to damages, penalties, liabilities or an
obligation to remove such substances or materials under any
applicable federal, state or local law, regulation or
ordinance.
(vi) No notice from any governmental body has ever been served
upon Seller, its agents or representatives, or upon any prior
owner of the Property, claiming any violation of any federal,
state or local law, regulation or ordinance concerning the
generation, handling, storage, or disposal of Medical Waste,
or the environmental state, condition, or quality of the
Property, or requiring or calling attention to the need for
any work, repairs, or demolition, on or in connection with the
Property in order to comply with any law, regulation or
ordinance concerning the environmental or healthful state,
condition or quality of the Property.
(vii) SCHEDULE 4.23 hereto lists all reports of health care
and environmental agencies received by Seller during the last
five (5) years from any supervisory governmental authority
with respect to the operations of the Therapy Business. Seller
has delivered copies of each such report to Buyer.
(b) To the best of Seller's knowledge and belief, at all
times, Seller has complied, and is complying in all respects with all
environmental and related laws, ordinances and governmental rules and
regulations applicable to it, the Property, the Assets and the Therapy Business,
including, but not limited to, the Resource Conservation and Recovery Act of
1976, as amended, the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended, the federal Water Pollution Control Act, as
amended by the Clean Water Act, and subsequent amendments, the Federal Toxic
Substances Control Act, as amended, and all other Federal and, state and local
laws, regulations and ordinances with respect to the protection of the
environment (collectively "Environmental Laws"). The foregoing representation
and warranty applies to all aspects of the operation of the Therapy Business and
the Assets including, but not limited to, the use, handling, treatment, storage,
transportation and disposal of any hazardous, toxic or infectious waste,
material or substance (including Medical Waste) and petroleum products, material
or waste whether performed on Seller's properties or at any other location.
4.24. FINDERS. Except for Healthquest, Inc., a Florida corporation, and
Peter J. Lord, its sole shareholder, no broker or finder has acted for Seller in
connection with the transactions contemplated by this Agreement, and no broker
or finder is entitled to any broker's or finder's fee or other commission in
respect thereof based in any way on agreements, understandings or arrangements
with Seller. Seller shall be responsible for any fees, commissions or any other
financial obligation due to Healthquest, Inc. and/or Peter J. Lord in connection
with the transactions contemplated by this Agreement and shall hold Buyer
harmless for any such obligation.
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4.25. TAX RETURNS. Except as provided in SCHEDULE 4.25 hereto, Seller
has filed all federal, state, county and local income, excise, property and
other tax returns and abandoned property reports (if any) to date that are due
and required to be filed by them, and there are no claims, liens, or judgments
for taxes due from Seller affecting the Therapy Business or any of the Assets,
and no basis for any such claim, lien, or judgment exists.
4.26. ENCUMBRANCES CREATED BY THIS AGREEMENT. The execution and
delivery of this Agreement or any of the Seller's Transaction Documents do not,
and the consummation of the transactions contemplated hereby or thereby will
not, create any liens or other encumbrances on any of the Assets in favor of
third parties.
4.27. PHYSICAL THERAPISTS. SCHEDULE 4.27 hereto contains a true,
accurate and complete list of all of the physical therapists employed or
otherwise retained to private services on behalf of Seller ("Seller's Physical
Therapists"). Each of Seller's Physical Therapists is duly licensed to engage in
the practice of physical therapy in the State of Florida. The Florida Board of
Physical Therapy Practice has never placed any of Seller's Physical Therapists
on probation, it has never denied a license to any of Seller's Physical
Therapists nor has it ever limited, suspended or revoked any of their licenses,
nor, to the best of Seller's knowledge do there exist any facts which could
provide a basis for the taking of any such action.
4.28. CLAIMS AND BILLING. Claims, billing and other information
submitted to, or required to be filed in connection with Seller's participation
in and reimbursement under Medicare, Medicaid and any private third party payor
programs have been submitted to the appropriate intermediary, state agency or
third party payor in accordance with applicable laws and regulations or pursuant
to contracts between Seller and the appropriate third party payor, as the case
may be. Except as disclosed on SCHEDULE 4.28 or any other Schedules hereto, (i)
no audit or investigation has been initiated by any governmental authority or
agency or private third party payor within the past five (5) years which
questions the validity or accuracy of the information submitted by Seller or
Seller's right to participate in Medicare, Medicaid or other private third party
payor programs, (ii) Seller has not been required to repay any money received
from Medicare, Medicaid, or any private third party payor, and (iii) to the best
of Seller's knowledge, no facts exist which could provide a basis for any
action, suit, proceeding or investigation against Owners, Seller or any of
Seller's officers, directors or employees relating to claims, billing and other
information submitted to, or required to be filed in connection with Seller's
participation in and reimbursement under Medicare, Medicaid, or any third party
payor programs.
4.29. NETWORK STOCK. The statement of assets, liabilities and equity
for The Physical Therapy Network, Inc. as set forth on SCHEDULE 1.5 is true and
correct, and to the best of its shareholders' knowledge after diligent inquiry,
no liabilities, contingent or otherwise, except for those on SCHEDULE 1.5 exist.
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ARTICLE V: REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Sellers as follows:
5.1. ORGANIZATION AND STANDING. Buyer has been duly incorporated and is
validly existing in good standing under the laws of the State of Delaware and is
authorized to do business in the State of Florida.
5.2. POWER AND AUTHORITY. Buyer has the corporate power and authority
to execute, deliver and perform this Agreement and the corporate power and
authority to execute and deliver the instruments and agreements required to be
delivered by it to Sellers at the Closing (collectively, "Buyer's Transaction
Documents").
5.3. BINDING AGREEMENT. This Agreement has been duly executed and
delivered by Buyer. This Agreement is, and when executed and delivered by Buyer
at the Closing each of the related transaction documents executed by Buyer will
be, the legal, valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its respective terms.
5.4. LEGAL PROCEEDINGS. There are no known disputes, claims, actions,
suits or proceedings, arbitrations or investigations, either administrative or
judicial, pending, threatened or contemplated, which would have a material
adverse effect on Buyer's business taken as a whole, nor, to the best of Buyer's
knowledge, is there any basis therefor, against or affecting Buyer's rights
therein or ability to consummate the transactions contemplated herein, at law or
in equity or otherwise, before or by any court or governmental agency or body,
domestic or foreign, or before an arbitrator of any kind.
5.5. COMPLIANCE WITH LAWS. Buyer has not received any claim or notice
that it is not in compliance with any applicable federal, state, local or other
governmental laws or ordinances, or any applicable order, rule or regulation of
federal, state, local or other governmental agency, which would have a material
adverse effect on Buyer's business taken as a whole.
5.6. CLAIMS AND BILLING. To the best of Buyer's knowledge, no facts
exist which could provide a basis for any action, suit, proceeding or
investigation against Buyer or any of Buyer's officers, directors or employees
relating to claims, billing and other information submitted to, or required to
be filed in connection with Buyer's participation in and reimbursement under
Medicare, Medicaid, or any third party payor programs, which would have a
material adverse effect on Buyer's business taken as a whole.
5.7. FINDERS. Except for Healthcare Alliance Group, Inc., no broker or
finder has acted for Buyer in connection with the transactions contemplated by
this Agreement, and no broker or finder is entitled to any broker's or finder's
fee or other commission in respect thereof based in any way on agreements,
understandings or arrangements with Buyer. Buyer shall be responsible for any
fees, commissions or any other financial obligation due to Healthcare Alliance
Group, Inc. in connection with this transaction and shall hold Sellers harmless
for any such obligation.
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ARTICLE VI: INFORMATION AND RECORDS CONCERNING THE FACILITIES
-------------------------------------------------
6.1. ACCESS TO INFORMATION AND RECORDS BEFORE CLOSING.
(a) Prior to the Closing Date, Buyer may make, or cause to be
made, such investigation of the Therapy Business and Sellers' financial and
legal conditions as Buyer deems necessary or advisable to familiarize itself
with the Therapy Business and/or matters relating to its history or operation.
Sellers shall permit Buyer and its authorized representatives (including legal
counsel and accountants), to have full access to the Therapy Business and
Sellers' books and records, and Sellers will furnish, or cause to be furnished,
to Buyer such financial and operating data and other information and copies of
documents with respect to the products, services, operations and assets, the
Property and the Therapy Business as Buyer shall from time to time request. The
documents to which the Buyer shall have access shall include but not be limited
to Sellers' tax returns and related work papers since its inception and
printouts of patient or resident account information maintained by or on behalf
of any person with respect to the Therapy Business; and Sellers shall make, or
cause to be made, extracts thereof as Buyer or its representatives may request
from time to time, to enable Buyer and its representatives to investigate the
affairs of Sellers and the Therapy Business and the accuracy of the
representations and warranties made in this Agreement. Sellers shall cause their
accountants to cooperate with Buyer and to disclose the results of audits
relating to Sellers and/or to the Therapy Business and to produce the working
papers relating therein. Except with respect to matters reflected in Schedules
or Exhibits hereto provided to by Sellers to Buyer, no such investigation by
Buyer or its representatives shall affect any of the Sellers' or Owners'
representations and warranties in this Agreement or Buyer's right to rely
thereon.
(b) In the event of the termination of this Agreement prior to
Closing, Buyer will deliver to Sellers all documents, work papers and other
materials hereunder obtained from Sellers and relating to Sellers or the
transactions herein contemplated, shall treat all information and data, written
or unwritten, obtained therefrom as confidential, not to be disclosed, shall
retain no copies thereof, shall not use any information or data to the detriment
of the Sellers, and shall instruct and cause its legal, financial and marketing
consultants to do the same.
6.2. MAPS, PLANS, SURVEYS, ETC. Sellers shall deliver, or cause to be
delivered, to Buyer, without charge, all plans, maps, surveys, descriptions, and
title reports respecting the Therapy Business and the use and occupancy thereof
in Sellers' possession that exist as of the date of this Agreement.
ARTICLE VII: OBLIGATIONS OF THE PARTIES UNTIL CLOSING
----------------------------------------
7.1. CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing, Sellers shall conduct their business relating to the
operation of the Therapy Business solely in the ordinary course of business
consistent with past practice and maintain their existence.
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7.2. AFFIRMATIVE COVENANTS. Between the date hereof and the Closing,
Sellers shall and Owners shall use their best efforts to cause Sellers to:
(a) maintain the Therapy Business in substantially the state
of repair, order and condition as on the date hereof, reasonable wear and tear
or loss by casualty excepted;
(b) maintain in full force and effect all Licenses currently
in effect with respect to the Therapy Business;
(c) maintain in full force and effect the insurance policies
and binders currently in effect with respect to the Therapy Business, including
without limitation those listed on SCHEDULE 4.18 hereto;
(d) to preserve intact the present business organization of
Sellers; keep available the services of Sellers' present employees and agents,
and any other employees and agents employed in connection with the Therapy
Business and maintain Sellers' relations and goodwill with the suppliers,
patients and residents, employees, affiliated medical personnel and anyone
having business relating to the Therapy Business;
(e) maintain all of the books and records relating to the
Therapy Business in accordance with its past practices;
(f) comply with all provisions of the Contracts listed in
SCHEDULE 4.7 hereto and with any other agreements that Sellers have entered into
with respect to the Therapy Business in the ordinary course of business since
the date of this Agreement and with the provisions of all laws, rules and
regulations applicable to Sellers' business or the Therapy Business;
(g) cause to be paid when due, all taxes, assessments and
changes or levies imposed upon them or on any of their properties or which they
are required to withhold and pay over;
(h) promptly advise Buyer in writing of the threat or
commencement against Sellers or Owners of any dispute, claim, action, suit or
proceeding, arbitration or investigation that would materially adversely affect
the operations, properties, assets or prospects of the Therapy Business.
7.3. PURSUIT OF CONSENTS AND APPROVALS. Prior to the Closing, the
parties shall undertake to obtain all consents and approvals of governmental
agencies and all other parties necessary for the lawful consummation of the
transactions contemplated hereby and the lawful use, occupancy and enjoyment of
the Therapy Business by Buyer in accordance herewith. Sellers and Owners shall
cooperate with and use their best efforts to assist Buyer in obtaining all such
consent and approvals, and Buyer shall use its best efforts to assist Sellers in
obtaining such consents and approvals, including any managed care contracts.
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If the applicable State of Florida Medicaid or Medicare certification
agency requires that, prior to giving written assurance regarding the issuance
of an operating license, certification or provider agreement to Buyer following
the Closing, all Medicaid and/or Medicare estimated adjustments be paid to the
applicable agency on or before the Closing, Sellers shall pay such amounts on or
before the Closing Date in order to permit Buyer to obtain such written
assurances.
ARTICLE VIII: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
-------------------------------------------
Unless waived by Buyer, its obligation to consummate the purchase of
the Assets is subject to the fulfillment, prior to or at the Closing, of the
conditions in Article III herein and each of the following conditions. Upon
failure of any of the following conditions, Buyer may terminate this Agreement
pursuant to and in accordance with Article XI herein.
8.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Sellers contained in this Agreement or on any Schedule, Exhibit, list,
certificate or other document delivered pursuant to the provisions hereof shall
be true and correct in all material respects at and as of the Closing Date as
though such representations and warranties were made at and as of such time
except to the extent affected by the transactions herein contemplated.
8.2. PERFORMANCE OF COVENANTS. Sellers shall have performed or complied
in all material respects with each of their agreements and covenants required by
this Agreement to be performed or complied with by them prior to or at the
Closing.
8.3. DELIVERY OF CLOSING CERTIFICATE. Sellers shall have executed and
delivered to the Buyer a certificate of each of the chief executive officer of
Sellers dated the Closing Date upon which Buyer may rely, certifying that the
statements made in Sections 8.1 and 8.2 herein are true, correct and complete as
of the Closing Date.
8.4. LEGAL MATTERS. No suit, action, investigation, or legal or
administrative proceeding shall have been brought or shall have been threatened
by any person that questions the validity or legality of this Agreement or the
transactions contemplated hereby. Sellers shall have delivered an opinion of
counsel of Sellers, dated the Closing Date, in the form of SCHEDULE 8.4 hereto.
8.5. APPROVALS.
(a) The consent or approval of all persons necessary for the
consummation of the transactions contemplated hereby shall have been granted,
including without limitation, the Required Approvals and any tax clearance or
similar approval;
(b) None of the foregoing consents or approvals (i) shall have
been conditioned upon the modification, cancellation or termination of any
material lease, contract, commitment, agreement, license, easement, right or
other authorization with respect to the Therapy Business, or (ii) shall impose
on the Buyer any material condition or provision or requirement with respect to
the
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Therapy Business or its operation that is more restrictive than or different
from the conditions imposed upon such operation prior to Closing.
8.6. MATERIAL CHANGE. Since the date of this Agreement there shall not
have been any material adverse change in the condition (financial or otherwise)
of the assets, properties or operations of the Therapy Business or Sellers.
8.7. ASSETS TRANSFERRED AT CLOSING. Sellers shall have delivered or
caused to be delivered to Buyer possession of the Assets (or the right to obtain
possession on demand pursuant to the terms of a mutually agreed upon Escrow
Agreement) together with such instruments of sale and transfer, including
without limitation a Bill of Sale and Assignment of Contracts, in form
acceptable to Buyer, sufficient to vest in Buyer good and marketable title to
the Assets, free and clear of all liens, security interests, encumbrances,
claims and other exceptions of any kind whatsoever. Sellers also shall execute
and deliver to Buyer at Closing a form of withdrawal of assumed name with
respect to the trade names of the Therapy Business in form and substance
acceptable to Buyer and its counsel.
8.8. POSSESSION. Possession of the Therapy Business shall be or shall
have been delivered to Buyer as provided in this Agreement, free and clear of
any liens, claims to or rights of possession.
8.9. COBRA. Sellers shall have, and shall have caused all concerned
benefits plan administrators to have, given all notices, made all offers, paid
and collected all premiums, obtained all group health plan coverage, and
performed all other actions mandated by Title X of the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA"), and which is required to be given,
made, paid, obtained, and performed as a result of the Closing under this
Agreement. Any amounts under COBRA or similar state or federal law or regulation
which becomes a liability to Buyer after Closing but which relates to any period
of time in which Sellers owned the Therapy Business shall be paid by Sellers
either by a dollar for dollar reduction of the Purchase Price at the Closing or
upon demand after the Closing.
8.10. AUTHORIZATION DOCUMENTS. Buyer shall have received a certificate
of the Secretary or other officer of each Sellers certifying a copy of
Resolutions of the Board of Directors of Sellers and consent of their
shareholders authorizing Sellers' execution and full performance of Sellers'
Transaction Documents, the Articles or Certificate of Incorporation and By-Laws
of Sellers and the incumbency of the officers of Sellers.
8.11. OTHER DOCUMENTS. Sellers shall have furnished Buyer with all
other documents, certificates and other instruments required to be furnished to
Buyer by Sellers pursuant to the terms herein.
8.12. DUE DILIGENCE REVIEW. Notwithstanding anything to the contrary
stated in this Agreement, the parties recognize and agree that the obligation of
Buyer to consummate the transactions contemplated by this Agreement are
expressly conditioned upon and subject to Buyer having completed, by the
Closing, its due diligence review of the Therapy Business and Sellers'
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business, and Buyer's satisfaction therewith in all respects as determined in
its sole and absolute discretion.
8.13. APPROVAL OF SCHEDULES. Schedules delivered previously and through
the Closing Date shall be satisfactory to Buyer.
ARTICLE IX: CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
--------------------------------------------
Unless waived by Sellers, its obligation to consummate the sale of the
Assets is subject to the fulfillment, prior to or at the Closing, of each of the
following conditions:
9.1. REPRESENTATION AND WARRANTIES. The representations and warranties
of Buyer in this Agreement or on any Schedule, Exhibit, list, certificate or
document delivered pursuant to the provisions hereof shall be true at and as of
the Closing Date as though such representations and warranties were made at and
as of such time, except to the extent affected by the transactions herein
contemplated.
9.2. PERFORMANCE OF COVENANTS. Buyer shall have performed or complied
with each of its agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
9.3. DELIVERY OF CLOSING CERTIFICATE. Buyer shall have delivered to
Sellers a certificate of an officer of Buyer dated the Closing Date upon which
Sellers can rely, certifying that the statements made in Sections 9.1 and 9.2
herein are true, correct and complete as of the Closing Date.
9.4. LEGAL MATTERS. No suit, actions, investigation or legal or
administrative proceedings shall have been brought or shall have been threatened
by any person that questions the validity or legality of the Agreement or the
transactions contemplated hereby.
9.5. AUTHORIZATION DOCUMENTS. Sellers shall have received a certificate
of the Secretary or other officer of the Buyer certifying a copy of Resolutions
of the Board of Directors of Buyers authorizing Buyer's execution and full
performance of Buyer's Transaction Documents and the incumbency of the officers
of the Buyer.
9.6. OTHER DOCUMENTS. Buyer shall have furnished Sellers with all
documents, certificates and other instruments required to be furnished to
Sellers by Buyer pursuant to the terms hereof.
ARTICLE X: OBLIGATIONS OF PARTIES AFTER CLOSING
------------------------------------
10.1. DISCHARGE OF LIABILITIES. The Owners shall cause Sellers to pay
all of their liabilities and obligations with respect to the Therapy Business
that are not expressly assumed by Buyer at Closing, as and when the same shall
become due and payable.
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10.2. INDEMNIFICATION.
(a) The Owners and Sellers, jointly and severally, hereby
covenant to and shall defend and indemnify Buyer and hold it harmless against
and with respect to any and all damage, loss, liability, deficiency, cost and
expense (including without limitation reasonable attorneys' fees and paralegals'
fees) (all of the foregoing hereinafter collectively referred to as "Loss")
resulting from: (i) any misrepresentation, breach of warranty, or failure to
fulfill any agreement or covenant on the part of the Owners or Sellers or under
this Agreement; (ii) any taxes, interest, penalties and additions to tax
(including workers' compensation charges) that are required to be paid to the
United States Government or any state or local taxing authority resulting from
the operation of the Therapy Business for any period ending on or before the
Closing Date; (iii) if applicable, all amounts that are due or that may become
due to Medicaid and/or Medicare intermediaries, or to other public or private
third party payors, if any, on account of adjustments to Medicaid and/or
Medicare or any other public or private third party payer cost reimbursement
claims made with respect to the Therapy Business for any period ending on or
before the Closing Date; (iv) any claim relating to any liability of the Therapy
Business or Sellers that are not expressly assumed by Buyer pursuant to the
terms of this Agreement ("Unassumed Liability"); (v) any liability arising out
of Sellers' noncompliance with COBRA or any like statute; (vi) any liability
arising out of any environmental hazard or condition with respect to the
Property or the Therapy Business existing as of the Closing Date and any law,
regulation or decree on action of any government entity in connection therewith;
(vii) any other claims, liability or cost of any nature whatsoever, known or
unknown, whether accrued, absolute contingent or otherwise, presently existing
or arising in the future which such liability arose out of Sellers' conduct
prior to Closing; and (viii) any and all actions, suits, proceedings, demands,
assessments, judgments, costs and legal and other expenses incident to any of
the foregoing.
(b) Buyer covenants and shall indemnify Owners and Sellers and
hold them harmless against and with respect to any and all Loss from: (i) any
misrepresentation, breach of warranty, or failure to fulfill and agreement or
covenant on the part of Buyer under this Agreement; (ii) any taxes, interest,
penalties and additions to tax (including workers' compensation charges) that
are required to be paid to the United States government or any state or local
taxing authority resulting from the operation of the Therapy Business for any
period after the Closing Date; (iii) if applicable, all amounts that are due or
that may become due to Medicaid and/or Medicare intermediaries, or to other
public or private third party payors, if any, on account of adjustments to
Medicaid and/or Medicare or any other public or private third party payer cost
reimbursement claims made with respect to the Therapy Business for any period
after the Closing Date, (iv) any claim relating to any liabilities of the
Therapy Business after Closing, except claims expressly assumed in writing by
Buyer; (v) any liability arising out of any environmental hazard or condition
with respect to the Property or the Therapy Business existing after the Closing
Date and any law, regulation or decree on action of any government entity in
connection therewith; (vi) any other claims, liability or cost of any nature
whatsoever, known or unknown, whether accrued, absolute contingent or otherwise,
presently existing or arising in the future which such liability arose out of
Buyer's conduct after Closing; and (vii) any and all actions, suits,
proceedings, demands, assessments, judgments, costs and legal and other expenses
incident to any of the foregoing.
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10.3. PAYMENT BY BUYER FOR EXPENSE ADJUSTMENTS AFTER CLOSING. If after
the Closing Date Buyer is required from time to time to pay any amounts for
Medicaid and/or Medicare or other third party payor cost adjustments, federal,
state or local taxes, workers' compensation insurance premiums or other
expenditures that relate to the operation of the Therapy Business before the
Closing Date other than those obligations expressly assumed in this Agreement,
and Buyer provides Sellers written notice and details of same within thirty (30)
days of first receiving knowledge of same, Sellers shall, upon the later of
twenty (20) days of such written demand from Buyer and presentation of evidence
of such requirement, pay to Buyer the amount of such required payment. Any
payment pertaining to operation of the Therapy Business after the Closing Date
shall be the responsibility of Buyer. Notwithstanding anything to the contrary
stated herein, Sellers shall not be responsible for increased workers'
compensation premiums or similar increased charges to Buyer which arise after
the Closing and by reason of Buyer becoming the transferee of Sellers' Assets
hereunder and/or operator of the Therapy Business.
10.4. COST REPORTS. Sellers shall prepare, execute and file all interim
cost reports and all other reports and statements required to be filed by
Sellers with all intermediaries and any other public or private third party
payor or administrative or regulatory agency or body in connection with the
transactions hereunder in a timely fashion and no later than forty-five (45)
days after closing.
10.5. COVENANT NOT-TO-COMPETE.
(a) Except for Robert M. Weldon and Dan W. Weldon, for a
period commencing on the Closing Date and ending on December 31, 1999, neither
Sellers, nor any corporation, partnership or other business entity or person
controlling, controlled by or under common control with any of the foregoing,
including each of the Owners ("Restricted Party") shall, directly or indirectly,
operate, manage, own, control, finance or provide financing for, be a consultant
for or enter into a service contract with, any nursing home, hospital or
licensed health care facility or other entity of any type, licensed or
unlicensed, existing or to be constructed and that provides physical therapy
services, or any entity existing or to be formed that competes in any way with
the Therapy Business, within Clay County, Duval County or Nassau County or
within fifty (50) miles of any business premises of the Therapy Business;
provided, however, this Subsection shall not be applicable if Buyer is in
material breach of the Promissory Note or the Contingent Payments.
(b) Except for Robert M. Weldon and Dan W. Weldon, for a
period commencing on January 1, 2000, and ending on the third anniversary of the
Closing Date, the Restricted Parties shall not, directly or indirectly, operate,
manage, own, control, finance or provide financing for, be a consultant for or
enter into a service contract to provide outpatient therapy services with, any
nursing home, hospital or licensed health care facility or other entity of any
type, licensed or unlicensed, existing or to be constructed that provides
outpatient therapy services within Clay County, Duval County or Nassau County or
within fifty (50) miles of any business premises of the Therapy Business;
provided, however, this Subsection shall not be applicable if Buyer is in
material breach of the Promissory Note or the Contingent Payments.
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(c) From and after the Closing Date, no Restricted Party shall
disclose, directly or indirectly, to any person outside of Buyer's employ
without the express authorization of Buyer, any patient lists, pricing
strategies, patient files and records, any proprietary data or trade secrets
relating to the Therapy Business or any financial or other information about the
Therapy Business not then in the public domain.
(d) For a period of three (3) years from and after the Closing
Date, no Restricted Party shall engage or participate in any effort or act to
induce any of the patients, physicians, suppliers, associates, employees or
independent contractors admitted to or employed by Sellers at the Therapy
Business prior to Closing, or by the Therapy Business or by Buyer, to take any
action or to refrain from taking any action or inaction that might be
disadvantageous to Buyer, including but not limited to the solicitation of their
respective patients, physicians, suppliers, associates, employees or independent
contractors to cease doing business, or their association or employment, with
the Therapy Business or Buyer.
(e) The Restricted Parties acknowledge that the restrictions
contained in this Section are reasonable and necessary to protect the legitimate
business interests of Buyer and that any violation thereof by any of them would
result in irreparable harm to Buyer. Accordingly, the Restricted Parties agree
that upon the violation by any of them of any of the restrictions contained in
this Section, Buyer shall be entitled to obtain from any court of competent
jurisdiction a preliminary and permanent injunction as well as any other relief
provided at law, equity, under this Agreement or otherwise. In the event any of
the foregoing restrictions are adjudged unreasonable in any proceeding, then the
parties agree that the period of time or the scope of such restrictions (or
both) shall be adjusted to such a manner or for such a time (or both) as is
adjudged to be reasonable.
10.6. RECORDS. On the Closing Date, Sellers shall deliver, or cause to
be delivered, to Buyer all patient lists and records and all other records or
copies of same and files or copies of same not then in Buyer's possession
relating to the operations of the Therapy Business.
10.7. COLLECTION OF ACCOUNTS RECEIVABLE. Buyer shall make reasonable
efforts to assist Sellers in collecting all accounts receivable resulting from
activities occurring or services rendered to patients prior to the Closing
including sending follow-up reminders, telephone calls, making or answering such
inquiries as would be undertaken by the Buyer in ordinary course of its own
collections. Such assistance, however, shall not include any legal work or more
than nominal out of pocket expenses. In addition, Buyer shall assist Sellers by
allowing examination by Sellers' authorized representative of relevant
documentation in Buyer's possession after the Closing Date, and by transferring
to Sellers any payments Buyer may receive from any source whatsoever concerning
Sellers' recovery of accounts receivable as provided below. Any payments
received by Buyer from Medicaid, Medicare or other third party payors for
services rendered prior to the Closing Date will be transferred to Sellers
monthly within fifteen (15) days after the last day of the month in which such
payments were received. Any payments made by such payors and earmarked or
itemized to certain time periods preceding or following Closing shall be applied
to accounts receivables arising for such time periods. Notwithstanding the
foregoing, and subject to the last paragraph of this Section 10.7,
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Sellers shall be paid promptly upon receipt one hundred percent (100%) of
collections of Sellers's accounts receivable for billings generated by Sellers
within thirty (30) days prior to the Closing Date and which are received within
thirty (30) days after the Closing Date.
After one hundred twenty (120) days, Sellers shall meet with Buyer to
review and appraise outstanding accounts receivable and determine the
feasibility of collection and any nonextraordinary measures to be taken. The
collection of any accounts receivable due Sellers that have not been collected
by Buyer or Sellers within one hundred twenty (120) days after the Closing Date
shall become the sole responsibility of Sellers, and Buyer shall have no further
obligation to assist Sellers with respect to collection thereof, except to
provide billing and collection data to Sellers for purposes of initiating their
own collection action, if necessary.
For one (1) year after Closing, Sellers may, during regular business
hours and upon reasonable notice to Buyer, and at Sellers' expense, access,
audit and photocopy all accounts, reports and medical records in order to allow
Sellers to document claims or submittals to Medicaid, Medicare or other third
party payors.
For its collection services rendered herein, Buyer shall receive an
administrative fee equal to: (i) three percent (3%) of the amount of receivables
collected by Buyer that are outstanding ninety (90) days or less, and (ii) five
percent (5%) of the amount of receivables collected by Buyer that are
outstanding between ninety (90) days, exclusive, and one hundred twenty (120)
days, inclusive.
10.8. EMPLOYMENT OF EXISTING EMPLOYEES. On the Closing Date Buyer shall
have the option of offering to employ those of Sellers' employees set forth on
SCHEDULE 4.15 hereto, except those listed on SCHEDULE 10.8 hereto. Sellers shall
compensate all employees for all services performed up to and including the
Closing Date. Subsequent to the Closing Date, Buyer shall assume the duty to
compensate any employees who are hired by it, subject to any other terms
contained in this Agreement relating to compensation of employees. Sellers
hereby agree to use their best efforts to facilitate Buyer in its efforts to
employ any of said employees.
10.9. CONSENTS AND APPROVALS. The parties shall undertake to obtain all
consents and approvals of governmental and reimbursement agencies and all other
parties necessary for the lawful consummation of the transactions contemplated
hereby.
10.10. SET-OFF. Anything in this Agreement to the contrary
notwithstanding, Buyer shall have the right to set-off from its payment
obligations under the Promissory Note (against the principal balance and not
only against the next payment due) and Contingent Payments any liability for any
Loss or other indemnification obligations of Sellers and/or Owners herein to
Buyer under this Agreement. Buyer shall notify Owners and/or Sellers in writing
as to the reason for and the amount of the set-off as soon as practicable but at
least thirty (30) days before the day that payment of such set-off amounts would
otherwise be due; provided, however, the failure to provide such notice shall
not affect Buyer's set-off right herein.
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10.11. THERAPY BUSINESS BOOKS AND RECORDS. Buyer shall maintain
separate books and records for the Therapy Business, which books and records
shall be available for review upon reasonable notice during normal business
hours by Owners and Sellers and their independent auditors and attorneys.
10.12. DESIGNATED CONTRACTS. Owners and Sellers shall use their best
efforts to assist Buyer in its assumption of or substitution of the Designated
Contracts within sixty (60) days of the Closing Date. To Owners' and Sellers'
knowledge, the inability of Buyer to assume or substitute all of the Designated
Contracts will not have a material adverse effect on the Therapy Business.
ARTICLE XI: TERMINATION
-----------
11.1. TERMINATION. This Agreement may be terminated at any time at or
prior to the time of Closing Date by:
(a) Buyer, if any condition precedent to Buyer's obligations
hereunder, including without limitation those conditions set forth in Article
VIII herein, have not been satisfied by the Closing Date or pursuant to Section
12.1 herein if any portion of the Assets is damaged or destroyed as a result of
fire, other casualty or for any reason whatsoever;
(b) Sellers, if any condition precedent to Sellers'
obligations hereunder, including without limitation those conditions set forth
in Article IX herein, have not been satisfied by the Closing Date;
(c) Buyer, if any Schedule or Exhibit hereto has been altered
or modified materially after the date hereof by Sellers or Owners;
(d) Sellers, upon the occurrence of an event that results in a
material adverse change in the financial condition of Buyer.
(e) the mutual consent of Buyer and Sellers.
11.2. EFFECT OF TERMINATION. Except as provided in Section 10.5 herein,
if a party terminates this Agreement because one of its conditions precedent has
not been fulfilled, or if this Agreement is terminated by mutual consent, this
Agreement shall become null and void without any liability of any party to the
other. Furthermore, nothing in this Section shall affect Buyer's right to
specific performance of Sellers' obligations at Closing hereunder. Upon
termination, each party shall redeliver promptly all documents, work papers and
other material (and all copies thereof) of any other party relating to the
transaction contemplated hereby, whether so obtained before or after the
execution hereof, to the party furnishing the same. The parties shall each use,
and will cause their advisors and representatives to use their respective best
efforts to keep confidential all information and documents to which it is given
access or copies by any of the parties in the course of its investigation of the
transaction contemplated hereby and will not (except as required by applicable
law, regulation or legal
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process), without the applicable party's prior written consent, disclose any
information or use any information for any purpose unrelated to the consummation
of the transactions contemplated hereby.
ARTICLE XII: CASUALTY, RISK OF LOSS
----------------------
12.1. CASUALTY, RISK OF LOSS. Sellers shall bear the risk of all loss
or damage to the Assets from all causes, until the Closing. If at any time prior
to the Closing any portion of the Assets is damaged or destroyed as a result of
fire, other casualty or for any reason whatsoever, Sellers shall immediately
give notice thereof to Buyer. Buyer shall have the right, in its sole and
absolute discretion, within ten (10) days of receipt of such notice, to (a)
elect not to proceed with the Closing and terminate this Agreement or (b)
proceed to Closing and consummate the transactions contemplated hereby and
receive any and all insurance proceeds received or receivable by Sellers on
account of any such casualty.
ARTICLE XIII: MISCELLANEOUS PROVISIONS
------------------------
13.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, covenants and agreements made by each party in this Agreement or in
any Schedule, Exhibit, certificate, document or list delivered by any such party
pursuant herein shall survive the Closing. Notwithstanding any investigation
conducted before or after the Closing or the decision of any party to consummate
the Closing, each party herein shall be entitled to rely and is hereby declared
to have reasonably relied upon the representations and warranties of the other
party.
13.2. PUBLIC ANNOUNCEMENTS AND CONFIDENTIALITY. No party shall make or
cause to be made any public announcement or similar media publicity with respect
to this Agreement or the transactions contemplated herein prior to the Closing
Date without the prior written notice of each party, and after the Closing Date,
all public announcements or similar media publicity with respect to this
Agreement or the transactions contemplated herein shall be at such time and in
such manner as Buyer shall determine; provided that nothing herein shall prevent
either party, upon prior written notice to the other, from making such written
notices as such party's counsel may consider advisable in order to satisfy the
party's legal and contractual obligations in such regard. The parties shall not,
and use their best efforts to ensure that their respective spouses, relatives,
employees and others associated with the parties, including but not limited to
attorneys and accountants do not, make or publish any negative, critical,
disparaging, slanderous or libelous statements about any of the parties, or any
of their officers, directors, shareholders, agents, employees, or
representatives concerning the parties.
13.3. COSTS AND EXPENSES. Except as expressly otherwise provided in
this Agreement, each party herein shall bear its own costs and expenses in
connection with preparation and closing of this Agreement and the transactions
contemplated hereby.
13.4. BENEFIT AND ASSIGNMENT. This Agreement binds and inures to the
benefit of each party herein and its successors and proper assigns. Buyer shall
remain liable on the Promissory Note and for the Contingent Payments in the
event Buyer assigns or sells any interest in the Therapy Business.
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13.5. EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This Agreement and the
Exhibits and Schedules as updated by either party between the date hereof and
closing herein embody the entire agreement and understanding of the parties and
supersede any and all prior agreements, arrangements and understandings relating
to matters provided for herein, including without limitations the Letter of
Intent executed by the parties as of June 4, 1997. The captions used herein are
for convenience only and shall not control or affect the meaning or construction
of the provisions of this Agreement. This Agreement may be executed in one or
more counterparts, and all such counterparts shall constitute one and the same
instrument.
13.6. COOPERATION - FURTHER ASSISTANCE. Subject to the terms and
conditions herein provided, each of the parties herein shall use its best
efforts to take, or cause to be taken, such action, to execute and deliver, or
cause to be executed and delivered, such additional documents and instruments,
and to do, or cause to be done, all things necessary, proper and advisable under
the provisions of this Agreement and under applicable law to consummate and make
effective the transactions contemplated by this Agreement.
13.7. NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed to be properly given when personally delivered to
the party entitled to receive the notice or when sent by telecopier or by
overnight courier, properly addressed to the party entitled to receive such
notice at the address stated below:
If to Sellers: Jacksonville Rehabilitation Center, Inc.
c/o Don Hunter, President
4171 Roosevelt Boulevard
Jacksonville, FL 32210
Telecopier: (904) 384-3550
Center for Sports Physical Therapy, Inc.
c/o Bob Weldon, Administrator
454 Blanding Boulevard, Suite B
Orange Park, FL 32073
Telecopier: (904) 276-7568
Jacksonville Group, Inc.
c/o Barnes E. Sale, III, President
10728 Atlantic Boulevard
Jacksonville, FL 32225
Telecopier: (904) 646-1144
30
<PAGE> 36
With a copy to: Stephen G. Prom, Esq.
Brant, Moore, Macdonald & Wells, P.A.
Suite 3100 Barnett Center
50 North Laura Street
Jacksonville, FL 32202
Telecopier: (904) 353-3100
If to Buyer: Arbor Health Care Company
1100 Shawnee Road
Lima, Ohio 45805
Telecopier: (419) 227-3499
Attention: Dennis R. Smith Senior Vice President
With a copy to: Brad C. Roush, Esquire
General Counsel
1100 Shawnee Road
Lima, Ohio 45805
Telecopier: (419) 221-3366
13.8. WAIVER, DISCHARGE, ETC. This Agreement shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties herein by
their duly authorized officer of representative. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
13.9. RIGHTS OF PERSONS NOT PARTIES. Nothing contained in this
Agreement shall be deemed to create rights in persons not parties herein, other
than the successors and proper assigns or the parties herein.
13.10. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida, disregarding any rules
relating to the choice or conflict of laws.
13.11. SEVERABILITY. Any provision, or distinguishable portion of any
provision, of the Agreement which is determined in any judicial or
administrative proceeding to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. It
is the intention of the parties that if any provision of Section 10.6 herein
shall be determined to be overly broad in any respect, then it should be
enforceable to the maximum extent permissible under the law. To the extent
permitted by applicable law, the parties waive any provision of law which
renders a provision hereof prohibited or unenforceable in any respect.
31
<PAGE> 37
13.12. SCHEDULES AND EXHIBITS. Each Schedule and Exhibit to this
Agreement that provides information of the Sellers or Owners shall be comprised
of three separate Schedules or Exhibits, as the case may be, each denominated by
the letter A, B or C to specify Seller or Owner Group for which the information
of such Schedule or Exhibit is provided. For example, the Contracts relating to
JG shall be listed on SCHEDULE 4.7-A, the Contracts relating to CSPT shall be
listed on SCHEDULE 4.7-B, and the Contracts relating to JRC shall be listed on
SCHEDULE 4.7-C.
IN WITNESS WHEREOF, each of the parties herein and in the capacity
indicated below has executed this Agreement as of the day and year first above
written.
ARBOR HEALTH CARE COMPANY JACKSONVILLE REHABILITATION
CENTER, INC.
By: \s\ James S. Crawford By: \s\ Don J. Hunter
------------------------------------- -----------------------
Title: Vice President - Outpatient Rehab Title: President
---------------------------------- --------------------
JACKSONVILLE GROUP, INC. CENTER FOR SPORTS PHYSICAL
THERAPY, INC.
By: \s\ Barnes E. Sale, III By: \s\ Robert M. Weldon
------------------------------------- -----------------------
Title: President Title: President
---------------------------------- --------------------
\s\ Barnes E. Sale, III \s\ Don J. Hunter
- ----------------------------------------- ---------------------------
BARNES E. SALE, III DON J. HUNTER
\s\ Arthur J. Collier \s\ James E. Harrison
- ----------------------------------------- ---------------------------
ARTHUR J. COLLIER JAMES E. HARRISON
\s\ David A. Shelton \s\ Robert M. Weldon
- ----------------------------------------- ---------------------------
DAVID A. SHELTON ROBERT M. WELDON
\s\ Dan W. Weldon
- -----------------------------------------
DAN W. WELDON
32
<PAGE> 38
Exhibit A-CSPT
All of the issued and outstanding stock of Center for Sports Physical
Therapy, Inc., a Florida corporation, is owned by the following named
individuals in the following amounts:
Robert M. Weldon 331/3%
Arthur J. Collier 331/3%
Dan W. Wledon 331/3%
-----
TOTAL 100%
=====
<PAGE> 39
Exhibit A-JG
All of the issued and outstanding stock of Jacksonville Group, Inc., a
Florida corporation, is owned by the following named individuals in the
following amounts:
Barnes E. Sale, III 23%
Don J. Hunter 23%
Arthur J. Collier 23%
James E. Harrison 8%
David A. Shelton 23%
-----
TOTAL 100%
=====
<PAGE> 40
Exhibit A-JRC
All of the issued and outstanding stock of Jacksonville Rehabilitation
Center, Inc., a Florida corporation, is owned by the following named individuals
in the following amounts:
Don J. Hunter 100%
----
TOTAL 100%
====
<PAGE> 41
Exhibit B-CSPT
PROMISSORY NOTE
$175,000.00
Lima, Ohio
September 10, 1997
For value received, the receipt and sufficiency of which are hereby
acknowledged, the undersigned, ARBOR HEALTH CARE COMPANY, a Delaware corporation
("Payor"), hereby promises to pay to the order of CENTER FOR SPORTS PHYSICAL
THERAPY, INC., a Florida corporation ("Payee") or its successors and assigns, at
Jacksonville, Florida, or at such other place as the holder hereof may, from
time to time, designate in writing, the total outstanding principal balance of
One Hundred Seventy-Five Thousand and No/100 Dollars ($175,000.00), with simple
interest on the unpaid principal sum hereof at a rate of eight percent (8%) per
year, payable at the times and on the terms as hereinafter provided in this
promissory note (the "Note"):
1. Interest hereon and the principal sum shall be paid in lawful money of the
United States of America.
2. Payor shall make three (3) annual payments of principal and accrued interest
thereon in arrears, with the first such annual payment due September 2, 1998.
The second payment is due September 2, 1999 and the third and final payment is
due on September 2, 2000. A payment shall be deemed "Late" if not received by
Payee on or before the tenth (10th) day after the date such payment is due.
Payor further agrees to pay a late payment charge of five percent (5%) of the
unpaid portion of any Late payment.
3. Prepayment of all or any part of the principal sum of this Note, together
with accrued interest thereon, shall be allowed at any time. Any partial
prepayment shall be applied first against accrued interest and then as a
reduction of principal. Any such prepayment shall not postpone the due date of
any subsequent installment.
4. The principal amount of this Note and/or any accrued interest thereon may be
reduced in the manner specified in Section 10.2: "Indemnification" of that
certain Asset Purchase Agreement entered into by and among Payor and Payee and
dated as of September 10, 1997 to be effective September 1, 1997 (the
"Agreement").
5. The happening of the following event shall be deemed a default under this
Note: default by Payor in the payment of any installment of principal or
interest when due under this Note and the same shall remain unpaid for a period
of fifteen (15) days after the date of such payment is due.
6. It is hereby agreed that in the event default shall be made in the payment of
principal or interest of this Note, then the whole of said principal sum
remaining unpaid hereunder and all interest then accrued thereon shall at the
option of the Payee of this Note forthwith become due and payable without demand
or notice (TIME BEING OF ESSENCE HEREOF) and shall thereafter bear interest at
the highest rate allowed by law until paid. The Payor agrees to pay all costs of
collection, including reasonable attorneys' fees, whether suit be brought or
not, if after maturity or default an attorney shall
<PAGE> 42
be employed to collect this Note or any payment of principal and/or interest due
hereunder and whether or not this Note is collected through the Bankruptcy Court
or any other judicial proceeding.
7. The Payor, for itself, its legal representatives, successors and assigns,
jointly, severally and expressly waives presentment, demand, protest, notice of
dishonor, notice of non-payment, notice of maturity, notice of protest,
presentment for the purpose of accelerating maturity, diligence in collection,
and the benefit of any exemption under any exemption or insolvency laws.
8. Any acceptance of more lenient terms of repayment of the principal or
interest by the Payee shall not waive the Payee's rights of repayment so
stipulated herein. No partial exercise by the Payee of any right or remedy shall
preclude any other future exercise thereof, or the exercise of any other right
or remedy.
9. This Note shall be construed by the laws of the State of Florida. Any and all
suits for any and every breach of this contract may be instituted and maintained
in any court of competent jurisdiction in Duval County, Florida.
10. This Note has been executed and delivered at Jacksonville, Duval County,
Florida on the date first above written.
ARBOR HEALTH CARE COMPANY
By:
-------------------------------------
Title:
----------------------------------
- -2-
<PAGE> 43
Exhibit B-JG
PROMISSORY NOTE
$525,000.00
Lima, Ohio
September 10, 1997
For value received, the receipt and sufficiency of which are hereby
acknowledged, the undersigned, ARBOR HEALTH CARE COMPANY, a Delaware corporation
("Payor"), hereby promises to pay to the order of JACKSONVILLE GROUP, INC., a
Florida corporation ("Payee") or its successors and assigns, at Jacksonville,
Florida, or at such other place as the holder hereof may, from time to time,
designate in writing, the total outstanding principal balance of Five Hundred
Twenty-Five Thousand and No/100 Dollars ($525,000.00), with simple interest on
the unpaid principal sum hereof at a rate of eight percent (8%) per year,
payable at the times and on the terms as hereinafter provided in this promissory
note (the "Note"):
1. Interest hereon and the principal sum shall be paid in lawful money of the
United States of America.
2. Payor shall make three (3) annual payments of principal and accrued interest
thereon in arrears, with the first such annual payment due September 2, 1998.
The second payment is due September 2, 1999 and the third and final payment is
due on September 2, 2000. A payment shall be deemed "Late" if not received by
Payee on or before the tenth (10th) day after the date such payment is due.
Payor further agrees to pay a late payment charge of five percent (5%) of the
unpaid portion of any Late payment.
3. Prepayment of all or any part of the principal sum of this Note, together
with accrued interest thereon, shall be allowed at any time. Any partial
prepayment shall be applied first against accrued interest and then as a
reduction of principal. Any such prepayment shall not postpone the due date of
any subsequent installment.
4. The principal amount of this Note and/or any accrued interest thereon may be
reduced in the manner specified in Section 10.2: "Indemnification" of that
certain Asset Purchase Agreement entered into by and among Payor and Payee and
dated as of September 10, 1997 to be effective September 1, 1997 (the
"Agreement").
5. The happening of the following event shall be deemed a default under this
Note: default by Payor in the payment of any installment of principal or
interest when due under this Note and the same shall remain unpaid for a period
of fifteen (15) days after the date of such payment is due.
6. It is hereby agreed that in the event default shall be made in the payment of
principal or interest of this Note, then the whole of said principal sum
remaining unpaid hereunder and all interest then accrued thereon shall at the
option of the Payee of this Note forthwith become due and payable without demand
or notice (TIME BEING OF ESSENCE HEREOF) and shall thereafter bear interest
at the highest rate allowed by law until paid. The Payor agrees to pay all costs
of collection, including
<PAGE> 44
reasonable attorneys' fees, whether suit be brought or not, if after maturity or
default an attorney shall be employed to collect this Note or any payment of
principal and/or interest due hereunder and whether or not this Note is
collected through the Bankruptcy Court or any other judicial proceeding.
7. The Payor, for itself, its legal representatives, successors and assigns,
jointly, severally and expressly waives presentment, demand, protest, notice of
dishonor, notice of non-payment, notice of maturity, notice of protest,
presentment for the purpose of accelerating maturity, diligence in collection,
and the benefit of any exemption under any exemption or insolvency laws.
8. Any acceptance of more lenient terms of repayment of the principal or
interest by the Payee shall not waive the Payee's rights of repayment so
stipulated herein. No partial exercise by the Payee of any right or remedy shall
preclude any other future exercise thereof, or the exercise of any other right
or remedy.
9. This Note shall be construed by the laws of the State of Florida. Any and all
suits for any and every breach of this contract may be instituted and maintained
in any court of competent jurisdiction in Duval County, Florida.
10. This Note has been executed and delivered at Jacksonville, Duval County,
Florida on the date first above written.
ARBOR HEALTH CARE COMPANY
By:
-------------------------------------
Title:
----------------------------------
- -2-
<PAGE> 45
Exhibit B-JRC
PROMISSORY NOTE
$300,000.00
Lima, Ohio
September 10, 1997
For value received, the receipt and sufficiency of which are hereby
acknowledged, the undersigned, ARBOR HEALTH CARE COMPANY, a Delaware corporation
("Payor"), hereby promises to pay to the order of JACKSONVILLE REHABILITATION
CENTER, INC., a Florida corporation ("Payee") or its successors and assigns, at
Jacksonville, Florida, or at such other place as the holder hereof may, from
time to time, designate in writing, the total outstanding principal balance of
Three Hundred Thousand and No/100 Dollars ($300,000.00), with simple interest on
the unpaid principal sum hereof at a rate of eight percent (8%) per year,
payable at the times and on the terms as hereinafter provided in this promissory
note (the "Note"):
1. Interest hereon and the principal sum shall be paid in lawful money of the
United States of America.
2. Payor shall make three (3) annual payments of principal and accrued interest
thereon in arrears, with the first such annual payment due September 2, 1998.
The second payment is due September 2, 1999 and the third and final payment is
due on September 2, 2000. A payment shall be deemed "Late" if not received by
Payee on or before the tenth (10th) day after the date such payment is due.
Payor further agrees to pay a late payment charge of five percent (5%) of the
unpaid portion of any Late payment.
3. Prepayment of all or any part of the principal sum of this Note, together
with accrued interest thereon, shall be allowed at any time. Any partial
prepayment shall be applied first against accrued interest and then as a
reduction of principal. Any such prepayment shall not postpone the due date of
any subsequent installment.
4. The principal amount of this Note and/or any accrued interest thereon may be
reduced in the manner specified in Section 10.2: "Indemnification" of that
certain Asset Purchase Agreement entered into by and among Payor and Payee and
dated as of September 10, 1997 to be effective September 1, 1997 (the
"Agreement").
5. The happening of the following event shall be deemed a default under this
Note: default by Payor in the payment of any installment of principal or
interest when due under this Note and the same shall remain unpaid for a period
of fifteen (15) days after the date of such payment is due.
6. It is hereby agreed that in the event default shall be made in the payment of
principal or interest of this Note, then the whole of said principal sum
remaining unpaid hereunder and all interest then accrued thereon shall at the
option of the Payee of this Note forthwith become due and payable without demand
or notice (TIME BEING OF ESSENCE HEREOF) and shall thereafter bear interest at
the highest rate allowed by law until paid. The Payor agrees to pay all costs of
collection, including reasonable attorneys' fees, whether suit be brought or
not, if after maturity or default an attorney
<PAGE> 46
shall be employed to collect this Note or any payment of principal and/or
interest due hereunder and whether or not this Note is collected through the
Bankruptcy Court or any other judicial proceeding.
7. The Payor, for itself, its legal representatives, successors and assigns,
jointly, severally and expressly waives presentment, demand, protest, notice of
dishonor, notice of non-payment, notice of maturity, notice of protest,
presentment for the purpose of accelerating maturity, diligence in collection,
and the benefit of any exemption under any exemption or insolvency laws.
8. Any acceptance of more lenient terms of repayment of the principal or
interest by the Payee shall not waive the Payee's rights of repayment so
stipulated herein. No partial exercise by the Payee of any right or remedy shall
preclude any other future exercise thereof, or the exercise of any other right
or remedy.
9. This Note shall be construed by the laws of the State of Florida. Any and all
suits for any and every breach of this contract may be instituted and maintained
in any court of competent jurisdiction in Duval County, Florida.
10. This Note has been executed and delivered at Jacksonville, Duval County,
Florida on the date first above written.
ARBOR HEALTH CARE COMPANY
By:
-----------------------------------------
Title:
--------------------------------------
- -2-
<PAGE> 47
ARBOR HEALTH CARE COMPANY
JACKSONVILLE THERAPY BUSINESS
ASSET PURCHASE AGREEMENT
SCHEDULE INDEX *
Schedule
- --------
1.2 Inventory
1.4 Designated Contracts
1.5 The Physical Therapy Network, Inc.
2.1(c) Determination and Payment of Purchase Price
2.2(a) Accrued Vacation Pay
2.2(b) Prepayments
2.5 Allocation of Purchase Price
4.1 Organization and Standing of Sellers
4.2 Authority
4.4 Absence of Conflicting Agreements
4.5 Consent List
4.6 Schedule of Assets
4.7 Contracts
4.8 Financial Statements
4.9 Material Changes
4.10 Cost Report Disputes
4.11 Licenses; Permits
4.12 Title, Condition to Personal Property
4.13 Title, Condition of the Property
4.14 Litigation
4.15 Employees
4.16(a) Collective Bargaining, Labor Contracts, Employments Practices, etc.
4.18 Insurance
4.19 Relationships
4.21 Absence of Certain Events
4.22 Compliance with Laws
4.23 Notices from Environmental Authorities
4.25 Tax Returns
4.27 Physical Therapists
4.28 Claims and Billing
8.4 Legal Matters
8.5 Approvals
10.8 Employment of Existing Employees
10.9 Excepted Employees
* The Company agrees to furnish to the Securities and Exchange Commission
supplementally a copy of the omitted schedules upon the Commission's
request.
<PAGE> 1
Exhibit 10.2
SHARE PURCHASE AGREEMENT
------------------------
This Share Purchase Agreement (the "Agreement") is made and
entered into as of this 31ST day of July, 1997, by and among Arbor Health Care
Company, a Delaware corporation ("Purchaser"), and Paulette Najarian - Knight of
Rochester Hills, MI and Paulette Najarian-Knight Trustee of the Paulette
Najarian-Knight Charitable Trust dated June 4, 1997 (hereinafter collectively
referred to as "Seller").
R E C I T A L S
WHEREAS, Seller owns all of the issued and outstanding shares
of capital stock (the "Shares") of Q.D. Pharmacy, Inc., a Michigan corporation
(the "Company");
WHEREAS, the Company is engaged in the business of providing
pharmaceutical and related services, which business is hereinafter referred to
as the "Company's Business"; and
WHEREAS, Seller desires to sell, and Purchaser desires to
purchase, all of the Shares pursuant to the terms and subject to the conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, of the
mutual promises, covenants and conditions herein contained and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. SALE AND PURCHASE OF THE SHARES.
--------------------------------
At the Closing (as defined in Section 6 of this Agreement) and
effective on the Effective Date (as defined in Section 6 of this Agreement),
Seller shall sell and deliver to Purchaser, and Purchaser shall purchase and
take from Seller, all of the Shares, all upon the terms and subject to the
conditions set forth in this Agreement. Such sale and delivery shall be effected
by Seller's delivery to Purchaser at the Closing of a certificate or
certificates representing the Shares, all in accordance with the provisions of
Article 8 hereof. Seller Paulette Najarian-Knight is the owner of 1,800 shares
of the outstanding and issued shares of the Company comprising 90% of the issued
and outstanding shares of the Company, and the Paulette Najarian-Knight
Charitable Trust is the owner of 200 shares of the outstanding and issued shares
of the Company comprising the remaining 10% of the issued and outstanding shares
of the Company.
2. CONSIDERATION FOR THE SHARES.
-----------------------------
In consideration of the sale and transfer to Purchaser by Seller of the
Shares as provided in Section 1 of this Agreement, Purchaser shall do the
following:
- 1 -
<PAGE> 2
(a) At the closing, Purchaser shall deliver $10,000.00 in
immediately available funds to P. Mark Accettura, Esq.,
Daguanno and Accettura, Arboretum Office Park, 34705 West
Twelve Mile Road, Suite 311, Farmington Hills, MI 48331; and
(b) At the Closing, Purchaser shall deliver (i) $1,566,000 in
immediately available funds to Paulette Najarian-Knight; and
(ii) $174,000 in immediately available funds to Paulette
Najarian-Knight in her capacity as Trustee of the Paulette
Najarian-Knight Charitable Trust dated June 4, 1997
(collectively the "Cash"); and
(c) At the Closing, Purchaser shall deliver to the Seller four (4)
promissory notes (individually, a "Note" and collectively, the
"Notes") in the respective principal amounts of $225,000.00;
$25,000.00; $90,000.00 and $10,000.00, in the forms attached
hereto as Exhibits A, B, C and D, respectively.
3. CONTINGENT PAYMENT.
-------------------
Purchaser shall pay Seller up to two (2) contingent payments, each in
the amount of $250,000.00 (individually, a "Contingent Payment" and
collectively, the "Contingent Payments"), which relate to the financial
performance of the Company through December 31, 2001 after acquisition of the
Company by Purchaser. The Contingent Payments shall only be payable as
hereinafter set forth:
3.1 GROSS MARGIN TARGETS. Seller shall be entitled to receive the
Contingent Payment(s) only as follows:
(a) If the aggregate gross margin of the Company for the
period beginning July 1, 1997 through December 31,
1999 equals or exceeds $1,505,000.00 (the "First
Gross Margin Target"), then Seller shall be entitled
to the first Contingent Payment in the amount of
$250,000.00.
(b) If the aggregate gross margin of the Company, for the
period beginning January 1, 2000 through December 31,
2001 equals or exceeds $1,853,000.00 (the "Second
Gross Margin Target"), then Seller shall be entitled
to the second Contingent Payment in the amount of
$250,000.00.
(c) If the first Contingent Payment as described in
Section 3.1(a) is not made because the First Gross
Margin Target was not achieved, the Purchaser shall
nonetheless pay Seller the amount of both Contingent
Payments if the aggregate gross margin of the Company
equals or exceeds $3,358,000.00 (the "Final Gross
Margin Target") for the period beginning July 1, 1997
through
-2-
<PAGE> 3
December 31, 2001. In such event, no further
Contingent Payment shall be payable, it being the
intention of the parties that the maximum amount of
the Contingent Payments payable to Seller shall be
$500,000.00.
3.2. CALCULATIONS. As used herein, "gross margin" shall mean the
revenue of the Company less all expenses, except for expenses associated with
the acquisition of the Company (interest, amortization of good will and
depreciation), and allocation of Purchaser's corporate and pharmacy overhead.
3.3. PAYMENT(S) OF THE CONTINGENT PAYMENT(S). The Contingent Payment(s)
shall be paid to Seller, if due, within 20 days after completion of the audit of
Purchaser's financial statements for the relevant period.
3.4. ACCOUNTING. Purchaser will cause appropriate accountants to
prepare a computation of gross margin of the Company to be prepared each year.
In conjunction with the audit of Purchaser's financial statements, Purchaser's
independent auditors will be instructed to review such computation for
conformity with the terms of this Agreement. In addition, Seller or her agent
shall have the right to examine all relevant books and records of the Company or
other relevant affiliates of Purchaser at all reasonable times and places. In
the event the Company is no longer a separate entity, or if other companies,
divisions or lines of business of Purchaser or its affiliates are added to
Company, separate books and records shall be maintained for purposes of
calculating the gross margins of the Company as if such combination or addition
had not taken place.
3.5. PRORATED PAYMENT. Notwithstanding anything to the contrary stated
herein, in the event that Purchaser sells the Company or the operations of the
Company prior to December 31, 2001 (a "Sale"), then a prorated portion of the
Contingent Payment(s) may be paid according to the terms hereof. In the event of
a Sale, the gross margin targets shall be recalculated by Purchaser on a monthly
basis, and the aggregate gross margin of the Company through the effective date
of the Sale shall be compared to the monthly gross margin targets. If the gross
margin of the Company for the period from the Effective Date (as defined in
Section 6 of this Agreement) through the effective date of the Sale meets or
exceeds the sum of the monthly gross margin targets for such period, then Seller
shall be paid a prorated portion of the Contingent Payment(s) determined by
multiplying the sum of $9,259.26 times the number of months elapsed from the
Effective Date (as defined in Section 6 of this Agreement) through the effective
date of the Sale. This provision shall not apply to any sale of Purchaser or its
other assets, in whole or in part. For purposes of any calculation required by
this Section 3.5, (i) the monthly gross margin target for the period beginning
July 1, 1997 through December 31, 1999 shall be $50,166.67, and (ii) the monthly
gross margin target for the period beginning January 1, 2000 through December
31, 2001 shall be $77,208.33.
-3-
<PAGE> 4
4. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF SELLER.
-----------------------------------------------------
Seller, jointly and severally, represent and warrant to
Purchaser, as follows:
4.1. BINDING EFFECT. This Agreement has been duly executed and
delivered by, and constitutes a legally binding and valid obligation of Seller,
enforceable in accordance with its terms. All corporate, stockholder and other
action required to be taken by or on the part of the Company and the Seller to
adopt and authorize the execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated hereby has been duly and
properly taken.
4.2. OWNERSHIP OF SHARES. Seller is the record owner of and has good
and valid title to the Shares. Seller has full right, power and authority to
sell and deliver the Shares to Purchaser pursuant to the terms of this Agreement
and, the sale and transfer by Seller of the certificate or certificates
representing the Shares pursuant to Section 1 above, Seller will deliver to
Purchaser good and valid title to the Shares, free and clear of any and all
claims, liens, charges, encumbrances, restrictions, agreements and defects of
any kind or nature whatsoever. No person other than Seller owns any shares of
the Company's capital stock or has any interest therein.
4.3. VOLUNTARY ACT. Seller is executing this Agreement freely,
knowingly and voluntarily, with full understanding of the contents and legal
effects hereof, and such execution is not the result of any duress, mistake or
undue influence whatsoever.
4.4. ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan and is
legally entitled and licensed to own and lease its properties and to carry out
the Company's Business as and in the places where such properties are now owned,
leased or operated and the Company's Business is conducted. There are no
jurisdictions in which the nature of the assets or the business of the Company
would require it to qualify as a foreign corporation.
4.5. CAPITALIZATION. The authorized capital stock of the Company
consists exclusively of 50,000 shares of common stock, no par value per share,
of which 2,000 are issued and outstanding and owned by Seller. The Shares
represent all the issued and outstanding shares of capital stock and securities
of any kind or nature whatsoever of the Company. The Shares are validly issued,
fully paid, non-assessable, outstanding and are all owned by Seller. There are
no potential claims that could be asserted by any governmental agency or any
other person or entity to the effect that any of the Shares have been issued in
violation of any federal or state securities laws.
4.6. OPTIONS. There are no existing options, warrants, commitments or
agreements of any kind or nature whatsoever relating to the issuance of the
capital stock or securities of the Company (collectively, the "Company's
Securities") and no existing agreements, trusts or understandings relating to
the voting or transfer of the Company's Securities.
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4.7. SUBSIDIARIES. The Company has no subsidiaries or investments in
any subsidiaries or any other businesses.
4.8. CORPORATE INSTRUMENTS. The Articles of Incorporation and By Laws
of the Company, as amended to date, are true, correct and complete in all
respects. The minute book of the Company contains true, correct and complete
minutes and records of all meetings, proceedings and other actions of the
stockholders, boards of directors and committees of the boards of directors of
the Company since the date of its organization. The stock record book of the
Company is true, correct and complete in all respects and accurately reflects
all issuances and transfers of the Company's Securities. All of such documents
and instruments shall be delivered to Purchaser at least 15 days prior to
Closing.
4.9. CONFLICTS. Except as set forth on SCHEDULE 4.9, neither the
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated nor compliance by Seller with any provisions
hereof will: (a) conflict with, cause an acceleration of, or result in a
material breach of or default under any of the terms, conditions, or provisions
of any (i) provision contained in the Articles of Incorporation or By Laws of
the Company, or (ii) note, bond, mortgage, indenture, license, agreement or
other instrument to which the Seller of the Company is a party or by which the
Seller or the Company or any of its property are bound; or (b) violate any
order, writ, injunction, decree, statute, rule or regulation, the violation of
which would have a material adverse consequence upon the Company, its
properties, or its assets.
4.10. CONSENT. Except as set forth on SCHEDULE 4.10, no consent or
approval by any governmental agency or authority or any non-governmental person
or entity is required in connection with the execution, performance and delivery
by Seller of this Agreement or the consummation of the transactions herein
contemplated, including, but not limited to, consents from federal, state,
municipal or other governmental agencies or authorities having jurisdiction over
the Company's Business.
4.11. FINANCIAL STATEMENTS. Seller has previously furnished Purchaser
with a true, correct and complete copy of the following: (a) the unaudited
balance sheets of the Company at June 30, 1997, June 30, 1996, June 30, 1995 and
June 30, 1994, and the statements of income for the periods then ending. All of
such documents are hereinafter referred to as the "Company's Financial
Statements." The Company's Financial Statements fairly present the respective
financial position of the Company as of their respective dates and the results
of the Company's operations for the respective periods then ended in conformity
with generally accepted accounting principles applied on a consistent basis. The
shareholder's equity of the Company determined in conformity with generally
accepted accounting principles applied on a consistent basis is at least
$50,987.00.
4.12. INVENTORIES. SCHEDULE 4.12 sets forth as of July 20, 1997 (the
"Inventory Date") a true, correct and complete description by classification of
all raw materials and manufacturing supplies, work-in-process and finished
inventories of the Company reflected on the Company's Financial Statements (such
items and any items acquired since the Inventory Date, other than items of
inventory disposed of in the ordinary course of business, are hereinafter
collectively referred to as the
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"Company's Inventories"). Since the Inventory Date, there have been no changes
in the levels of the Company's Inventories in any category except in the
ordinary course of business. Except as otherwise provided on SCHEDULE 4.12, the
Company's Inventories consist solely of quantities and qualities useable and
saleable in the ordinary course of the Company's Business. No material amounts
of the Company's Inventories have been consigned. All of the Company's
Inventories are located on property owned or leased by the Company.
4.13. TANGIBLE ASSETS. SCHEDULE 4.13 sets forth as of June 30, 1997 a
complete list, description and location of each item of the Company's tangible
assets, including without limitation, machinery and equipment, used in the
Company's Business having an initial cost of greater than $1,000. Each such
asset is in good operating condition and repair, normal wear and tear excepted,
and is free of any material defects. Since June 30, 1997 and except as otherwise
provided in SCHEDULE 4.13, there has been no sale or other disposition of any
such asset.
4.14. REAL PROPERTY. As to any leased real property, Seller has
delivered to Purchaser copies of such leases (which have been initialed for
identification by Seller), and the Company is not in default under any such
leases and such leases are in full force and effect.
4.15 ACCOUNTS RECEIVABLE. Except as disclosed on SCHEDULE 4.15, all
accounts receivable of the Company as of June 30, 1997 and all notes and
accounts receivable acquired by it subsequent to June 30, 1997, have arisen in
the ordinary course of business and have been collected or are in the process of
collection and will be collected in the ordinary course of business in the
aggregate recorded amounts thereof, less the applicable allowances set up on the
books of the Company. SCHEDULE 4.15 also sets forth a description of the
Company's policies and current status with respect to sales discounts, returns
and allowances, and also sets forth a description of any material changes in
credit terms since June 30, 1997.
4.16. PATENTS AND TRADEMARKS. SCHEDULE 4.16 sets forth a true, correct
and complete listing of all patents, trademarks, trade names, brand names,
registered copyrights, all other intellectual property rights and any pending
applications therefor, owned by or licensed to the Company (collectively, the
"Company's Patents"), together with a brief description of the filing,
registration or issuance thereof, as to any licenses, sublicenses, covenants or
agreements entered into or granted by or to the Company with respect thereto and
as to any pending or threatened disputes or adverse claims with respect thereto.
Except as set forth on SCHEDULE 4.16, the Company solely owns or has the
exclusive right to use, free and clear of any payment or encumbrance, all
patents, trademarks, trade names and brand names (whether registered or
unregistered) and copyrights used in the conduct of the Company's Business.
Except as set forth on SCHEDULE 4.16, there is no claim or demand of any person
pertaining to, or any proceedings which are pending or, to Seller's knowledge,
overtly threatened, which challenge: (a) the exclusive rights of the Company's
Patents; or (b) the rights of the Company in respect of any material
confidential information or material trade secrets used in the conduct of the
Company's Business. None of the Company's Patents are subject to any outstanding
order, ruling, decree, judgment or stipulation by or with any court, arbitrator
or administrative agency or, to Seller's knowledge, infringes or is being
infringed by others or is used by others (whether or
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not such use constitutes infringement), except for orders, rulings, decrees,
judgments, stipulations or alleged infringements set forth on SCHEDULE 4.16,
none of which individually or collectively will materially and adversely affect
the Company's Business.
4.17. ASSETS USED IN BUSINESS. Since June 30, 1997, the Company has not
utilized any material assets in the conduct of the Company's Business other
than: (a) assets reflected on the balance sheets included in the Company's
Financial Statements; (b) assets set forth on the schedules delivered pursuant
to this Agreement (collectively, the "Schedules"), including SCHEDULE 4.17; and
(c) supplies and inventories acquired, consumed or disposed of by the Company
since June 30, 1997 in the ordinary course of the Company's Business.
4.18. TITLE TO ASSETS. The Company has good, valid and indefeasible
leasehold title to all of the assets listed on the Schedules and to all of the
assets reflected on the balance sheets included in the Company's Financial
Statements, except for such assets sold, consumed or otherwise disposed of in
the ordinary course of the Company's Business since the dates of such balance
sheets, free and clear of all mortgages, liens, pledges, charges, restrictions,
agreements, encroachments or encumbrances of any kind or nature whatsoever,
except: (a) as disclosed on SCHEDULE 4.18; and (b) for liens for current taxes
not yet due and payable.
4.19. NO UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE 4.19,
the Company has no material liabilities or obligations of any kind or nature
whatsoever, whether absolute, accrued, contingent or otherwise and whether due
or to become due, other than: (a) those reflected on or referred to in the
Company's Financial Statements and not since paid or discharged; and (b) those
incurred since June 30, 1997 in the ordinary course of the Company's Business
and disclosed in one or more Schedules delivered to Purchaser by the Company.
Except as set forth on SCHEDULE 4.19, the Company does not have, directly or
indirectly, any contractual arrangement with or commitment to or from any of its
officers, directors or employees. Without limiting the generality of the
foregoing and except as so disclosed, no officer, director, shareholder or
employee of the Company was or is, directly or indirectly, a joint investor or
co-venturer with, or owner, lessor, lessee, licensor, licensee or supplier of
any real or personal property, tangible or intangible, owned or used by or a
lender to or debtor of the Company and the Company has no commitments or
obligations as a result of any such transaction prior to the date of this
Agreement.
4.20. ACCOUNTS PAYABLE. SCHEDULE 4.20 sets forth as of June 30, 1997
all of the accounts payable of the Company as of such date. No accounts payable
have arisen since June 30, 1997 except in the ordinary course of the Company's
Business.
4.21. TAXES. Copies of all federal, state and local, as the case may
be, income tax returns of the Company for each of the three (3) consecutive
taxable years immediately preceding the year ended December 31, 1996 have
heretofore been delivered to Purchaser. Such returns and reports reflect
accurately all required and appropriate liability for taxes of the Company for
the periods covered thereby. All federal, state, local and foreign income,
profits, franchise, sales, use, occupancy, excise and other taxes and
assessments (including interest and penalties) payable by, or due from, the
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Company have been fully paid or adequately disclosed and fully provided for in
its books and financial statements, including the balance sheets delivered
pursuant to Section 4.11 hereof, and will be accrued fully through the Closing
Date. The federal and state income tax liability of the Company has been finally
determined and paid and/or accrued in the financial statements for all fiscal
years through and including the fiscal year ended June 30, 1997. No examination,
audit or inquiry of any tax return, federal, state or otherwise, of the Company
is currently in progress and the Company has not received notice of intent to
commence any inquiry, audit or examination of any such tax returns from any
taxing authority. There are no outstanding agreements or waivers extending the
statutory period of limitations applicable to any tax return of the Company. The
Company has been since its inception a qualifying C corporation within the
meaning of the Internal Revenue Code of 1986, as amended. Seller hereby
indemnifies Purchaser and the Company from and with respect to all liability for
such taxes. Payment of federal, state and local income taxes payable on or
within respect to the taxable income of the Company is payable by Seller who
shall remain liable therefor with respect to all taxable periods of the Company
through the Closing Date.
4.22. INDEBTEDNESS. SCHEDULE 4.22 sets forth as of the date of this
Agreement a complete description of each outstanding note, advance, mortgage,
security agreement, guarantee and loan and credit agreement or commitment to
which the Company is a party or by which the Company or any of its assets are
bound.
4.23. CAPITAL EXPENDITURES. SCHEDULE 4.23 sets forth as of the date of
this Agreement each outstanding commitment of the Company to make a capital
expenditure, capital addition or capital improvement in the amount of $5,000.00
or more.
4.24. GOVERNMENTAL AUTHORIZATIONS. The Company now has and, in a manner
consistent with good business practice, will maintain in effect all licenses,
permits, certificates, agreements, consents and other authorizations from all
federal, state and local agencies or authorities as are necessary for the lawful
and proper conduct of the Company's Business up to the Closing Date. SCHEDULE
4.24 sets forth as of the date of this Agreement a complete list of all such
governmental authorizations material to the conduct of the Company's Business.
4.25. OFFICERS, ETC.. SCHEDULE 4.25 sets forth as of the date of this
Agreement a complete list of all officers, directors and employees of the
Company, whether full time or part time, indicating the name of each such
person, the method and the amount of annual compensation of each such person and
the title or job description of each such person. SCHEDULE 4.25 also sets forth
a complete description of any increase in the compensation payable or to become
payable by the Company to any of its officers, directors, employees or agents
which became effective after December 31, 1996.
4.26. COMMITTEES. SCHEDULE 4.26 sets forth a complete list of all
committees of the board of directors of the Company indicating the name of each
committee, the authority delegated to each committee and the name of each member
of each committee.
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4.27. CONSULTANTS. SCHEDULE 4.27 sets forth as of the date of this
Agreement a complete list of all consultants of the Company, whether full time
or part time, indicating the name of each consultant and any compensation
arrangement with each consultant.
4.28. FRINGE BENEFITS. SCHEDULE 4.28 sets forth as of the date of this
Agreement a complete list and description of all fringe benefits, including
hospitalization insurance, accident and health insurance, disability insurance,
death insurance, vacation policies, meals and lodging policies and parking
policies along with true, correct and complete copies of all contracts,
policies, procedures, actuarial reports and manuals of employee disclosures
related thereto.
4.29. EMPLOYEE BENEFIT PLANS. SCHEDULE 4.29 sets forth as of the date
of this Agreement a complete list and description of all employment contracts,
bonus, collective bargaining, deferred compensation, stock option,
profit-sharing, pension, retirement, termination, incentive or other similar
arrangement, plan or commitment (other than those described on SCHEDULE 4.28 or
SCHEDULE 4.30) to which the Company is a party or by which the Company or its
respective assets or properties are bound, along with complete copies of such
documents, arrangements or plans.
4.30. ERISA PLANS. The only "employee benefit plans" (individually, a
"Plan," collectively, the "Plans"), as that term is defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), with
respect to which any liability under ERISA or otherwise presently exists or may
be incurred by the Company are those listed on SCHEDULE 4.30. No Plan is a
"multi employer plan" as that term is defined in Section 3(37) of ERISA. Each
Plan is and has been in all material respects operated and administered in
accordance with its provisions and applicable law, and each Plan is qualified
within the meaning of Section 401(a) of the Code and each related trust is
exempt from taxation under Section 501(a) of the Code. No material liability
under ERISA or otherwise has been incurred by the Company with respect to any
Plan, individually or in the aggregate, and, after reasonable investigation,
Seller is not aware of any facts which indicate that such liability is
reasonably likely to be incurred in the future. No "prohibited transaction," as
such term is defined in Section 406 of ERISA, or in Section 4975 of the Code,
nor any "reportable event," as that term is defined in Section 4043 of ERISA,
has occurred with respect to any Plan, no "accumulated funding deficiency," as
such term is defined in Section 302 of ERISA or in Section 412 of the Code
(whether or not waived), exists with respect to any Plan and no suits, claims or
other actions have been commenced or threatened with respect to any Plan. No
Plan is a "defined benefit plan" as that term is defined in Section 3(35) of
ERISA.
4.31. AGREEMENTS AND COMMITMENTS. SCHEDULE 4.31 sets forth as of the
date of this Agreement a complete list of all of the following written
agreements (copies of which shall be made available to Purchaser), and describes
all the following oral agreements and commitments to which the Company is a
party:
(a) PURCHASE AND SALE COMMITMENTS. Each outstanding purchase
and sale commitment of the Company in the amount of $5,000.00 or more.
No material outstanding purchase commitments by the Company is in
excess of the normal,
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ordinary and usual requirements of the Company's Business. No
commitment the term of which extends beyond ninety (90) days after the
date hereof purports to obligate the Company to sell any product at a
price which, in view of currently prevailing and projected costs of raw
materials, would result, when all such sales commitments are taken in
the aggregate, in a loss to the Company. The Company has not rendered
billings for or collected progress or other advance payments under any
sales commitment providing for such payments in excess of amounts that
could reasonably be billed or collected on the basis of work actually
completed thereunder.
(b) DISTRIBUTORSHIP AND SALES MANAGEMENT. Each
distributorship, sales, agency, franchise or similar agreement of the
Company.
(c) LICENSES. Each license agreement to which the Company is a
party, either as Licensor or Licensee.
(d) LEASES. Each outstanding lease to which the Company is a
party, other than the leases set forth on other schedules delivered to
Purchaser by the Company.
(e) OTHER AGREEMENTS. Each material contract, agreement and
commitment to which the Company is a party or by which the Company or
any of its assets are bound other than those disclosed on the other
Schedules delivered to Purchaser by the Company.
4.32. ADVERSE CHANGE. SCHEDULE 4.32 sets forth as of the date of this
Agreement a complete description of any material adverse change in the financial
condition, business or properties of the Company occurring after June 30, 1997,
whether or not such change is reflected in the Company's Financial Statements or
in the ordinary course of the Company's Business, including, but not limited to,
any material change in the value of the assets or properties of the Company.
4.33. INSURANCE POLICIES. SCHEDULE 4.33 sets forth as of the date of
this Agreement a complete description of all policies of insurance with respect
to the Company covering its properties, buildings, machinery, equipment,
furniture, fixtures, operations and employees including, but not limited to,
policies covering errors and omissions and public liability, along with true,
correct and complete copies of all such policies. All of such policies are in
full force and effect, and no notice of termination or cancellation has been
received with respect to any such policy. The Company is not in default with
respect to any provisions of any such policy and has not failed to give any
notice or present any material claim thereunder in due and timely fashion. There
are no claims pending under such policies related to the Company's Business.
4.34. SUPPLIERS. SCHEDULE 4.34 sets forth as of the date of this
Agreement a complete list of all suppliers to the Company that were paid more
than $10,000.00 by the Company during the last fiscal year or the period
consisting of the last twelve (12) months prior to the date of this Agreement,
along with copy of all material service or supply contracts.
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4.35. STATUS OF AGREEMENTS. Each of the contracts, agreements,
commitments, licenses and leases listed on Schedules delivered by the Company
pursuant to this Agreement is a valid and legally binding obligation of the
Company and is in full force and effect as to the Company. There is no material
default as to the Company under the terms of any such agreement or other item
and no condition exists which, with the passage of time, the giving of notice,
or both, would result in such a material default under the terms of any thereof.
4.36. BANK ACCOUNTS. The name of every bank in which the Company has an
account or safe deposit box, the identifying numbers of all such accounts and
safe deposit boxes, and the names of all persons having power to borrow,
discount debt obligations, cash or draw checks or otherwise act on behalf of the
Company in any dealings with such banks are set forth on SCHEDULE 4.36.
4.37. INTERIM OPERATIONS. Except as disclosed on SCHEDULE 4.37 or the
other Schedules or in the Company's Financial Statements, since December 31,
1996, the Company's Business has been conducted only in the ordinary course and
there has not been: (a) any material change in the condition (financial or
otherwise), assets, liabilities or business of the Company other than changes in
the ordinary course, none of which, singly or in the aggregate, has been
materially adverse; (b) any damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting the business or assets of the
Company; (c) any declaration, setting aside a payment of any dividend, or other
distribution, in respect of the Company's Securities or any direct or indirect
redemption, purchase or other acquisition of any of the Company's Securities;
(d) any option to purchase the Company's Securities granted to any person, or
any employment or deferred compensation agreement entered into between the
Company and any of its officers, directors, employees or consultants; (e) any
issuance or sale by the Company of any stock, bonds, or other corporate
securities; (f) any labor disputes materially and adversely affecting the
business or assets of the Company; (g) to the best of Seller's knowledge but
without any inquiry or investigation any statute enacted or any rule or
regulation adopted which may materially and adversely affect the Company's
Business; (h) any mortgage, pledge, lien or other encumbrance or security
interest (other than liens for current taxes not yet due and such encumbrances,
if any, except such as are not substantial in character, amount or extent and do
not materially detract from the value or interfere with the present or proposed
use of the property subject thereto or affected thereby, or otherwise materially
impair business operations) created on any material asset, tangible or
intangible, of the Company or assumed, either by the Company or by others with
respect to any such asset; (i) any indebtedness or other liability or obligation
(whether absolute, accrued, contingent or otherwise) incurred, or other
transactions (except as reflected in this Agreement) engaged in, by the Company,
except in the ordinary course of business, which is material in light of the
Company's Business; (j) any material obligation or liability discharged or
satisfied by the Company other than current liabilities shown in the Company's
Financial Statements and current liabilities incurred since that date in the
ordinary course of business; (k) any amendment, termination or waiver of any
material right of substantial value belonging to the Company; or (l) any
increase in the compensation payable or to become payable by the Company to any
of its officers, employees, directors, consultants or agents, other than normal
merit and cost-of-living increases in accordance with the Company's general
prevailing practices.
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4.38. LITIGATION AND PROCEEDINGS. Except as set forth in SCHEDULE 4.38,
there is no litigation or any proceedings or governmental investigations pending
or to Seller's knowledge threatened against or relating to the Company or its
properties or business, including, but not limited to, litigation, proceedings
or governmental investigations under federal or state anti-trust laws, labor
laws, environmental protection laws, safety and occupation laws or tax laws
before any court, arbitrator or administration agency which may materially and
adversely affect the Company or its business and properties. To Seller's
knowledge, no facts exist, and no investigation has been instituted by any
governmental agency, which might result in any such action or proceeding. Such
Schedule sets forth a statement as to reserves and other provisions that have
been made by the Company concerning possible liabilities that may arise out of
pending or threatened litigation or proceedings.
4.39. COMPLIANCE WITH LAWS. Except as set forth on SCHEDULE 4.39: (a)
the Company is not in material violation of any applicable building, zoning,
occupational safety and health, pension, environmental control or similar law,
ordinance or regulation in relation to their structures, equipment, or the
operation thereof or of the Company's Business, or any applicable fair
employment, equal opportunity or similar law, ordinance or regulation; (b) the
Company has not received any written notice or complaint from any governmental
agency or authority and, to the best of Seller's knowledge none is threatened,
alleging that the Company has violated any such requirement, law, ordinance or
regulation; (c) the Company has not received any written notice from any
governmental agency or authority of any pending proceeding to take all or any
part of the properties of the Company (whether leased or owned) by condemnation
or right of eminent domain and no such proceeding has been or to Seller's
knowledge is threatened; and (d) the Company is not a party to any agreement or
instrument, or subject to any judgment, order, writ, injunction, rule,
regulation, code or ordinance which materially and adversely affects or may
affect the business, operations, prospects, properties, assets or condition,
financial or otherwise, of the Company.
4.40. WORKERS' COMPENSATION; UNEMPLOYMENT COMPENSATION. SCHEDULE 4.40
is a description of the basis upon which, under the various applicable laws,
workers' compensation and unemployment compensation matters have been handled
for the Company for the last three fiscal years. Except as otherwise described
in such Schedule, workers' compensation and unemployment compensation matters
have been conducted and are being conducted so as to be in substantial
compliance with all laws and regulations applicable thereto.
4.41. POWERS OF ATTORNEY. The Company has no powers of attorney or
similar authorizations outstanding, other than those issued in the ordinary
course of business, with respect to insurance, tax and federal and state
securities laws.
4.42. RELATIONSHIP WITH CUSTOMERS. Except as provided on SCHEDULE
4.42(A), no customer of the Company that has accounted for more than five
percent (5%) of the Company's annual sales during the last two years has refused
to honor any of its commitments to purchase products produced by the Company or
provided the Company with information indicating material dissatisfaction with
the quality, production or price of the Company's products, and there has been
no material adverse
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change with respect to the relationship of the Company with any such customer.
SCHEDULE 4.42(B) sets forth as of the date of this Agreement a true, accurate
and complete list of each institutional customer of the Company. True and
correct copies of the Company's contracts with the customers listed on SCHEDULE
4.42(B) have been delivered to the Purchaser prior to the date hereof. There has
been no adverse change in the business relationship of the Company with any
customer listed on SCHEDULE 4.42(B). No customer listed on SCHEDULE 4.42(B)
accounted for more than 5% of the Company's sales during the last fiscal year or
the period consisting of the last twelve (12) months prior to the date of this
Agreement. No customer listed on SCHEDULE 4.42(B) has informed the Company that
it intends to terminate, cancel or limit its business relationship with the
Company or that consummation of the transactions contemplated by this Agreement
will adversely affect the Company's business relationship with any such
customer.
4.43. ENVIRONMENTAL MATTERS. The Company has not engaged in or
permitted any operations or activities upon, or any use of, any real property
owned, leased or otherwise used by it in connection with the Company's Business
(collectively, the "Property"), or any portion thereof, for the purpose of or in
any way involving the treatment, storage, release, discharge, dumping or
disposal of any Hazardous Materials (as defined below) on, under, in or about
the Property, except as in compliance with applicable Environmental Requirements
(as defined below), nor are any Hazardous Materials presently deposited, stored,
or otherwise located on, under, in or about the Property, except as in
compliance with applicable Environmental Requirements. To the best knowledge of
Seller and the Company, the Property and all activities and conduct of business
related thereto, comply in all material respects with all Environmental
Requirements. Neither Seller nor the Company has received (i) any notice or
other communication concerning any alleged material violation of Environmental
Requirements; (ii) any notice or other communication concerning any claim,
demand, investigation, enforcement, statutory lien or other governmental or
regulatory action instituted or threatened against the Company pursuant to any
Environmental Requirements; or (iii) any communication to or from any
governmental or regulatory agency arising out of or in connection with Hazardous
Materials on, about, beneath, arising from or generated at the Property,
including without limitation, any notice of violation, citation, complaint,
order, directive, request for information or response thereto, notice letter,
demand letter or compliance schedule. The Company holds all permits, consents,
licenses, approvals, registrations, certifications and authorizations required
under applicable Environmental Requirements.
4.44. CERTAIN CONDITIONS FOR ACCOUNTING TREATMENT. The Company has not
been a subsidiary or division of another corporation; the Company has not
changed the equity interest of the shares of the Company's Securities in
contemplation of effecting the transactions contemplated by this Agreement
during the period beginning on the date of its respective organization and
ending on the date of this Agreement; and the Company has never reacquired any
of the shares of the Company's Securities.
4.45. CLAIMS AND BILLING. Claims, billing and other information
submitted to, or required to be filed in connection with the Company's
participation in and reimbursement under, Medicare, Medicaid, Blue Cross and
Blue Shield of Michigan and other private third party payor programs has
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been submitted to the appropriate intermediary, state agency or third party
payor in accordance with applicable laws and regulations or pursuant to
contracts between the Company and the appropriate third party payor, as the case
may be. Except as disclosed on SCHEDULE 4.44, (i) no audit or investigation has
been initiated by any governmental authority or agency or private third party
payor within the past five (5) years which questions the validity or accuracy of
the information submitted by the Company or the Company's right to participate
in Medicare, Medicaid, Blue Cross and Blue Shield of Michigan or other private
third party payor programs, and (ii) the Company has not been required to repay
any money received from Medicare, Medicaid, Blue Cross and Blue Shield of
Michigan or other private third party payor, and (iii) no facts exist which
could provide a basis for any action, suit, proceeding or investigation against
the Seller, the Company or any of the Company's officers, directors or employees
relating to claims, billing and other information submitted to, or required to
be filed in connection with the Company's participation in and reimbursement
under Medicare, Medicaid, Blue Cross and Blue Shield of Michigan or other
private third party payor programs.
4.46. PHARMACISTS. SCHEDULE 4.47 contains a true, accurate and complete
list of all of the pharmacists employed or otherwise retained to provide
services on behalf of the Company (the "Company Pharmacists"). Each of the
Company Pharmacists is duly licensed to engage in the practice of pharmacy in
the State of Michigan. The Michigan Board of Pharmacy has never placed any of
the Company Pharmacists on probation, it has never denied a license to any of
the Company Pharmacists nor has it ever, limited, suspended or revoked any of
their licenses, nor do there exist any facts which could provide a basis for the
taking of any such action.
4.47. OFFICERS AND DIRECTORS. SCHEDULE 4.25 contains a true, accurate
and complete list of all of the individuals who (i) are officers and directors
of the Company on the date hereof, or (ii) were officers and directors of the
Company at any time within twelve (12) months prior to the date hereof.
4.48. DOCUMENTS, CERTIFICATES AND SCHEDULES. All documents,
certificates and Schedules delivered to Purchaser by Seller or the Company
pursuant to the provisions of this Agreement are true, correct and complete in
all material respects.
4.49. BROKER'S FEE. Neither Seller nor the Company has engaged or
consulted with any broker with respect to the Transaction so as to give rise to
any valid claim against Seller, the Company or Purchaser for a brokerage
commission, finder's fee or like payment.
4.50. ACCURACY OF INFORMATION. No statement contained in the Schedules
or in any other written documents executed and/or delivered by or on behalf of
the Company or Seller pursuant to the terms of this Agreement nor any
representation or warranty contained herein or made hereunder, contains any
misstatement of a material fact, or omits or will omit to state a material fact
required to be stated herein or therein in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading. The Schedules and such other documents shall be deemed to
constitute representations and warranties of Seller under this Agreement to the
same extent as if set forth in this Agreement.
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<PAGE> 15
4.51. RELIANCE. Purchaser may rely on the foregoing representations and
warranties of Seller and the Company in consummating the transactions
contemplated hereby.
5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF PURCHASER.
--------------------------------------------------------
Purchaser represents and warrants to Seller as follows:
5.1. ORGANIZATION OF PURCHASER. Purchaser is a corporation duly
organized and validly existing under the laws of the State of Delaware and is
legally entitled to own and lease its properties and to carry on its business as
and in the places where such properties are now owned, leased or operated or
where its business in now conducted.
5.2. AUTHORITY. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated have been duly and validly
authorized by all necessary action on the part of Purchaser and this Agreement
constitutes a valid and legally binding obligation of Purchaser enforceable in
accordance with its terms.
5.3. BROKER'S FEE. Purchaser has not engaged or consulted with any
broker with respect to the transactions contemplated by this Agreement so as to
give rise to any valid claim against Seller, the Company or Purchaser for a
brokerage commission, finder's fee or like payment.
5.4 CONFLICTS. Neither the execution and delivery of this Agreement and
the consummation of the transactions herein contemplated nor compliance by
Purchaser with any provisions hereof will: (a) conflict with, cause an
acceleration of or result in a material breach of or default under any of the
terms, conditions, or provisions of any (i) charter instrument of Purchaser or
(ii) note, bond, mortgage, indenture, license, agreement or other instrument to
which Purchaser is a party or by which it or any of its property is bound; or
(b) violate any order, writ, injunction, decree, statute, rule or regulation,
the violation of which would have a material adverse consequence upon Purchaser,
its properties, and its assets, taken as a whole.
6. THE CLOSING.
------------
The closing of the transaction contemplated under this Agreement (the
"Closing") shall occur on July 31, 1997, simultaneously with the execution of
this Agreement, at the office of Dykema Gosset, PLLC, 1577 North Woodward
Avenue, Suite 300, Bloomfield Hills, Michigan 48304-2820, at 10:00 A.M.,
Detroit, MI time (the "Closing Date"). The transaction described in this
Agreement shall be effective as of 12:01 A.M., August 1, 1997 (the "Effective
Date"). Simultaneously with the execution of this Agreement, the parties are
delivering the following documents:
6.1. CERTIFICATES OF GOOD STANDING. The Company and Purchaser are
delivering to each other certified copies of their respective Certificates of
Good Standing executed by the Secretary of the State in which they are
incorporated and dated no more than ten (10) days prior to the date of Closing.
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<PAGE> 16
6.2. CERTIFIED RESOLUTIONS OF PURCHASER. Purchaser is delivering to
Seller a copy of resolutions adopted by its Board of Directors, certified true
and correct by an officer as of the date of Closing, authorizing Purchaser to
enter into this Agreement and to effect the transactions herein contemplated.
6.3. DOCUMENTS TO SELLER. Paulette Najarian-Knight is executing and
delivering to Purchaser the employment agreement attached hereto as EXHIBIT E.
6.4. DOCUMENTS TO PURCHASER. Purchaser is executing and delivering to
Paulette Najarian- Knight the employment agreement attached hereto as EXHIBIT E.
6.5. DELIVERY OF SHARE CERTIFICATES. Seller is delivering to Purchaser
the share certificate or certificates representing the Shares as required by
Section 1 of this Agreement, either duly authorized in blank by Seller or
accompanied by a stock power duly executed in blank by Seller with such
signature guarantees or other certifications or affidavits as Purchaser shall
reasonably request.
6.6. OPINION OF COUNSEL. Seller is delivering to Purchaser the opinion
of P. Mark Accettura legal counsel to Seller, dated as of the Closing Date, in
the form attached on SCHEDULE 8.12 hereto.
6.7. RESIGNATIONS. With respect to each current officer and director of
the Comapny listed on SCHEDULE 4.48, Seller is delivering to Purchaser a copy of
his or her resignation as such along with an appropriate release, effective the
Closing Date.
7. INDEMNIFICATION.
----------------
7.1 INDEMNIFICATION BY SELLER. From and after the Closing, Seller shall
indemnify, defend and hold harmless Purchaser from, against and with respect to
any claim, liability, obligation, loss, damage, assessment, judgment, cost and
expense, including, without limtiation, reasonable attorneys' and accountants'
fees and costs and expenses reasonably incurred in investigating, preparing,
defending against or prosecuting any litigation or claim, action, suit,
proceeding or demand (individually, a "Loss", of any kind or character arising
out of or in any manner incident, relating or attributable to (i) the inaccuracy
in any representation or breach of warranty of Seller contained in this
Agreement, in the Schedules, or in any certificate, instrument or other document
or agreement executed by Seller in connection with this Agreement or otherwise
made or given in writing in connection with this Agreement by Seller, (ii) any
failure by Seller or the Company to perform or observe any covenant, agreement
or condition to be performed or observed by either of them under this Agreement
or under any certificates or other documents or agreements executed by either of
them in connection with this Agreement, (iii) reliance by Purchaser on any books
or records of the Company or on any information furnished to Purchaser in
writing pursuant to this Agreement by or on behalf of Seller which is erroneous
or inaccurate, (iv) claims relating to the enforcement of Purchaser's rights
under this Agreement in the event Seller is in violation of this Agreement, (v)
any audit, investigation, claim or recoupment by any governmental authority or
agency or private third
-16-
<PAGE> 17
party payor relating to claims or billings submitted by the Company to, or
payments received by the Company from, Medicare, Medicaid, Blue Cross and Blue
Shield or Michigan or other private third party payor programs, and (vi) any
actions, omissions or circumstances occurring prior to the Closing that in any
way adversely effect the Company or the Company's Business. If any claim covered
by the foregoing indemnity is asserted against Purchaser, then Purchaser shall
notify Seller promptly in writing and give her an opportunity to defend the
same, and Purchaser shall extend reasonable cooperation to Seller in connection
with such defense. In the event that Seller fails to defend the same within a
reasonable time, Purchaser shall be entitled to assume the defense thereof and
Seller shall be liable to repay Purchaser for all of its expenses reasonably
incurred in connection with such defense (including reasonable attorneys' fees
and settlement payments).
7.2 ENVIRONMENTAL INDEMNIFICATION BY SELLER. In addition to the
indemnifcation described above, Seller agrees to indemnify, defend, reimburse
and hold harmless Purchaser and from and against: 1) any and all Environmental
Damages arising from the presence of Hazardous Materials upon, about or beneath
the Property or migrating to or from the Property, or arising in any manner
whatsoever out of the violation of any Environmental Requirements pertaining to
the Property and the activities thereon, either of which conditions exist at
Closing; 2) any and all liability to federal, state and local authorities and to
third parties with regard to solid or hazardous waste generated on the Property
prior to Closing but transported to an Off-Site Location (as defined below); and
3) the breach of any environmental warranty or covenant or the inaccuracy of any
environmental representation of Seller or the Company contained in this
Agreement.
7.3. RIGHT OF SET OFF. If Purchaser, in its sole discretion, determines
that it is or is reasonably expected to be entitled to indemnifcation for any
amounts (collectively, the "Amounts Subject to Indemnification") pursuant to
Sections 7.1 or 7.2 of this Agreement, then Purchaser may, in lieu of or in
addition to pursuing its rights of indemnification from Seller, give notice to
Seller that: (i) it is reducing any amounts due to Seller under the Notes by an
amount equal to the Amounts Subject to Indemnification, such reduction to be
treated as first credited against interest accrued by not yet paid and then a
prepayment of principal without penalty; and/or (ii) reduce any Contingent
Payment due Seller by an amount equal to the amounts Subject to Indemnification.
7.4. INDEMNIFICATION BY PURCHASER. From and after the Closing,
Purchaser shall indemnify, defend and hold harmless Seller from, against and
with respect to any Loss of any kind or character arising out of or in any
manner incident, relating or attributable to (i) the inaccuracy in any
representation or breach of warranty of Purchaser contained in this Agreement,
in the Schedules, or in any certificate, instrument or other document or
agreement executed by Purchaser in connection with this Agreement or otherwise
made or given in writing in connection with this Agreement by Purchaser; (ii)
any failure by Purchaser to perform or observe any covenant, agreement or
condition to be performed or observed by it under this Agreement or under any
certificates or other documents or agreements executed it in connection with
this Agreement; and (iii) claims relating to the enforcement of Seller's rights
under this Agreement. If any claim covered by the foregoing indemnity is
asserted against Seller, Seller shall notify Purchaser promptly and give it an
opportunity to defend the same, and Seller shall extend reasonable cooperation
to Purchaser in connection with such
-17-
<PAGE> 18
defense. In the event that Purchaser fails to defend the same within a
reasonable time, Seller shall be entitled to assume the defense thereof and
Purchaser shall be liable to repay Seller for all of his expenses reasonably
incurred in connection with such defense (including reasonable attorneys' fees
and settlements payments).
8. ENVIRONMENTAL DEFINITIONS.
--------------------------
8.1. ENVIRONMENTAL DEFINITIONS. For purposes of this Agreement, the
following definitions shall apply:
(a) "Hazardous Material" means any substance the presence of
which requires investigation or remediation under any Environmental Requirements
and includes, without limitation, petroleum products, PCB's, asbestos,
"hazardous wastes" and "hazardous substances," as defined in the Resource
Conversation and Recovery Act of 1976 and the Comprehensive Environmental
Response, compensation and Liability Act of 1980, respectively.
(b) "Environmental Requirements" means all applicable statutes
and regulations of all governmental agencies of the United States,
states and political subdivisions thereof and all applicable judicial,
administrative, and regulatory decrees, judgments, and orders relating
to the protection of human health or the environment.
(c) "Environmental Damages" means all claims, judgments,
damages, losses, penalties, fines, liabilities (including strict
liability), encumbrances, liens, costs and expenses of investigation
and defense of any claim, whether or not such claim is ultimately
defeated, and of any good faith settlement of judgment, of whatever
kind or nature, contingent or otherwise, matured or unmatured,
foreseeable or unforeseeable, including without limitation reasonable
attorneys' fees and disbursements and consultants' fees, any of which
are incurred at any time as a result of the existence prior to Closing
of Hazardous Material upon, about, beneath the Property or migrating or
threatening to migrate to or from the Property or the existence of a
violation of Environmental Requirements pertaining to the Property.
(d) "Off-Site Location" means any site or facility to which
Hazardous Material generated on the Property prior to Closing was
transported for recycling, reuse, treatment, storage or disposal.
9. WAIVERS.
--------
Seller or Purchaser may, by an instrument in writing, extend
the time for or waive the performance of any of the obligations of the other or
waive compliance by the other with any of the covenants or conditions contained
in this Agreement.
-18-
<PAGE> 19
10. NOTICES.
--------
All notices and other communications which are required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given when delivered personally or when mailed, by registered or certified mail,
postage prepaid, or when delivered by nationally recognized overnight courier
service, or when telecopied, as follows:
If to Seller: Paulette Najarian - Knight
1894 Star Batt Road
Rochester Hills, MI 48309
Telecopier: (248) 391-7995
with a copy to: P. Mark Accettura, Esq.
Daguanno and Accettura
34705 W. 12 Mile Road, Suite 311
Farmington Hills, MI 48335
Telecopier: (248) 489-1453
If to Purchaser to: Arbor Health Care Company
1100 Shawnee Road
P.O. Box 840
Lima, OH 45805
Attention: Pier C. Borra, President
Telecopier: (419) 227-3499
with a copy to: Brad C. Roush, General Counsel
Arbor Health Care Company
1100 Shawnee Road
P.O. Box 840
Lima, OH 45805
Telecopier: (419) 221-3366
11. COVENANT NOT-TO-COMPLETE.
------------------------
(a) For a period of two (2) years from and after the Closing
Date, neither Seller nor any corporation, partnership or other business entity
or person controlling, controlled by or under common control with any of the
foregoing ("Restricted Party") shall, directly or indirectly, operate, manage,
own, control, finance or provide financing for, be a consultant for or enter
into a service contract with, any institutional pharmacy facility or business,
licensed or unlicensed, existing or to be constructed that is located in
Michigan, Ohio or Florida.
-19-
<PAGE> 20
(b) From and after the Closing Date, no Restricted Party shall
disclose, directly or indirectly, to any person outside of Purchaser's employ
without the express authorization of Purchaser, any patient lists, pricing
strategies, patient files and records, any proprietary data or trade secrets
relating to the Company or any financial or other information about the Company
not then in the public domain.
(c) For a period of two (2) years from and after the Closing
Date, no Restricted Party shall engage or participate in any effort or act to
induce any of the customers, suppliers, associates, employees or independent
contractors admitted to or employed by Seller at the Company prior to Closing,
or by the Company or by Purchaser, to take any action or to refrain from taking
any action or inaction that might be disadvantageous to Purchaser, including but
not limited to the solicitation of their respective patients, physicians,
suppliers, associates, employees or independent contractors to cease doing
business, or their association or employment, with the Company or Purchaser.
(d) The Restricted Parties acknowledge that the restrictions
contained in this Section 11 are reasonable and necessary to protect the
legitimate business interests of Purchaser and that any violation thereof by any
of them would result in irreparable harm to Purchaser. Accordingly, the
Restricted Parties agree that upon the violation by any of them of any of the
restrictions contained in this Section 11, Purchaser shall be entitled to obtain
from any court of competent jurisdiction a preliminary and permanent injunction
as well as any other relief provided at law, equity, under this Agreement or
otherwise. In the event any of the foregoing restrictions are adjudged
unreasonable in any proceeding, then the parties agree that the period of time
or the scope of such restrictions (or both) shall be adjusted to such a manner
or for such a time (or both) as is adjudged to be reasonable.
12. ENTIRE AGREEMENT.
-----------------
This Agreement (including the Recitals, Exhibits and Schedules
hereto) supersedes any and all oral or written agreements of the parties hereto,
including, but not limited to, the four (4) page Letter of Intent by and between
Purchaser and Seller, executed on or about June 9, 1997, heretofore made
relating to the subject matter hereof and constitutes the entire agreement of
the parties hereto relating to the subject matter hereof.
13. NO IMPLIED RIGHTS OR REMEDIES.
------------------------------
Except as otherwise expressly provided herein, nothing herein
expressed or implied is intended or shall be construed to confer upon or to give
any person, firm or corporation, other than Seller or Purchaser any rights or
remedies under or by reason of this Agreement.
- 20 -
<PAGE> 21
14. HEADINGS.
---------
Headings in this Agreement are inserted for convenience of
reference only and shall not be a part of or control or affect the meaning of
this Agreement.
15. COUNTERPARTS.
-------------
This Agreement may be executed in several counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
16. NO ASSIGNMENT.
--------------
This Agreement shall not be assigned whether by operation of
law or otherwise, except that Purchaser may assign its rights under this
Agreement to a related corporation.
17. GOVERNING LAW.
--------------
This Agreement shall be governed by and construed in
accordance with the laws of the State of Ohio.
18. CROSS-REFERENCES.
-----------------
To the extent that any Schedule hereto would be required to
contain information covered by another Schedule hereto, a brief cross-reference
identifying the information and the Schedule where it is best described will be
sufficient.
19. PRONOUNS.
---------
Whenever required by the context herein, the singular includes
the plural and the masculine includes the feminine or the neuter.
20. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
-------------------------------------------
All of the representations and warranties made in this Agreement by
either the Shareholders or Purchaser including without limitation agreements to
indemnify, under Section 7 and hereunder, shall survive the Closing.
-20-
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
PURCHASER SELLER
ARBOR HEALTH CARE COMPANY
By: \s\ Dennis R. Smith \s\ P. Najarian-Knight
-------------------------------- ------------------------------------
Paulette Najarian - Knight
Title: Sr. V.P. - Finance
-----------------------------
\s\ P. Najarian-Knight
------------------------------------
Paulette Najarian-Knight, Trustee
of the Paulette Najarian-Knight
Charitable Trust dated June 4, 1997
-21-
<PAGE> 23
EXHIBIT A
PROMISSORY NOTE
---------------
$225,000.00 Bloomfield Hills, Michigan
July __, 1997
For value received, the receipt and sufficiency of which are
hereby acknowledged, the undersigned, ARBOR HEALTH CARE COMPANY, a Delaware
corporation ("Payor"), hereby promises to pay to the order of PAULETTE NAJARIAN
- - KNIGHT ("Payee") or her heirs, personal representatives and assigns, at 1894
Starbatt Road, Rochester Hills, MI 48309, or at such other place as the holder
hereof may, from time to time, designate in writing, the outstanding principal
balance of Two Hundred Twenty-Five Thousand and No/100 Dollars ($225,000.00),
with simple interest on the unpaid principal sum thereof at a rate of seven
percent (7%) per year, payable at the times and on the terms as hereinafter
provided in this promissory note (the "Note"):
1. Interest hereon and the principal sum shall be paid in lawful
money of the United States of America.
2. Payor shall pay: (a) a principal payment in the amount of One
Hundred Twelve Thousand Five Hundred and No/100 Dollars
($112,500.00) plus accrued interest thereon on that date which
is one (1) year from the date hereof; and (b) the principal
balance due hereunder on that date which is two (2) years from
the date hereof, whereupon this Note shall be canceled.
<PAGE> 24
3. Prepayment of all or any part of the principal sum of the
Note, together with accrued interest thereon, shall be allowed
at any time. Any partial prepayment shall be applied first
against accrued interest and then as a reduction of principal,
except as otherwise provided in the Agreement (as that term is
defined in paragraph 4 hereof). Any such prepayment shall not
postpone the due date of any subsequent installment.
4. The principal amount of this Note and/or accrued interest
thereon may be reduced in the manner specified in Section 7:
"Indemnification" of that certain Share Purchase Agreement
entered into by and among Payor and Payee, and dated as of
July ___, 1997 (the "Agreement").
5. The happening of the following event shall be deemed a default
under this Note: default by Payor in the payment of any
installment of principal or interest when due under this Note
and the same shall remain unpaid for a period of ten (10) days
after written notice thereof has been delivered to Payor.
6. In the event of a default under this Note, the holder hereof
may by an instrument or instruments in writing signed by him
and addressed and delivered to the undersigned (a) declare
that the entire principal balance then owing shall bear
interest at a rate of ten percent (10%) per year, or (b)
declare the outstanding principal balance of this Note due and
payable and, upon such declaration being made, the entire
unpaid principal and all accrued interest shall be due and
payable.
<PAGE> 25
No delay on the part of the holder of this Note shall
constitute a waiver of his rights under this paragraph.
7. This Note shall be construed by the laws of the State of Ohio.
8. This Note has been executed and delivered at Bloomfield Hills,
Michigan, on the date first above written.
ARBOR HEALTH CARE COMPANY
By:
-----------------------------
Pier C. Borra, President
<PAGE> 26
EXHIBIT B
PROMISSORY NOTE
---------------
$25,000.00 Bloomfield Hills, Michigan
July __, 1997
For value received, the receipt and sufficiency of which are
hereby acknowledged, the undersigned, ARBOR HEALTH CARE COMPANY, a Delaware
corporation ("Payor"), hereby promises to pay to the order of PAULETTE NAJARIAN
- - KNIGHT CHARITABLE TRUST ("Payee") its successors and assigns, at 1894 Starbatt
Road, Rochester Hills, MI 48309, or at such other place as the holder hereof
may, from time to time, designate in writing, the outstanding principal balance
of Twenty-Five Thousand and No/100 Dollars ($25,000.00), with simple interest on
the unpaid principal sum thereof at a rate of seven percent (7%) per year,
payable at the times and on the terms as hereinafter provided in this promissory
note (the "Note"):
1. Interest hereon and the principal sum shall be paid in lawful
money of the United States of America.
2. Payor shall pay: (a) a principal payment in the amount of
Twelve Thousand Five Hundred and No/100 Dollars ($12,500.00)
plus accrued interest thereon shall be made on that date which
is one (1) year from the date thereof, and (b) the principal
balance due thereunder on that date which is two (2) years
from the date hereof, whereupon this Note shall be canceled.
<PAGE> 27
3. Prepayment of all or any part of the principal sum of the
Note, together with accrued interest thereon, shall be allowed
at any time. Any partial prepayment shall be applied first
against accrued interest and then as a reduction of principal,
except as otherwise provided in the Agreement (as that term is
defined in paragraph 4 hereof). Any such prepayment shall not
postpone the due date of any subsequent installment.
4. The principal amount of this Note and/or accrued interest
thereon may be reduced in the manner specified in Section 7:
"Indemnification" of that certain Share Purchase Agreement
entered into by and among Payor and Payee, and dated as of
July _____, 1997 (the "Agreement").
5. The happening of the following event shall be deemed a default
under this Note: default by Payor in the payment of any
installment of principal or interest when due under this Note
and the same shall remain unpaid for a period of ten (10) days
after written notice thereof has been delivered to Payor.
6. In the event of a default under this Note, the holder hereof
may by an instrument or instruments in writing signed by him
and addressed and delivered to the undersigned (a) declare
that the entire principal balance then owing shall bear
interest at a rate of ten percent (10%) per year, or (b)
declare the outstanding principal balance of this Note due and
payable and, upon such declaration being made, the entire
unpaid principal and all accrued interest shall be due and
payable.
<PAGE> 28
No delay on the part of the holder of this Note shall
constitute a waiver of his rights under this paragraph.
7. This Note shall be construed by the laws of the State of Ohio.
8. This Note has been executed and delivered at Bloomfield Hills,
Michigan, on the date first above written.
ARBOR HEALTH CARE COMPANY
By:
-----------------------------
Pier C. Borra, President
<PAGE> 29
EXHIBIT C
PROMISSORY NOTE
---------------
$90,000.00 Bloomfield Hills, Michigan
July __, 1997
For value received, the receipt and sufficiency of which are
hereby acknowledged, the undersigned, ARBOR HEALTH CARE COMPANY, a Delaware
corporation ("Payor"), hereby promises to pay to the order of PAULETTE NAJARIAN
- - KNIGHT ("Payee") or her heirs, personal representatives and assigns, at 1894
Starbatt Road, Rochester Hills, MI 48309, or at such other place as the holder
hereof may, from time to time, designate in writing, the outstanding principal
balance of Ninety Thousand and No/100 Dollars ($90,000.00), with simple interest
on the unpaid principal sum thereof at a rate of seven percent (7%) per year,
payable at the times and on the terms as hereinafter provided in this promissory
note (the "Note"):
1. Interest hereon and the principal sum shall be paid in lawful
money of the United States of America.
2. Payor shall make the following payments of principal and
interest: a principal sum of Eighteen Thousand and No/100
Dollars ($18,000.00) plus accrued interest therein shall be
made on July __, 1998 and annually thereafter until July ___,
2002, whereupon this Note shall be canceled.
<PAGE> 30
3. Prepayment of all or any part of the principal sum of the
Note, together with accrued interest thereon, shall be allowed
at any time. Any partial prepayment shall be applied first
against accrued interest and then as a reduction of principal,
except as otherwise provided in the Agreement (as that term is
defined in paragraph 4 hereof). Any such prepayment shall not
postpone the due date of any subsequent installment.
4. The principal amount of this Note and/or accrued interest
thereon may be reduced in the manner specified in Section 7:
"Indemnification" of that certain Share Purchase Agreement
entered into by and among Payor and Payee, and dated as of
July ___, 1997 (the "Agreement").
5. The happening of the following event shall be deemed a default
under this Note: default by Payor in the payment of any
installment of principal or interest when due under this Note
and the same shall remain unpaid for a period of ten (10) days
after written notice thereof has been delivered to Payor.
6. In the event of a default under this Note, the holder hereof
may by an instrument or instruments in writing signed by him
and addressed and delivered to the undersigned (a) declare
that the entire principal balance then owing shall bear
interest at a rate of ten percent (10%) per year, or (b)
declare the outstanding principal balance of this Note due and
payable and, upon such declaration being made, the entire
unpaid principal and all accrued interest shall be due and
payable. No delay on the part of the holder of this Note shall
constitute a waiver of his rights under this paragraph.
<PAGE> 31
7. This Note shall be construed by the laws of the State of Ohio.
8. This Note has been executed and delivered at Bloomfield Hills,
Michigan, on the date first above written.
ARBOR HEALTH CARE COMPANY
By:
---------------------------------
Pier C. Borra, President
<PAGE> 32
EXHIBIT D
PROMISSORY NOTE
---------------
$10,000.00 Bloomfield Hills, Michigan
July __, 1997
For value received, the receipt and sufficiency of which are
hereby acknowledged, the undersigned, ARBOR HEALTH CARE COMPANY, a Delaware
corporation ("Payor"), hereby promises to pay to the order of PAULETTE NAJARIAN
- - KNIGHT CHARITABLE TRUST ("Payee") or her heirs, personal representatives and
assigns, at 1894 Starbatt Road, Rochester Hills, MI 48309, or at such other
place as the holder hereof may, from time to time, designate in writing, the
outstanding principal balance of Ten Thousand and No/100 Dollars ($10,000.00),
with simple interest on the unpaid principal sum thereof at a rate of seven
percent (7%) per year, payable at the times and on the terms as hereinafter
provided in this promissory note (the "Note"):
1. Interest hereon and the principal sum shall be paid in lawful
money of the United States of America.
2. Payor shall make the following payments of principal and
interest: a principal sum of Two Thousand and No/100 Dollars
($2,000.00) plus accrued interest therein shall be made on
July __, 1998 and annually thereafter until July ___, 2002,
whereupon this Note shall be canceled.
<PAGE> 33
3. Prepayment of all or any part of the principal sum of the
Note, together with accrued interest thereon, shall be allowed
at any time. Any partial prepayment shall be applied first
against accrued interest and then as a reduction of principal,
except as otherwise provided in the Agreement (as that term is
defined in paragraph 4 hereof). Any such prepayment shall not
postpone the due date of any subsequent installment.
4. The principal amount of this Note and/or accrued interest
thereon may be reduced in the manner specified in Section 7:
"Indemnification" of that certain Share Purchase Agreement
entered into by and among Payor and Payee, and dated as of
July ____, 1997 (the "Agreement").
5. The happening of the following event shall be deemed a default
under this Note: default by Payor in the payment of any
installment of principal or interest when due under this Note
and the same shall remain unpaid for a period of ten (10) days
after written notice thereof has been delivered to Payor.
6. In the event of a default under this Note, the holder hereof
may by an instrument or instruments in writing signed by him
and addressed and delivered to the undersigned (a) declare
that the entire principal balance then owing shall bear
interest at a rate of ten percent (10%) per year, or (b)
declare the outstanding principal balance of this Note due and
payable and, upon such declaration being made, the entire
unpaid principal and all accrued interest shall be due and
payable. No delay on the part of the holder of this Note shall
constitute a waiver of his rights under this paragraph.
<PAGE> 34
7. This Note shall be construed by the laws of the State of Ohio.
8. This Note has been executed and delivered at Bloomfield Hills,
Michigan, on the date first above written.
ARBOR HEALTH CARE COMPANY
By:
---------------------------------
Pier C. Borra, President
<PAGE> 1
Exhibit 10.3
LEASE AGREEMENT
By and Between
Pinecrest Care Center,
an Ohio general partnership
"Lessor"
and
Arbor Health Care Company,
a Delaware Corporation
"Lessee"
July 23, 1997
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
1. FACILITY.................................................................................................1
2. LEASE TERM...............................................................................................1
3. RENT.....................................................................................................1
(a) Rent During the Initial Term...........................................................1
(b) Rent During Extended Term(s)...........................................................2
4. USE; REVENUES............................................................................................2
5. LESSOR'S TITLE...........................................................................................2
6. COVENANTS OF LESSEE......................................................................................3
(a) Operation of Premises..................................................................3
(b) Business Use...........................................................................3
(c) Lawful use.............................................................................4
(d) Hold Harmless..........................................................................4
(e) Creation of Additional Hazards.........................................................4
(f) Utilities..............................................................................4
(g) Provisions as to Maintenance, Repair, Replacement, and Restoration.....................4
(h) Alterations and Improvements...........................................................4
(i) Liens..................................................................................5
(j) Taxes and Fees.........................................................................5
(k) Insurance and Liability................................................................5
(l) Lessee's Failure to Maintain Insurance, Pay Liens, Utilities, Taxes....................6
(m) Fixtures and Personal Property.........................................................6
(n) Surrender of Possession at End of Lease................................................6
(o) Assignment of Lease....................................................................6
(p) Right of Entry.........................................................................7
(q) Rent Demand............................................................................7
(r) Lessor Liability.......................................................................7
(s) Cumulative Nature of Lessor's Rights...................................................7
(t) Lessee's Personalty....................................................................7
(u) Hold-Over..............................................................................7
(v) Triple Net Lease.......................................................................7
7. COVENANTS OF LESSOR......................................................................................7
(a) Quiet Enjoyment........................................................................7
(b) Absence of Deficiencies................................................................8
(c) Management and Control.................................................................8
(d) Lessor's Other Warranties..............................................................8
8. CONDITIONS...............................................................................................9
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
9. PROVISIONS AS TO LOSS OF USE OF PREMISES................................................................11
10. ACCESS TO RECORDS.......................................................................................11
11. INDEMNIFICATION.........................................................................................12
12. DEFAULT BY LESSEE.......................................................................................12
13. LESSOR'S BREACH.........................................................................................13
14. NO ASSUMPTION OF LIABILITIES............................................................................13
15. MANAGEMENT BY LESSEE....................................................................................13
16. FORCE MAJEURE...........................................................................................14
17 REPLACEMENT RESERVE.....................................................................................14
18. TERMINATION PAYMENTS....................................................................................14
19. BROKERS.................................................................................................14
20. NOTICES.................................................................................................15
21. MEMORANDUM OF LEASE.....................................................................................15
22. RELATIONSHIP............................................................................................15
23. WAIVER..................................................................................................16
24. ENTIRE AGREEMENT........................................................................................16
25. AMENDMENTS..............................................................................................16
26. BINDING EFFECT..........................................................................................16
27. HEADINGS................................................................................................16
28. USE OF NAME.............................................................................................16
29. GOVERNING LAW...........................................................................................16
30. ATTORNEYS FEES..........................................................................................16
31. AUTHORITY...............................................................................................16
32. SECURITY DEPOSIT........................................................................................16
</TABLE>
<PAGE> 4
LEASE AGREEMENT
---------------
This Lease Agreement ("Lease") is made as of this 23rd day of July,
1997, by and between PINECREST CARE CENTER, an Ohio general partnership, c/o
Gerald E. Vallee, 936 S.R. 160, P.O. Box 788, Gallipolis, OH 45631 (hereinafter
referred to as "Lessor"), and ARBOR HEALTH CARE COMPANY, a Delaware corporation,
of 1100 Shawnee Road, P.O. Box 840, Lima, Ohio 45802-0840 (hereinafter referred
to as "Lessee").
For valuable consideration, the receipt and sufficiency of which are
acknowledged, Lessor and Lessee hereby agree as follows:
1. FACILITY. Lessor hereby leases to Lessee and Lessee hereby leases
from Lessor the one hundred sixteen (116) bed licensed nursing home facility
("Facility") located at 170 Pinecrest Drive, Gallipolis, Ohio 45631, including
the land and all easements, rights, and other appurtenances relating to the land
("Land") more particularly described on Exhibit A attached hereto and made a
part hereof. The Facility includes the Land and all buildings, improvements, and
fixtures located thereon and all furniture, equipment, and other personal
property used in connection with the Facility; including, but not limited to,
the furniture, fixtures, equipment, and other personal property being set forth
on Exhibit B attached hereto and made a part hereof.
2. LEASE TERM. The term of this Lease shall commence on September 1,
1997, (Commencement Date" and each September 1 thereafter to be known as the
"Anniversary Date"), and shall terminate on August 31, 2002 ("Termination
Date"), unless Lessee exercises its right of renewal as hereinafter provided.
Such initial five (5) year term shall be referred to as the "Initial Term".
Lessor shall give Lessee possession of the Facility on the Commencement Date. As
used in this Lease, "Lease Year" means the twelve (12) calendar month period
beginning on the Commencement Date and each twelve (12) calendar month period
thereafter.
If no event of default shall have occurred and be continuing, Lessee is
hereby granted the right to renew this Lease for three (3) five (5) year
optional renewal terms ("Extended Terms"), upon giving written notice to Lessor
of each such extension at least one hundred-eighty (180) but not more than three
hundred-sixty (360) days prior to the termination of the then current term.
During each such Extended Term, all of the terms and conditions of this Lease
shall continue in full force and effect.
3. RENT.
(a) RENT DURING THE INITIAL TERM. Rent in the Lease Years of
the Initial Term shall be as follows:
Lease Year 1 - Two Hundred Forty-Five Thousand and No/100 Dollars
($245,000.00);
Lease Year 2 - Two Hundred Fifty-Five Thousand and No/100 Dollars
($255,000.00);
Lease Year 3 - Two Hundred Sixty-Five Thousand and No/100 Dollars
($265,000.00);
Lease Year 4 - Two Hundred Seventy-Five Thousand and No/100 Dollars
($275,000.00); and
Lease Year 5 - Two Hundred Eighty-Five Thousand and No/100 Dollars
($285,000.00).
<PAGE> 5
The rent during each Lease Year shall be paid in advance in equal
consecutive monthly installments.
(b) RENT DURING EXTENDED TERM(S). For each of the Lease Years
of any Extended Term, Lessee agrees to pay in advance to Lessor, as and for rent
for the Facility, an amount equal to the sum of: (i) Three Hundred Thousand and
No/100 Dollars ($300,000.00) per Lease Year (the "Extended Term Base Rent");
plus (ii) fifty percent (50%) of any increase over and above the Medicaid
Capital Cost Property Component in existence at the beginning of the first Lease
Year of the first Extended Term to which Lessee or the Facility is entitled to
receive ("Additional Rent"). Notwithstanding anything to the contrary stated
herein, the aggregate Additional Rent in any Lease Year shall not exceed the
total sum of Five Thousand Six Hundred and No/100 Dollars ($5,600.00). The
Additional Rent shall be cumulative from year to year so long as the additional
Medicaid reimbursement received by Lessee and which serves as the basis for the
Additional Rent also continues from year to year.
The rent during any Extended Term shall be paid in advance in equal
monthly installments and shall be based on the Extended Term Base Rent. The
Additional Rent shall be effective during the month when any such increased
Medicaid Capital Cost Property Component becomes effective, and Lessor's portion
shall be paid with the next monthly installment of the Extended Term Base Rent
after Lessee shall have received the above-described amount. Notwithstanding the
above provision for Additional Rent, no Additional Rent shall be payable in
respect of any Medicaid Capital Cost Component paid to Lessee resulting from
Lessee's renovations, remodeling, or improvements to the Facility which are paid
for by Lessee. Additional Rent shall not be due and payable unless Lessee
exercises its option(s) to renew the Lease pursuant to Section 2 hereof. Lessee
shall provide Lessor access at all reasonable times to Lessee's books and
records to verify Lessee's calculations of Additional Rent.
4. USE; REVENUES. Lessee intends to use the property leased hereunder
to operate a nursing home and/or intermediate care facility in accordance with
policies and procedures adopted by Lessee. Lessee agrees to use best efforts to
keep all one hundred sixteen (116) beds at the Facility licensed for use
throughout the Lease term. Lessor acknowledges that all revenues and receipts of
operation shall belong to Lessee. At the Termination Date (unless extended by
Lessee in accordance with the terms hereof) and upon written request from
Lessor, Lessee shall surrender the physical plant which comprises the Facility
with a valid nursing home license issued by the State of Ohio and in a condition
which qualifies for Medicare certification as a skilled nursing home
facility.Lessee may, in its sole and absolute discretion, reduce the licensed
capacity of the facility by up to eight (8) beds at any time during the term of
the Lease, and Lessee shall not be required to re-license any such beds upon
termination of the Lease.
5. LESSOR'S TITLE. Lessor represents and warrants to Lessee that it has
fee simple and marketable title to the Facility, that it has full right and
power to execute and perform this Lease, and that title to the Land and the
Facility is free and clear of all mortgages, liens, and encumbrances, except
restrictions, conditions, and easements of record, taxes and installments of
assessments not yet due and payable, and those other matters set forth on
Exhibit C attached hereto (the "Permitted Encumbrances"). Lessor further
represents and warrants that the Permitted Encumbrances do not, nor will they
prohibit the Facility to be licensed and operated as a nursing home under the
laws of the State of Ohio and participate in the state Medicaid and federal
Medicare programs and receive
2
<PAGE> 6
reimbursements therefore.
In the event that Lessor shall at any time fail to pay any installments
of principal or interest or any other sum under any mortgage or indenture now or
hereafter placed on the Facility, Lessee, if not in default under the terms of
this Lease, shall have the right, but not the obligation, upon thirty (30) days
written notice to Lessor, to pay such principal, interest, and other sums with
respect to which Lessor may be in default. Lessee may deduct such nonpayment by
Lessor, with interest thereon at the rate provided in Section 6 (l) of this
Lease from the date of payment, from the next succeeding installments of rent
until Lessee shall have been fully reimbursed for such payment, expense, and
interest.
Lessor represents and warrants that at no time during the term of this
Lease will it permit the total, aggregate balance then outstanding under the
current mortgage or any future mortgage or mortgage(s) to exceed One Million
Five Hundred Thousand and No/100 Dollars ($1,500,000.00), without the prior
written consent of Lessee. Lessor agrees that any mortgagee(s) of the Facility
shall, by written, recorded agreement, on request of Lessee, recognize the
rights of Lessee under this Lease and assure Lessee of continued and undisturbed
occupancy and possession of the Facility regardless of any defaults by Lessor
under, or foreclosure by said mortgagee(s) of, the applicable mortgage(s). At
the request of Lessor, Lessee shall subordinate its leasehold rights hereunder
in whole or in part to the above mortgage or to future mortgages, but only in
the event that said mortgage or mortgages shall comply with the terms of this
section.
6. COVENANTS OF LESSEE. Lessee does hereby covenant and agree with
Lessor as follows:
(a) OPERATION OF PREMISES. Lessee acknowledges that prior
business usage of the premises as a nursing home by Lessor or its managers or
operators has resulted in the creation of goodwill and that the useful life of
the premises extends beyond the term of this Lease and that Lessor may resume
the operation of this Lease or upon the termination of this Lease and that the
willful failure by Lessee to operate the premises in accordance with applicable
Ohio nursing home licensure standards in effect from time to time can cause
damage to Lessor. Therefore, Lessee warrants and agrees that it will endeavor to
operate the premises at all times during the term of this Lease as a nursing
home in accordance with applicable Ohio nursing home licensure standards in
effect from time to time.
(b) BUSINESS USE. Lessee agrees that the demised premises
shall be operated by no other person or firm except upon and with the written
consent of Lessor and shall be used for the sole business purpose of a nursing
home, including ancillary services directly related to health care services and
patient care and comfort. The preceding shall not preclude Lessee's use of third
party providers of health care service at the Facility. Lessee agrees to operate
its business during each calendar day, unless prevented from doing so by
casualty or other conditions set forth in Article 16 hereof. Lessee further
covenants that it has or will immediately apply for all the necessary permits
and certificates to operate the Facility and will diligently pursue the same and
that it shall use best efforts to keep said certificates in full force and
effect during the term of this Lease.
(c) LAWFUL USE. Lessee will use and occupy the premises and
appurtenances thereto in a careful, safe, and proper manner, and will not commit
or suffer any waste therein, or
3
<PAGE> 7
permit the same to be used for any unlawful purpose, and will conform to and
abide by any and all valid governmental regulations respecting the demised
premises and the use and occupancy thereof.
(d) HOLD HARMLESS. Lessee shall indemnify and save harmless
Lessor from and against all loss sustained or damage for injury to person or
property sustained on said premises and from all loss, liability, or damage by
reason of the operation of said nursing home by Lessee, unless such loss is due
to the negligence or fault of Lessor.
(e) CREATION OF ADDITIONAL HAZARDS. Lessee will neither do,
nor permit, any act or thing which may increase the casualty or fire hazard or
insurance rates on such buildings except with the proper consent of Lessor and
assumption by Lessee, during the original term or any Extended Term of this
Lease, of additional rates arising from such additional potential hazard.
(f) UTILITIES. Lessee will pay, before delinquent, all
telephone, heat, water, gas, electric, sanitary sewer or other utility expense
or assessment, or trash removal expense which may be assessed or charged against
Lessee during the term of this Lease.
(g) PROVISIONS AS TO MAINTENANCE, REPAIR, REPLACEMENT, AND
RESTORATION. Lessee agrees that, subject to ordinary wear and tear and the
provisions of Article 9, at its sole cost and expense, to maintain the Facility
and make all necessary repairs to the buildings and all the interior and
exterior components, systems, fixtures, and equipment, including state and
federally mandated building repairs, improvements, or modifications necessitated
by laws or regulations as may be necessary to maintain the Facility in as good
repair and condition as the same are on the date of the commencement of this
Lease (after giving effect to the Mandated Improvements as hereinafter defined
in this paragraph), or which may be required by any laws, ordinances, or
regulations of any pubic authority having jurisdiction. In fulfilling its
obligations of maintenance hereunder during the Initial Term, Lessee covenants
and agrees to make capital expenditures at the Facility in the minimum amount of
Two Hundred Thousand and No/100 Dollars ($200,000.00) during the course of such
Initial Term (the "Mandated Improvements"). No such specific requirement shall
apply to any Extended Terms.
(h) ALTERATIONS AND IMPROVEMENTS. Lessee shall have the right,
at its expense, to perform, from time to time, alterations and leasehold
improvements at the Facility, provided all work shall be done in a good and
workmanlike manner and in accordance with applicable codes and regulations, and
provided that with respect to structural or major alterations Lessor has given
written approval of such alterations or improvements, Lessor's consent not to be
unreasonably withheld or delayed. "Major Alterations" shall mean those costing
in excess of Twenty-Five Thousand and No/100 Dollars ($25,000.00). Lessee shall
not allow any mechanic's or other liens to exist against the Facility by reason
of work, labor, services, or materials supplied or claimed to have been supplied
to Lessee upon the termination or expiration of this Lease. Any and all
permanent alterations and lease hold improvements made by Lessee to the Facility
shall remain the absolute property of Lessor [subject to the provisions of
Section 6(t) herein], without reimbursement or adjustment by Lessor to Lessee,
either during or at the termination of this Lease.
(i) LIENS. Lessee shall not suffer or permit any liens to be
attached to the premises, building, improvements, appurtenances, trade fixtures,
apparatus, or equipment of Lessor located on said premises. If liens do occur
and Lessee does not discharge said liens within sixty (60)
4
<PAGE> 8
days of written notice by Lessor, or if legal action is taken before sixty (60)
days to satisfy said liens, then Lessor may pay said lien and charge said costs
as outlined in Section 6(l) hereunder; provided, however, Lessee may
legitimately contest any lien that it feels is improper as long as the
contesting of said lien does not cause foreclosure or other proceedings which
puts the property of Lessor in jeopardy, and in that case Lessor can satisfy the
Lien as outlined herein.
(j) TAXES AND FEES. Lessee shall pay all license fees,
assessments, and sales, use, real and personal property, and other taxes or
assessments now or hereafter imposed on the leased property by reason of
ownership, leasing, renting, possession, or use, whether they be assessed to
Lessor or Lessee, together with any penalties or interest in connection
therewith (unless Lessor shall not have timely forwarded any tax bill to
Lessee). If any tax related to the leased premises is now or hereafter required
by law to be assessed or billed to Lessor, Lessee, at its expense, will do
anything required to be done by Lessor in connection with the levy, assessment,
billing, or payment of such tax, and is hereby authorized by Lessor to act on
Lessor's behalf in such respects. Lessee will cause all billings of such taxes
to Lessor to be made by Lessor in care of Lessee and will, from time to time on
request of Lessor, submit written evidence of the payment of all of the
governmental obligations mentioned in this Section. Real estate taxes and
assessments shall be prorated as of the Commencement Date and Termination Date.
(k) INSURANCE AND LIABILITY. Lessee shall procure and maintain
in force throughout the term of this Lease, with a responsible insurance company
or company reasonable acceptable to Lessor, insurance policies insuring the
Facility and its contents for fire and extended damage coverage. Coverage and
amounts thereof shall be 100% of replacement value and shall be updated annually
as to that replacement value. In addition, Lessee shall maintain proper business
interruption insurance for at least three hundred sixty-five (365) days loss of
income. Lessee acknowledges this responsibility to pay rent during the period of
any rebuilding carried out under the terms of Section 9 (a) hereof. In addition
thereto, Lessee agrees to maintain, at Lessee's expense, liability insurance
coverage in an amount of not less than $5,000,000.00/$10,000.000.00. Said policy
shall be procured by Lessee, at its own expense, and all policies shall name
Lessor and Lessee as insured and shall provide that the policies may not be
canceled or altered without at least thirty (30) days written notice to Lessor.
Lessee shall provide Lessor with such evidence of the insurance company as
Lessor may require. The mortgagee of Lessor shall also be named as an insured
party and the policy shall further provide that it may not be canceled or
altered without at least thirty (30) days advance written notice to Lessor's
mortgagee. Lessee may provide the insurance required thereunder through the
blanket coverage insurance policies which it may from time to time maintain.
Neither Lessor nor Lessee shall be liable (by way of subrogation or
otherwise) to any other party (or any insurance company insuring another party)
for any loss or damage to any property covered by insurance, even though such
loss or damage might have been caused by the negligence of Lessor or Lessee, or
their respective agents, servants, employees, clients, invitees, patrons, or
guests. This provision shall be in effect only so long as the applicable
insurance policies provide that this waiver shall not affect the right of the
insured to recover under such policies, and each party shall use its best
efforts (including payment of additional premiums by Lessee, if necessary) to
have its insurance policies contain the standard waiver of subrogation clause.
In the event Lessor's or Lessee's insurance carrier declines to accept a
standard waiver of subrogation clause, Lessor or Lessee, as the case may be,
shall promptly notify the other party, in which event the other party shall not
be required to have its insurance policy contain such waiver of subrogation
clause.
5
<PAGE> 9
(l) LESSEE'S FAILURE TO MAINTAIN INSURANCE, PAY LIENS,
UTILITIES, OR PAY TAXES. In the event Lessee fails to make any payment or do any
act required hereof, including but not limited to failure to pay any lien,
utility, or taxes and failure to maintain required insurance, Lessor may,
without notice of demand, and without releasing Lessee from any obligation
hereunder or waiving any breach hereof, make or do the same, and may pay,
purchase, contest or compromise any charge, lien or encumbrance that in the
judgment of Lessor appears to affect the lease property thereby incurring any
liability and expending any amounts Lessor may, in its discretion, deem
necessary or appropriate. All expenses so paid or incurred by Lessor shall be
due immediately, shall be payable by Lessee without demand, and shall bear
interest until paid at the prime rate of interest announced from time to time by
Provident Bank, plus two percent (2%) per annum, or fifteen percent (15%) per
annum, whichever is greater; but in no event more than the maximum lawful rate.
(m) FIXTURES AND PERSONAL PROPERTY. Lessee warrants that all
furniture, fixtures, equipment, and apparatus listed on Exhibit B and the
heating plant, air conditioner system, and electrical system will be in good
working order and repair at the termination of the Lease, and if not, they shall
be repaired by Lessee at Lessee's expense.
During the term of this Lease, Lessee agrees to replace or repair any
and all furniture, fixtures, and equipment listed on Exhibit B as necessary for
the operation of the Facility and to pay for said furniture, fixtures, and
equipment replacement or repair. At the termination of the Lease, it is agreed
and understood that the property so listed on Exhibit B, replaced or repaired by
Lessee will become the sole and exclusive property of Lessor, without expense to
Lessor.
(n) SURRENDER OF POSSESSION AT END OF LEASE. Lessee agrees to
surrender possession of the leased premises to Lessor at the end of the term,
without notice or demand, in as good as condition as when entered, ordinary wear
and tear excepted and subject to the provisions of Section 6(g) and Article 9
hereof. Upon termination, Lessee agrees to reimburse Lessor for any damage done
to said premises during the term of the Lease.
(o) ASSIGNMENT OF LEASE AND/OR SALE. This Lease shall not be
sublet or assigned, and Lessee will not assign or allow the Facility to be
managed by any other party without the prior written consent of the Lessor.
Lessor's consent to the assignment of this Lease shall not be
required if the assignment is to a corporation which is a wholly owned
subsidiary or affiliated corporation (as that term is defined in Internal
Revenue Code Section 1504) of Lessee and provided that the succeeding
corporation expressly assumes by appropriate written instruments and authority
the obligation of Lessee hereunder whether accrued or accruing prior to or after
the date of such assignment or assumption. Lessee acknowledges that Lessor has
the right, at any time during the Initial Term or any Extended Term of this
Lease, to sell the Facility to a third party or assign the Lease to another
entity, subject to Lessee's rights hereunder.
(p) RIGHT OF ENTRY. Lessor, or any of its duly authorized
agents, may enter upon the premises, at all reasonable times, to examine the
condition of the premises and the state of repair and maintenance being
performed by Lessee.
(q) RENT DEMAND. Every demand for rent made after the same
falls due shall have
6
<PAGE> 10
the same effect in law as if made on the day and at the time the same is due,
any provision to the contrary notwithstanding.
(r) LESSOR LIABILITY. Lessee agrees that all personal property
of every kind and description that may at any time be in and or on the premises
shall be at Lessee's sole risk and that Lessor shall not be liable for any
damage to the said property unless caused by action of Lessor.
(s) CUMULATIVE NATURE OF LESSOR'S RIGHTS. All rights and
remedies of Lessor under this Lease shall be cumulative and none shall be
exclusive of any other right or remedy allowed by law.
(t) LESSEE'S PERSONALTY. Lessee shall have the right and
privilege at the expiration of the Lease, or any extension or renewal thereof,
to remove all of its furniture and equipment, except those items which have
become permanently affixed to the premises, and for this purpose said furniture
and equipment shall be considered personalty to the extent to which they have
not been permanently fixed to the premises; provided Lessee shall promptly
repair any damage occasioned by the removal. At the expiration of this Lease,
Lessee shall have no right or claim to the personal property described in
Exhibit B attached hereto or any replacements thereof, which shall remain the
absolute and exclusive property of Lessor.
(u) HOLD-OVER. Rights acquired under this Lease shall not
extend beyond their term herein granted, and no holding over, or continuing in
the occupancy of the leased premises shall cause or be construed to be an
extension of said Lease; but in any and all such cases Lessee shall be a tenant
at will at the option of Lessor, subject to removal by said Lessor by summary
process and proceedings. Lessee hereby agrees to pay for the time said Lessee
shall retain possession of said premises after the termination of this Lease, at
the rate of rental for the last month of the term of said Lease, and to pay all
expenses of Lessor incurred in enforcing the provisions hereof.
(v) TRIPLE NET LEASE. Lessee and Lessor acknowledge that this
is a "Triple Net Lease" and that, except as otherwise provided herein, all costs
of maintaining the Facility as specified in this Lease Agreement including but
not limited to taxes and assessments, insurance, all maintenance and repairs and
all alterations and additions are the responsibility and cost of Lessee.
7. COVENANTS OF LESSOR.
(a) QUIET ENJOYMENT. Lessor will warrant and defend Lessee in
the enjoyment and peaceable possession of the demised premises (both Land and
Facility, including the property listed on Exhibit B, all of which property is
referred to in this Lease as the "Facility") during the term hereof, if Lessee
shall perform any and all of the covenants, agreement, terms, and conditions
herein agreed to be kept by Lessee. The covenants contained in this Section 7(a)
shall not be restricted, limited, or qualified by any other provision of this
Lease.
(b) ABSENCE OF DEFICIENCIES. Lessor covenants and agrees that
the demised premises will be delivered to the Lessee upon the commencement of
this Lease free from all orders, notices, and violations filed or entered by any
public or quasi-public authority and free from complaints and/or reports of
violations filed with any federal, state, county, municipal or other authority,
unless such conditions shall be due to the fault of Lessee.
7
<PAGE> 11
(c) MANAGEMENT AND CONTROL. Lessor covenants and agrees that
Lessee shall have the entire right of management, control and operation of the
Facility and business which is the subject matter of said Facility, namely, the
operation of a duly licensed nursing home, without interference, hindrance or
directly or indirectly, by the Lessor or any officers, agents, directors or
employees of Lessor.
(d) LESSOR'S OTHER WARRANTIES. Lessor further warrants to
Lessee as follows:
1. There are and will be no leases, contracts, or
similar agreements or obligations in force which affect the use or occupancy of
the premises as a nursing home facility.
2. Lessor is not aware of any violation and there
have been no notices of violation of any applicable law, order, ordinance, rule,
regulation, or requirements, or of any covenant, condition or restriction
affecting or relating to the use or occupancy of the premises as a nursing home
facility issued by any governmental agency or any person entitled to enforce
same.
3. To the best of Lessor's knowledge, there are
currently pending no legal or administrative proceedings or investigations in
any court or agency of any nature whatsoever or judgments, orders, writs,
injunctions, regulations, codes, or ordinances affecting the use of the Facility
by Lessee as a nursing home facility.
4. Lessor will cooperate fully with Lessee to permit
a smooth transition of operations at the Facility, including but not limited to,
doing all things to assist Lessee in obtaining all licenses, permits and
certificates necessary for the operation of a nursing home at the Facility.
5. To the best of Lessor's knowledge, (i) neither
Lessor nor the current tenant is in violation of any federal, state, or local
legal or regulatory requirement of an kind or nature whatsoever relating to the
Facility (including zoning and land use laws, building, safety, or health
ordinances and codes), or of any covenants, conditions, and restrictions
affecting or relating to the use or occupancy thereof; (ii) neither Lessor nor
the current tenant has received any notice from any governmental agency or
authority of any pending proceeding to take all or any part of the assets
(whether leased or owned) by condemnation or right of eminent domain and, to the
best of the knowledge of Lessor, no such proceeding is threatened; and (iii)
Lessor or the current tenant now has and will maintain in effect all licenses,
permits, certificates of need, Section 1122 approvals, facility certifications,
provider agreements, consents, and other authorizations from all federal, state,
municipal, and other governmental agencies or authorities as are necessary to
lawfully operate all beds contained in the Facility as a nursing home that is
dually certified to provide skilled nursing and intermediate care facility
services, and to receive payment therefor under the Medicare and state Medicaid
programs (the "Government Approvals") and there are no, and no notices have been
given to any party of any, violations or breaches of any law, rule, regulation,
order, certificate, agreement, condition in participation, or standard related
to any of the governmental authorizations except taxes that have been cured or
were given formal waivers at the time of the claim.
6. As of August 31, 1997, all Facility systems,
equipment, and the structure of the buildings on the land shall be in good
working order and condition. Lessor warrants that it has no knowledge of any
latent defects respecting the Facility.
8
<PAGE> 12
8. CONDITIONS. Lessee's obligations hereunder shall be further subject
to and contingent upon all of the following, at Lessee's option, unless waived
in writing by Lessee:
(a) Lessee shall have obtained in its name, as Lessee, all
licenses, certificate of need, Medicare and Medicaid certifications, or other
governmental approvals or authorizations of any kind required to permit Lessee
to lease and operate the Facility as presently operated and to obtain Medicare
and Medicaid reimbursement ("Lessee's Government Approvals"). Lessee agrees to
make application for Lessee's Government Approvals as soon as practicable and to
diligently pursue the approval of such applications. Lessor agrees to cooperate
fully with Lessee to obtain Lessee's Government Approvals. It shall be a
condition of Lessee's obligations under this Lease that:
(i) Lessee shall have obtained in its name prior to
September 30, 1997, a license to operate the Facility as a nursing home; and
(ii) Certification of the Facility as a dually
certified skilled nursing intermediate care facility under the Medicare and
Medicaid programs, and provider agreements to participate in such programs not
later than September 30, 1997. Should said licensing and certifications not be
obtained by said dates, then Lessor or Lessee may give a written notice to the
other of cancellation of this Lease to be effective at the end of the calendar
month next following the date of receipt of said written notice. In order that
Lessee may take possession of the Facility and operate same as of the
Commencement Date, the current tenant of the Facility shall have delivered a
letter of responsibility to the Ohio Department of Health allowing Lessee to
operate the Facility until receipt of Lessee's Government Approvals.
(b) Receipt by Lessee and approval of a commitment for the
issuance to Lessee of an ALTA Form B leasehold title insurance policy currently
dated and showing Lessor to hold fee simple title to the Land, free and clear of
all liens, defects, encumbrances, assessments, encroachments, reservations, and
restrictions, whatsoever except for (i) zoning ordinances, (ii) real estate
taxes and installments of assessments which are not delinquent, and (iii)
easements, agreements, and restrictions of record which do not interfere with
Lessee's intended use of the Facility. The commitment shall be in the amount of
One Million Four Hundred Thousand and No/100 Dollars ($1,400,000.00) and shall
be paid for by Lessee.
(c) Receipt and approval by Lessee of a staked survey of the
Land containing a legal description thereof and showing the location of all
improvements and easements located on the Land in relation to property lines and
all roadways adjoining the Facility. The survey shall be paid for by Lessee.
(d) Receipt and approval by Lessee of a report showing that
the Facility is not subject to collections of radon gas or radon gas
infiltration. The test and report shall be paid for by Lessee.
(e) Receipt and approval by Lessee of a report of an
environmental audit ("Audit") of the Facility prepared by a registered engineer
("Engineer") acceptable to the Lessee. The Audit shall contain the results of
the following:
(i) Search of records of governmental agencies
(local, state, and federal)
9
<PAGE> 13
on environmental matters respecting the Facility and adjoining land, if any,
owned by Lessor;
(ii) Physical inspection of the Facility; and,
(iii) if there is any reason to suspect the presence
of hazardous materials, then appropriate samples and tests of the soil, surface
water, and ground water;
(iv) further, if the Facility is uncontaminated, a
certification by the Engineer that the Facility meets all federal and state of
Ohio environmental statues and regulations.
The Audit must be in form and substance satisfactory to Lessee. Lessor
shall fully cooperate in providing to Lessee's Engineer all pertinent
information it may have which relates to the Audit, as requested by Engineer.
The cost of the Audit shall be paid for by Lessee.
(f) The current tenant of the Facility shall have timely filed
a forty-five (45) day notice with the Ohio Department of Human Services.
If items (b) and (c) shall not have been satisfied or waived in writing
by Lessee by July 11, 1997, then, in that event, Lessee shall have the option of
canceling this Lease by giving written notice to Lessor not later than July 11,
1997.
Lessee shall give written notice on or before July 11, 1997, to Lessor
stating whether Lessee intends to have the tests conducted which are provided
for in Items (d) and (e). If Lessee elects to have either or both tests
conducted, then each of these conditions must be satisfied or waived not later
than July 11, 1997, and if either or both conditions shall not have been
satisfied or waived by said date, then, in that event, Lessee shall have the
option of canceling this Lease by giving written notice to Lessor not later than
July 11, 1997.
At the termination of the Lease, Lessee shall, at Lessor's request, do
all things reasonably necessary to transfer the nursing home license to Lessor
or its designee.
9. PROVISIONS AS TO LOSS OF USE OF PREMISES.
(a) FIRE AND OTHER UNAVOIDABLE CASUALTY. If the Facility is
partially or totally destroyed by fire, the elements or other casualty, Lessor
shall restore or rebuild the same as nearly as practicable to the condition at
the time of the commencement of the Lease, such restoring or rebuilding to be
commenced and completed as soon as reasonably possible after such fire or
destruction and to be completed in the event of total destruction within three
hundred sixty-five (365) days from the date of the casualty. During the time the
restoring or rebuilding of the premises is being carried out, Lessee shall be
responsible for paying the rent. Notwithstanding the foregoing, in the event
that such fire or other casualty shall destroy more that fifty percent (50%) of
the then value of the Facility including the property listed on Exhibit B (and
all replacement thereof), and the premises cannot be rebuilt or restored within
three hundred sixty-five (365) days, then Lessor or Lessee may terminate this
Lease as of the day of such damage or destruction by giving written notice to
the other of its election to do so within thirty (30) days after such damage or
destruction. If said Lease is not terminated, the premises shall be rebuilt or
restored as provided herein, as soon as reasonably practicable.
10
<PAGE> 14
(b) EMINENT DOMAIN. If the whole or any material portion of
the Facility is taken by or conveyed to any public authority under the power of
eminent domain, Lessee may terminate this lease as of the date possession is
delivered to such authority or purchaser and any rent paid in advance, as of
such delivery date, shall be refunded to Lessee. Lessee shall have the right to
continue the possession of any part of the Facility not taken under the power of
eminent domain, upon the same terms and conditions hereof, provided that the
rent shall be reduced in direct proportion to the number of licensed beds in the
Facility which are rendered unusable by the taking. The reduction shall be based
on the ratio of the licensed beds which are lost to the total number of licensed
beds presently in the Facility which is one hundred sixteen (116). Lessee shall
not be entitled to proceeds arising from condemnation or the threat thereof
unless a specific award or allegation is made for Lessee's interest, provided,
however, nothing contained herein shall be deemed or construed to prevent Lessee
from enforcing and prosecuting a claim for the value of its interest in a
condemnation proceeding brought against either under a power of eminent domain.
Lessor and Lessee shall fully cooperate with each other in pursuing awards for
their respective interests.
10. ACCESS TO RECORDS. Notwithstanding any other provision of this
Lease, Lessor and Lessee agree that they will make available, upon written
request of the Secretary of Health and Human Services, or upon request of the
Comptroller General, or any of their duly authorized representatives, the
contract, and books, documents and records necessary to comply with the
provisions of Section 952 of the Omnibus Reconciliation Act of 1980, Section
1861 (v)(1)(I) of the Social Security Act, to the extent that such are now in
either party's possession or come into either party's possession following the
execution of this Lease, until the expiration of four (4) years after the
furnishing of services pursuant to this Lease, within the meaning of that
Section. This Article 10 shall continue to be effective between the parties
notwithstanding the termination or recision of all or part of the remainder of
this Lease.
11. INDEMNIFICATION. Lessee shall indemnify and save Lessor harmless of
and from any loss, cost, damage, or expense whatsoever arising out of any
accident or other occurrence causing injury to any person or property due
directly or indirectly to the use of the leased premises or any public or
private property adjacent thereto by Lessee or any person claiming under Lessee,
or as the result of any act or omission of Lessee, its agents and employees, or
the act of any other person.
Lessor shall indemnify and hold Lessee harmless from any claims for
personal injury or property damage arising from Lessor's default in the
performance of its obligations under this Lease.
12. DEFAULT BY LESSEE. This Lease is made upon the condition that
Lessee shall punctually and faithfully perform all of the covenants and
agreements by it to be performed as herein set forth, and if any of the
following events of default shall occur, to wit: (a) any installment of rent or
any other sums required to be paid by Lessee hereunder, or any part thereof,
shall, at any time be in arrears and unpaid by Lessee hereunder, or any part
thereof, shall, at any time be in arrears and unpaid after the same is due and
payable for ten (10) days after receipt of written notice from Lessor; (b) there
be any default on the part of the Lessee in the observance or performance of any
of the other covenants agreements, or conditions of this Lease on the part of
the Lessee to be kept and performed, and said default shall continue for a
period of thirty (30) days after written notice thereof from Lessor to Lessee
[unless such default cannot reasonably be cured within thirty (30) days and
Lessee shall have commenced to cure said default within said thirty (30) days
and continues diligently to pursuant
11
<PAGE> 15
the curing of the same]; (c) Lessee shall file a petition in bankruptcy, have a
petition filed against it or be adjudicated as bankrupt, or file any petition or
answer seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief for itself under any present or
future federal, state or other statute, law or regulation or make an assignment
for the benefit of creditors; (d) any trustee, receiver or liquidator of Lessee
or of all or any substantial part of its properties or of the premises shall be
appointed in any action, suit or proceeding by or against Lessee and such
proceeding or action shall not have been dismissed within thirty (30) days after
such appointment; (e) the leasehold estate hereby created shall be taken on
execution or by other process of law; (f) Lessee shall vacate or abandon the
premises; or (g) the license for the operation of the Facility or the
certification of the Facility's eligibility for Medicare and/or Medicaid are at
any time suspended, terminated, or revoked and such suspension, termination, or
revocation shall continue unstayed and in effect for a period of fifteen (15)
days consecutively, which period shall be automatically extended during the
pendency of any proceeding, review, or appeal regarding such suspension,
termination, or revocation (Lessee shall promptly notify Lessor in writing of
any such pending proceeding), then and in any of said cases, Lessor, at its
option, may, by written notice, terminate this Lease and re-enter upon the
premises and take possession thereof with full right to sue for and collect all
sums or amounts with respect to which Lessee may then be in default and accrued
up to the time of such entry, including damages to Lessor by reason of any
breach or default on the part of Lessee, or Lessor may, if it elects to do so,
bring suit for the collection of such rents and damages without entering into
possession of the premises or voiding this Lease.
In addition to, but not in limitation of, any of the remedies set forth
in this Lease or given to Lessor by law or in equity, Lessor shall also have the
right and option, in the event of any default by Lessee under this Lease and the
continuance of such default after the period of notice above provided, to retake
possession of the premises from Lessee by summary proceedings or otherwise, and
it is agreed that the commencement and prosecution of any action by Lessor in
forcible entry and detainer, ejectment or otherwise, or any execution of any
judgment or decree obtained in any action to recover possession of the premises,
shall not be construed as an election to terminate this Lease unless Lessor
expressly exercises its option hereinbefore provided to declare the term hereof
ended, whether or not such entry or re-entry be had or taken under summary
proceedings or otherwise, and shall not be deemed to have absolved or discharged
Lessee from any of its obligations and liabilities for the remainder of the term
of this Lease, and Lessee shall, notwithstanding such entry or re-entry,
continue to be liable for the payment of the rents and the performance of the
other covenants and conditions hereof and shall pay to Lessor all monthly
deficits after any such re-entry in monthly installments as the amounts of such
deficits from time to time are ascertained, and, if in the event of any such
ouster, Lessor rents or leases the premises to some other person, firm or
corporation (whether for a term greater, less than or equal to the unexpired
portion of the term created hereunder but assuming arms length negotiations,
with a new tenant unrelated to Lessor) for an aggregate rent during the portion
of such new lease co-extensive with the term created hereunder which is less
than the rent and other charges which Lessee would pay hereunder for such
period, Lessor may immediately upon the making such new lease of the creation of
such new tenancy sue for the recovery of the difference between the aggregate
rental provided of in said new lease for the portion of the term co-extensive
with the term created hereunder, and the rent which Lessee would pay hereunder
for such period, together with any expense to which Lessor may be put for
brokerage commission, placing the premises in tenantable condition or otherwise.
If such new lease or tenancy is made for a shorter term that the balance of this
Lease, any such action brought by Lessor to collect the deficit for that period
shall not bar Lessor from thereafter suing for any loss accruing during the
balance of the unexpired term of this Lease. All rights and remedies of Lessor
herein enumerated shall be cumulative, and none
12
<PAGE> 16
shall exclude any other remedies allowed at law or in equity.
13. LESSOR'S BREACH. In the event of any breach of any representations,
warranty or covenants of Lessor under this Lease, then unless such breach or
failure is cured within thirty (30) days after written notice from Lessee, (if
such default cannot reasonably be cured within such thirty [30] day period, then
Lessor shall not be deemed in default so long as it commences to cure the same
within such period and diligently pursues such cure), Lessee may terminate this
Lease and all of its obligations hereunder and seek all available remedies at
law or in equity.
14. NO ASSUMPTION OF LIABILITIES. Notwithstanding any provision
contained in this Lease or in any exhibit or other document referred to in this
Lease to the contrary, this Lease is intended as and shall be deemed to be an
agreement for the lease of assets and none of the provisions hereof shall be
deemed to create any obligation or liability of any party to any person or
entity that is not a party to this Lease, whether under a third-party
beneficiary theory, laws relating to transferee liabilities or otherwise.
15. MANAGEMENT BY LESSEE. Lessee, during the Lease term, will manage
the nursing home facility upon the premises. Lessee warrants that it will
operate the nursing home facility in a professional manner, and will materially
comply with all federal, state, and local laws and regulations. Lessee will be
primarily responsible to Lessor under this Lease. Lessee will not allow any
other party to manage the Facility without the express written consent of Lessor
which said consent Lessor in its sole discretion may withhold.
Lessee agrees to furnish Lessor a complete annual financial report
within ninety (90) days following the end of each fiscal year, based upon
examination of the books and records of Lessee for the Facility being operated
pursuant to this Lease, prepared in accordance with the requirements of the
Secretary of Housing and Urban Development, certified to by an officer of
Lessee, and prepared and certified to by a Certified Public Accountant. In
addition, Lessee agrees to provide to Lessor, upon request, an annual "Medicaid
Cost Report", in accordance with the requirements of Medicaid. Further, Lessee
shall provide Lessor with a quarterly statement of income respecting the
operations of the Facility, and will provide Lessor with a monthly statement of
income if and when Lessee routinely provides such statements at monthly
internals to its other lessors.
16. FORCE MAJEURE. In the event that either Lessor or Lessee shall be
delayed, hindered or prevented from the performance of any act required
hereunder by reason of strikes, lockouts, labor troubles, inability to procure
materials, riots, insurrection, war or other factors beyond the parties'
reasonable control, then performance shall be extended for the period of such
delay.
17. REPLACEMENT RESERVE. The parties acknowledge and agree that the
United States Department of Housing and Urban Development, Federal Housing
Administration ("HUD") has provided Lessor with mortgage financing for the
Facility (the "HUD Financing"). The HUD Financing requires Lessor to maintain a
replacement reserve fund for capital improvements (the "Replacement Reserve").
Lessor hereby covenants and agrees that Lessee may utilize funds in the
Replacement Reserve to fund capital improvements made at the Facility in
accordance with the Lease throughout the Initial Term and/or any Extended
Term(s) so long as the balance in such Replacement Reserve at the end of the
Initial Term and /or any Extended Term is not less than One Hundred Fifty
Thousand and No/100 Dollars ($150,000.00). Nothing stated herein shall relieve
Lessor from its obligation to make the required payments to the Replacement
Reserve, and Lessor covenants and
13
<PAGE> 17
agrees to make such payments as required by the HUD Financing. If Lessee is
required to provide funds in order that the Replacement Reserve has the balance
required herein, such funds shall be paid to Lessor and Lessor agrees to pay
same in accordance with the HUD Financing.
18. TERMINATION PAYMENTS. Lessor covenants and agrees with Lessee that
any payments Lessor receives from the current tenant of the Facility (except for
retention by Lessor of a security deposit in the amount of Sixty Five Thousand
and No/100 Dollars ($65,000.00) in connection with the early termination of the
existing lease shall, at the option of Lessee: (i) be credited to Lessee's rent
obligations due under this Lease; or (ii) utilized to fund capital improvements
made by Lessee to the Facility in accordance with this Lease.
19. BROKERS. Lessor and Lessee represent and warrant to each together
that they have not dealt with any real estate brokers or agents and that no
brokerage fees, finder's fees or commissions are owed in connection with this
Lease. Lessor and Lessee shall indemnify and hold the other harmless from any
other fees claimed in connection with this Lease thought the indemnifying party.
20. NOTICES. Any notice, statement, request, demand, consent or other
communication required or permitted by this Lease ("Notices") shall be in
writing and delivered personally, or by a national courier service or by
certified mail, postage prepaid, return receipt requested to the addresses as
follows, or such other address as the parties shall notify each other in
writing.
If to Lessor: Pinecrest Care Center
------------- c/o Dr. Gerald E. Vallee
Medical Plaza
936 S. R. 160
Gallipolis, Ohio 45631
and
Dr. Richard E. Vallee
619 South Bourbon Street
Blanchester, Ohio 45107
With a Copy to: Donald L. Feinstein, Esq.
--------------- Feinstein, Mulligan & Fromson
3478 North High Street
Columbus, Ohio 43214
If to Lessee: Arbor Health Care Company
------------- 1100 Shawnee Road
Lima, Ohio 45805
Attn: Pier C. Borra, President
With a Copy to: Brad C. Roush, Esq.
--------------- 1100 Shawnee Road
Lima, Ohio 45805
14
<PAGE> 18
When personally delivered, all notices shall be deemed given upon
actual receipt. When mailed, all notices shall be deemed given upon actual
receipt, or three (3) days after mailing, whichever occurs first. Any notices
meeting the requirements of this section shall be effective, regardless of
whether actually received.
21. MEMORANDUM OF LEASE. This Lease shall not be recorded. Lessor and
Lessee each agree upon the request of the other to execute and deliver a short
form memorandum of lease for recording purposes.
22. RELATIONSHIP. Nothing contained in this Lease shall be deemed or
construed as creating the relationship of principal and agent, partnership,
joint venture or any association whatsoever between Lessor and Lessee. No acts
of Lessor and Lessee shall be deemed to create any relationship other than
Lessor and Lessee.
23. WAIVER. No failure of Lessor and Lessee to enforce against the
other any term or provision of this Lease shall be deemed a waiver thereof.
24. ENTIRE AGREEMENT. This Lease is the entire agreement of Lessor and
Lessee concerning the Facility and supersedes any and all oral or written
agreements of the parties hereto, including, but not limited to, the Letter of
Intent dated as of June 6, 1997. All terms, conditions, and provisions of this
Lease shall be deemed to be covenants.
25. AMENDMENTS. This Lease may be amended only in a writing signed by
Lessor and Lessee.
26. BINDING EFFECT. This Lease shall be binding upon and shall inure to
the benefit of Lessor and Lessee, their respective successors and permitted
assigns.
27. HEADINGS. The section headings contained herein are for convenience
only and shall not, in any way, affect the interpretation or enforceability of
any provision of this Lease.
28. USE OF NAME. Lessor hereby assigns to Lessee, effective as of the
Commencement Date, the exclusive right to the use of the name Pinecrest Care
Center.
29. GOVERNING LAW. This Lease shall be construed and enforced pursuant
to the laws of the State of Ohio.
30. ATTORNEYS FEES. In the event that any party is required to engage
the services of legal counsel to enforce its rights under this Lease against any
other party, regardless of whether such action results in litigation, the
prevailing party shall be entitled to reasonable attorneys fees and costs from
the other party.
31. AUTHORITY. Lessor and Lessee each represent and warrant to the
other that the representative signing of this Lease on behalf of Lessor and
Lessee is authorized to bind Lessor and Lessee respectively and that this Lease
has been approved by all partners of Lessor and Lessee's Board of Directors.
15
<PAGE> 19
32. SECURITY DEPOSIT. A security deposit of Fifty Thousand Dollars
($50,000.00) shall be paid by Lessee within one (1) year from the Commencement
Date. In the event of a default and after the passage of any applicable grace
period(s), Lessor may utilize said security deposit to cure Lessee's default or
breach under this Lease, reserving all other legal and equitable remedies. In
the event Lessee pays all rent and complies with all the terms and conditions of
this Lease through the date of expiration, then the security deposit shall be
returned to Lessee, without interest, within thirty (30) days of termination
unless Lessor shall have given written notice to Lessee indicating that all or a
portion of the security deposit is being held to cure a default or breach under
the Lease by Lessee.
IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease to be
executed by their duly authorized representatives as of the day and year first
above written.
<TABLE>
<CAPTION>
Signed and Acknowledged PINECREST CARE CENTER, an Ohio general
in the Presence of: partnership
<S> <C>
\s\ Jeanie Sims By: \s\ Richard E. Vallee
- ---------------------------------------- -------------------------------
(as to Gerald E. Vallee, James A. Kemp, Richard E. Vallee
Mel P.Simon and Gene H. Abels)
\s\ Jeanie Sims By: \s\ Gerald E. Vallee
- ---------------------------------------- -------------------------------
(as to Gerald E. Vallee, James A. Kemp, Gerald E. Vallee
Mel P. Simon and Gene H. Abels)
\s\ Constance Sims By: \s\ James A. Kemp
- ---------------------------------------- -------------------------------
(as to Richard E. Vallee) James A. Kemp
\s\ Donna S. Colley By: \s\ Mel P. Simon
- ---------------------------------------- -------------------------------
(as to Richard E. Vallee) Mel P. Simon
\s\ Patricia M. Perign
- ----------------------------------------
(as to Robert D. Murtha) By: \s\ Gene H. Abels
-------------------------------
Gene H. Abels
\s\ Maura Miller
- ----------------------------------------
(as to Robert D. Murtha) By: \s\ Robert D. Murtha
-------------------------------
Robert D. Murtha
ARBOR HEALTH CARE COMPANY,
A Delaware corporation
\s\ Donna S. Colley By: \s\ Pier C. Borra
- ----------------------------------------- -------------------------------
Pier C. Borra, President
\s\ Constance Sims
- -----------------------------------------
</TABLE>
16
<PAGE> 20
STATE OF OHIO )
) SS:
COUNTY OF GALLIA )
------
The foregoing instrument was acknowledged before me this 25th day of
July, 1997, by Gerald E. Vallee, James A. Kemp, Mel P. Simon and Gene H. Abels,
partners of Pinecrest Care Center, an Ohio general partnership.
\s\ Jeanie Sims
----------------------------------
Notary Public
My Commission Expires: 2-27-2000
---------
STATE OF OHIO )
) SS:
COUNTY OF ALLEN )
-----
The foregoing instrument was acknowledged before me this 28th day of
July, 1997, by Richard E. Vallee, a partner of Pinecrest Care Center, an Ohio
general partnership.
\s\ Constance Sims
----------------------------------
Notary Public
My Commission Expires: 12-26-97
--------
STATE OF OHIO )
-------- ) SS:
COUNTY OF FRANKLIN )
--------
The foregoing instrument was acknowledged before me this 29th day of
July, 1997, by Robert D. Murtha, a partner of Pinecrest Care Center, an Ohio
general partnership.
\s\ Patricia M. Perigo
----------------------------------
Notary Public
My Commission Expires: 4-9-2001
---------
17
<PAGE> 21
STATE OF OHIO )
) SS:
COUNTY OF ALLEN )
-------
The foregoing instrument was acknowledged before me this 28th day of
July, 1997, by Pier C. Borra, the President of Arbor Health Care Company, a
Delaware corporation, on behalf of the corporation.
\s\ Constance Sims
----------------------------------
Notary Public
My Commission Expires: 12-26-97
--------
18
<PAGE> 1
Exhibit 10.4
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (the "Agreement") is made as of this 15th
day of July, 1997, between Arbor Health Care Company, a Delaware corporation
("Buyer"), Total Living Care of St. Augustine, Inc., a Florida corporation
("Seller") and Tony J. Marchio, an individual (the "Shareholder")(Seller and the
Shareholder are collectively referred to as the "Group").
BACKGROUND
----------
A. Seller currently owns, operates and maintains a comprehensive
outpatient rehabilitation facility located at Island Park South, 2225 State
Route 3, Suite B6, St. Augustine, FL 32084 (the "Facility").
B. The Shareholder owns all of the issued and outstanding capital stock
of Seller.
C. Buyer wishes to acquire, and Seller wishes to sell all of the assets
of Seller that comprise the Facility in accordance with the terms and conditions
hereinafter set forth.
D. As an inducement to Buyer to enter into the Agreement, Seller and
Shareholder agree to make certain representations, warranties, agreements and
covenants in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants, agreements and representations and warranties herein contained,
Seller, Shareholder and Buyer, intending to be legally bound, agree as follows:
ARTICLE I: SALE AND PURCHASE OF ASSETS
---------------------------
1.1. ACQUIRED ASSETS. Subject to the terms and conditions of this
Agreement, at the Closing (as hereinafter defined), Buyer, in reliance upon the
covenants, representations, warranties and agreements of Seller contained
herein, will acquire from Seller, and Seller will sell, assign, transfer and
convey to Buyer, all of the assets, properties and business of Seller that
comprise the Facility, including without limitation, such property owned or
leased by Seller that comprises or is directly used in connection with the
Facility, including without limitation, all tangible, intangible, personal or
mixed property, the Inventory (defined herein), claims and rights under
contracts, Designated Contracts (defined herein), the trade names, trademarks,
service marks, patient lists and records, telephone numbers, good will, and, to
the extent permitted by law, all permits, licenses and certificates of need and
other rights held by Seller with respect to the ownership or operation of the
Facility as the same shall exist on the Closing Date (defined herein), as the
case may be, and all of Seller's books and records pertaining to the foregoing
all as more fully set forth on the Schedules attached hereto, but excluding
cash, cash equivalents, accounts receivable, notes receivables, and tax refunds,
(together all such properties, assets or business to be conveyed to Buyer from
Seller at the Closing are hereafter referred to as the "Assets").
<PAGE> 2
1.2. INVENTORY. Seller shall, at its own expense, make an inventory of
the complete contents of the Facility, and promptly (but not later than ten (10)
days from the date hereof) deliver the tally to Buyer (the "Inventory"). Seller
shall maintain the Inventory at its present inventory levels through the Closing
Date. The Inventory shall be included on Schedule 4.6 attached hereto.
1.3. ASSUMPTION OF LIABILITY. Except as expressly provided herein,
Buyer shall not assume, nor in any way be liable or responsible for any claims,
lawsuits, liabilities, obligations or debts of Seller, including without
limitation (i) malpractice claims asserted by patients of the Facility or any
other tort claims asserted against Seller, claims for breach of contract, or any
claims of any kind asserted by patients, former patients, employees of Seller or
any other party that are based on acts or omissions occurring on or before the
Closing Date; (ii) amounts due or that may become due to Medicaid and/or
Medicare or any other health care reimbursement or payment intermediary on
account of health care reimbursement cost report adjustments or other payment
adjustments attributable to any period prior to the Closing Date; (iii) any form
of Medicaid and/or Medicare or other health care reimbursement recapture,
adjustment or overpayment whatsoever with respect to any period prior to the
Closing Date; and (iv) any accounts payable, employment or other taxes, and any
other obligation or liability of Seller to pay money whatsoever.
Notwithstanding the provisions of the immediately preceding paragraph,
on the Closing Date, contingent upon the consummation of the transactions
contemplated hereby, Buyer shall assume and thereafter in due course fully
satisfy those obligations arising under the Designated Contracts (defined
herein) specified pursuant to Paragraph 1.4 below and assigned by Seller to
Buyer, with respect to, and only with respect to, performance and payments owed
that become due thereunder subsequent to the Closing Date. Liabilities and
obligations under such Designated Contracts that have accrued, or the
performance of which is due, on or prior to the Closing Date, and all
liabilities and obligations under all other Contracts shall remain the sole
responsibility of Seller.
1.4. DESIGNATED CONTRACTS.
(a) As soon as practicable after the date hereof but in no
event later than the day immediately preceding the Closing Date, Buyer shall
deliver notice in writing to Seller designating which, if any, of the Contracts
(defined herein) set forth on Schedule 4.7 will be assigned to and assumed by
Buyer (the "Designated Contracts"). Such notice of designation will be set forth
on Schedule 1.4 to be attached hereto. If within said period of time Buyer fails
to so deliver notice to Seller, Buyer will be deemed to have designated none of
the Contracts and Seller will remain fully liable thereunder. To the extent
Buyer makes any such designation, Seller shall at Closing be obligated to assign
all of its right, title and interest under such Contracts to Buyer and Buyer
shall assume the obligations accruing after Closing under such Designated
Contracts.
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(b) Notwithstanding anything to the contrary contained herein,
Buyer is not assuming and will not be responsible for any liabilities or
obligations under the Designated Contracts incurred on or occurring before the
Closing Date; all such liabilities and obligations remaining the sole and
exclusive responsibility of Seller pursuant to Paragraph 1.3 herein and shall be
paid or performed on or prior to the Closing Date.
(c) Immediately after notice of the designation by Buyer of
the Contracts to be assigned by Seller, Seller will use its best efforts and
shall diligently proceed to obtain any consents of any parties necessary to
permit the assignment of the Designated Contracts. In the event that any of the
Designated Contracts are not assignable, or the parties to such Designated
Contract fail or refuse to consent to any assignment on or before the Closing
Date, Buyer shall have no liability to assume and will not assume any such
Designated Contracts.
ARTICLE II: PURCHASE PRICE
--------------
2.1. DETERMINATION AND PAYMENT OF PURCHASE PRICE. The purchase price of
the Assets shall be Three Hundred Twenty Five Thousand Dollars and No Cents
($325,000.00), subject to adjustment as provided in Section 2.2 and 2.3 below
(the "Purchase Price"). The Purchase Price shall be paid to Seller in "same day"
funds by wire transfer to an account designated by Seller's attorney.
2.2. CERTAIN ADJUSTMENTS TO THE PURCHASE PRICE. In addition, at the
Closing hereunder:
(a) Seller shall deliver to Buyer Schedule 2.2(a), effective
as of the Closing Date, showing the amount of accrued holiday and vacation pay,
accrued sick pay and personal leave, and payroll taxes and workers' compensation
insurance premiums with respect thereto for each of its employees who Buyer
desires to employ and who accept such employment with Buyer as of the Closing
Date. The amount of all such accrued holiday and vacation pay and accrued sick
pay and personal leave and payroll taxes and workers' compensation insurance
premiums with respect thereto due for such employees as of the Closing Date
shall reduce the Purchase Price at Closing pursuant to Subparagraph (c) below.
(b) Seller shall deliver to Buyer Schedule 2.2(b) listing the
amount of any prepayments received or paid by Seller prior to Closing on account
of any goods or services to be rendered or supplied by Seller, or to be received
by Seller and such prepayments which Buyer receives the benefit of shall adjust
the Purchase Price at Closing pursuant to Subparagraph (c) below.
(c) The amount of any accruals calculated under Section 2.2(a)
and any prepayment amounts under Section 2.2(b) above will reduce or increase,
as the case may be, the Purchase Price payable to Seller on a dollar-for-dollar
basis, rather than paid by Seller to Buyer at Closing.
2.3. TRANSFER TAXES; PRORATED ITEMS. On the Closing Date, the following
adjustments and prorations shall be computed as of the Closing Date with respect
to the following taxes (unless
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otherwise stated herein) and the cash portion of the Purchase Price shall be
adjusted, upward or downward as appropriate, to reflect such prorations:
(a) TRANSFER TAXES. All state and local transfer taxes,
documentary stamps and recording fees shall be borne by Seller.
(b) CHARGES. All public or governmental charges against the
Assets (including charges for sewer, water, drainage or other services) assessed
for the fiscal year in which the Closing Date occurs shall be adjusted and
apportioned as of the Closing Date and paid thereafter by Buyer.
(c) SERVICES CONTRACTS, LEASES AND UTILITIES. All prepayments
made or payments due under any continuing service contracts and leases affecting
the Assets, including without limitation water, sewer, electric, gas and utility
bills, parking, garbage removal, and maintenance agreements shall be adjusted
and apportioned as of the Closing Date and such obligations thereafter shall be
assumed by Buyer.
2.4. OTHER PRORATIONS. In the event that accurate prorations and other
adjustments cannot be made as of the Closing Date because current bills or
adjustments are not obtainable (as, for example, utility bills), the parties
shall prorate such items upon receipt of the final bill of statement, but in no
event later than sixty (60) days after Closing. Seller shall use its best
efforts to have all utility meters read on the Closing Date so as accurately to
determine the proration of current liability bills.
2.5. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated as set forth in Schedule 2.5 hereof, and the parties shall adhere to
such allocations in filing all returns to the appropriate taxing authorities.
Seller reserves the right to approve the allocation of the Purchase Price.
ARTICLE III: THE CLOSING
-----------
3.1. TIME AND PLACE OF CLOSING.
(a) Except as otherwise set forth herein, the closing (the
"Closing") of the purchase and sale of the Assets contemplated by this Agreement
shall take place on or before July 18, 1997, but to be effective as of July 15,
1997 (such date or such other earlier date as the parties hereto shall mutually
agree upon being hereinafter called the "Closing Date"). The Closing will be
done in escrow according to such terms as the parties may agree. Seller shall
deliver possession of the Assets to Buyer, which shall accept the same on said
date.
(b) If prior to or by the Closing Date Buyer has not received
certification and participation agreements with respect to Medicaid and Medicare
effective upon Buyer's purchase of the Assets (items 3(b) (i) and (ii) are
hereafter referred to as the "Required Approvals"); then, the
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<PAGE> 5
Closing Date automatically shall be extended for a period of fifteen (15) days;
provided, however, that if the Required Approvals are not obtained by July 30,
1997, this Agreement automatically shall terminate and such termination shall be
governed in accordance with Article XI herein.
3.2. CERTIFICATION AND ASSIGNMENT OF PARTICIPATION AGREEMENTS . In the
event that: (i) all conditions precedent specified in Section 8 and Section 9
have been satisfied except for the conditions in Section 8.6 relating to receipt
of the Required Approvals; and (ii) Buyer has obtained assurances by the
authorized government agencies that are satisfactory to Buyer to the effect that
they have reason to believe that the existing, certifications and provider
agreement(s) will be assigned to Buyer, and that such agency has no reason to
believe that any condition existing during the period of Seller's operation
will, if left uncorrected, prevent or delay granting the Required Approvals- to
Buyer, the transactions contemplated in this Agreement may, at Buyer's option,
be closed.
ARTICLE IV: REPRESENTATIONS AND WARRANTIES OF THE GROUP
-------------------------------------------
The Group represents and warrants to Buyer as follows:
4.1. ORGANIZATION AND STANDING OF SELLER. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida. Copies of its Articles of Incorporation and By-Laws and all amendments
hereof to date, have been delivered to Buyer, and are complete and correct.
Seller has the power and authority to own the property and assets now owned by
it and to conduct the business presently being conducted by it. Seller is not
qualified to do business as a foreign corporation in any state, and neither the
ownership of its assets nor the conduct of its business makes such
qualifications necessary.
4.2. AUTHORITY. Seller has the full corporate power and authority to
make, execute, deliver and perform this Agreement including all Schedules and
Exhibits hereto, and the other instruments and documents required or
contemplated hereby and thereby ("Seller's Transaction Documents"). Such
execution, delivery, performance and consummation have been duly authorized by
all necessary action, corporate or otherwise, on the part of Seller, its
directors and shareholders and all consents of holders of indebtedness of Seller
that are not being paid prior to or at the Closing have been obtained.
4.3. BINDING EFFECT. This Agreement and all related transaction
documents executed by Seller constitute the valid and binding obligation of
Seller, enforceable against Seller in accordance with their respective terms.
4.4. ABSENCE OF CONFLICTING AGREEMENTS. Neither the execution or
delivery of this Agreement or any of the Seller's Transaction Documents by
Seller nor the performance by Seller of the transactions contemplated hereby and
thereby, conflicts with, or constitutes a breach of or a default under (i)
Seller's Articles of Incorporation or By-Laws; or (ii) any applicable law, rule,
judgment, order, writ, injunction, or decree of any court, currently in effect;
or (iii) any applicable rule
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<PAGE> 6
or regulation of any administrative agency or other governmental authority
currently in effect; or (iv) any agreement, indenture, contract or instrument to
which Seller or any shareholder thereof is now a party or by which any of them
or any of the Assets is bound.
4.5. CONSENTS. Except as set forth in Schedule 4.5, no authorization,
consent, approval, license, exemption by filing or registration with any court
or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, is or will be necessary in connection with
Seller's entry into, execution, delivery and performance of this Agreement, any
of the transaction documents related hereto, or for the Seller's consummation of
the transactions contemplated hereby and thereby.
4.6. SCHEDULE OF ASSETS AND PROPERTIES.
(a) Set forth in Schedule 4.6 are complete and accurate lists
of all the material items comprising Seller's Assets including the Inventory as
of the date of this Agreement as follows:
(i) All machinery, vehicles and equipment, office equipment,
furniture and supplies owned or leased by Seller and used in
connection with the Facility and any other items of personal
property that comprise or is otherwise used by Seller in
connection with the Facility.
(ii) All patents, trademarks, service marks, or applications
for any of the same, copyrights, franchises, licenses,
permits, easements, rights and other authorizations, if any,
and any other item of intangible or intellectual property that
are owned, possessed or used by Seller or any person in the
operation of the Facility. The trade name used for the
Facility has not been registered as a service mark under any
state or federal statute, and are fully and freely assignable
by Seller.
4.7. CONTRACTS
(a) Schedule 4.7 sets forth a complete and correct list of all
agreements, contracts and commitments whether written or oral, relating to the
Facility or its operations or to which Seller is a party or by which it or the
Assets are bound (the "Contracts"). Seller has delivered to Buyer true and
correct copies of all Contracts. All the information set forth on Schedule 4.7
with respect to the Contracts is, true, complete and accurate. The Contracts and
commitments referred to in this Section 4.7 were entered into and require
performance in the ordinary course of business and are in full force and effect.
Seller is not in default under any Contract and there has not been asserted,
either by or against Seller under any Contract, any notice of default, set-off
or claim of default. The parties to the Contracts other than Seller are not in
default of any of their respective obligations under the Contracts, and there
has not occurred any event which with the passage of time or the giving of
notice (or both) would constitute a default or breach under any Contract. All
amounts payable under
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the Contracts are, or will at the Closing Date, be on a current basis. Except as
set forth in Schedule 4.7, the Contracts are assignable to Buyer without the
consent of the remaining parties thereto.
(b) Except as listed on Schedule 4.7, Seller is not a party to
or liable in connection with and has not granted any written or express, oral or
implied:
(i) contract, agreement or commitment for the employment or
retention of, or collective bargaining, severance or
termination agreement with, any director, officer, employee,
consultant or agent or group of employees;
(ii) profit sharing, thrift, bonus, incentive, deferred
compensation, stock option, stock purchase, severance pay,
pension, retirement, hospitalization, insurance or other
similar plan, agreement or arrangement;
(iii) agreement or arrangement for the sale of any of its
assets, property or rights outside the ordinary course of
business (other than the Letter Agreement (defined herein)),
or requiring the consent of any party to the transfer and
assignment of any such assets, property or rights (by sale of
assets, sale of stock, merger or otherwise);
(iv) contract which contains any provisions requiring the
Seller to indemnify or act for any other person or entity;
(v) agreement restricting Seller from conducting business
anywhere in the world;
(vi) partnership or joint venture contract or similar
arrangement or agreement which is likely to involve a sharing
of profits or future payments with respect to the Facility;
(vii) licensing, distributor, dealer, franchise, sales or
manufacturer's representative, agency or other similar
contract, arrangement or commitment;
(viii) agreement not made in the ordinary and normal course of
business and consistent with past practice of Seller; or
(ix) agreement with any physician ( or an immediate family
member of such physician) that has a financial relationship
(as defined in 42 U.S.C.A. ss.1359) with Seller and who makes
referrals to Seller.
4.8. FINANCIAL STATEMENTS.
(a) Seller has delivered to Buyer true and correct copies, in
all material respects, of: (a) the compiled statement of assets, liabilities and
equity of Seller at December 31, 1996, and the statements of revenues and
expenses for the fiscal year then ended, including the notes thereto,
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<PAGE> 8
which have been compiled by Nichols and Carter, Certified Public Accountants, as
more fully described in their reports included therein and (b) the compiled
monthly statement of assets, liabilities and equity and the statements of
revenues and expenses through March 31, 1997 (collectively referred to as the
"Financial Statements"). The Financial Statements (including any related notes
thereto) are true and correct in all material respects and present fairly the
financial condition and results of operations of Seller as, at and for the
periods therein specified and were prepared in accordance with generally
accepted accounting principles applied on a basis consistent with prior periods.
Seller's books of account from which the Financial Statements were prepared
accurately and reflect all of Seller's items of income and expense, all of its
assets and liabilities and all of its accruals.
(b) The statement of assets, liabilities and equity contained
in the Financial Statements as of March 31, 1997 (the "Statement") reflects all
liabilities and obligations of Seller, whether absolute, accrued, contingent,
due or otherwise as of the date thereof, and Seller does not have any material
liabilities or obligations that are not reflected thereon, except for such
current liabilities as have been incurred since the date of the Statement in the
ordinary course of business consistent with past practice (such current
liabilities hereinafter called "Current Liabilities"). There is no basis for the
assertion against Seller of any liability or obligation of any nature or in any
amount (other than Current Liabilities as aforesaid) not fully reflected or
reserved against in the Statement.
4.9. MATERIAL CHANGES. Except as noted on Schedule 4.9 hereto, between
the date of the Balance Sheet and the date of this Agreement, there has not been
any material adverse change in the condition (financial or otherwise), of the
assets, properties or operations of Seller or the Facility, or any damage or
destruction of the Facility by fire or other casualty, whether or not covered by
insurance, and Seller has, and as of the Closing, will have, conducted its
business only in the normal course. Seller has identified and communicated to
Buyer all material information with respect to any fact or condition that might
adversely affect the future prospects (financial or otherwise) of the Facility.
Since the most recent date on the Financial Statements, there has been no sale
or disposition of the machinery and equipment reflected therein.
4.10. COST REPORTS. Seller has delivered to Buyer a true and correct
copy of its Medicare cost report relating to the Facility for the a 1996 fiscal
year. The information contained in such report is true and correct in all
respects. Seller has only recently become a Medicaid provider, and no such cost
report has been filed. There is no dispute between Seller and such fiscal
intermediaries, except as disclosed on Schedule 4.10.
4.11. LICENSES; PERMITS. Schedule 4.11 sets forth a description of (a)
each license and all other governmental or other regulatory permits and
approvals relating to the operation of the Facility heretofore obtained and that
is now in effect; and (b) each other license, permit, easement, right or other
authorization that is necessary to operate the Facility legally (collectively,
the "Licenses"). Seller has delivered to Buyer true and correct copies of all of
the Licenses listed on Schedule 4.11. Schedule 4.11 also sets forth a
description of each accreditation of the Facility, copies of which Seller
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has delivered to Buyer. Seller owns, possesses or has the legal right to use the
Licenses, free and clear of all liens, pledges, claims or other encumbrances any
nature whatsoever. Seller is not in default under, now has it received any
notice of any claim or default or any other claim or proceeding relating to, any
such License. The Facility is fully and completely licensed by all appropriate
authorities for Seller to carry on the business presently conducted at the
Facility. The Facility is accredited for participation in the Florida Medicaid
program and the federal Medicare program. No shareholder, director or officer,
employee or former employee of Seller, or any other person, firm or corporation
owns or has any proprietary, financial or other interest, direct or indirect, in
whole or in part in any such License owned, possessed or used in the operation
of the Facility as now operated.
4.12. TITLE, CONDITION TO PERSONAL PROPERTY.
(a) All of Seller's property comprising the Assets is located
at the Facility. Except for the security interests that will be discharged and
released prior to or at the Closing, Seller has good and marketable title to all
such personal property, subject to no mortgage, security interest, pledge, lien,
conditional sales agreement, lease, claim, encumbrance or charge, or restraint
on transfer whatsoever. No other person has any right to the use or possession
of any of such property. During the five (5) year period preceding the date
hereof, Seller has conducted its business activities only under the corporate
and/or trade names currently in use. All of such personal property comprising
equipment, improvements, furniture and other tangible personal property, whether
owned or leased, is in operating condition and is functioning in the manner and
for the purpose for which it was intended and is in compliance with (and the
operation thereof is in compliance with) all applicable Federal, state, and
local laws, rules, and regulations, and is sufficient and suitable to enable
Buyer to operate the Facility in a normal and efficient manner.
(b) No tangible personal property, except as otherwise
disclosed on schedules attached hereto, used by Seller in connection with the
operation of the Facility is subject to a lease, conditional sale, security
interest or similar arrangement.
4.13. TITLE, CONDITION OF THE PROPERTY
(a) Seller owns a valid leasehold estate in the office
building comprising the Facility (the "Property").
(b) There are no leases or other agreements of Seller as
lessor, granting any third party the right to use or occupy any of the Property
and no person, firm or entity has any ownership interest or option or right of
first refusal to acquire any ownership interest in the Property or any building
or improvements thereon.
(c) To the best of Seller's knowledge, the buildings and other
improvements comprising the Facility and all of their systems, including without
limitation, the heating, ventilating and air condition systems, and the
plumbing, electrical, mechanical and drainage systems, and roof
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are in good operating condition, repair and working order.
(d) Seller has not received any notice of noncompliance from
any governmental authority regarding any of the improvements constructed at the
Facility or the use or occupancy thereof.
4.14. LEGAL PROCEEDINGS. Other than as set forth on Schedule 4.14,
there are no disputes, claims, actions, suits or proceedings, arbitrations or
investigations, either administrative or judicial, pending, or, to the best of
Seller's knowledge, threatened or contemplated, nor, to the best of Seller's
knowledge, is there any basis therefor, against or affecting the Facility or
Seller's rights therein or Seller's ability to consummate the transactions
contemplated herein, at law or in equity or otherwise, before or by any court or
governmental agency or body, domestic or foreign, or before an arbitrator of any
kind. Seller has received no requests for information with respect to the
transactions contemplated hereby from any governmental agency.
4.15. EMPLOYEES. Schedule 4.15 contains a complete and correct list of
the name, position, current rate of compensation and any vacation or holiday
pay, sick pay, personal leave and any other compensation arrangements or fringe
benefits, of each current employee, consultant and agent of Seller (together
with a description of any specific arrangements or rights concerning such
persons) that are not reflected in any agreement or document referred to in
Schedule 4.7. Seller currently has no, and has never had, any pension, profit
sharing, bonus, incentive, welfare benefit, or other plan applicable to any of
the employees of the Facility. No such employee, consultant or commission agent
has any vested or unvested retirement benefits or other termination benefits,
except as described on Schedule 4.15.
4.16. COLLECTIVE BARGAINING, LABOR CONTRACTS, EMPLOYMENT PRACTICES,
ETC.
(a) During the two (2) years prior to the Closing Date, there
has been no material or adverse change in the relationship between Seller an its
employees nor any strike or labor disturbance by such employees affecting
Seller's business and there is no indication that such a change, strike or labor
disturbance is likely. Seller's employees are not represented by any labor union
or similar organization and Seller has no reason to believe that there are
pending or threatened any activities the purpose of which is to achieve such
representation of all or some of Seller's employees. There are no pending suits,
actions or proceedings against Seller relating to employees of Seller, and
Seller does not know of any threats of strikes, work stoppages or pending
grievances by any such employees. Except as set forth on Schedule 4.7, Seller
has no collective bargaining or other labor contracts, employment contracts,
pension, profit-sharing, retirement, insurance, bonus, deferred compensation or
other employee benefit plans, agreements or arrangements with respect to such
employees. Seller is in compliance with the requirements prescribed by all
federal, state and local statutes, orders and governmental rules and regulations
applicable to any of the employee benefit plans, agreements and arrangements
identified on Schedule 4.7, including, without limitation, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
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(b) Between the date hereof and the Closing Date, Seller shall
not enter into any contract or agreement (or negotiations in connection
therewith) with any union or other collective bargaining representative
representing any employees at the Facility without the prior written consent of
Buyer.
4.17. ERISA. Seller does not maintain or make contributions to and has
not at any time in the past maintained or made contributions to any employee
benefit plan which is subject to the minimum funding standards of ERISA. Seller
does not now maintain or make contributions to and has not at any time in the
past maintained or made contributions to any multi-employer plan subject to the
terms of the Multi-employer Pension Plan Amendment Act of 1980 (the
"Multi-employer Act").
4.18. INSURANCE AND SURETY AGREEMENTS. Schedule 4.18 contains a true
and correct list of: (a) all policies of fire, liability and other forms of
insurance held or owned by Seller or otherwise in force and providing coverage
for the Facility or the Assets (including but not limited to medical malpractice
insurance, and any state sponsored plan or program for worker's compensation);
and (b) all bonds, indemnity agreements and other agreements of suretyship made
for or held by Seller or otherwise in force and relating to the Facility or the
Assets, including a brief description of the character of the bond or agreement,
the name of the surety or indemnifying party. Schedule 4.18 sets forth for each
such insurance policy the name of the insurer, the amount of coverage, the type
of insurance, the policy number, the annual premium and a brief description of
the nature of insurance included under each such policy and of any claims made
thereunder during the past two years. Such policies are owned by and payable
solely to Seller, and said policies or renewals or replacements thereof will be
outstanding and duly in force at the Closing Date. All insurance policies listed
on Schedule 4.18 are in full force and effect, all premiums due on or before the
Closing Date have been or will be paid on or before the Closing Date, Seller has
not been advised by any of its insurance carriers of an intention to terminate
or modify any such policies, nor has Seller failed to comply with any of the
material conditions contained in any such policies.
4.19. RELATIONSHIPS. Except as disclosed on Schedule 4.19 hereto,
neither Seller nor any shareholder, director or officer thereof or any member of
such person's immediate family has, or at any time within the last two (2) years
has had, a material ownership interest in any business, corporate or otherwise,
that is a party to, or in any property that is the subject of, business
relationships or arrangements of any kind relating to the operation of the
Facility by which Buyer will be bound after the Closing.
4.20. ASSETS COMPRISING THE FACILITY. The Assets, Contracts, Inventory,
and Licenses listed on the Schedules to this Agreement as owned by Seller,
represent all of the real and personal property, licenses, permits and
authorizations, contracts, leases and other agreements that are necessary and
material to the operation of the Facility as now operated.
4.21. ABSENCE OF CERTAIN EVENTS. Except as set forth on Schedule 4.21,
since the date of the Balance Sheet, Seller has not and from the date of the
Balance Sheet to the Closing Date, Seller
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will not have (except for transactions directly with Buyer):
(a) sold, assigned or transferred any of its assets or
properties, except in the ordinary course of business consistent with past
practice;
(b) mortgaged, pledged or subjected to any lien, pledge,
mortgage, security interest, conditional sales contract or other encumbrance of
any nature whatsoever any of the Assets other than the liens, if any, of current
taxes not yet due and payable;
(c) made or suffered any amendment or termination of any
contract, commitment, instrument or agreement materially relating to the
Facility;
(d) except in the ordinary course of business, consistent with
past practice, or otherwise to comply with any applicable minimum wage law,
increased the salaries or other compensation of any of its employees at the
Facility, or made any increase in, or any additions to, other benefits to which
any of such employees may be entitled.
(e) discharged or satisfied any lien or encumbrance, or paid
any material liabilities, other than in the ordinary course of business
consistent with past practice, or failed to pay or discharge when due any
liabilities, the failure to pay or discharge of which has caused or will cause
any actual damage or risk of loss to Seller or the Facility;
(f) changed any of the accounting principles followed by it or
the methods of applying such principles;
(g) made or suffered any amendment or termination of any
material contract, commitment or agreement to which it is a party or by which it
is bound, or canceled, modified or waived any debt or claims held by it, other
than in the ordinary course of business consistent with past practice, or waived
any rights of substantial value, whether or not in the ordinary course of
business; or
(h) entered into any material transaction other than in the
ordinary course of business consistent with past practice.
4.22. COMPLIANCE WITH LAWS. Seller has not received any claim or notice
that the Facility is not in compliance with any applicable federal, state, local
or other governmental laws or ordinances, or any applicable order, rule or
regulation of federal, state, local or other governmental agency. Seller shall
report to Buyer, within five (5) days after Seller's receipt thereof, any
written or oral claims or notices that the Facility is not in compliance with
any of the foregoing.
4.23. ENVIRONMENTAL COMPLIANCE.
(a) At any time during Seller's possession of the Property
and, to the best of
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Seller's knowledge, prior to Seller's possession thereof:
(i) The Property has not been used for the disposal of any
industrial refuse or waste, including but not limited to
potentially infectious waste, blood-contaminated materials, or
other wastes generated in the course of patient treatment
(collectively "Medical Waste"), or for the processing,
manufacture, storage, handling, treatment or disposal of any
hazardous or toxic substance, material or waste.
(ii) No asbestos-containing materials have been used or
disposed of on the Property.
(iii) No machinery, equipment or fixtures containing
polychlorinated biphenyls ("PCBs") have been located on the
Property.
(iv) No storage tanks for gasoline, petroleum, or any other
substance have been located on the Property.
(v) No toxic or hazardous substances or materials have been
located on the Property, which substances or materials, if
found on the Property, would subject the owner or occupant of
the Property to damages, penalties, liabilities or an
obligation to remove such substances or materials under any
applicable federal, state or local law, regulation or
ordinance.
(vi) No notice from any governmental body has ever been served
upon Seller, its agents or representatives, or upon any prior
owner of the Property, claiming any violation of any federal,
state or local law, regulation or ordinance concerning the
generation, handling, storage, or disposal of Medical Waste,
or the environmental state, condition, or quality of the
Property, or requiring or calling attention to the need for
any work, repairs, or demolition, on or in connection with the
Property in order to comply with any law, regulation or
ordinance concerning the environmental or healthful state,
condition or quality of the Property.
(vii) Schedule 4.23 lists all reports of health care and
environmental agencies received by Seller during the last five
(5) years from any supervisory governmental authority with
respect to the operations of the Facility. Seller has
delivered copies of each such report to Buyer.
(b) At all times, Seller has complied, and is complying in all
respects with all environmental and related laws, ordinances and governmental
rules and regulations applicable to it, the Property, the Assets and the
Facility, including, but not limited to, the Resource Conservation and Recovery
Act of 1976, as amended, the Comprehensive Environmental Response Compensation
and Liability Act of 1980, as amended, the federal Water Pollution Control Act,
as amended by the Clean Water Act, and subsequent amendments, the Federal Toxic
Substances Control Act, as amended, and
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all other Federal and, state and local laws, regulations and ordinances with
respect to the protection of the environment (collectively "Environmental
Laws"). The foregoing representation and warranty applies to all aspects of the
operation of the Facility and the Assets including, but not limited to, the use,
handling, treatment, storage, transportation and disposal of any hazardous,
toxic or infectious waste, material or substance (including Medical Waste) and
petroleum products, material or waste whether performed on Seller's properties
or at any other location.
4.24. FINDERS. No broker or finder has acted for Seller in connection
with the transactions contemplated by this Agreement, and no broker or finder is
entitled to any broker's or finder's fee or other commission in respect thereof
based in any way on agreements, understandings or arrangements with Seller.
4.25. TAX RETURNS. Seller has filed all federal, state, county and
local income, excise, property and other tax returns and abandoned property
reports (if any) to date that are due and required to be filed by it, and there
are no claims, liens, or judgments for taxes due from the Seller affecting the
Facility or any of the Assets, and no basis for any such claim, lien, or
judgment exists.
4.26. ENCUMBRANCES CREATED BY THIS AGREEMENT. The execution and
delivery of this Agreement or any of the Seller's Transaction Documents does
not, and the consummation of the transactions contemplated hereby or thereby
will not, create any liens or other encumbrances on any of the Assets in favor
of third parties.
ARTICLE V: REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Seller as follows:
5.1. ORGANIZATION AND STANDING. Buyer has been duly incorporated and is
validly existing in good standing under the laws of the State of Delaware and is
authorized to do business in the State of Florida.
5.2. POWER AND AUTHORITY. Buyer has the corporate power and authority
to execute, deliver and perform this Agreement, and the corporate power and
authority to execute and deliver the instruments and agreements required to be
delivered by it to Seller at the Closing (collectively, "Buyer's Transaction
Documents").
5.3. BINDING AGREEMENT. This Agreement has been duly executed and
delivered by Buyer. This Agreement is, and when executed and delivered by Buyer
at the Closing each of the related transaction documents executed by Buyer will
be, the legal, valid and binding obligation of Buyer, enforceable against Buyer
in accordance with their respective terms.
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ARTICLE VI: INFORMATION AND RECORDS CONCERNING THE FACILITIES
-------------------------------------------------
6.1. ACCESS TO INFORMATION AND RECORDS BEFORE CLOSING.
(a) Prior to the Closing Date, Buyer may make, or cause to be
made, such investigation of the Facility and Seller's financial and legal
conditions as Buyer deems necessary or advisable to familiarize itself with the
Facility and/or matters relating to its history or operation. Seller shall
permit Buyer and its authorized representatives (including legal counsel and
accountants), to have full access to the Facility and Seller's books and records
and Seller will furnish, or cause to be furnished, to Buyer such financial and
operating data and other information and copies of documents with respect to the
products, services, operations and assets, the Property and the Facility as
Buyer shall from time to time request. The documents to which the Buyer shall
have access shall include, but not be limited to Seller's tax returns and
related work papers since its inception and printouts of patient or resident
account information maintained by or on behalf of any person with respect to the
Facility; and Seller shall make, or cause to be made, extracts thereof as Buyer
or its representatives may request from time to time, to enable Buyer and its
representatives to investigate the affairs of Seller and the Facility and the
accuracy of the representations and warranties made in this Agreement. Seller
shall cause its accountants to cooperate with Buyer and to disclose the results
of audits relating to Seller and/or to the Facility and to produce the working
papers relating thereto. No such investigation by Buyer or its representatives
shall affect any of the Seller's representations and warranties in this
Agreement or Buyer's right to rely thereon.
(b) In the event of the termination of this Agreement prior to
Closing, Buyer will deliver to Seller all documents, work papers and other
materials hereunder obtained from Seller and relating to Seller or the
transactions herein contemplated.
6.2. MAPS, PLANS, SURVEYS, ETC. Seller shall deliver, or cause to be
delivered, to Buyer, without charge, all plans, maps, surveys, descriptions, and
title reports respecting the Facility and the use and occupancy thereof in
Seller's possession that exist as of the date of this Agreement.
ARTICLE VII: OBLIGATIONS OF THE PARTIES UNTIL CLOSING
----------------------------------------
7.1. CONDUCT OF BUSINESS PENDING CLOSING. Between the date of this
Agreement and the Closing, Seller shall conduct its business relating to the
operation of the Facility solely in the ordinary course of business consistent
with past practice, and maintain its existence.
7.2. AFFIRMATIVE COVENANTS. Between the date hereof and the Closing,
Seller shall:
(a) maintain the Facility in substantially the state of
repair, order and condition as on the date hereof, reasonable wear and tear or
loss by casualty excepted;
(b) maintain in full force and effect all Licenses currently
in effect with respect to the Facility;
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(c) maintain in full force and effect the insurance policies
and binders currently in effect with respect to the Facility, including without
limitation those listed on Schedule 4.18;
(d) utilize its best efforts to preserve intact the present
business organization of Seller; keep available the services of Seller's present
employees and agents, and any other employees and agents employed in connection
with the Facility; and maintain Seller's relations and goodwill with the
suppliers, patients and residents, employees, affiliated medical personnel and
anyone having business relating to the Facility;
(e) maintain all of the books and records relating to the
Facility in accordance with its past practices;
(f) comply with all provisions of the Contracts listed in
Schedule 4.7 and with any other agreements that Seller has entered into with
respect to the Facility in the ordinary course of business since the date of
this Agreement and with the provisions of all laws, rules and regulations
applicable to Seller's business or the Facility;
(g) cause to be paid when due, all taxes, assessments and
changes or levies imposed upon it or on any of its properties or which it is
required to withhold and pay over;
(h) promptly advise Buyer in writing of the threat or
commencement against Seller or any shareholder of any dispute, claim, action,
suit or proceeding, arbitration or investigation that would materially adversely
affect the operations, properties, assets or prospects of the Facility.
7.3. PURSUIT OF CONSENTS AND APPROVALS. Prior to the Closing, the
parties shall undertake to obtain all consents and approvals of governmental
agencies and all other parties necessary for the lawful consummation of the
transactions contemplated hereby and the lawful use, occupancy and enjoyment of
the Facility by Buyer in accordance herewith. Seller shall cooperate with and
use its best efforts to assist the Buyer in obtaining all such approvals.
If the applicable State of Florida Medicaid or Medicare certification
agency requires that, prior to giving written assurance regarding the issuance
of an operating license, certification or provider agreement to Buyer following
the Closing, all Medicaid and/or Medicare estimated adjustments be paid to the
applicable agency on or before the Closing, Seller shall pay such amounts on or
before the Closing Date in order to permit Buyer to obtain such written
assurances.
ARTICLE VIII: CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
-------------------------------------------
Unless waived by Buyer, its obligations to consummate the purchase of
the Assets is subject to the fulfillment, prior to or at the Closing, of the
conditions in Article III and each of the following conditions. Upon failure of
any of the following conditions Buyer may terminate this Agreement pursuant to
and in accordance with Article XI herein.
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<PAGE> 17
8.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Group contained in this Agreement or on any Schedule, list, certificate
or other document delivered pursuant to the provisions hereof shall be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made at and as of such time except to the
extent affected by the transactions herein contemplated.
8.2. PERFORMANCE OF COVENANTS. Seller shall have performed or complied
in all material respects with each of its agreements and covenants required by
this Agreement to be performed or complied with by it prior to or at the
Closing.
8.3. DELIVERY OF CLOSING CERTIFICATE. Seller shall have executed and
delivered to the Buyer a certificate of the chief executive officer of the
Seller dated the Closing Date upon which Buyer may rely, certifying that the
statements made in Sections 8.1 and 8.2 are true, correct and complete as of the
Closing Date.
8.4. LEGAL MATTERS. No suit, action, investigation, or legal or
administrative proceeding shall have been brought or shall have been threatened
by any person that questions the validity or legality of this Agreement or the
transactions contemplated hereby.
8.5. APPROVALS.
(a) The consent or approval of all persons necessary for the
consummation of the transactions contemplated hereby shall have been granted,
including without limitation, the Required Approvals and any tax clearance or
similar approval;
(b) None of the foregoing consents or approvals (i) shall have
been conditioned upon the modification, cancellation or termination of any
material lease, contract, commitment, agreement, license, easement, right or
other authorization with respect to the Facility, or (ii) shall impose on the
Buyer any material condition or provision or requirement with respect to the
Facility or its operation that is more restrictive than or different from the
conditions imposed upon such operation prior to Closing.
8.6. MATERIAL CHANGE. Since the date of this Agreement there shall not
have been any material adverse change in the condition (financial or otherwise)
of the assets, properties or operations of the Facility or Seller.
8.7. ASSETS TRANSFERRED AT CLOSING. Seller shall have delivered or
caused to be delivered to Buyer possession of the Assets (or the right to obtain
possession on demand) together with such instruments of sale and transfer,
including without limitation, a Bill of Sale and Assignment of Contracts, in
form acceptable to Buyer, sufficient to vest in Buyer good and marketable title
to the Assets, free and clear of all liens, security interests, encumbrances,
claims and other exceptions of any kind whatsoever. Seller shall also execute
and deliver to Buyer at Closing a form of withdrawal of assumed name with
respect to the trade names of the Facility in form and substance acceptable to
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<PAGE> 18
Buyer and its counsel.
8.8. POSSESSION. Possession of the Facility shall be or shall have been
delivered to Buyer as provided in this Agreement, free and clear of any liens,
claims to or rights of possession.
8.9. COBRA. Seller shall have, and shall have caused all concerned
benefits plan administrators to have, given all notices, made all offers, paid
and collected all premiums, obtained all group health plan coverage, and
performed all other actions mandated by Title X of the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA"), and which is required to be given,
made, paid, obtained, and performed as a result of the Closing under this
Agreement. Any amounts under COBRA or similar state or federal law or regulation
which becomes a liability to Buyer after Closing but which relates to any period
of time in which Seller owned the Facility shall be paid by Seller either by a
dollar for dollar reduction of the Purchase Price at the Closing or upon demand
after the Closing.
8.10. AUTHORIZATION DOCUMENTS. Buyer shall have received a certificate
of the Secretary or other officer of Seller certifying a copy of Resolutions of
the Board of Directors of Seller and consent of its shareholders authorizing
Seller's execution and full performance of Seller's Transaction Documents, the
Articles or Certificate of Incorporation and By-Laws of Seller and the
incumbency of the officers of Seller.
8.11. OTHER DOCUMENTS. Seller shall have furnished Buyer with all other
documents, certificates and other instruments required to be furnished to Buyer
by Seller pursuant to the terms hereto.
8.12. DUE DILIGENCE REVIEW. Notwithstanding anything to the contrary
stated in this Agreement, the parties recognize and agree that the obligation of
Buyer to consummate the transactions contemplated by this Agreement are
expressly conditioned upon and subject to Buyer having completed, by the
Closing, its due diligence review of the Facility and Seller's business, and
Buyer being satisfied therewith in all respects as determined in its sole
absolute discretion.
ARTICLE IX: CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
--------------------------------------------
Unless waived by Seller, its obligation to consummate the sale of the
Assets is subject to the fulfillment, prior to or at the Closing, of each of the
following conditions:
9.1. REPRESENTATION AND WARRANTIES. The representations and warranties
of Buyer in this Agreement or on any schedule, list, certificate or document
delivered pursuant to the provisions hereof shall be true at and as of the
Closing Date as though such representations and warranties were made at and as
of such time, except to the extent affected by the transactions herein
contemplated.
9.2. PERFORMANCE OF COVENANTS. Buyer shall have performed or complied
with each of its agreements and conditions required by this Agreement to be
performed or complied with by it prior
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<PAGE> 19
to or at the Closing.
9.3. DELIVERY OF CLOSING CERTIFICATE. Buyer shall have delivered to
Seller a certificate of an officer of Buyer dated the Closing Date upon which
Seller can rely, certifying that the statements made in Sections 9.1 and 9.2 are
true, correct and complete as of the Closing Date.
9.4. LEGAL MATTERS. No suit, actions, investigation or legal or
administrative proceedings shall have been brought or shall have been threatened
by any person that questions the validity or legality of the Agreement or the
transactions contemplated hereby.
9.5. AUTHORIZATION DOCUMENTS. Seller shall have received a certificate
of the Secretary or other officer of the Buyer certifying a copy of Resolutions
of the Board of Directors of Seller authorizing Buyer's execution and full
performance of Buyer's Transaction Documents and the incumbency of the officers
of the Buyer.
9.6. OTHER DOCUMENTS. Buyer shall have furnished Seller with all
documents, certificates and other instruments required to be furnished to Seller
by Buyer pursuant to the terms hereof.
ARTICLE X: OBLIGATIONS OF PARTIES AFTER CLOSING
------------------------------------
10.1. DISCHARGE OF LIABILITIES. The Group shall cause Seller to pay all
of its liabilities and obligations with respect to the Facility that are not
expressly assumed by Buyer at Closing, as and when the same shall become due and
payable.
10.2. INDEMNIFICATION.
(a) The Group hereby covenants and shall defend and indemnify
Buyer and hold it harmless against and with respect to any and all damage, loss,
liability, deficiency, cost and expense (including without limitation reasonable
attorney's fees) (all of the foregoing hereinafter collectively referred to as
"Loss") resulting from (i) any misrepresentation, breach of warranty, or failure
to fulfill any agreement or covenant on the part of Seller or the Group under
this Agreement; (ii) any taxes, interest, penalties and additions to tax
(including workers' compensation charges) that are required to be paid to the
United States Government or any state or local taxing authority resulting from
the operation of the Facility for any period ending on or before the Closing
Date: (iii) if applicable, all amounts that are due or that may become due to
Medicaid and/or Medicare intermediaries, or to other public or private third
party payors, if any, on account of adjustments to Medicaid and/or Medicare or
any other public or private third party payer cost reimbursement claims made
with respect to the Facility for any period ending on or before the Closing
Date; (iv) any claim relating to any liability of the Facility or Seller that
are not expressly assumed by Buyer pursuant to the terms of this Agreement
("Unassumed Liability"); (v) any liability arising out of Seller's noncompliance
with COBRA or any like statute; (vi) any liability arising out of any
environmental hazard or condition with respect to the Property or the Facility
existing as of the Closing Date and any law, regulation or decree on action of
any government entity in connection therewith; (vii) any other claims, liability
or
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cost of any nature whatsoever, known or unknown, whether accrued, absolute
contingent or otherwise, presently existing or arising in the future which such
liability arose out of Seller's conduct prior to Closing; and (viii) any and all
actions, suits, proceedings, demands, assessments, judgments, costs and legal
and other expenses incident to any of the foregoing.
(b) Buyer covenants and shall indemnify the Group and hold it
harmless against and with respect to any and all Loss from (i) any
misrepresentation, breach of warranty, or failure to fulfill and agreement or
covenant on the part of Buyer under this Agreement; (ii) any taxes (including
workers' compensation charges) that are required to be paid to the United States
government or any state or local taxing authority resulting from the operation
of the Facility for any period after the Closing Date; (iii) if applicable, all
amounts that are due or that may become due to Medicaid and/or Medicare
intermediaries, or to other public or private third party payors, if any, on
account of adjustments to Medicaid and/or Medicare or any other public or
private third party payer cost reimbursement claims made with respect to the
Facility for any period after the Closing Date.
(c) Not withstanding any thing herein to the contrary, the
maximum liability of the Group for a loss under Section 10.2 (a) shall be capped
at the Purchase Price.
10.3. PAYMENT BY BUYER FOR EXPENSE ADJUSTMENTS AFTER CLOSING. If after
the Closing Date the Buyer is required from time to time to pay any amounts for
Medicaid and/or Medicare or other third party payor cost adjustments, federal,
state or local taxes, workers' compensation insurance premiums or other
expenditures that relate to the operation of the Facility before the Closing
Date and Buyer provides Seller written notice and details of same within thirty
(30) days of first receiving knowledge of same, Seller shall, upon the later of
ten (10) days of such written demand from Buyer and presentation of evidence of
such requirement or the exhaustion of Seller's remedies and appeals exercised in
a diligently pursued, good faith objection to any such expenditures imposed by
third parties, pay to Buyer the amount of such required payment. Any payment
pertaining to operation of the Facility after the Closing Date shall be the
responsibility of Buyer. Notwithstanding anything to the contrary stated herein,
Seller shall not be responsible for increased workers' compensation premiums or
similar increased charges to Buyer which arise after the Closing and by reason
of Buyer becoming the transferee of Seller's Assets hereunder and/or operator of
the Facility.
10.4. COST REPORTS. Seller shall prepare, execute and file all interim
cost reports and all other reports and statements required to be filed by Seller
with all intermediaries and any other public or private third party payor or
administrative or regulatory agency or body in connection with the transactions
hereunder in a timely fashion and no later than 45 days after closing.
10.5. COVENANT NOT-TO-COMPETE.
(a) For a period of three (3) years from and after the Closing
Date neither Seller nor Shareholder, nor any corporation, partnership or other
business entity or person controlling, controlled by or under common control
with any of the foregoing ("Restricted Party") shall, directly or indirectly,
operate, mange, own, control, finance or provide financing for, be a consultant
for or
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enter into a service contract with, any nursing home, hospital or licensed
health care facility or other entity of any type, licensed or unlicensed,
existing or to be constructed and that provides comprehensive outpatient
rehabilitation services, or any entity existing or to be formed that competes in
any way with the Facility, located within St. Johns County, Florida.
(b) From and after the Closing Date, no Restricted Party shall
disclose, directly or indirectly, to any person outside of Buyer's employ
without the express authorization of Buyer, any patient lists, pricing
strategies, patient files and records, any proprietary data or trade secrets
relating to the Facility or any financial or other information about the
Facility not then in the public domain.
(c) For a period of three (3) years from and after the Closing
Date, no Restricted Party shall engage or participate in any effort or act to
induce any of the patients, physicians, suppliers, associates, employees or
independent contractors admitted to or employed by Seller at the Facility prior
to Closing, or by the Facility or by Buyer, to take any action or to refrain
from taking any action or inaction that might be disadvantageous to Buyer,
including but not limited to the solicitation of their respective patients,
physicians, suppliers, associates, employees or independent contractors to cease
doing business, or their association or employment, with the Facility or Buyer.
(d) The Restricted Parties acknowledge that the restrictions
contained in this Paragraph 10.5 are reasonable and necessary to protect the
legitimate business interests of Buyer and that any violation thereof by any of
them would result in irreparable harm to Buyer. Accordingly, the Restricted
Parties agree that upon the violation by any of them of any of the restrictions
contained in this Paragraph 10.5, Buyer shall be entitled to obtain from any
court of competent jurisdiction a preliminary and permanent injunction as well
as any other relief provided at law, equity, under this Agreement or otherwise.
In the event any of the foregoing restrictions are adjudged unreasonable in any
proceeding, then the parties agree that the period of time or the scope of such
restrictions (or both) shall be adjusted to such a manner or for such a time (or
both) as is adjudged to be reasonable.
10.6. RECORDS. On the Closing Date, Seller shall deliver, or cause to
be delivered, to Buyer all patient lists and records and all other records and
files not then in Buyer's possession relating to the operations of the Facility.
10.7. COLLECTION OF ACCOUNTS RECEIVABLE. Buyer shall make reasonable
efforts to assist Seller, in collecting all accounts receivable resulting from
activities occurring or services rendered to patients prior to the Closing. Such
assistance, however, shall not include any legal work or out of pocket expenses.
In addition, Buyer shall assist Seller by allowing examination by Seller's
authorized representative of relevant documentation in Buyer's possession after
the Closing Date, and by transferring to Seller any payments Buyer may receive
from any source whatsoever concerning Seller's recovery of accounts receivable
as provided below. Any payments received by Buyer from Medicaid, Medicare or
other third party payors for services rendered prior to the Closing Date will
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<PAGE> 22
be transferred to Seller monthly within fifteen (15) days after the last day of
the month in which such payments were received. Any payments made by such payors
and earmarked or itemized to certain time periods preceding or following Closing
shall be applied to accounts receivables arising for such time periods.
Notwithstanding the foregoing, Seller shall be paid promptly upon receipt 100%
of collections of Seller's accounts receivable for billings generated by Seller
within thirty (30) days prior to July 18, 1997 and which are received within
thirty (30) days after July 18, 1997.
Except as hereinabove provided, the collection of any accounts
receivable due Seller that have not been collected by Buyer or Seller within one
hundred twenty (120) days after the Closing Date shall become the sole
responsibility of Seller, and Buyer shall have no further obligation to assist
Seller with respect to collection thereof.
For one (1) year after Closing, Seller may, during regular business
hours and upon reasonable notice to Buyer, access, audit and photocopy all
accounts, reports and medical records in order to allow Seller to document
claims or submittals to Medicaid, Medicare or other third party payors.
For its collection services rendered herein, Buyer shall receive an
administrative fee equal to fifty percent (50%) of the amount of receivables
collected by Buyer.
10.8. EMPLOYMENT OF EXISTING EMPLOYEES. On the Closing Date Buyer shall
have the option of offering to employ those of Seller's employees set forth on
Schedule 4.15, except those listed on Schedule 10.8 attached hereto. Seller
shall compensate all employees for all services performed up to and including
the Closing Date. Subsequent to the Closing Date, Buyer shall assume the duty to
compensate any employees who are hired by it, subject to any other terms
contained in this Agreement relating to compensation of employees. Seller hereby
agrees to use its best efforts to facilitate Buyer in its efforts to employ any
of said employees.
10.9. CONSENTS AND APPROVALS. The parties shall undertake to obtain all
consents and approvals of governmental and reimbursement agencies and all other
parties necessary for the lawful consummation of the transactions contemplated
hereby.
ARTICLE XI: TERMINATION
-----------
11.1. TERMINATION. This Agreement may be terminated at any time at or
prior to the time of Closing by:
(a) Buyer, if any condition precedent to Buyer's obligations
hereunder, including without limitation those conditions set forth in Article
VIII hereof, have not been satisfied by the Closing Date or pursuant to Section
12.1 if any portion of the Assets is damaged or destroyed as a result of fire,
other casualty or for any reason whatsoever;
(b) Seller, if any condition precedent to Seller's obligations
hereunder, including
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<PAGE> 23
without limitation those conditions set forth in Article IX hereof, have not
been satisfied by the Closing Date;
(c) the mutual consent of Buyer and Seller.
11.2. EFFECT OF TERMINATION. If a party terminates this Agreement
because one of its conditions precedent has not been fulfilled, or if this
Agreement is terminated by mutual consent, this Agreement shall become null and
void without any liability of any party to the other and the Deposit plus all
interest paid or earned thereon shall be returned to Buyer within five (5)
business days from the happening of any such event; provided, however, that if
such termination is by the Seller pursuant to Section 11.1 (b) as a result of a
breach by Buyer of any of its representations, warranties or covenants in this
Agreement, then the Deposit plus all interest paid or earned thereon shall be
paid to Seller within five (5) business days from the happening of any such
event as full and agreed upon liquidated damages. Furthermore, nothing in this
Section 11.2 shall affect Buyer's right to specific performance of Seller's
obligations at Closing hereunder.
ARTICLE XII: CASUALTY, RISK OF LOSS
----------------------
12.1. CASUALTY, RISK OF LOSS. Seller shall bear the risk of all loss or
damage to the Assets from all causes, until the Closing. If at any time prior to
the Closing any portion of the Assets is damaged or destroyed as a result of
fire, other casualty or for any reason whatsoever, Seller shall immediately give
notice thereof to Buyer. Buyer shall have the right, in its sole and absolute
discretion, within ten (10) days of receipt of such notice, to (1) elect not to
proceed with the Closing and terminate this Agreement, or (2) proceed to Closing
and consummate the transactions contemplated hereby and receive any and all
insurance proceeds received or receivable by Seller on account of any such
casualty.
ARTICLE XIII: MISCELLANEOUS PROVISIONS
------------------------
13.1. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations,
warranties, covenants and agreements made by each party in this Agreement or in
any Schedule, certificate, document or list delivered by any such party pursuant
hereto shall survive the Closing. Notwithstanding any investigation conducted
before or after the Closing or the decision of any party to consummate the
Closing, each party hereto shall be entitled to rely and is hereby declared to
have reasonably relied upon the representations and warranties of the other
party.
13.2. PUBLIC ANNOUNCEMENTS. Any general public announcements or similar
media publicity with respect to this Agreement or the transactions contemplated
herein shall be at such time and in such manner as Buyer shall determine;
provided that nothing herein shall prevent either party, upon
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notice to the other, from making such written notices as such party's counsel
may consider advisable in order to satisfy the party's legal and contractual
obligations in such regard; provided further, that no such public announcement
made by Buyer shall contain any derogatory or negative statements pertaining to
Seller, Shareholder or the operations of the Facility.
13.3. COSTS AND EXPENSES. Except as expressly otherwise provided in
this Agreement, each party hereto shall bear its own costs and expenses in
connection with this Agreement and the transactions contemplated hereby.
13.4. BENEFIT AND ASSIGNMENT. This Agreement binds and inures to the
benefit of each party hereto and its successors and proper assigns. Buyer may
assign its interest under this Agreement to any other person or entity without
the prior written consent of Seller.
13.5. EFFECT AND CONSTRUCTION OF THIS AGREEMENT. This Agreement and the
Exhibits and Schedules hereto embody the entire agreement and understanding of
the parties and supersede any and all prior agreements, arrangements and
understandings relating to matters provided for herein, including without
limitations the Letter of Intent executed by the parties as of May 19, 1997. The
captions used herein are for convenience only and shall not control or affect
the meaning or construction of the provisions of this Agreement. This Agreement
may be executed in one or more counterparts, and all such counterparts shall
constitute one and the same instrument.
13.6. COOPERATION - FURTHER ASSISTANCE. Subject to the terms and
conditions herein provided, each of the parties hereto shall use its best
efforts to take, or cause to be taken, such action, to execute and deliver, or
cause to be executed and delivered, such additional documents and instruments,
and to do, or cause to be done, all things necessary, proper and advisable under
the provisions of this Agreement and under applicable law to consummate and make
effective the transactions contemplated by this Agreement.
13.7. NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed to be properly given when personally delivered to
the party entitled to receive the notice or when sent by telecopier or by
overnight courier, properly addressed to the party entitled to receive such
notice at the address stated below:
If to Seller and/or Total Living Care of St. Augustine, Inc.
Shareholder: c/o Tony J. Marchio
Appoquinimink School District
118 South 6th Street
Odessa, DE 19730
Telecopier: (904) 460-0418
24
<PAGE> 25
With a copy to: Dan McCollom, Esq.
Morris, James, Hitchens & Williams
222 Delaware Ave., P.O. Box 2306
Wilmington, Delaware 19899
Telecopier: (302) 571-1750
If to Buyer: Arbor Health Care Company
1100 Shawnee Road
Lima, Ohio 45805
Telecopier: (419) 227-3499
Attention: Dennis R. Smith
Senior Vice President - Finance
With a copy to: Brad C. Roush
General Counsel
Arbor Health Care Company
1100 Shawnee Road
Lima, Ohio 45805
Telecopier: (419) 227-3499
13.8. WAIVER, DISCHARGE, ETC. This Agreement shall not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing executed by or on behalf of each of the parties hereto by
their duly authorized officer of representative. The failure of any party to
enforce at any time any of the provisions of this Agreement shall in no way be
construed to be a waiver of any such provision, nor in any way to affect the
validity of this Agreement or any part hereof or the right of any party
thereafter to enforce each and every such provision. No waiver of any breach of
this Agreement shall be held to be a waiver of any other or subsequent breach.
13.9. RIGHTS OF PERSONS NOT PARTIES. Nothing contained in this
Agreement shall be deemed to create rights in persons not parties hereto, other
than the successors and proper assigns or the parties hereto.
13.10. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida, disregarding any rules
relating to the choice or conflict of laws.
13.11. SEVERABILITY. Any provision, or distinguishable portion of any
provision, of the Agreement which is determined in any judicial or
administrative proceeding to be prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction. It
is the intention of the parties that if any provision of Section 10.6 shall be
determined to be overly broad in any respect, then it should be enforceable to
the maximum extent permissible under the law. To the extent permitted by
applicable law, the parties
25
<PAGE> 26
waive any provision of law which renders a provision hereof prohibited or
unenforceable in any respect.
IN WITNESS WHEREOF, each of the parties hereto and in the capacity
indicated below has executed this Agreement as of the day and year first above
written.
ARBOR HEALTH CARE COMPANY TOTAL LIVING CARE OF ST. AUGUSTINE, INC.
By: \s\ Dennis R. Smith By: \s\ Tony J. Marchio
------------------------------ -----------------------------
Tony J. Marchio, President
Title: Sr. V.P. - Finance \s\ Tony J. Marchio
---------------------------- ------------------------------
Tony J. Marchio, individually
26
<PAGE> 27
ARBOR HEALTH CARE COMPANY
TOTAL LIVING CARE OF ST. AUGUSTINE, INC.
ASSET PURCHASE AGREEMENT
SCHEDULE INDEX*
Schedule
- --------
1.2 Inventory
1.4 Designated Contracts
2.2(a) Accrued Vacation Pay
2.2(b) Prepayments
2.5 Allocation of Purchase Price
4.5 Consent List
4.6 Schedule of Assets
4.7 Contracts
4.9 Material Changes
4.10 Cost Report Disputes
4.11 Licenses; Permits
4.14 Litigation
4.15 Employees
4.18 Insurance
4.19 Relationships
4.21 Absence of Certain Events
4.23 Notices from Environmental Authorities
10.8 Excepted Employees
10.9 Consents and Approvals
* The Company agrees to furnish to the Securities and Exchange Commission
supplementally a copy of the omitted schedules upon the Commission's request.
<PAGE> 1
Exhibit 11.1
ARBOR HEALTH CARE COMPANY AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------------- ------------------------------
1996 1997 1996 1997
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net income (1) $2,690 $3,248 $6,956 $8,558
============= ============= ============ ============
Weighted average shares outstanding:
Common Stock 6,897 6,936 6,895 6,922
Common Stock equivalents based upon the
treasury stock method 57 154 75 113
------------- ------------- ------------ ------------
Total(2) 6,954 7,090 6,970 7,035
============= ============= ============ ============
Net income per share (1)/(2) $0.39 $0.46 $1.00 $1.22
============= ============= ============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ARBOR HEALTH
CARE COMPANY AND SUBSIDIARIES' CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED
STATEMENTS OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,781
<SECURITIES> 0
<RECEIVABLES> 52,775
<ALLOWANCES> 2,099
<INVENTORY> 3,839
<CURRENT-ASSETS> 67,134
<PP&E> 184,711
<DEPRECIATION> 40,108
<TOTAL-ASSETS> 233,895
<CURRENT-LIABILITIES> 48,809
<BONDS> 103,720
0
0
<COMMON> 208
<OTHER-SE> 74,894
<TOTAL-LIABILITY-AND-EQUITY> 233,895
<SALES> 0
<TOTAL-REVENUES> 181,204
<CGS> 0
<TOTAL-COSTS> 139,329
<OTHER-EXPENSES> 19,433
<LOSS-PROVISION> 2,285
<INTEREST-EXPENSE> 6,106
<INCOME-PRETAX> 14,051
<INCOME-TAX> 5,493
<INCOME-CONTINUING> 8,558
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,558
<EPS-PRIMARY> 1.22
<EPS-DILUTED> 1.22
</TABLE>
