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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 8, 1997
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RENAL CARE GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-27640 62-1622383
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
2100 West End Avenue, Suite 800, Nashville, Tennessee 37203
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(Address, including zip code, of principal executive offices)
(615) 345-5500
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(Registrant's telephone number, including area code)
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Item 2. Acquisition or Disposition of Assets.
On December 8, 1997, Renal Care Group, Inc. (the "Registrant") acquired
all of the issued and outstanding stock of STAT Dialysis Corporation and STAT
Management Corporation (collectively, the "STAT Companies"), the kidney dialysis
and wound care businesses of Laidlaw Inc. ("LAIDLAW"), pursuant to a Stock
Purchase Agreement dated November 4, 1997 (the "Agreement") by and among the
Registrant, Laidlaw and STAT Healthcare, Inc., a wholly-owned subsidiary of
Laidlaw ("STAT"). The consideration for the stock of the STAT Companies
consisted of 2,135,730 shares of common stock of the Registrant, cash in the
amount of $3,000,000, and assumption of certain liabilities enumerated in the
Agreement, as determined based upon negotiations with Laidlaw and STAT. The
Registrant financed the cash portion of the purchase price from working capital.
The descriptions contained herein of the transaction are qualified in
their entirety by reference to the Agreement, which is attached hereto as
Exhibit 2.1 and incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired. The financial
statements for the business acquisition referred to in Item 2 above are not
included in this Current Report on Form 8-K and shall be filed by amendment not
later than 60 days after the date this initial report on Form 8-K is required to
be filed as provided by item 7(a)(4).
(b) Pro Forma Financial Information. The pro forma financial
information for the business acquisition referred to in Item 2 above is not
included in this Current Report on Form 8-K and shall be filed by amendment not
later than 60 days after the date this initial report on Form 8-K is required to
be filed as provided by item 7(a)(4).
(c) Exhibits.
2.1 Stock Purchase Agreement, dated November 4, 1997 by and among
Renal Care Group, Inc., Laidlaw Inc., and STAT Healthcare,
Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
RENAL CARE GROUP, INC.
/s/ Ronald Hinds
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Executive Vice President and
Chief Financial Officer
Date: December 15, 1997
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RENAL CARE GROUP, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number and
Description of Exhibit
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<S> <C>
1. None
2.1 Stock Purchase Agreement, dated November 4, 1997 by and among Renal
Care Group, Inc., Laidlaw Inc., and STAT Healthcare, Inc.
4. None
16. None
17. None
21. None
23. None
24. None
27. None
99. None
</TABLE>
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<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of November 4, 1997, by and between RENAL CARE GROUP, INC. ("RCG"), a
Delaware corporation having its principal office located in Nashville,
Tennessee, LAIDLAW INC. ("Laidlaw"), a Canadian corporation having its principal
office located in Burlington, Ontario and STAT HEALTHCARE, INC. ("STAT"), a
Delaware corporation and a wholly-owned subsidiary of Laidlaw, having its
principal office located in Houston, Texas (STAT and Laidlaw hereinafter
collectively referred to as the "Sellers").
PREAMBLE
The Sellers desire to sell the Dialysis Business (as herein defined) to
RCG, and RCG desires to purchase the Dialysis Business from the Sellers. The
Sellers currently conduct the Dialysis Business through certain of their
wholly-owned subsidiaries, including STAT Management Corporation, a Delaware
corporation ("STAT Management") and STAT Dialysis Corporation, a Delaware
corporation ("STAT Dialysis") (STAT Management and STAT Dialysis, the
"Transferred Companies") and the Dialysis Subsidiaries (as herein defined) (the
Transferred Companies and the Dialysis Subsidiaries together the "Dialysis
Companies").
Prior to the Closing, the Sellers will have completed the transfer of
all of the assets of the Dialysis Business held directly or indirectly by them
to the Transferred Companies, including all of the outstanding common stock of
the Dialysis Subsidiaries, and the sale of the Dialysis Business to RCG will be
effected by means of a sale by STAT and the purchase by RCG of all of the
outstanding capital stock of the Transferred Companies (the "Transferred
Shares") pursuant to the terms and conditions of the Agreement.
The transactions described in this Agreement are subject to the
expiration of the required waiting period under the HSR Act, and the
satisfaction of certain other conditions described in this Agreement.
Certain terms used in this Agreement are defined in Article 10 of this
Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
SALE AND PURCHASE OF CAPITAL STOCK
1.1 Purchase and Sale of Shares. At the Closing, on the terms and
subject to the conditions of this Agreement, STAT shall sell, assign, transfer
and deliver to RCG, and RCG shall purchase and accept from STAT, all of the STAT
Management Shares and STAT Dialysis Shares free and clear of all Liens.
1.2 Purchase Price. In consideration of STAT's sale, assignment,
transfer and delivery of the Transferred Shares to RCG, RCG shall pay to STAT
aggregate consideration in the amount equal to $77,290,000, as may be adjusted
pursuant to Section 1.3 below, less the Deducted Liabilities (the "Purchase
Price").
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1.3 Payment of Purchase Price.
(a) The Purchase Price shall be payable at the Closing as follows :
(i) a payment of cash in the amount of $3,000,000 (the Purchase
Price less such cash amount is referred to herein as the "Net Purchase
Price"), and
(ii) subject to adjustment as provided in this Section 1.3 and in
Section 1.4, the issuance by RCG to STAT of a number of shares of RCG
Common Stock (the "Base Number of Shares") equal to the Net Purchase
Price divided by $33.00.
(b) The Base Number of Shares of RCG Common Stock issuable pursuant to
paragraph (a)(ii) above shall be adjusted as follows:
(i) If the Base Period Trading Price is greater than $27.00 but
less than $30.00, then RCG shall issue a number of shares of RCG Common
Stock equal to the quotient of (A) the Base Number of Shares times
$30.00, divided by (B) the Base Period Trading Price;
(ii) If the Base Period Trading Price is greater than $36.00, then
RCG shall issue a number of shares of RCG Common Stock equal to the
quotient of (A) the Base Number of Shares times $36.00, divided by (B)
the Base Period Trading Price; and
(iii) If the Base Period Trading Price is less than or equal to
$27.00, then the Sellers shall have the right to terminate this
Agreement by written notice to RCG by 2:00 P.M. EST on the last trading
day preceding the Closing Date established pursuant to Section 1.5,
provided, however, that such termination by Sellers shall not be
effective (and deemed withdrawn) if RCG shall elect at its sole
discretion to issue a number of shares of RCG Common Stock equal to the
quotient of (A) the Base Number of Shares times $30.00 divided by (B)
the Base Period Trading Price.
1.4 Anti-Dilution Provisions. In the event RCG changes the number of
shares of RCG Common Stock issued and outstanding prior to the Closing as a
result of a stock split, stock dividend, combination of shares or similar
recapitalization with respect to such RCG Common Stock (an "Anti-Dilution
Event") and the record date therefor or, if there is no record date, the
effective date thereof, shall be prior to the Closing, then the Base Period
Trading Price and the numbers of shares specified in Section 1.3, as applicable,
shall be adjusted to appropriately and proportionately adjust the number of
shares of RCG Common Stock issuable as part of the Purchase Price.
1.5 Time and Place of Closing. The closing (the "Closing") will take
place at 10:00 A.M. on December 5, 1997 to be deemed effective as of 12:00
midnight on November 28, 1997 (the "Effective Time") at the offices of Alston &
Bird LLP, 1201 West Peachtree Street, Atlanta, Georgia 30309, or on such other
time and date or at such other place as may be mutually agreed upon in writing
by the Parties (such actual date of Closing the "Closing Date"). The Effective
Time shall serve as the date on which the Closing Balance Sheet is established
as provided in Section 1.7 and the date after which the economic benefit of the
Dialysis Business shall inure to RCG and after which the Dialysis Companies
shall make no further cash or other distributions or payments to the Sellers or
any of their Affiliates other than for the fair market value of services
rendered or supplies provided. For all other purposes, including the risk of
loss, indemnities and other matters, the actual Closing Date shall govern.
1.6 Retention of Liabilities. RCG and Sellers acknowledge and agree
that the Dialysis Companies will have only the following liabilities: (i) the
Deducted Liabilities; (ii) items that would properly be included as trade
accounts payable and accrued operating expenses in a balance sheet of the
Dialysis Companies prepared as of the Closing Date in accordance with generally
accepted accounting
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principles consistently applied (the "Payables"), (iii) the executory
obligations and liabilities arising prior to the Closing Date pursuant to the
terms of the Company Agreements and (iv) any unpaid amounts due to RCG as of the
Closing Date for management fees pursuant to any management agreement between
RCG and Sellers (such liabilities described in (i) through (iv) being defined as
the "Assumed Liabilities"). The Dialysis Companies will have no liabilities
other than the Assumed Liabilities from and after the date of this Agreement,
and at the Closing, Sellers, jointly and severally, will assume all liabilities
of the Dialysis Companies other than the Assumed Liabilities (such liabilities
assumed by the Sellers referred to herein as the "Retained Liabilities") by
executing and delivering an Assumption Agreement substantially in the form
attached hereto as Exhibit 1.6 (the "Assumption Agreement").
1.7 Payment for Working Capital.
(a) Within ninety (90) days after the Closing, RCG shall prepare
and deliver to Sellers a balance sheet as of the Effective Time, setting forth
the current assets and the Payables of the Dialysis Companies in accordance with
generally accepted accounting principles consistently applied (the "Closing
Balance Sheet").
(b) The Closing Balance Sheet shall be deemed conclusively
binding upon the parties unless the Sellers notify RCG of the Seller's
disagreement therewith within fifteen (15) days of receipt of the Closing
Balance Sheet (which notice shall also state with reasonable specificity the
reasons for any disagreement and the amounts in dispute). The parties agree (i)
that any dispute regarding the Closing Balance Sheet shall be submitted to a
"big six" accounting firm which has no prior or existing relationship with the
parties hereto and is agreed to by the parties hereto (the "Accountants") for a
final and binding resolution of such dispute within 90 days, (ii) that RCG and
the Sellers agree to each pay for one-half of the fees and expenses of the
Accountants related to the resolution of such dispute and (iii) that the amount
which is in dispute shall continue to be retained and withheld until the
resolution of such dispute. RCG shall allow the Sellers to have reasonable
access to the information and individuals as necessary to determine the accuracy
of the Closing Balance Sheet.
(c) If, according to the Closing Balance Sheet, the current assets
exceed the Payables by more than $3,000,000 (such amount, the "Working Capital
Excess"), the amount of such Working Capital Excess shall be paid by RCG to the
Sellers in immediately available funds within five (5) days after the
determination of such amount.
(d) If, according to the Closing Balance Sheet, the Payables plus
$3,000,000 exceed the current assets of the Dialysis Companies (such amount, the
"Working Capital Shortfall"), the amount of such Working Capital Shortfall shall
be paid by the Sellers to RCG in immediately available funds within five (5)
days of the determination of such amount.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
The Sellers jointly and severally represent and warrant the following
to RCG:
2.1 Organization, Authority and Capacity. Each of the Sellers and the
Dialysis Companies is a corporation, duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation, and has
the full corporate power and authority necessary to (i) execute, deliver and
perform its obligations under this Agreement and the other documents and
instruments to be delivered by it pursuant to this Agreement (collectively with
this Agreement, the "Transaction Documents") and (ii) carry on its business as
it has been and is now being conducted and to own and lease the properties and
assets which it now owns or leases. Each of the Sellers and the Dialysis
Companies is duly qualified to do business and is in good standing in the
jurisdictions set forth in Schedule 2.1, which includes every jurisdiction in
which
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the failure to be so qualified or in good standing would have a material adverse
effect on (i) the Sellers' or the Dialysis Companies' ability to perform their
obligations under the Transaction Documents or (ii) the assets, results of
operations or prospects of Dialysis Companies.
2.2 Authorization and Validity. The execution, delivery and performance
of the Transaction Documents have been duly authorized by all necessary
corporate action on the part of the Sellers. The Transaction Documents to be
executed and delivered by the Sellers have been or will be, as the case may be,
duly executed and delivered by the Sellers and the Dialysis Companies and
constitute or will constitute the legal, valid and binding obligations of the
Sellers and the Dialysis Companies, enforceable in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency, or other
laws affecting creditors' rights generally, or as may be modified by a court of
equity.
2.3 Ownership Interest Held and Conveyed. The Sellers are the owners of
all right, title and interest (legal, record and beneficial) in and to all of
the equity securities of the Dialysis Companies as set forth on Schedule 2.3,
free and clear of any and all Liens (except for any restrictions on transfer
imposed by securities laws), and the Sellers hold no other interest in the
Dialysis Companies. Except as provided in Schedule 2.3 or as specifically
contemplated by this Agreement, no person or entity has any right or privilege
(whether preemptive or contractual) for the purchase of any equity securities of
the Dialysis Companies from the Sellers. Schedule 2.3 contains a complete list
of all agreements or arrangements, whether written or oral, to which the Sellers
are a party that relate in any way to the Company Equity Securities. The
delivery to RCG of the Transferred Shares pursuant to this Agreement will
transfer to RCG good and marketable title to such Transferred Shares free and
clear of all Liens.
2.4 Absence of Conflicting Agreements or Required Consents. Except as
set forth on Schedule 2.4, the execution, delivery and performance by the
Sellers and the Dialysis Companies of the Transaction Documents to be executed
and delivered by either of the Sellers or any of the Dialysis Companies: (i)
with the exception of the expiration of the required waiting period under the
HSR Act, do not require the consent of or notice to any governmental or
regulatory authority or any other third party; (ii) will not conflict with any
provision of the organizational documents of the Sellers and the Dialysis
Companies; (iii) will not conflict with or result in a violation of any law,
ordinance, regulation, ruling, judgment, order or injunction of any court or
governmental instrumentality to which the Sellers and the Dialysis Companies are
subject or by which the Sellers and the Dialysis Companies or any of their
properties are bound; (iv) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, require any
notice under, or accelerate or permit the acceleration of any performance
required by the terms of any agreement, instrument, license or permit to which
the Sellers and the Dialysis Companies are a party or by which the Sellers and
the Dialysis Companies or any of its properties are bound; and (v) will not
create any lien, encumbrance or restriction upon any of the assets or properties
of the Sellers and the Dialysis Companies.
2.5 Governing Documents of the Dialysis Companies. True and correct
copies of the organizational documents and all amendments thereto of the
Dialysis Companies (certified by the Secretary of State of their respective
states of incorporation) have been provided to RCG. RCG has previously been
provided with access to the minutes of the Dialysis Companies and such minutes
accurately reflect all proceedings of the board of directors of the Dialysis
Companies (and all committees thereof). The record books of the Dialysis
Companies, which have been made available to RCG for review, contain true,
complete and accurate records of the ownership of the Dialysis Companies.
2.6 Outstanding and Authorized Capitalization. All authorized and
outstanding equity securities of the Dialysis Companies are accurately described
on Schedule 2.6. No shares of capital stock are held in the treasury of any of
the Dialysis Companies except as set forth on Schedule 2.6. All outstanding
equity securities of the Dialysis Companies are listed and held of record as
indicated on Schedule 2.6 and have been duly and validly issued, are fully paid
and nonassessable. None of the equity securities of the Dialysis Companies were
issued in violation of preemptive rights of any past or present holder of any
equity securities of the Dialysis Companies. Except as set forth on Schedule
2.6, there are no
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outstanding warrants, options, rights, calls or other commitments of any nature
relating to equity securities of the Dialysis Companies and there are no
outstanding securities of either convertible into or exchangeable for any equity
securities of the Dialysis Companies. Except as set forth on Schedule 2.6, the
Dialysis Companies are not obligated to issue or repurchase any equity
securities for any reason and no person or entity has any right or privilege
(whether preemptive or contractual) for the purchase, subscription or issuance
of any unissued equity securities of the Dialysis Companies. There are no
outstanding rights to demand registration of securities of the Dialysis
Companies or to sell securities of the Dialysis Companies in connection with a
registration by the Dialysis Companies under the 1933 Act.
2.7 Subsidiaries, Investments and Predecessors. Except as set forth on
Schedule 2.7, none of the Dialysis Companies has owned or currently owns,
directly or indirectly, of record, beneficially or equitably, any capital stock
or other equity, ownership or proprietary interest in any corporation,
partnership, limited liability company, association, trust, joint venture or
other entity. Set forth on Schedule 2.7 is a listing of all predecessor
companies of each of the Dialysis Companies, including the names of any entities
from whom such entity previously acquired material assets, and any other entity
of which such entity has been a subsidiary or division. Except as listed on
Schedule 2.7, none of the Dialysis Companies has sold or disposed of, by way of
asset sale, stock sale, spin-off or otherwise (a "Disposition"), any material
assets or business of such entity and none of the Sellers or their Affiliates
has made a Disposition of any business or assets related to renal dialysis.
2.8 Financial Statements. Attached hereto as Schedule 2.8 are audited
financial statements of the Dialysis Business for the three years ended December
31, 1995, unaudited financial statements of the Dialysis Business for the year
ended December 31, 1996 and unaudited financial statements of the Dialysis
Business for the year ended August 31, 1997, which reflect the results of
operations and financial condition of the Dialysis Business for such periods and
at such dates (collectively, the "Financial Statements"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles consistently applied other than as indicated on Schedule 2.8 and
except for (i) the omission of notes to unaudited Financial Statements, and (ii)
the fact that interim Financial Statements are subject to normal and customary
year-end adjustments which will not, in the aggregate, be material. The
Financial Statements present fairly in all material respects the financial
position of the Dialysis Business as of the dates indicated and present fairly
in all material respects the results of the Dialysis Business operations for the
periods then ended, and are in accordance with the books and records of the
Dialysis Business, which have been properly maintained and are complete and
correct in all material respects.
2.9 Absence of Changes. Except as set forth on Schedule 2.9, and except
as contemplated by this Agreement, since December 31, 1996, the Dialysis
Companies have conducted the Dialysis Business only in the ordinary course, and
neither any Dialysis Company nor any portion of the Dialysis Business has:
(i) suffered any material adverse change in their working capital,
condition (financial or otherwise), assets, liabilities, reserves,
business or operations;
(ii) paid, discharged or satisfied any material liability other
than in the ordinary course of business;
(iii) written off as uncollectible any account receivable other than
in the ordinary course of business;
(iv) compromised any debts, claims or rights or disposed of any of
its properties or assets other than in the ordinary course of business;
(v) entered into any commitments or transactions not in the
ordinary course of business involving aggregate value in excess of
$250,000 or made aggregate capital expenditures or commitment in excess
of $250,0000;
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(vi) made any material change in any method of accounting or
accounting practice;
(vii) subjected any of its assets, tangible or intangible, to any
lien, encumbrance or restriction of any nature whatsoever, except for
liens for current property taxes not yet due and payable;
(viii) increased any salaries, wages or employee benefits for any
employee of the Dialysis Companies other than in the ordinary course of
business;
(ix) hired, committed to hire or terminated any employee or
medical director other than in the ordinary course of business;
(x) except for payments, dividends or distributions consistent
with past practices for prior periods, declared, set aside or made
any payment, dividend or other distribution to any holder of an
equity security of any of the Dialysis Companies or purchased,
redeemed or otherwise acquired, directly or indirectly, any equity
security of any of the Dialysis Companies;
(xi) terminated or amended any material contract, license or other
instrument to which a Transferred Entity is a party or suffered any
loss or termination or threatened loss or termination of any existing
business arrangement or material supplier, the termination or loss of
which, in the aggregate, could materially and adversely affect such
Transferred Entity;
(xii) effected any change in its capital structure; or
(xiii) agreed, whether in writing or otherwise, to take any action
described in this Section 2.9.
2.10 No Undisclosed Liabilities. Except as listed on Schedule 2.10
hereto, or otherwise disclosed herein or in the Schedules hereto, none of the
Dialysis Companies (or the Sellers or their Affiliates relating to the Dialysis
Business) has any liabilities or obligations, whether accrued, absolute,
contingent or otherwise, except for liabilities and obligations reflected in the
Financial Statements or incurred in the ordinary course of its business since
the date of the most recent balance sheet included in the Financial Statements.
2.11 Litigation, etc. Except as listed on Schedule 2.11 hereto, (i)
there are no claims, lawsuits, actions, arbitrations, administrative or other
proceedings pending against any of the Sellers or their Affiliates relating to
the Dialysis Business or against any of the Dialysis Companies, and, to the
knowledge of the Sellers, no such matter is threatened and there is no basis for
any such action, (ii) to the knowledge of the Sellers, there are no governmental
or administrative investigations or inquiries pending that involve any of the
Dialysis Companies or the Dialysis Business, and (iii) there are no judgments
against or consent decrees binding on any of the Dialysis Companies (or the
Sellers or their Affiliates relating to the Dialysis Business) or, to the
knowledge of the Sellers, without independent investigation, any licensed
professional relating to the Dialysis Companies or the Dialysis Business.
2.12 No Violation of Law. Except as set forth on Schedule 2.12, to the
knowledge of the Sellers, none of the Dialysis Companies (or the Sellers or
their Affiliates relating to the Dialysis Business) has been and is not in
violation of any applicable local, state or federal law, ordinance, regulation,
order, injunction or decree, or any other requirement of any governmental body,
agency or authority or court binding on it, or relating to its property or
business or its advertising, sales or pricing practices, except for any such
violations as would not individually or in the aggregate have a material adverse
effect on such Transferred Entity, financial or otherwise.
2.13 Real and Personal Property. (a) Schedule 2.13(a) sets forth a list
of all items of material personal and mixed, tangible and intangible property,
rights and assets used or held for use in the Dialysis
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Business having an original or replacement cost or value greater than $10,000.
Except as set forth on Schedule 2.13(a), the Dialysis Companies (i) have or will
have good and valid title to all of the personal and mixed, tangible and
intangible property, rights and assets which it purports to own, including all
the personal property and assets reflected in the Financial Statements, (ii) the
Dialysis Companies own or will own all assets, properties and rights used or
held for use by the Sellers or their Affiliates in the Dialysis Business; and
(iii) own or will own such rights, assets and personal property free and clear
of all Liens. To the extent any assets, properties or rights used or held for
use in the Dialysis Business are owned by Sellers or any Affiliates other than
the Dialysis Companies on the date of this Agreement, such assets will be
transferred to a Dialysis Company at or prior to Closing. Except as set forth on
Schedule 2.13(a)-1, the Dialysis Companies do not, have not and will not hold
any assets, properties or rights that are not used or held for use in the
Dialysis Business.
(b) Schedule 2.13(b) contains a true and correct description of all
real property owned or leased by the Dialysis Companies or used in the Dialysis
Business, including all improvements located thereon. Except as set forth on
Schedule 2.13(b), each of the Dialysis Companies has good and marketable title
to all real property owned by it, and at the Closing one of the Dialysis
Companies will have good and marketable title to all real property owned by the
Sellers or any affiliates and used or held for use in the Dialysis Business, in
each case free and clear of any Liens. RCG has been furnished with true, correct
and complete copies of all leases, deeds, easements and other documents and
instruments concerning the matters listed on Schedule 2.13(b). No condemnation
or similar actions are currently in effect or pending against any part of any
real property owned or leased by the Dialysis Companies or used in the Dialysis
Business and, to the best knowledge of the Sellers, no such action is threatened
against any such real property. There are no encroachments, leases, easements,
covenants, restrictions, reservations or other burdens of any nature which might
impair in any material respect the use of any such owned or leased real property
in a manner consistent with past practices nor does any part of any building
structure or any other improvement thereon encroach on any other property.
(c) The present zoning, subdivision, building and other ordinances
and regulations applicable to any owned or leased real property permit the
continued operation, use, occupancy and enjoyment of such real property
consistent with past practices, and the Dialysis Companies and the Dialysis
Business are in compliance with, and have received no notices of violations of,
any applicable zoning, subdivision or building regulation, ordinance or other
law, regulation, or requirement. The Dialysis Companies have all rights and
easements necessary for public ingress thereto and egress therefrom and for the
provision of all utility services thereto, including any required curb cut or
street opening permits or licenses for vehicular access over presently existing
roads and driveways.
(d) The Dialysis Companies' assets (including all buildings and
improvements in connection therewith) are and will be in good operating
condition and repair, ordinary wear and tear excepted, and such assets include
or will include all rights, properties, interests in properties, and assets
necessary to permit RCG to carry on the Dialysis Business as presently
conducted.
(e) Each piece of real property set forth on Schedule 2.13(b) is,
to the knowledge of the Sellers, separately assessed for real property tax
assessment purposes and is not combined with any other real property for such
tax assessment purposes. Schedule 2.13(e) contains true, complete and correct
copies of the most recent tax bills for each piece of real property set forth on
Schedule 2.13(b).
(f) Schedule 2.13(f) contains a complete and correct list of all
trademarks, trade names, service marks, service names, brand names, copyrights,
technology rights and licenses, know-how, software and patents, registrations
thereof and applications therefor, and any other intellectual property used or
held for use in the Dialysis Business, together with a complete list of all
licenses granted by or to the Dialysis Companies with respect to any of the
foregoing. Neither the Sellers nor any of the Dialysis Companies is currently in
receipt of any notice of any violation of, and each has no reason to believe
that the operations of the Dialysis Business are violating the rights of others
with respect to any such matter, and
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reasonable measures have been taken to protect the rights with respect to any
such matters as are proprietary to the Dialysis Companies or the Dialysis
Business.
2.14 Contracts and Commitments. (a) Schedule 2.14 contains a complete
and accurate list of all contracts, agreements, commitments, instruments and
obligations (whether written or oral, contingent or otherwise) of the Dialysis
Companies (or the Sellers relating to the Dialysis Business) concerning the
following matters (the "Company Agreements"):
(i) the lease (as lessee or lessor) or license (as licensee or
licensor) of any real or personal property (tangible or intangible);
(ii) the employment or engagement of any officer, director,
employee, consultant or agent;
(iii) any relationship with any person or entity affiliated with or
related to the Sellers or the Dialysis Companies or any officer,
director, employee, consultant or agent;
(iv) any arrangement limiting the freedom of any of the Dialysis
Companies, or any other person with respect to the Dialysis Business to
compete in any manner in any line of business or requiring any of the
Dialysis Companies to share profits;
(v) any arrangement that could reasonably be anticipated to have
a material adverse effect on any of the Dialysis Companies or the
Dialysis Business, financial or otherwise;
(vi) any arrangement not in the ordinary course of business;
(vii) any power of attorney, whether limited or general, granted by
or to any of the Dialysis Companies, or any other person with respect
to the Dialysis Business; and
(viii) any other arrangement that requires performance for a period
of more than 90 days or that requires payments in excess of $50,000.
(b) The Sellers have delivered to RCG true and complete copies
of all Company Agreements that are in writing. Except as indicated on Schedule
2.14, the Company Agreements are valid and effective in accordance with their
terms, and there is not under any of such contracts (i) any existing or claimed
default by any of the Dialysis Companies or the Sellers or their Affiliates or
event which with notice or lapse of time, or both, would constitute a material
default by any of the Dialysis Companies or the Sellers or their Affiliates or
(ii) to the knowledge of the Sellers, any existing or claimed default by any
other party or event which with notice or the lapse of time, or both, would
constitute a material default by any such party. Except as indicated on Schedule
2.14, the continuation, validity and effectiveness of the Company Agreements
will not be affected by the Transactions, and the Transactions will not result
in a breach of or default under, or require the consent of any other party to,
any of the Company Agreements. There is no actual or, to the knowledge of the
Sellers, threatened termination, cancellation or limitation of any Company
Agreements that would have a material adverse effect on any of the Dialysis
Companies or the Dialysis Business, financial or otherwise. To the knowledge of
the Sellers, there is no pending or threatened bankruptcy, insolvency or similar
proceeding with respect to any other party to the Company Agreements.
2.15 Employment and Labor Matters. (a) Schedule 2.15(a) sets forth (i)
the number of full-time and part-time employees of each of the Dialysis
Companies and the Dialysis Business and (ii) the name and compensation paid to
each employee of or consultant to any of the Dialysis Companies or the Dialysis
Business who received salary, benefits and bonuses for either of the two most
recently ended fiscal years in excess of $50,000.
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(b) The Dialysis Companies and the Dialysis Business are in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment, wages
and hours, occupational safety and health, including laws concerning unfair
labor practices within the meaning of Section 8 of the National Labor Relations
Act, and the employment of non-residents under the Immigration Reform and
Control Act of 1986.
(c) Except as disclosed on Schedule 2.15(c),
(i) there are no charges, governmental audits, investiga-
tions, administrative proceedings or complaints concerning the
Dialysis Companies' or the Dialysis Business' employment practices
pending or, to the knowledge of the Sellers, threatened before any
federal, state or local agency or court, and, to the knowledge of
the Sellers, no basis for any such matter exists;
(ii) to the knowledge of the Sellers, there are no inquiries,
investigations or monitoring of activities of any licensed,
registered, or certified professional personnel employed by,
credentialed or privileged by, or otherwise affiliated with or
providing services to the Dialysis Companies or the Dialysis
Business pending or threatened by any state professional board or
agency charged with regulating the professional activities of health
care practitioners;
(iii) there are no union or collective bargaining agreements,
with respect to any employee providing services to, and, to the
knowledge of the Sellers, no union attempts to organize any of such
employees of the Dialysis Business have been made, nor are any such
attempts now threatened; and
(iv) the Dialysis Business has not experienced any organized
slowdown, work interruption, strike, or work stoppage by its
employees.
2.16 Employee Benefit Matters. The employee benefit plans and
agreements described in Schedule 2.16 hereto are the only employee benefit plans
and agreements maintained by the Dialysis Companies or any other person with
respect to the Dialysis Business for the benefit of the shareholders, officers,
directors, employees, former employees, or independent contractors involved with
the Dialysis Business, including, without limitation, (i) profit sharing,
pension, ESOP, 401(k) or other retirement plans or programs, (ii) current and
deferred compensation, severance, vacation, stock purchase, stock option, bonus
and incentive compensation benefits, and (iii) medical, hospital, life, health,
accident, disability, death and other fringe and welfare benefits, including any
split-dollar life insurance policies, all of which plans, programs, practices,
policies and other individual and group arrangements and agreements, including
any unwritten compensation, fringe benefit, payroll or employment practices,
procedures or policies of any kind or description are hereinafter referred to as
the "Benefit Plans." Except as disclosed on Schedule 2.16, there are no
contributions or payments due with respect to any of the Benefit Plan, nor will
any such contributions or payments be due or required to be paid on or prior to
the Closing Date. Each Benefit Plan has been operated and administered in
substantial compliance with the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA"), and the provisions of the Code applicable to it.
No Benefit Plan of the Dialysis Companies or their ERISA Affiliates which is
subject to the minimum funding standards of ERISA or the Code, if any, has
incurred any accumulated funding deficiency within the meaning of ERISA or the
Code. All contributions with respect to a Benefit Plan of the Dialysis Companies
or their ERISA Affiliates that is subject to Code Section 412 or ERISA Section
302 have been timely made and there is no lien or expected to be a lien under
Code Section 412(n) or ERISA Section 302(f) or tax under Code Section 4971. No
Benefit Plan of the Dialysis Companies or their ERISA Affiliates has a
"liquidity shortfall" as defined in Code Section 412(m)(5). Neither the Dialysis
Companies nor their ERISA Affiliates are subject to or can reasonably be
expected to become subject to a lien under Code Section 401(a)(29). No event has
occurred in connection with a Benefit Plan of the Dialysis Companies or their
ERISA Affiliates that could result in liability to the Dialysis Companies under
Title IV of ERISA. The Dialysis Companies have not incurred any liability to
the Pension Benefit Guaranty Corporation in
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connection with any Benefit Plan of the Dialysis Companies or their ERISA
Affiliates which is subject to Title IV of ERISA, if any. The assets of each
Benefit Plan of the Dialysis Companies or their ERISA Affiliates that is subject
to Title IV of ERISA, if any, are sufficient to provide all "benefit
liabilities" (as defined in ERISA Section 4001(a)(16) under such Benefit Plan if
such Benefit Plan terminated, and are also sufficient to provide all other
benefits due under the Benefit Plan (including, but not limited to, ancillary,
disability, shutdown, early retirement and welfare benefits). Neither the
Dialysis Companies nor their ERISA Affiliates have had an "obligation to
contribute" (as defined in ERISA Section 4212) to a "multi-employer pension
plan" (as defined in ERISA Sections 4001(a)(3) and 3(37)(A)) at any time. No
event which constitutes a reportable event as defined in Section 4043 of ERISA
has occurred or is continuing with respect to any Benefit Plan covered by ERISA.
No facts exist which will result in a material increase in the premium costs of
any Benefit Plan for which benefits are insured or a material increase in
benefit costs of any Benefit Plan which provides self-insured benefits. No
"prohibited transaction" (as defined in ERISA Section 406 or Code Section 4975)
has occurred with respect to any Benefit Plan. None of the Benefit Plans has any
current or projected liability in respect of post-employment or post-retirement
health or medical or life insurance benefits for former or retired employees of
the Dialysis Companies, except as required to avoid excise taxes under Code
Section 4980B. All Benefit Plans subject to Code Section 4980B or Part 6 of
Title I of ERISA have been maintained in compliance with the requirements of
Code Section 4980B and Part 6 of Title I of ERISA. There is no contract,
agreement, plan or arrangement covering any employee or former employee of the
Dialysis Companies that could result in the payment of any amount that would not
be deductible under Code Sections 162(m) or 280G. As of the Closing Date, the
Dialysis Companies have no Liability under any Benefit Plan.
2.17 Insurance Policies. Except as described on Schedule 2.17, all of
the assets and business of the Dialysis Companies and the Dialysis Business are
insured in such amounts and against such losses, casualties or risks as are
customary for similar properties and businesses, and such insurance has been
maintained continuously from the earlier of (i) the date of its inception and
(ii) the date of inception of any of its predecessors. Schedule 2.17 sets forth
a complete and accurate list and description of all insurance policies in force
with respect to the Dialysis Business or any of its properties or employees or
naming the Dialysis Companies, or any employee thereof, as an insured or
beneficiary or as a loss payee or for which the Dialysis Companies have paid or
are obligated to pay all or part of the premiums, including, without limitation,
all liability, malpractice, fire, health and life insurance policies. All such
policies are in full force and effect, and the premiums due thereon have been
timely paid. The Sellers have not received notice of any pending or threatened
termination or premium increase (retroactive or otherwise) with respect thereto,
and, to the knowledge of the Sellers, the Dialysis Companies are in compliance
with all conditions contained therein. Except as set forth on Schedule 2.17,
there are no pending claims against such insurance as to which insurers are
defending under reservation of rights or have denied liability, and except as
set forth on Schedule 2.17, there exists no claim under such insurance that has
not been properly filed by the Dialysis Companies. To the knowledge of the
Sellers, there are no outstanding or unfulfilled requirements or recommendations
of any insurance company insuring the Dialysis Companies regarding any repairs
to or work to be performed with respect to the assets of the Dialysis Companies.
The Dialysis Business has complied with any such requirements and
recommendations as to which the Dialysis Business received notice. Schedule 2.16
contains a listing of all claims made and loss histories in respect of any
insurance maintained with respect to the Dialysis Business or any of its
properties or employees or the Dialysis Companies or any predecessor during the
past three (3) years.
2.18 Environmental Matters. Except as set forth in Schedule 2.18, there
are no present or past Environmental Conditions in any way relating to the
business, properties or assets of the Dialysis Companies or Dialysis Business.
For the purposes of this Agreement, "Environmental Condition" means (a) the
introduction into the environment of any pollution, including without limitation
any contaminant, irritant or pollutant or other toxic or hazardous substance, in
violation of any federal, state or local law, ordinance or governmental rule or
regulations, as a result of any spill, discharge, leak, emission, escape,
injection, dumping or release of any kind whatsoever of any substance or
exposure of any type in any work places or to any medium, including without
limitation air, land, surface waters or ground waters, or from any generation,
transportation, treatment, discharge, storage or disposal of waste materials,
raw materials,
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hazardous materials, toxic materials or products of any kind or from the
storage, use or handling of any hazardous or toxic materials or other
substances, as a result of which the Dialysis Companies have or may become
liable to any person or by any reason of which any of the assets of the Dialysis
Companies or the Dialysis Business may suffer or be subjected to any lien,
encumbrance or restriction of any nature, or (b) any noncompliance with any
federal, state or local environmental law, rule, regulation or order as a result
of or in connection with any of the foregoing.
2.19 Accounts Receivable and Payable. The accounts receivable of the
Dialysis Companies and the Dialysis Business as of the Closing Date will
represent, bona fide claims for services actually rendered and goods actually
provided, subject to no defenses, counterclaims, or rights of setoff other than
those arising in the ordinary course of business and for which adequate reserves
have been or will be established, as applicable. No accounts payable of the
Dialysis Companies are, at this date, past due and no accounts payable of the
Dialysis Companies will be past due at the Closing Date, the Sellers
acknowledging and agreeing that the Assumed Liabilities do not include any of
such accounts payable.
2.20 Taxes (a) Except as set forth in Schedule 2.20, each of the
Dialysis Companies and any affiliated group filing a consolidated or combined
Tax Return including any of the Dialysis Companies has filed all Tax Returns
that it was required to file in a timely manner (taking into account all
extensions of due dates), and has paid in a timely manner all Taxes shown
thereon as owing (or has established adequate reserves therefor as reflected on
the Financial Statements). All information provided in such Tax Returns is true,
correct and complete in all material respects as to the Dialysis Companies or as
to any liability for Taxes for which they could be liable. Each of the Dialysis
Companies is in compliance in all material respects with and retains in its
records all information and documents necessary to comply with all applicable
Tax or information reporting and any Tax withholding requirements under federal,
state and local Tax laws.
(b) Schedule 2.20 lists all Tax Returns filed with respect to
any of the Dialysis Companies or any of their properties, income or operations
or for which they otherwise could be held liable for taxable periods which are
open to examination by relevant taxing authorities ("Open Tax Returns").
Schedule 2.20 lists all Tax Returns filed with respect to any of the Dialysis
Companies or with respect to Taxes for which they could be held liable for any
period for which there is any claim or assessment pending, or where to the
knowledge of the Sellers such a claim or assessment is threatened, or where an
audit or investigation with respect to any liability of the Dialysis Companies
exists. The Sellers have delivered or made available to RCG correct and complete
copies of all Tax Returns listed in Schedule 2.20 (including amendments thereto)
and all examination reports and statements of deficiencies assessed against or
agreed to by any of the Dialysis Companies since December 31, 1990. The statute
of limitations with respect to the assessment of any federal, state or local
income tax has expired on all Taxes other than those addressed by Open Tax
Returns. All Taxes due with respect to completed and settled examinations or
concluded litigation regarding Tax Returns have been paid.
(c) Except as set forth in Schedule 2.20, none of the Dialysis
Companies has waived (or has had waived on its behalf) any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency for which it could be held liable.
(d) Except as set forth in Schedule 2.20, none of the Dialysis
Companies is a party to any Tax allocation or sharing agreement.
(e) Except as set forth in Schedule 2.20, none of the Dialysis
Companies has been a member of an Affiliated Group filing a consolidated federal
income Tax Return other than a group the common parent of which is the Seller.
(f) For purposes hereof, "Taxes" shall mean any federal, state,
county, local, foreign or other tax, charge, imposition or other levy (including
interest or penalties thereon) including without limitation, income taxes
estimated taxes, excise taxes, sales taxes, use taxes, gross receipts taxes,
franchise
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taxes, taxes on earnings and profits, employment and payroll related taxes,
property taxes, real property transfer taxes, Federal Insurance Contributions
Act taxes, taxes on value added and import duties, whether or not measured in
whole or in part by net income, imposed by the United States or any political
subdivision thereof or by any jurisdiction other than the United States or any
political subdivision thereof. A "Tax Return" shall mean all returns,
declarations, reports and forms, claims for refunds or information returns and
reports relating to Taxes, including any schedule or attachment thereto, and
including any amendments thereof.
2.21 Licenses, Authorizations and Provider Programs. (a) The Dialysis
Companies (i) are the holders of all valid licenses and other rights and
authorizations required by law, ordinance, regulation or ruling of any
governmental regulatory authority necessary to operate the Dialysis Business as
currently operated, and (ii) are certified for participation and reimbursement
under Titles XVIII and XIX of the Social Security Act (the "Medicare and
Medicaid programs") (Medicare and Medicaid programs and all other similar
federal, state or local reimbursement or governmental programs for which the
Dialysis Companies are eligible are hereinafter referred to collectively as the
"Government Programs") and have current provider agreements for such Government
Programs and with such private non-governmental programs, including without
limitation any private insurance program, under which the Dialysis Business
directly or indirectly is presently receiving payments (such non-governmental
programs herein referred to as "Private Programs"). Set forth on Schedule
2.21.1, as to each separate facility operated by the Dialysis Business, is a
correct and complete list of such licenses, permits and other authorizations,
and provider agreements under all Government and Private Programs, complete and
correct copies of which have been provided to RCG. True, complete and correct
copies of all surveys of the Dialysis Business or its facilities conducted in
connection with any Government Program, Private Program or licensing or
accrediting body during the past three (3) years have been provided to RCG.
(b) To the knowledge of the Sellers, no material violation,
default, order or deficiency exists with respect to any of the items listed on
Schedule 2.21.1. Neither any of the Sellers nor any of the Dialysis Companies
has received any notice of any action pending or recommended by any state or
federal agencies having jurisdiction over the items listed on Schedule 2.21.1,
either to revoke, withdraw or suspend any license, right or authorization, or to
terminate the participation of any of the Dialysis Companies in any Government
or Private Program. To the knowledge of the Sellers, no event has occurred
which, with the giving of notice, the passage of time, or both, would constitute
grounds for a violation, order or deficiency with respect to any of the items
listed on Schedule 2.21.1 or to revoke, withdraw or suspend any such license, or
to terminate or modify the participation of the Dialysis Companies in any
Government or Private Program. To the knowledge of the Sellers, there has been
no decision not to renew any provider or third-party payor agreement of any of
the Dialysis Companies. Except as listed on Schedule 2.21.2, no consent or
approval of, prior filing with or notice to, or any action by, any governmental
body or agency or any other third party is required in connection with any such
license, right or authorization, or Government or Private Program, by reason of
the consummation of the Transactions, and the continued operation of the
Dialysis Business thereafter on a basis consistent with past practices.
(c) All cost reports and other reports required to be filed prior
to the date hereof with respect to the Government and Private Programs, all
fiscal intermediaries and other insurance carriers with respect to the Dialysis
Business have been timely filed, and all such reports are complete and accurate
in all material respects and have been prepared in accordance with all
applicable laws, regulations, and principles governing reimbursement and payment
claims. True and complete copies of such cost reports filed with respect to the
Dialysis Business for the most recent cost-reporting year, if applicable, have
heretofore been delivered to RCG. The Dialysis Companies have paid or caused to
be paid or have properly reflected in the Financial Statements, all known and
undisputed refunds, overpayments, discounts or adjustments which have become due
pursuant to such reports with respect to the Dialysis Business have been paid,
and there is no liability under any Government or Private Program (known or
unknown, contingent or otherwise) for any refund, overpayment, discount or
adjustment other than in the ordinary course, and no interest or penalties
accruing with respect thereto, except as has been specifically disclosed herein
or in the Schedules hereto. To the knowledge of the Sellers, except as set forth
on Schedule 2.21.3, there are no pending
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appeals, adjustments, challenges, audits, litigation, or notices of intent to
reopen any closed cost reports. There are no other reports required to be filed
by the Dialysis Companies in order to be paid under any Government or Private
Program for services rendered, except for cost reports not yet due.
2.22 Inspections and Investigations. Except as set forth and described
in Schedule 2.22, (i) neither the Dialysis Companies' rights nor, to the
knowledge of the Sellers, the right of any licensed professional or other
individual affiliated with the Dialysis Companies or the Dialysis Business to
receive reimbursements pursuant to any Government or Private Program has been
terminated or otherwise adversely affected as a result of any investigation or
action whether by any federal or state governmental regulatory authority or
other third party, (ii) neither the Dialysis Companies nor the Dialysis
Business, nor, to the knowledge of the Sellers, any licensed professional or
other individual affiliated with the Dialysis Business has, during the past
three (3) years, been the subject of any inspection, investigation, survey,
audit, monitoring or other form of review by any governmental regulatory entity,
trade association, professional review organization, accrediting organization or
certifying agency for the purpose of any alleged improper activity on the part
of such individual, nor have the Sellers or the Dialysis Companies received any
notice of deficiency in connection with their operations, (iii) there are not
presently, and at the Closing there will not be, any outstanding deficiencies or
work orders of any governmental authority having jurisdiction over the Dialysis
Business, or other third party, requiring conformity to any applicable
agreement, statute, regulation, ordinance or bylaw, including but not limited
to, the Government and Private Programs, and (iv) there is not any notice of any
claim, requirement or demand of any licensing or certifying agency or other
third party supervising or having authority over the Dialysis Business or its
operations to rework or redesign any part thereof or to provide additional
furniture, fixtures, equipment, appliances or inventory so as to conform to or
comply with any existing law, code, rule, regulation or standard. Attached as
part of Schedule 2.22 are copies of all reports, correspondence, notices and
other documents relating to any matter described or referenced therein.
2.23 Certain Relationships. (a) Except as set forth on Schedule
2.23(a), neither any of the Dialysis Companies or any other person with respect
to the Dialysis Business has:
(i) offered, paid, solicited or received anything of value, paid
directly or indirectly, overtly or covertly, in cash or in kind ("Remuneration")
to or from any physician, family member of a physician, or an entity in which a
physician or physician family member has an ownership or investment interest,
including, but not limited to:
(A) payments for personal or management services pursuant to a
medical director agreement, consulting agreement, management
contract, personal services agreement, or otherwise;
(B) payments for the use of premises leased to or from a
physician, a family member of a physician or an entity in which a
physician or family member has an ownership or investment interest;
(C) payments for the acquisition or lease of equipment,
goods or supplies from a physician, a family member of a physician
or an entity in which a physician or family member has an ownership
or investment interest; or
(ii) offered, paid, solicited or received any Remuneration
(excluding fair market value payments for equipment or supplies) to or from any
healthcare provider, pharmacy, drug or equipment supplier, distributor or
manufacturer, including, but not limited to:
(A) payments or exchanges of anything of value under a
warranty provided by a manufacturer or supplier of an item to the
Dialysis Companies or the Dialysis Business; or
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(B) discounts, rebates, or other reductions in price on a
good or service received by any of the Dialysis Companies or the
Dialysis Business;
(iii) offered, paid, solicited or received any Remuneration to
or from any person or entity in order to induce business, including, but not
limited to, payments intended not only to induce referrals of patients, but also
to induce the purchasing, leasing, ordering or arrangement for any good,
facility, service or item;
(iv) entered into any joint venture, partnership,
co-ownership or other arrangement involving any ownership or investment interest
by any physician, or family member of a physician, or an entity in which
physician or physician family member has an ownership or investment interest,
directly or indirectly, through equity, debt, or other means, including, but not
limited to, an interest in an entity providing goods or services to any of the
Dialysis Companies or the Dialysis Business;
(v) entered into any joint venture, partnership,
co-ownership or other arrangement involving any ownership or investment interest
by any person or entity including, but not limited to, a hospital, pharmacy,
drug or equipment supplier, distributor or manufacturer, that is or was in a
position to make or influence referrals, furnish items or services to, or
otherwise generate business for any of the Dialysis Companies or the Dialysis
Business; or
(vi) entered into any agreement providing for the referral of
any patient for the provision of goods or services by any of the Dialysis
Companies or the Dialysis Business, or payments by any of the Dialysis Companies
or the Dialysis Business as a result of any referrals of patients to any of the
Dialysis Companies or the Dialysis Business.
(b) Set forth on Schedule 2.23(b) is a list of all affiliated practices
or physicians who have privileges to use any of the dialysis facilities of the
Dialysis Business or who are otherwise involved with the use, operation of or
referral of patients to the dialysis facilities of the Dialysis Business.
2.24 Fraud and Abuse. The Dialysis Companies, the Sellers and persons
and entities providing professional services for the Dialysis Companies or
otherwise with respect to the Dialysis Business have not engaged in any
activities which are prohibited under 42 U.S.C. ss. 1320a-7b, or the regulations
promulgated thereunder pursuant to such statutes, or related state or local
statutes or regulations, or which are prohibited by rules of professional
conduct, including but not limited to the following: (a) knowingly and willfully
making or causing to be made a false statement or representation of a fact in
any application for any benefit or payment; (b) knowingly and willfully making
or causing to be made any false statement or representation of a fact for use in
determining rights to any benefit or payment; (c) failing to disclose knowledge
by a claimant of the occurrence of any event affecting the initial or continued
right to any benefit or payment on its own behalf or on behalf of another, with
intent to fraudulently secure such benefit or payment; and (d) knowingly and
willfully soliciting or receiving any remuneration (including any kickback,
bribe or rebate), directly or indirectly, overtly or covertly, in cash or in
kind or offering to pay or receive such remuneration (i) in return for referring
an individual to a person for the furnishing or arranging for the furnishing of
any item or service for which payment may be made in whole or in part by
Medicare or Medicaid, or (ii) in return for purchasing, leasing, or ordering or
arranging for or recommending purchasing, leasing, or ordering any good,
facility, service or item for which payment may be made in whole or in part by
Medicare or Medicaid.
2.25 Rates and Reimbursement Policies. Except for ethical limitations,
the jurisdictions in which the Dialysis Business has operations or conducts
business do not currently impose any restrictions or limitations on rates which
may be charged to private pay patients receiving services provided by the
Dialysis Business. There is no rate appeal currently pending before any
governmental authority or any administrator of any Private Programs with respect
to the Dialysis Business. The Sellers have no knowledge of any applicable law,
which has been enacted, promulgated or issued within the eighteen (18) months
preceding the date of this Agreement or any such legal requirement proposed or
currently pending in the jurisdictions
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in which the Dialysis Business has operations or does business, which could have
an adverse effect on any of the Dialysis Business or may result in the
imposition of additional Medicaid, Medicare, charity, free care, welfare, or
other discounted or government assisted patients at the Dialysis Business or
require any person with respect to the Dialysis Business to obtain any necessary
authorization which such person does not currently possess.
2.26 Statements True and Correct. No representation or warranty made
herein by the Sellers, nor in any statement, certificate or instrument to be
furnished to RCG by the Sellers pursuant to any Transaction Document, contains
or will contain any untrue statement of material fact or omits or will omit to
state a material fact necessary to make these statements contained herein and
therein not misleading.
2.27 Purchase for Investment, Etc. (a) Each Seller is acquiring the RCG
Common Stock for such Seller's own account and not with a view to or for sale in
connection with any public distribution thereof within the meaning of the 1933
Act;
(b) each Seller is an Accredited Investor as contemplated by
Regulation D under the 1933 Act and (i) has sufficient knowledge and experience
in financial and business matters to enable it to evaluate the merits and risks
of an investment in the RCG Common Stock, (ii) has the ability to bear the
economic risk of acquiring the RCG Common Stock, (iii) has received and reviewed
the RCG Documents identified on Schedule 4.8, and (iv) has had an opportunity to
ask questions of and to receive answers from the officers of RCG and to obtain
additional information in writing as requested, which has been made available to
and examined by such Seller's officers or such Seller's advisors; and
(c) each Seller (i) acknowledges that the RCG Common Stock has not
been registered under any securities laws and cannot be resold without
registration thereunder or exemption therefrom, (ii) agrees not to transfer all
or any of the RCG Common Stock received by each Seller unless such transfer has
been registered or is exempt from registration under applicable securities laws
and (iii) acknowledges that the certificate(s) representing the RCG Common Stock
shall bear a prominent legend with respect to the restrictions on transfer under
applicable securities laws.
ARTICLE 3
TAX MATTERS AND POST-CLOSING TAXES AND ACCOUNTS RECEIVABLE
3.1 Tax Sharing Agreements. Any Tax sharing agreement between either of
the Sellers or their Affiliates and any of the Dialysis Companies shall be
terminated prior to the Closing Date and will have no further effect for any
taxable year or period prior to, including, or following the Closing Date. For
purposes of computing the Liability of the Dialysis Companies for Taxes for the
federal income tax accounting period ending on the Closing Date or for any
federal income tax accounting period prior thereto for which there is an
adjustment in Tax Liability, such liability shall be computed assuming that the
Dialysis Companies filed a federal income tax return as a separate consolidated
group.
3.2 Allocation of Tax Liability.
(a) The Sellers shall indemnify and hold the Dialysis Companies and
RCG harmless from (i) any Liability of the Dialysis Companies for Taxes related
or allocable to a period ending on or before the Closing Date, including any
Taxes attributable to any elections or election made by RCG or the Dialysis
Companies under Section 338 of the Code, and (ii) any Liability for Taxes of
Sellers or any member of their Affiliated Group other than the Dialysis
Companies whenever arising. RCG shall indemnify and hold Sellers harmless from
and against any Liability for Taxes of the Dialysis Companies related to any
period following the Closing Date.
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(b) In the case of Taxes that are payable with respect to a
taxable period that begins before the Closing Date and ends after the Closing
Date, the portion of any such Tax that is allocable to the portion of the period
ending on the Closing Date shall: (i) in the case of Taxes that are either (x)
based upon or related to income or receipts or (y) imposed in connection with
any sale, other transfer or assignment or any deemed sale, transfer or
assignment of property (real or personal, tangible or intangible), be deemed
equal to the amount that would be payable if the taxable year ended on the
Closing Date, and (ii) in the case of Taxes imposed on a periodic basis (such as
property taxes), be deemed to be the amount of such Taxes for the entire period
(or, in the case of such Taxes determined on an arrears basis, the amount of
such Taxes for the immediately preceding period) multiplied by a fraction the
numerator of which is the number of calendar days in the portion of such period
ending on the Closing Date and the denominator of which is the number of
calendar days in the entire period. For purposes of clause (i) above, any
exemption, deduction, credit or other item that is calculated on an annual basis
shall be allocated to the period beginning before the Closing Date and, pursuant
to clause (i) treated as ending on the Closing Date, based on the pro rata
portion of such item determined by multiplying the total amount of such item
times a fraction, the numerator of which is the number of calendar days in the
period up to and including the Closing Date and the denominator of which is the
total number of calendar days in the entire period.
(c) The Dialysis Companies will furnish Tax information to the
Sellers for inclusion in the Sellers' federal consolidated income Tax Return for
the period that includes the Closing Date in accordance with the Sellers' past
custom and practice.
3.3 Returns and Payments.
(a) From the date of this Agreement through and after the
Closing Date, the Sellers shall prepare and file or otherwise furnish to the
appropriate party (or cause to be prepared and filed or so furnished) in a
timely manner all Tax Returns with respect to the Dialysis Companies for any
taxable period ending on or before the Closing Date and pay all Taxes as shown
as due thereon, and RCG shall do the same for any taxable period ending after
the Closing Date. With respect to any Tax Return required to be filed with
respect to the Dialysis Companies after the Closing Date and as to which an
amount of Tax is allocable to the Sellers under Section 3.2(b), RCG shall
provide the Sellers and its authorized representatives with a copy of such
completed Tax Return and a statement (including all necessary supporting
schedules and information required to support such statement) that certifies and
sets forth the calculation of the amount of Tax shown on such Tax Return that is
allocable to the Sellers pursuant to Section 3.2(b) at least 30 days prior to
the due date (including any extension thereof) for the filing of such Tax
Return, and the Sellers and its authorized representatives shall have the right
to review such Tax Return and statement (including any supporting Schedules or
other documents relevant thereto) prior to the filing of such Tax Return. The
Sellers and RCG agree to consult and to attempt in good faith to resolve any
issues arising as a result of the review of such Tax Return and statement by the
Sellers or its authorized representatives.
(b) The Sellers and RCG shall each pay or cause to be paid when
due and payable all Taxes that have not been paid as of the Closing Date that
are allocable to them pursuant to the provisions of Section 3.2.
(c) Payment of any amounts due under this Article 3 shall be made
(i) with respect to agreed amounts, at least three calendar days before the
payment of any such Tax is due, provided that no such payment shall be due prior
to 10 business days following receipt of written notice that payment of such Tax
is due, or (ii) within 10 business days following either an agreement between
the Sellers and RCG that an amount is payable by the Sellers or RCG to the other
or within 10 business days of a "determination" as defined in section 1313(a) of
the Code.
(d) Any refund of taxes (including any interest thereon)
attributable to a period prior to Closing shall be the Sellers'.
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3.4 Cooperation and Exchange of Information. The Sellers and RCG will
provide each other with such cooperation and information as either of them
reasonably may request of the other in filing any Tax Return, amended return or
claim for refund, determining a liability for Taxes or a right to a refund of
Taxes or participating in or conducting any audit or other proceeding in respect
of Taxes. Such cooperation and information shall include providing copies of
relevant Tax Returns or portions thereof, together with accompanying schedules
and related work papers and documents relating to rulings or other
determinations by taxing authorities, but in no event shall the Sellers or RCG
be required to disclose to the other any information relating to the operations
of either, as the case may be, other than information relating to a liability
for Taxes of the Dialysis Companies. The Sellers and RCG shall make their
respective employees available on a mutually convenient basis to provide
explanations of any documents or information provided hereunder. The Sellers and
RCG will retain all Tax Returns, schedules and work papers and all material
books and records or other documents relating to Tax matters of the Dialysis
Companies for its taxable period first ending after the Closing Date and for all
prior taxable periods until the expiration of the statute of limitations of the
taxable periods to which such returns and other documents relate, without regard
to extensions (but taking into account any extended statute of limitations
applicable to a year in which a net operating loss is reported) except to the
extent notified by the other party in writing of such extensions for the
respective Tax periods. Any information obtained under this Section 3.4 shall be
kept confidential, except as may be otherwise necessary in connection with the
filing of returns or claims for refund or in conducting an audit or other
proceeding. Notwithstanding anything in this Section 3.4 to the contrary, no
party shall be required to divulge any information to the other party that would
operate as a waiver of the attorney-client privilege. RCG and the Sellers shall
use reasonable efforts not to destroy or allow the destruction of any such books
and records and workpapers without first providing 60 days written notice of
intention to destroy to the other party, and allowing such other party to take
possession of such records.
3.5 Tax Sharing Indemnification. Sellers agree to indemnify RCG and the
Dialysis Companies from and against any loss they may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any Liability of any
of the Dialysis Companies for any Taxes of any Person other than any of the
Dialysis Companies (i) under Reg. ss.1.1502-6 (or any similar provision of
state, local or foreign law), (ii) as a transferee or successor, (iii) by
contract, or (iv) otherwise.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF RCG
RCG hereby represents and warrants to the Sellers as follows:
4.1 Organization, Authority and Capacity. RCG is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. RCG has the full power and authority necessary to (i) execute, deliver
and perform its obligations under the Transaction Documents to be executed and
delivered by it, and (ii) carry on its business as it has been and is now being
conducted and to own and lease the properties and assets which it now owns or
leases. RCG is duly qualified to do business and is in good standing in each
jurisdiction in which a failure to be so qualified or in good standing would
have a material adverse effect on (i) its ability to perform its objections
under the Transaction Documents to be executed and delivered by it, or (ii) the
assets, results of operations or prospects of RCG.
4.2 Authorization and Validity. The execution, delivery and performance
of the Transaction Documents to be executed and delivered by RCG have been duly
authorized by all necessary action by RCG. The Transaction Documents to be
executed and delivered by RCG have been or will be, as the case may be, duly
executed and delivered by RCG and constitute or will constitute the legal, valid
and binding obligations of RCG, enforceable in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency, or other laws
affecting creditors' rights generally, or as may be modified by a court of
equity.
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4.3 Absence of Conflicting Agreements or Required Consents. The
execution, delivery and performance by RCG of the Transaction Documents to be
executed and delivered by it: (i) do not require the consent of or notice to any
governmental or regulatory authority or any other third party; (ii) will not
conflict with any provision of RCG's certificate of incorporation or bylaws;
(iii) will not conflict with or result in a violation of any law, ordinance,
regulation, ruling, judgment, order or injunction of any court or governmental
instrumentality to which RCG is a party or by which RCG or any of its respective
properties are bound; (iv) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, require any
notice under, or accelerate or permit the acceleration of any performance
required by the terms of any agreement, instrument, license or permit to which
RCG is a party or by which any of its properties are bound; and (v) will not
create any lien, encumbrance or restriction upon any of the assets or properties
of RCG.
4.4 Governing Documents. True and correct copies of the organizational
documents and all amendments thereto of RCG (certified by the Secretary of State
of the State of Delaware) and copies of the bylaws of RCG have been provided to
the Sellers. The Sellers have previously been provided with access to RCG's
minutes, and such minutes accurately reflect all proceedings of the shareholders
and board of directors of RCG (and all committees thereof).
4.5 Outstanding and Authorized Capitalization. As of September 30,
1997, RCG had approximately 22,741,880 shares of RCG Common Stock and no shares
of Preferred Stock issued and outstanding. All issued and outstanding shares of
RCG Common Stock have been duly and validly issued, are fully paid and
non-assessable. Except for (i) options to purchase 3,425,306 shares of common
stock, and (ii) warrants to purchase 330,000 shares of common stock, there are
no outstanding warrants, options, rights, calls or other commitments of any
nature relating to shares of capital stock of RCG, no outstanding securities
convertible into or exchangeable for shares of capital stock of RCG, and, RCG is
not obligated to issue or repurchase any of its shares of capital stock for any
reason and no person or entity has any right or privilege (whether preemptive or
contractual) for the purchase, subscription or issuance of any unissued shares
of capital stock of RCG. No shares of Common Stock are held in RCG's treasury.
All RCG Common Stock to be issued in connection with the Transactions will be
duly and validly issued, fully paid and nonassessable, and, based on the
representations of the Sellers herein and in documents delivered pursuant
hereto, will be issued pursuant to a valid exemption from registration under the
1933 Act and all applicable state securities laws.
4.6 Litigation and Claims. There are no claims, lawsuits, actions,
arbitrations, administrative or other proceedings, governmental investigations
or inquiries pending or threatened against RCG affecting the performance by RCG
of the Transaction Documents and there is no basis for any such action or any
state of facts or occurrence of any event which might give rise to the
foregoing.
4.7 Statements True and Correct. No representation or warranty made
herein by RCG, nor in any statement, certificate or instrument to be furnished
to the Sellers by RCG pursuant to any Transaction Document, contains or will
contain any untrue statement of material fact or omits or will omit to state a
material fact necessary to make these statements contained and therein not
misleading.
4.8 RCG Documents. RCG has heretofore furnished to the Sellers the
documents set forth on Schedule 4.8. The foregoing documents together with the
exhibits thereto (which will be made available upon written request), are
collectively referred to herein as the "RCG Documents." The RCG Documents
include accurate and complete copies of each (i) report and registration
statement filed with the SEC during the last twelve months ("SEC Documents") and
(ii) publicly disseminated press release of RCG during the past twelve months
("Press Releases").
ARTICLE 5
ADDITIONAL AGREEMENTS
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5.1 Access to Dialysis Business Information. At all times prior to the
Closing, the Sellers will afford the officers and authorized representatives of
RCG, access to all of the Dialysis Companies' and the Dialysis Business'
properties, books and records that may relate to or concern the Transactions or
the Dialysis Business and will furnish such parties with such additional
financial, operating and other information as to the business and properties of
the Dialysis Companies and the Dialysis Business as such parties may from time
to time reasonably request. Such parties shall also be allowed access, upon
reasonable notice, to consult with the officers, employees, accountants, counsel
and agents of the Dialysis Companies and the Dialysis Business in connection
with such investigation of the properties and the Dialysis Business. In
addition, at all times prior to the Closing, RCG will afford to the Sellers, and
their representatives, access, upon reasonable notice, to all of RCG's and its
Affiliates' properties, books and records as the Sellers may reasonably request.
No such investigation shall diminish or otherwise affect any of the
representations, warranties, covenants or agreements of any party under this
Agreement.
5.2 No-Shop. Unless and until this Agreement is terminated pursuant to
Article 8 hereof, the Sellers shall not, and shall cause their Affiliates not
to, directly or indirectly, through any officer, director, employee, agent,
intermediary or otherwise: (i) solicit, initiate or encourage submission of
proposals or offers from any person or other entity relating to a sale of the
Dialysis Business whether in the form of a merger, sale of assets, sale of stock
or otherwise (a "Sale Transaction"); (ii) participate in any discussions or
negotiations regarding, or furnish to any other person or other entity, any
information with respect to, or otherwise respond to, cooperate or encourage,
any effort or attempt by any other person or other entity with respect to a
possible Sale Transaction; or (iii) approve or undertake any such activities or
a Sale Transaction. The Sellers shall promptly communicate to RCG the terms of
any such oral or written proposal or offer upon knowledge or receipt of such
proposal or offer.
5.3 Applications; Antitrust Notification. To the extent required by the
HSR Act, each of the Parties has or will promptly file with the United States
Federal Trade Commission and the United States Department of Justice the
notification and report form required for the transactions contemplated hereby
and any supplemental or additional information which may reasonably be requested
in connection therewith pursuant to the HSR Act and will comply in all material
respects with the requirements of the HSR Act. The Parties shall cooperate with
and deliver to each other copies of all filings, correspondence and orders to
and from all Regulatory Authorities in connection with the transactions
contemplated hereby.
5.4 Press Releases. Prior to the Closing Date, RCG and the Sellers
shall consult with each other as to the form and substance of any press release
or other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, that nothing in this Section 5.4
shall be deemed to prohibit any Party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such Party's disclosure
obligations imposed by Law.
5.5 Tax Matters. (a) The Sellers and RCG shall make a timely election
under ss.338(h)(10) of the Code and ss.1.338(h)(10)-1 of the Treasury
Regulations promulgated pursuant to the Code, and any corresponding elections
under state or local tax law. The Sellers and RCG shall (i) take, and cooperate
with each other to take, all actions necessary and appropriate (including,
without limitation, the preparation, completion and timely joint filing by the
Sellers and RCG of Form 8023-A, and the preparation, completion and timely
filing of such other forms, returns, elections, schedules and other documents
and instruments) to effect, perfect and preserve a timely ss.338(h)(10) election
in accordance with ss.338(h)(10) of the Code and ss.1.338(h)(10)-1 of the
Treasury Regulations promulgated pursuant to the Code, and (ii) report the
purchase and sale of the Transferred Shares consistent with the election
pursuant to ss.338(h)(10) and shall take no position contrary thereto or
inconsistent therewith in any tax return, or in any discussion with or any
proceeding before any taxing authority or other governmental body or otherwise.
Within 90 days of the filing of Form 8023-A, RCG will provide for Sellers'
review the allocation of purchase price among the assets of the Dialysis
Companies. Should Sellers and RCG be unable to agree to an allocation, an
independent accounting firm will be used to arbitrate. Sellers and RCG shall
bear one-half, respectively, of the expense of such firm, whose decision shall
be binding upon the parties. In the event an election under ss.338(h)(10) is not
available under the law of any state or locality but an election can be made
under Section
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338(g) of the Code, such election shall be made in such state or locality and
the Sellers shall bear the cost of any tax on the Dialysis Companies related
thereto.
(b) RCG shall have the right to review and approve (such
approval not to be unreasonably withheld) (A) the federal income tax returns to
be filed on behalf of the Dialysis Companies for the period ending as of the
close of business on the Closing Date that will include the gain or loss
resulting from the "deemed sale" and "deemed liquidation" that will occur
(pursuant to Treasury Regulation ss.1.338(h)(10)-1(e)(1) and (2) promulgated
under the Code) by reason of the Sellers' and RCG's election pursuant to
ss.338(h)(10) of the Code and (B) the corresponding state and local income tax
returns to be filed on behalf of the Dialysis Companies for the period ending as
of the close of business on the Closing Date.
5.6 Seller Releases. Effective as of the Closing Date, each Seller
hereby releases, remises, and forever discharges each of the Dialysis Companies
and their respective officers, directors, employees, and insurers, and their
respective successors and assigns, and each of them (hereinafter individually
and collectively, the "Releases") of and from any and all claims, demands,
debts, accounts, covenants, agreements, obligations, costs, expenses, actions or
causes of action of every nature, character or description, now accrued or which
may hereafter accrue, without limitation of law, equity or otherwise, based in
whole or in part on any facts, conduct, activities, transactions, events or
occurrences known or unknown, which have or allegedly have existed, occurred,
happened, arisen or transpired from the beginning of time to the Closing Date
(the "Released Claims"). Each Seller represents and warrants that no Released
Claim released herein has been assigned, expressly, impliedly, or by operation
of Law, and that all Released Claims of such Seller released herein are owned by
such Seller, who has the sole authority to release them. Each Seller agrees that
such holder shall forever refrain and forebear from commencing, instituting or
prosecuting any lawsuit action or proceeding, judicial, administrative, or
otherwise, or otherwise attempting to collect or enforce any Released Claims
which are released and discharged herein.
5.7 Affirmative Covenants of the Sellers. From the date hereof until
the earlier of the Closing Date or the termination of this Agreement, the
Sellers covenant and agree that, unless the prior written consent of RCG shall
have been obtained, and except as otherwise expressly contemplated herein, each
of the Dialysis Companies (and the Sellers with respect to the Dialysis
Business) shall:
(i) operate its business only in the usual, regular, and ordinary
course of business, consistent with past practices;
(ii) use reasonable commercial efforts to preserve intact its
business organization, licenses, permits, government programs, private
programs and customers;
(iii) use reasonable commercial efforts to retain the services of
its employees, agents and consultants on terms and conditions not less
favorable than those existing prior to the date hereof and to ensure
that there are no material or adverse changes to employee relations;
(iv) keep and maintain its assets in their present condition,
repair and working order, except for normal depreciation and wear and
tear, and maintain its insurance, rights and licenses;
(v) pay all accounts payable in accordance with past practice and
collect all accounts receivable in accordance with past practice, but
not less than in accordance with prudent business practices;
(vi) consult with RCG prior to undertaking any new business
opportunity outside the ordinary course of business and not undertake
such new business opportunity without the prior written consent of RCG;
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(vii) confer on a regular and frequent basis with one or more
designated representatives of RCG to report material operational
matters and to report the general status of ongoing business
operations;
(viii) make available to RCG true and correct copies of all internal
management and control reports (including aging of accounts receivable,
listings of accounts payable, and inventory control reports) and
financial statements related to its operations and furnished to
management of the Sellers or Dialysis Companies;
(ix) cause all tax returns that have not been filed prior to the
date hereof to be prepared and filed on or before the date such tax
return is required to be filed (taking into account any extensions of
the filing deadlines granted); provided, however, that any such tax
return shall not be filed without a reasonable opportunity for prior
review and comment by RCG;
(x) as soon as reasonably practicable after they become
available, but in no event more than thirty (30) days following
the end of each calendar month, deliver to RCG true and complete
copies of its monthly financial statements for each calendar month
ending subsequent to the date hereof on the format historically
utilized by such entity;
(xi) perform in all material respects all obligations under
agreements relating to or affecting its assets, properties or rights;
(xii) keep in full force and effect present insurance policies or
other comparable insurance coverage; and
(xiii) notify RCG of (i) any event or circumstance which is
reasonably likely to have a material adverse effect on the Sellers or
any of the Dialysis Companies or would cause or constitute a breach of
any of the Sellers' representations, warranties or covenants contained
herein; or (ii) any unexpected change in the normal course of business
or in the operation of the Dialysis Companies' assets, and of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), adjudicatory
proceedings, budget meetings or submissions involving any material
property. The Sellers agree to keep RCG fully informed of such events
and to permit RCG's representatives prompt access to all materials
prepared in connection therewith.
5.8 Negative Covenants of the Sellers. From the date hereof until the
earlier of the Closing Date or the termination of this Agreement, the Sellers
covenant and agree that each of the Dialysis Companies and the Dialysis Business
will not do any of the following without the prior written consent of the RCG:
(i) take any action which would (i) adversely affect the ability
of any party to the Transaction Documents to obtain any consents required
for the transactions contemplated thereby, or (ii) adversely affect the
ability of any party hereto to perform its covenants and agreements under
the Transaction Documents;
(ii) amend any of its organizational or governing documents;
(iii) incur any additional debt obligation or other obligation for
borrowed money in excess of an aggregate of $100,000 except in the
ordinary course of the business of such entity consistent with past
practices, or impose, or suffer the imposition, on any asset of such
entity of any lien or permit any such lien to exist;
(iv) repurchase, redeem, or otherwise acquire or exchange,
directly or indirectly, any of the equity securities of the
Dialysis Companies, or any securities convertible into the equity
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securities of the Dialysis Companies, or declare or pay any dividend or
make any other distribution in respect of the equity securities of the
Dialysis Companies, other than such dividends or distributions as are
in the ordinary course consistent with past practice;
(v) other than pursuant to the Transaction Documents,
issue, sell, pledge, encumber, authorize the issuance of, enter into
any contract to issue, sell, pledge, encumber, or authorize the
issuance of, or otherwise permit to become outstanding, any additional
equity securities of the Dialysis Companies or any rights with respect
to any equity securities of the Dialysis Companies;
(vi) purchase or acquire any assets or properties, whether
real or personal, tangible or intangible, or sell or dispose of any
assets or properties, whether real or personal, tangible or intangible,
except in the ordinary course of business and consistent with past
practices;
(vii) adjust, split, combine or reclassify any of the equity
securities of the Dialysis Companies or issue or authorize the issuance
of any other securities in respect of or in substitution for the equity
securities of the Dialysis Companies, or sell, lease, mortgage or
otherwise dispose of or otherwise encumber any asset having a book
value in excess of $50,000 other than in the ordinary course of
business for reasonable and adequate consideration;
(viii) purchase any securities or make any material
investment, either by purchase of stock or other securities,
contributions to capital, asset transfers, or purchase of any assets,
in any entity, or otherwise acquire direct or indirect control over any
other entity;
(ix) grant any increase in compensation or benefits to the
employees or officers of the Dialysis Companies, except in accordance
with past practice; pay any severance or termination pay or any bonus
other than pursuant to written policies or written contracts in effect
as of the date hereof and disclosed on the Schedules hereto; enter into
or amend any severance agreements with officers of the Dialysis
Companies; or grant any material increase in fees or other increases in
compensation or other benefits to directors of the Dialysis Companies
except in accordance with past practice;
(x) enter into or amend any employment contract between the
Dialysis Companies and any person or entity (unless such amendment is
required by law) that the Dialysis Companies do not have the
unconditional right to terminate without liability (other than
liability for services already rendered), at any time on or after the
Closing Date;
(xi) adopt any new employee benefit plan or make any
material change in or to any existing employee benefit plans other than
any such change that is required by law or that, in the opinion of
counsel, is necessary or advisable to maintain the tax qualified status
of any such plan;
(xii) make any significant change in any tax or accounting
methods or systems of internal accounting controls, except as may be
appropriate to conform to changes in tax laws or regulatory accounting
requirements or GAAP;
(xiii) commence any litigation other than in accordance with
past practice, settle any litigation involving any liability of any of
the Dialysis Companies for material money damages or restrictions upon
the operations of any of the Dialysis Companies;
(xiv) modify, amend or terminate any material contract or
waive, release, compromise or assign any material rights or claims;
(xv) except in the ordinary course of business and, even if
in the ordinary course of business, then not in an amount to exceed
$300,000 in the aggregate, make or commit to make any capital
expenditure, or enter into any lease of capital equipment as lessee or
lessor;
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<PAGE> 23
(xvi) take any action, or omit to take any action, which
would cause any of the representations and warranties contained in
Article 2 to be untrue or incorrect; or
(xvii) make any loan to any person or increase the aggregate
amount of any loan currently outstanding to any person.
5.9 Confidentiality. The parties hereby affirm and ratify the terms of
that certain letter agreement, dated May 12, 1997, among them concerning
confidentiality, public announcements and related matters, which agreement
remains valid and binding among the parties notwithstanding Section 11.8 hereof.
5.10 Confidentiality, Noncompetition and Nonsolicitation. (a) (i) Each
Seller agrees that neither it nor any of its Affiliates shall, for a period of
five (5) years after the Closing Date, in any manner, directly or indirectly, by
itself or in conjunction with any other person, conduct activities that are
competitive with the Dialysis Business or acquire, establish or own any
financial, beneficial or other interest in, make any loan to or for the benefit
of, or render any managerial, marketing or other business advice, to any entity
that is then conducting activities that are competitive with the Dialysis
Business, in either case within a geographic territory defined as United States
of America.
(ii) Each Seller further agrees that it and its Affiliates
shall, for a period of five (5) years after the Closing Date, keep confidential
and not directly or indirectly divulge to anyone or use or otherwise appropriate
for such parties own benefit or for the benefit of others, any knowledge or
information of a confidential nature with respect to the business of the
Dialysis Companies, RCG, or any of their Affiliates, including all trade
secrets, pricing information, marketing information or technical information
(hereinafter referred to as the "Confidential Data"), except for (A) a
disclosure that is required by law; or (B) information that has been made
generally available to the public by the act of one who has the right to
disclose such information. Each Seller hereby acknowledges and agrees that the
prohibitions against disclosure of Confidential Data recited herein are in
addition to, and not in lieu of, any rights or remedies which RCG may have
available pursuant to the laws of any jurisdiction or at common law to prevent
the disclosure of confidential information, and the enforcement by RCG of its
rights and remedies pursuant hereto shall not be construed as a waiver of any
other rights or available remedies which RCG may possess in law or equity. Each
Seller acknowledges that RCG has taken reasonable and appropriate steps to
ensure the confidentiality and non-disclosure of all such Confidential Data.
(iii) Each Seller also agrees that it and its Affiliates
shall, for a period of five (5) years after the Closing Date, not, for such
parties own benefit or the benefit of others, solicit any person or entity that
has had, or disrupt or attempt to disrupt, any relationship, contractual or
otherwise, with the Dialysis Companies, the Dialysis Business, RCG or any of its
Affiliates (including any patient, payor, physician, provider, managed care
organization or supplier), for the purpose of assisting, or creating such a
relationship for, any business entity that is conducting activities competitive
with the Dialysis Business.
(iv) Each Seller further agrees that it and its Affiliates
shall, for a period of five (5) years after the Closing Date, shall not induce,
nor attempt to induce, any employee of the Dialysis Companies, the Dialysis
Business, RCG, or any of its Affiliates, to terminate his or her association
with any such party.
(b) Notwithstanding the foregoing provisions of Section 5.10(a), the
parties hereto agree that the foregoing covenants shall not be deemed to
prohibit Sellers or any of their Affiliates from acquiring, as an investment,
not more than five percent (5%) of the capital stock of an entity that is
conducting activities competitive with the Dialysis Business, provided that such
stock is purchased on a national securities exchange or over-the-counter.
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(c) The foregoing restrictions in Section 5.10(a) shall not prohibit
any Seller or its Affiliates from acquiring a business that has incidental
operations that are competitive with the Dialysis Business, provided that (i)
such competitive operations are incidental to the primary operation of the
acquired business and are not the purpose of the acquisition and (ii) such
Sellers or Affiliates of Sellers shall have 120 days to dispose of such
competitive operations to a third party and shall provide RCG with thirty (30)
days notice prior to such disposition and a right of first refusal to match any
bona fide offer for the purchase of such competitive operations. If RCG elects
not to exercise such right of first refusal, then such Sellers or Affiliates may
only sell such operations to the party submitting the bona fide proposal that
RCG declined at the offered or greater price and terms within 90 days after the
date that RCG elects not to exercise its right to first refusal.
(d) The covenants contained in this Section 5.10 are considered
by the parties hereto to be fair, reasonable and necessary for the protection
of RCG, the Dialysis Companies and the Dialysis Business. The parties mutually
agree that if a violation of any covenant contained in this Section 5.10
occurs, such violation or threatened violation will cause irreparable injury to
RCG and the Dialysis Companies and the remedy at law for any such violation or
threatened violation will be inadequate. Each Seller therefore agrees that RCG
shall be entitled to appropriate equitable relief, including but not limited to
a temporary restraining order or a preliminary injunction, in addition to any
other remedy that might be available at law or in equity.
5.11 Standstill. Until the second anniversary of the Closing Date
neither the Sellers nor their Affiliates shall:
(a) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or voting
rights or direct or indirect rights or options to acquire any voting
securities of RCG or any of its Affiliates other than as a result of a
stock split, stock dividend or similar recapitalization;
(b) make or cause to be made any proposal for an Extraordinary
Transaction;
(c) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the 1934 Act) with respect to any
securities of RCG or its Affiliates;
(d) make, or in any way cause or participate in, any "solicita-
tion" of "proxies" to vote (as those terms are defined in Regulation
14A under the 1934 Act) with respect to RCG or its Affiliates, or
become a "participant" in any "election contest" (as those terms are
defined or used in Rule 14a-11 under the 1934 Act) with respect to RCG
or its Affiliates;
(e) initiate, propose or otherwise solicit stockholders for the
approval of one or more stockholder proposals with respect to RCG or
its Affiliates or induce any Person to initiate any stockholder
proposal, or seek election to or seek to place a representative on the
Board of Directors of RCG or its Affiliates, other then as expressly
contemplated by Section 5.12 hereof.
(f) in any manner, agree, attempt, seek or propose (or make any
request for permission with respect thereto) to deposit any securities
of RCG or its Affiliates, directly or indirectly, in any voting trust
or similar arrangement or to subject any securities of RCG or its
Affiliates to any other voting or proxy agreement, arrangement or
understanding;
(g) disclose any intention, plan or arrangement, or make any public
announcement (or request permission to make any such announcement), or
induce any other Person to take any action, inconsistent with the
foregoing;
(h) enter into any negotiations, arrangements or understandings with
any third party with respect to any of the foregoing;
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<PAGE> 25
(i) advise, assist or encourage or finance (or assist or arrange
financing to or for) any other Person in connection with any of the
foregoing;
(j) otherwise act in concert with others, to seek to control or
influence the management, Board of Directors or policies of RCG or its
Affiliates;
provided, that this Section 5.11 shall not restrict or inhibit the
rights of Sellers to otherwise exercise its voting rights as a
stockholder of RCG.
5.12 Representations on RCG Board of Directors. For so long as the
Seller's ownership of shares of RCG Common Stock issued to them hereunder is
equal to or greater than 4% of the total number of outstanding shares of RCG
Common Stock, RCG agrees that it shall, at the written election of the Sellers
at any time after the Closing Date, increase the number of members to its Board
of Directors by one and add an individual specified by the Sellers as a new
member, with such member subject to the reasonable approval of RCG, to serve an
initial term ending on the date of the Annual Meeting of the RCG stockholders
next occurring after the date of such designee's appointment and that
thereafter, if requested in writing by Sellers, RCG shall recommend to its
stockholders at such Annual Meeting that such designee, or such other designee
reasonably approved by RCG, serve for an additional term as a member of the
Board of Directors of RCG. The Sellers agree that the resignation of such
designee shall be deemed to occur upon notice from RCG that ownership of the
Sellers described above is no longer equal to or greater than 4% of the total
number of outstanding shares of RCG Common Stock, and such designee shall sign a
prospective resignation to that effect prior to being entitled to serve on the
RCG Board of Directors.
5.13 Delivery of Schedules. As soon as reasonably practical following
the execution hereof, the Sellers shall deliver all Schedules to be delivered by
them to RCG and its counsel accompanied by a certificate, executed by the
Sellers stating that all Schedules required to be delivered by them hereunder
have been delivered. The Sellers understand and acknowledge that RCG's
obligation to consummate the Closing is subject to its satisfactory review of
said Schedules as contemplated by Section 6.6 hereof.
5.14 Availability of Rule 144 Information. Subject to Section 5.11, for
so long as RCG is subject to the 1934 Act, RCG shall take all reasonable actions
to enable the Sellers to sell any shares of RCG Stock received by them without
registration under the 1933 Act within the limitations of the exemption provided
by Rule 144 under the 1933 Act, as such rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission, including filing on a timely basis all reports required to
be filed by the 1934 Act. Upon the request of the Sellers, RCG shall deliver to
the Sellers a written statement as to whether it has complied with such
requirements.
5.15 Resignation and Releases. Simultaneously with the Closing, each
officer and director of the Dialysis Companies shall deliver a Resignation and
Release, in form reasonably satisfactory to RCG.
5.16 Employment and Non-Competition Agreements. Simultaneously with the
Closing, Messrs. Daniel Perez, David Perez and Larry Nail shall each deliver an
employment agreement, which contains non-competition provisions, in form and
upon terms reasonably satisfactory to RCG.
5.17 Conditions to Closing. The Sellers and RCG agree to use their
commercially reasonable best efforts to satisfy the closing conditions set forth
in Articles 6 and 7 of this Agreement by December 5, 1997, and if not by such
time, as soon thereafter as possible.
5.18 Certain Transition Services. The Sellers agree that, upon the
request of RCG, they shall make available to RCG on a transitional basis for not
more that 90 days after the Closing Date certain services in respect of the
administration and provision of employee benefits for employees of the Dialysis
Business and in respect of management information services and accounting
services of the Dialysis Business. RCG agrees to reimburse the Sellers for their
actual cost of providing any such services.
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ARTICLE 6
CONDITIONS TO OBLIGATIONS OF RCG
The obligation of RCG to consummate the Transactions is subject to the
satisfaction or waiver, at or prior to Closing, of each of the following
conditions:
6.1 Representations and Warranties. The representations and warranties
of the Sellers set forth in this Agreement, or any document or instrument
delivered to RCG hereunder, shall be true and correct as of the Closing Date
with the same force and effect as if such representations and warranties had
been made at and as of the Closing Date, except with respect to any of such
representations and warranties specifically referring to a state of facts
existing on a specified date prior to the Closing Date, it shall be sufficient
if at the Closing Date such representation and warranty continues to describe
accurately the state of facts existing on the date so specified.
6.2 Performance; Covenants. All of the terms, covenants and conditions
of the Transaction Documents to be complied with or performed by the Sellers at
or prior to Closing shall have been complied with and performed in all material
respects including, but not limited to, the delivery of the following documents:
(a) All original certificates evidencing the Transferred Shares
duly executed in blank or accompanied by stock powers duly executed in blank;
(b) A good standing certificate regarding each of the Sellers and
the Dialysis Companies, certified by the Secretary of State or similar official
of their respective states of their incorporation dated within fifteen (15)
business days of the Closing;
(c) A certificate dated as of the Closing Date signed by the duly
authorized officers of the Sellers certifying the matters described in Sections
6.1 and 6.2, and that all of the conditions of this Article 6 have been
fulfilled;
(d) Written consents of all third parties necessary for the
consummation of the transactions contemplated by the Transaction Documents;
(e) Resolutions of the Sellers (Board and shareholder, if
applicable) in form and substance satisfactory to RCG approving the execution,
delivery and performance of this Agreement and the consummation of the
Transactions, certified by an appropriate officer of the Sellers;
(f) An incumbency certificate certifying the identity of the
officers of the Sellers;
(g) Resignations and Releases as contemplated by Section 5.15 of
each of the officers and directors of the Dialysis Companies effective as of the
Closing Date;
(h) All books and records of the Dialysis Companies, including all
corporate and other records, minute books, stock record books, stock registers,
books of accounts, contracts, agreements and such other documents or
certificates as shall be reasonably requested by RCG;
(i) The Assumption Agreement;
(j) The Employment Agreements as contemplated by Section 5.16; and
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<PAGE> 27
(k) All agreements or arrangements, whether written or oral, among
the Sellers and/or the Dialysis Companies that relate in any manner to the
equity securities of the Dialysis Companies shall have been terminated.
6.3 Necessary Consents and Approvals. RCG and the Sellers shall have
obtained all licenses, consents and permits, provided all notices, and all
waiting periods required by Law shall have expired, necessary in order for RCG
and the Sellers to consummate the Transactions and for the continued operation
of the business of the Dialysis Companies after the Closing Date consistent with
its operation prior to the Closing Date, including all consents and approvals
listed on the Schedules hereto.
6.4 No Material Adverse Change. There shall not have occurred any
material adverse change in the business, assets, liabilities or condition,
financial or otherwise, of the Dialysis Companies or the Dialysis Business
between the date hereof and the Closing Date, and a certificate shall have been
delivered to RCG to such effect signed by such executive officers of the Sellers
as RCG may request.
6.5 No Injunction, Etc. No action, proceeding, investigation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency, or legislative body to enjoin, restrain, prohibit or obtain
substantial damages in respect of, or which is related to, arises out of, this
Agreement or the consummation of the Transactions, or which is related to or
arises out of the business or operations of the Dialysis Companies or the
Dialysis Business, if such action, proceeding, investigation or legislation, in
the reasonable judgment of RCG or its counsel, would make it inadvisable to
consummate such transactions.
6.6 Satisfactory Due Diligence. RCG shall in all respects be reasonably
satisfied with the results of its due diligence investigation of the Dialysis
Companies and the Dialysis Business, including its continuing review of matters
contained or not contained in the Schedules.
6.7 Legal Opinion. RCG shall have received an opinion of counsel to the
Sellers in form and substance reasonably satisfactory to RCG and its counsel.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF THE SELLERS
The obligations of the Sellers to close the Transactions are subject to
the satisfaction or waiver, at or prior to Closing, of each of the following
conditions:
7.1 Representations and Warranties. The representations and warranties
of RCG set forth in this Agreement, or any document or instrument delivered to
any party hereunder, shall be true and correct as of the Closing Date with the
same force and effect as if such representations and warranties had been made at
and as of the Closing Date, except with respect to any of such representations
and warranties specifically referring to a state of facts existing at a
specified date prior to the Closing Date, it shall be sufficient if at the
Closing Date such representation and warranty continues to describe accurately
the state of facts existing on the date so specified.
7.2 Performance; Covenants. All of the terms, covenants and conditions
of this Agreement to be complied with or performed by RCG at or prior to the
Closing shall have been complied with and performed in all material respects,
including, but not limited to delivery of the following documents:
(a) A good standing certificate regarding RCG certified by the
Secretary of State of the State of Delaware, dated within 15 days prior to
Closing;
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(b) A certificate dated as of the Closing Date signed by a duly
authorized officer of RCG certifying the matters in Sections 7.1 and 7.2 and
that RCG has fulfilled all of the conditions of this Article 7;
(c) Resolutions adopted by the Board of Directors of RCG approving
the execution, delivery and performance of this Agreement, certified by the
Secretary of RCG; and
(d) An incumbency certificate certifying the identity of the
officers of RCG.
7.3 No Material Adverse Change. There shall not have occurred any
material adverse change in the business, assets, liabilities or condition,
financial or otherwise, of RCG between the date hereof and the Closing Date.
7.4 No Injunction, Etc. No action, proceeding, investigation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency, or legislative body to enjoin, restrain, prohibit or obtain
substantial damages in respect of, or which is related to, arises out of, this
Agreement or the consummation of the Transactions, or which is related to or
arises out of the business or operations of RCG, if such action, proceeding,
investigation or legislation, in the reasonable judgment of the Sellers or their
counsel, would make it inadvisable to consummate such transactions.
7.5 Registration Rights Agreement. The Sellers shall have received an
executed Registration Rights Agreement from RCG in substantially the form
attached hereto as Exhibit 7.5.
7.6 Legal Opinion. The Sellers shall have received an opinion of
counsel to RCG in form and substance reasonably satisfactory to Sellers and
Sellers' counsel.
ARTICLE 8
TERMINATION
8.1 Right of Termination. This Agreement and the Transactions may be
terminated at any time prior to the Closing Date:
(a) By the mutual written consent of RCG and the Sellers.
(b) By RCG in the event that the conditions set forth in Section
1.3(b)(iii) or Article 6 of this Agreement shall not have been satisfied or
waived by December 31, 1997, unless such satisfaction shall have been frustrated
or made impossible by any act or failure to act of RCG.
(c) By the Sellers as provided in Section 1.3(b)(iii) or in the
event that the conditions set forth in Article 7 of this Agreement shall not
have been satisfied or waived by December 31, 1997, unless such satisfaction
shall have been frustrated or made impossible by any act or failure to act of
the Sellers.
(d) By the Sellers or RCG if the Closing shall not have occurred by
January 31, 1998.
8.2 Effect of Termination. In the event of termination in accordance
with Section 8.1, this Agreement shall become void and of no further force or
effect, without any liability on the part of any of the parties hereto or their
respective owners, directors, officers or employees, except (i) the obligations
of each party to preserve the confidentiality of documents, certificates and
information furnished to such party pursuant thereto, and (ii) for any
obligation or liability of any party based on or arising from any breach or
default by such party with respect to its representations, warranties, covenants
or agreements contained in the Transaction Documents.
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ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by Sellers. Subject to Sections 9.3 through 9.5,
each Seller shall jointly and severally indemnify and hold harmless RCG, the
Dialysis Companies and their respective officers, directors, agents or
affiliates, from and against any and all demands, claims, actions or causes of
action, assessments, losses, diminution in value, damages (including special and
consequential damages), liabilities, costs and expenses, including but not
limited to reasonable attorneys' fees ("Losses"), suffered or incurred by any
such party by reason of or arising out of any of the following:
(a) the breach of any representation or warranty contained in any
Transaction Document or in any document or instrument delivered by the Sellers
in connection therewith;
(b) the non-fulfillment of any covenant or agreement of the Sellers
contained in any Transaction Document or in any document or instrument delivered
by the Sellers in connection therewith;
(c) any claim or demand by any person asserting any interest in any
equity security of the Dialysis Companies or any other claim in respect to the
Transactions; and
(d) any and all debts, liabilities, causes of actions or claims of
any nature, absolute or contingent, known or unknown attributable to the
business or operations of the Dialysis Companies prior to the Closing Date,
including without limitation, the Retained Liabilities, but excluding the
Assumed Liabilities.
9.2 Indemnification by RCG. Subject to Sections 9.3 through 9.5, RCG
shall indemnify and hold harmless the Sellers, and any of their officers,
directors, agents and affiliates, at all times after the date hereof from and
against any and all Losses suffered or incurred by any such party by reason of,
or arising out of any of the following:
(a) the breach of any representation or warranty contained in any
Transaction Document or any document or instrument delivered by RCG in
connection therewith; and
(b) the non-fulfillment of any covenant or agreement of RCG
contained in any Transaction Document or in any document or instrument delivered
by RCG in connection therewith.
9.3 Notice and Opportunity to Defend. The party indemnified under this
Article 9 (the "Indemnified Party") shall promptly notify in writing the
indemnifying party (the "Indemnifying Party"), with the Sellers being deemed one
party acting through Laidlaw for purposes of this Article 9, of any matter
giving rise to an obligation to indemnify and the Indemnifying Party shall
defend such claim at its expense with counsel reasonably acceptable to the
Indemnified Party, provided that the Indemnifying Party may not settle any such
claim without the consent of the Indemnified Party. The assumption of defense by
an Indemnifying Party hereunder shall be deemed an admission by such
Indemnifying Party of its obligation to indemnify the Indemnified Party
hereunder with respect to such claim. The Indemnified Party agrees to cooperate
with the Indemnifying Party and to make reasonably available to the Indemnifying
Party any necessary records or documents in the possession of the Indemnified
Party which are necessary to defend such claim. If the Indemnifying Party does
not defend or settle such claim, the Indemnified Party may do so without the
Indemnifying Party's participation, in which case the Indemnifying Party shall
pay the expenses of such defense, and the Indemnified Party may settle or
compromise such claim without the Indemnifying Party's consent. The failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations hereunder except to the extent that the
Indemnifying Party is actually prejudiced by such failure to give notice.
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9.4 Indemnification Limits. (a) Subject to paragraph (d) of this
Section, no party hereto shall be required to indemnify any other party hereto
unless the amount of the loss or claim for which indemnification is sought, when
aggregated with all other losses and claims for which indemnification is sought
by such party, exceeds $100,000, at which time rights to indemnification for
losses and claims may be asserted for all amounts, including such initial
$100,000 amount.
(b) Subject to paragraph (d) of this Section, no party shall be
required to satisfy indemnification obligations hereunder to the extent such
obligations exceed an amount equal to the Purchase Price determined as of the
Closing Date.
(c) No claim for indemnification with respect to an alleged
misrepresentation or breach of warranty may be made after the third anniversary
of the Closing Date, provided, however, that the right to indemnification shall
extend beyond such period (i) with respect to any claim for indemnification for
which written notice was given during such period, (ii) with respect to any
claim brought for a misrepresentation or breach of Section 2.20 (a "Tax Claim")
until the liability to which such claim may relate is barred by all applicable
statute of limitations, and (iii) with respect to any claim brought for
misrepresentation or breach of Sections 2.1 through 2.6 (an "Ownership Claim")
of this Agreement indefinitely.
(d) The limitations contained in paragraphs (a) through (c) of this
Section 9.4 shall not apply to (i) any indemnification claim under Sections
9.1(b), (c) or (d) or 9.2(b) or (ii) a Tax Claim or an Ownership Claim, or (iii)
any Loss which results from or arises out of fraud or intentional
misrepresentation or an intentional breach of warranty on the part of a party to
the Transaction Documents. To the extent that any claim for indemnification
could be construed to be excluded from the limitations contained in this Section
9.4, such interpretation shall be the controlling interpretation.
9.5 Survival, Exclusivity and Insurance. The representations and
warranties of the parties contained in the Transaction Documents or in any
document or instrument delivered in connection therewith shall survive the
Closing and shall not be extinguished thereby notwithstanding any investigation
or other examination by any party, provided that from and after the Closing the
remedies set forth in this Article 9 shall constitute the sole and exclusive
remedy for any inaccuracy or breach of any such representation or warranty. Any
indemnified Loss that is not covered by insurance maintained by the Indemnifying
Party shall be reduced by the amount of any insurance proceeds actually received
from insurance maintained by the Indemnified Party, which shall nevertheless be
applied against the amounts described in Section 9.4. The limitations contained
in this Article 9 shall not apply to fraud or intentional misrepresentation
ARTICLE 10
CERTAIN DEFINITIONS
Except as otherwise provided herein, the capitalized terms set forth
below shall have the following meanings:
"Affiliate" of a Person shall mean (i) any other Person,
directly or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person, (ii) any officer,
director, partner, employer, or direct or indirect beneficial owner of 10% or
greater equity or voting interest of such Person, or (iii) any other Person for
which a person described in clause (ii) acts in such capacity.
"Agreement" shall mean this Agreement, including the Exhibits and
Schedules delivered pursuant hereto and incorporated herein by reference.
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"Base Period Trading Price" means the average of the daily last
sale prices for the shares of RCG Common Stock for the twenty (20) consecutive
trading days on which such shares are actually traded as over-the-counter
securities and quoted on the Nasdaq National Market ending at the close of
trading on the second (2nd) trading day immediately preceding the Closing Date.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"Deducted Liabilities" means the long term debt and capital lease
obligations reflected on the most recent balance sheet of the Dialysis Companies
included in three Financial Statements in the approximate amount of $4,000,000.
"Dialysis Business" shall mean (i) owning or operating a renal
dialysis center, unit or facility or providing dialysis supplies or services to
any other center, unit or acute care or other facility or any home dialysis
patient, including the provision of pharmaceuticals or laboratory services,
(ii)the owning or operating of a hyperbaric or wound care treatment center, unit
or facility or providing hyperbaric or wound care supplies or services to any
other center, unit or acute care or other facility or (iii) owning or operating
a home health care business.
"Dialysis Subsidiaries" shall mean those companies set forth on
Schedule 10.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean, with respect to any entity, any other
entity, which, together with such entity, would be treated as a single employer
(i) under Section 414(b) or (c) of the Code or (ii) for purposes of any Benefit
Plan subject to Title IV of ERISA, under Section 414(b), (c), (m) or (o) of the
Code.
"Exhibits" shall mean the Exhibits so marked, copies of which are
attached to this Agreement. Such Exhibits are hereby incorporated by reference
herein and made a part hereof, and may be referred to in this Agreement and any
other related instrument or document without being attached hereto.
"Extraordinary Transaction" shall mean any tender offer for RCG
Common Stock or any proposal for a merger or acquisition of all or substantially
all of the stock or assets of, or other business combination involving RCG, or
any agreement by RCG to enter into or effect any of same.
"HSR Act" shall mean Section 7A of the Clayton Act, as added by
Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
"Knowledge of the Sellers" shall mean the knowledge after due
inquiry of matters that are known or should reasonably have been known after due
inquiry by all officers and senior management (including internal counsel) of
any Seller or any Dialysis Company, including the knowledge of any such persons
obtained on which would have been obtained from a reasonable investigation.
"Law" shall mean any code, law, ordinance, regulation, reporting
or licensing requirement, rule, or statute applicable to a person or its
assets, Liabilities or business, including those promulgated, interpreted or
enforced by any Regulatory Authority.
"Liens" shall mean any conditional sale agreement, default of
title, easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, or with respect to any property or interest
other than Liens for current property Taxes not yet due and payable.
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"Liability" shall mean any direct or indirect, primary or
secondary, liability, indebtedness, obligation, penalty, cost or expense
(including costs of investigation, collection and defense), claim, deficiency,
guaranty or endorsement of or by any Person (other than endorsements of notes,
bills, checks, and drafts presented for collection or deposit in the ordinary
course of business) of any type, whether accrued, absolute or contingent,
liquidated or unliquidated, matured or unmatured, or otherwise.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Person" shall mean a natural person or any legal, commercial
or governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"RCG Common Stock" shall mean the $0.01 par value common stock of
RCG.
"Regulatory Authorities" shall mean, collectively, all federal
and state regulatory agencies having jurisdiction over the Parties and their
respective Subsidiaries, including the NASD, and the SEC.
"SEC" shall mean the Securities and Exchange Commission.
"Transactions" shall mean the transactions contemplated by the
Transaction Documents.
"Transferred Companies" shall have the meaning set forth in the
preamble to this Agreement.
"Transferred Shares" shall mean all of the ownership of the equity
securities of the Transferred Companies.
(b) In addition to the terms defined in Section 10.1 (a)
above, the terms set forth below shall have the meanings ascribed thereto in the
referenced sections:
<TABLE>
<S> <C>
Anti-Dilution Provisions - Section 1.3 IRS - Section 2.20
Closing Date - Section 1.4 Losses - Section 9.1
Contracts and Commitments - Section 2.14 Medicare and Medicaid programs - Section 2.21
Confidential Data - Section 5.7(b) Private Programs - Section 2.21
Dialysis Companies - Preamble RCG Documents - Section 4.8
Employee Benefit Matters - Section 2.16 Remuneration - Section 2.23
Environmental Matters - Section 2.18 Taxes - Section 2.20
Financial Statements - Section 2.8 Transaction Documents - Section 2.1
Licenses, Authorizations and Provider Programs Transferred Shares - Preamble
- Section 2.21
Indemnified Party - Section 9.3
</TABLE>
(c) Any singular term in this Agreement shall be deemed to include the
plural, and any plural term the singular. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed
followed by the words "without limitation."
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ARTICLE 11
MISCELLANEOUS PROVISIONS
11.1 Notices. (a) Any notice required or permitted by this Agreement
shall be sent in accordance with the provisions of this Section 11.1 and shall
be deemed to have been received (even if delivery is refused or unclaimed) on
the date which is: (i) the date of proper posting, if sent by certified U.S.
mail or by Express U.S. mail or private overnight courier; or (ii) the date on
which sent, if sent by facsimile transmission, with confirmation and with the
original to be sent by certified U.S. mail, addressed as follows:
If to the Sellers: c/o Ivan Cairns
Laidlaw Inc.
3221 N. Service Road
Burlington, Ontario,
Canada L7R 348
Telecopy Number:(905) 332-6550
If to RCG: Renal Care Group, Inc.
1801 West End Avenue, Suite 1100
Nashville, Tennessee 37203
Telecopy Number: (615) 327-3034
Attention: Chief Financial Officer
Copy to Counsel (which shall not constitute notice):
Alston & Bird LLP
One Atlantic Center
1201 W. Peachtree Street
Atlanta, Georgia 30309
Telecopy Number: (404) 881-7777
Attention: Steven L. Pottle, Esq.
(b) Any party hereto may change its address specified for
notices herein by designating a new address by notice in accordance with this
Section 11.1.
11.2 Expenses. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, provided, however, all legal, accounting and other fees
and expenses incurred by the Dialysis Companies concerning the transactions
contemplated hereby shall be paid by the Sellers prior to the Closing, or to the
extent not so paid, then paid by the Sellers after the Closing when due.
11.3 Further Assurances. Each party covenants that at any time, and
from time to time, after the Closing, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
parties to confirm or perfect or otherwise to carry out the intent and purposes
of this Agreement.
11.4 Waiver. Any failure on the part of any party to comply with any of
its obligations, agreements or conditions hereunder may be waived by any other
party to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
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11.5 Assignment. RCG may assign its rights under this Agreement to any
Affiliated entity, provided that RCG shall remain bound by all of its covenants
hereunder, but otherwise this Agreement shall not be assignable by any of the
parties hereto without the written consent of all other parties.
11.6 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, executors, administrators, successors and assigns. This
Agreement shall survive the Closing and not be merged therein.
11.7 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.8 Entire Agreement. This Agreement and the Exhibits, Schedules,
certificates and other documents delivered pursuant hereto or incorporated
herein by reference, contain and constitute the entire agreement among the
parties and supersede and cancel any prior agreements, representations,
warranties, or communications, whether oral or written, among the parties
relating to the transactions contemplated by this Agreement. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, but only by an agreement in writing signed by the party
against whom or which the enforcement of such change, waiver, discharge or
termination is sought.
11.9 Governing Law; Severability. This Agreement shall be governed by
and construed in accordance with the Laws of the State of Delaware, without
regard to any applicable conflicts of Laws. The provisions of this Agreement are
severable and the invalidity of one or more of the provisions herein shall not
have any effect upon the validity or enforceability of any other provision.
11.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.11 No Brokers. The Sellers and RCG each represent to the others that
no broker or finder has been employed in connection with the transactions
hereunder.
11.12 Schedules and Exhibits. All Schedules and Exhibits attached to
this Agreement are by reference made a part hereof.
-34-
<PAGE> 35
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
ATTEST: LAIDLAW INC.
- -------------------------- By: /s/ Ivan R. Cairns
Secretary ----------------------------
Title: Senior Vice-President
[CORPORATE SEAL]
ATTEST: STAT HEALTHCARE, INC.
- -------------------------- By: /s/ Ivan R. Cairns
Secretary -----------------------------
Title: Authorized Signing Officer
[CORPORATE SEAL]
ATTEST: RENAL CARE GROUP, INC.
- ------------------------- By: /s/ Ronald Hinds
Secretary ----------------
Title: EVP
[CORPORATE SEAL]
<PAGE> 36
SCHEDULES
<TABLE>
<S> <C>
2.1 Foreign Qualifications
2.4 Conflicting Agreements or Required Consents
2.6 Outstanding and Authorized Capitalization
2.7 Subsidiaries, Investments and Predecessors
2.8 Financial Statements
2.9 Changes Since December 31, 1996
2.10 Liabilities
2.11 Litigation and Claims
2.12 Violations of Law
2.13(a) Personal Property
2.13(b) Owned or Leased Real Property
2.13(e) Real Estate Taxes
2.13(f) Intangible Property Rights
2.14 Contracts and Commitments
2.15(a) Employees
2.15(c) Employment Matters
2.16 Employee Benefits
2.17 Insurance Policies, Exceptions and Claims
2.18 Environmental Matters
2.19.1 Accounts Receivable
2.19.2 Accounts Payable
2.20 Taxes, Claims, Extensions and Waivers
2.21.1 Licenses, Permits, Authorizations, Provider Agreements and
Regulatory Deficiencies
2.21.2 Regulatory Consents, Approvals or Notices
2.21.3 Regulatory Appeals, Adjustments, Challenges, Audits
2.22 Inspections and Investigations
2.23(a) Certain Relationships
2.23(b) Affiliated Physicians and Practices
4.8 RCG Documents
10 Dialysis Subsidiaries
EXHIBITS
1.6 Assumption Agreement
7.5 Registration Rights Agreement
</TABLE>
