SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB-A
Amendment Number 1
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from to
Commission file No. 0-26666
RAMSAY MANAGED CARE, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 72-1249464
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
One Poydras Plaza
639 Loyola Avenue, Suite 1725
New Orleans, Louisiana 70113
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (504) 585-0515
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
The number of shares of the Registrant's Common Stock outstanding at
May 10, 1996 follows:
Common Stock, par value $0.01 per share - 6,387,019 shares
Transitional Small Business Disclosure Format (Check one): Yes No X
<PAGE>
RAMSAY MANAGED CARE, INC.
FORM 10-QSB
INDEX
Page
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated balance sheets - March 31, 1996
and June 30, 1995 (unaudited) ..................................... 1
Consolidated statements of operations - three and nine months ended March
31, 1996 and 1995, (unaudited) .............................. 3
Consolidated statements of cash flows - nine months ended March 31,
1996 and 1995 (unaudited) ....... ................................. 4
Notes to consolidated financial statements -
March 31, 1996 (unaudited) ....................................... 6
*Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ......................... 9
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ............................. 15
SIGNATURES ............................................................ 16
*Not amended
<PAGE>
PART I. FINANCIAL INFORMATION
RAMSAY MANAGED CARE, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31 June 30
1996 1995
---------- ----------
Assets
Current assets:
Cash and cash equivalents................... $ 703,000 $ 4,314,000
Accounts receivable, less allowance for doubtful
accounts of $56,000 and $33,000 at March 31,
1996 and June 30, 1995, respectively....... 1,016,000 925,000
Other receivables............................ 302,000 67,000
Income tax receivable........................ 322,000 314,000
Deferred income taxes........................ ---- 142,000
Other current assets......................... 50,000 282,000
------------- ---------------
Total current assets............................ 2,393,000 6,044,000
Other assets:
Restricted cash.............................. 1,265,000 1,253,000
Goodwill and other intangible assets......... 9,633,000 10,217,000
Deferred preopening and organizational costs. 3,191,000 1,857,000
Other non-current assets..................... 67,000 281,000
----------- -------------
Total other assets.............................. 14,156,000 13,608,000
Property and equipment:
Building and improvements.................... 137,000 121,000
Equipment, furniture and fixtures............ 2,392,000 2,149,000
------------- ------------
2,529,000 2,270,000
Less accumulated depreciation................ 1,152,000 1,074,000
------------- ------------
Total property and equipment.................... 1,377,000 1,196,000
Total assets.................................. $ 17,926,000 $ 20,848,000
============ ===========
See notes to consolidated financial statements.
<PAGE>
RAMSAY MANAGED CARE, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31 June 30
1996 1995
----------- ---------
Liabilities and stockholders' equity
Current liabilities:
Accounts payable.............................$ 1,354,000 $ 2,384,000
Accrued salaries and wages................... 952,000 518,000
Hospital and medical claims payable.......... 1,449,000 922,000
Other accrued liabilities.................... 476,000 281,000
Due to related party......................... 1,948,000 1,441,000
Note payable................................. 400,000 ---
Current portion of long-term debt............ 2,115,000 978,000
-------------- -------------
Total current liabilities....................... 8,694,000 6,524,000
Deferred income taxes (benefits)................ 778,000 920,000
Long-term debt, less current portion:
Due to related party......................... 4,941,000 6,000,000
Other........................................ 861,000 1,820,000
Minority interest............................... 12,000 ----
Stockholders' equity:
ClassA convertible preferred stock, $.01 par
value - authorized 1,000,000 shares; issued
-0- shares at March 31, 1996 and -0- shares
at June 30, 1995........................... --- ---
Common stock, $.01 par value - authorized
20,000,000 shares; issued 6,387,019 shares at
March 31, 1996 and 6,370,909 shares at June
30, 1995..................................... 64,000 64,000
Additional paid-in capital...................... 7,423,000 7,393,000
Retained earnings (deficit)..................... (4,505,000) (1,512,000)
Note receivable to purchase common stock........ (342,000) (361,000)
-------------- ---------------
Total stockholders' equity...................... 2,640,000 5,584,000
----------- ---------------
Total liabilities and stockholders' equity....$ 17,926,000 $ 20,848,000
============ ============
See notes to consolidated financial statements.
<PAGE>
RAMSAY MANAGED CARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Quarter Ended Nine Months Ended
March 31 March 31 March 31 March 31
1996 1995 1996 1995
---------- ---------- ---------- ----------
Revenues:
Managed care revenue.... $5,541,000 $4,082,000 $15,141,000 $10,416,000
Clinical fee for service
and other revenue..... 577,000 308,000 1,483,000 929,000
---------- ---------- ----------- -----------
Total revenues............. 6,118,000 4,390,000 16,624,000 11,345,000
Operating expenses:
Contracted provider
services.............. 2,289,000 1,595,000 6,201,000 3,350,000
Salaries, wages and
benefits.............. 2,672,000 1,819,000 8,021,000 4,886,000
Management fees charged by
related companies..... 78,000 58,000 210,000 233,000
General and administrative
expenses.............. 1,329,000 780,000 3,556,000 1,957,000
Depreciation and
amortization.......... 362,000 270,000 1,048,000 780,000
Interest and other financing
charges............... 184,000 (31,000) 571,000 170,000
Total operating expenses... 6,914,000 4,491,000 19,607,000 11,376,000
--------- --------- ---------- -----------
Loss before income taxes and
minority interests...... (796,000) (101,000) (2,983,000) (31,000)
Minority interests......... 12,000 --- 12,000 ---
--------- --------- ---------- -----------
Loss before income taxes... (808,000) (101,000) (2,995,000) (31,000)
Income tax (benefit) expenses --- (13,000) --- 59,000
--------- --------- ---------- -----------
Net loss income............ $ (808,000) $ (88,000) $(2,995,000) $ (90,000)
========== ========== ========== ===========
Loss per common share...... $ (0.13) $ (0.02) $ (0.47) $ (0.03)
=========== =========== ============ ============
Weighted average number of
shares outstanding.... 6,384,934 4,160,002 6,375,550 3,340,626
=========== ========== ============ ==========
(Primary and fully diluted)
See notes to consolidated financial statements.
<PAGE>
RAMSAY MANAGED CARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
March 31 March 31
1996 1995
---------- ----------
Cash flows from operating activities
Net (loss) income..............................$ (2,995,000) $ (90,000)
Adjustments to reconcile net (loss) income to
net cash provided by operating activities:
Depreciation and amortization........ 1,048,000 780,000
Minority interest.................... 12,000 ---
Other................................ --- (30,000)
Cash flows from (increase) decrease in
operating assets:
Accounts receivable, net........ (91,000) (335,000)
Other receivables............... (235,000) 20,000
Deferred income taxes........... (115,000) (214,000)
Income tax receivable........... (8,000) 154,000
Other current assets............ 232,000 (253,000)
Other non-current assets........ 214,000 ---
Cash flow from increase (decrease) in
operating liabilities:
Accounts payable................ (1,030,000) 402,000
Accrued salaries, wages and other
liabilities.................. 434,000 383,000
Hospital and medical claims payable 527,000 475,000
Due to related party............ 507,000 ---
Other accrued liabilities....... 195,000 (319,000)
------------ ---------------
Total adjustments.............................. 1,690,000 1,063,000
------------ ---------------
Net cash (used) provided by operating activities (1,305,000) 973,000
------------ ---------------
Cash flows from investing activities
Expenditure for property and equipment......... (575,000) (457,000)
Deposit of funds in connection with establishment
of health maintenance organization.......... (12,000) (1,001,000)
Sale of partnership interest................... --- 325,000
Preopening and organizational costs............ (1,394,000) (1,143,000)
Expenditure on note receivable to purchase common
stock....................................... --- (149,000)
------------ ---------------
Net cash used in investing activities.......... (1,981,000) (2,425,000)
============ ============
See notes to consolidated financial statements.
<PAGE>
RAMSAY MANAGED CARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
(unaudited)
Nine Months Ended
March 31 March 31
1996 1995
---------- ----------
Cash flows from financing activities
Advances from (payments) to related party...... 507,000 1,201,000
Payment on debt................................ (881,000) (951,000)
Issuance of common stock....................... 30,000 3,320,000
Expenditure for costs related to distribution
and certain stock transactions.............. --- (1,349,000)
Receipt from note receivable to purchase common
stock....................................... 19,000 ---
Net cash (used) provided by financing activities (325,000) 2,221,000
----------- -----------
Net (decrease) increase in cash and cash
equivalents................................. (3,611,000) 769,000
Cash and cash equivalents at beginning of period 4,314,000 763,000
----------- -----------
Cash and cash equivalents at end of period.... $ 703,000 $ 1,532,000
=========== ===========
Supplemental disclosures of cash flow information
Cash paid (received)during the period for:
Interest................................... $ 324,000 $ 165,000
=========== ==========
Income taxes............................... $ (117,000) $ 110,000
=========== ==========
See notes to consolidated financial statements.
<PAGE>
RAMSAY MANAGED CARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
March 31, 1996
NOTE 1
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-B. Accordingly, they do not include all of the information and
notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation of the interim information are of a normal
recurring nature and have been included. The Company's business is seasonal in
nature and subject to general economic conditions and other factors.
Accordingly, operating results for the quarter and nine months ended March 31,
1996 are not necessarily indicative of the results that may be expected for the
year.
The Company was incorporated in the State of Delaware in July, 1993, and
commenced operations with the acquisition of Florida Psychiatric Management,
Inc. ("FPM") on October 31, 1993.
NOTE 2
The Company's long-term debt consists of the following:
March 31 June 30
1996 1995
-------------- ---------------
8% 6-year unsecured promissory note issued
to Ramsay Health Care, Inc. payable
quarterly, due September 30, 2000.. $ 6,000,000 $ 6,000,000
Variable rate (interest rate of 8.1875%
at March 31, 1996 and 8.7% at
June 30,1995), 3-year secured term
First Union National Bank of Florida,
Inc., payable quarterly, due January
31, 1998................................ 1,250,000 1,667,000
8.25% 3-year secured promissory note issued in
connection with the acquisition of HDI,
payable monthly, due June 30, 1997...... 417,000 667,000
7.25% 2-year unsecured notes due to former
shareholders of FPA, payable monthly,
due May 10, 1996........................ 13,000 71,000
Other notes and leases payable............... 237,000 393,000
-------------- ---------------
7,917,000 8,798,000
Less amounts due within one year............. 2,115,000 978,000
-------------- ---------------
$ 5,802,000 $ 7,820,000
========== ==========
<PAGE>
RAMSAY MANAGED CARE, INC.
The 8%, six-year, unsecured promissory note (the "Subordinated Promissory
Note") has been issued to Ramsay Health Care, Inc. ("RHCI"), which is the
Company's former parent corporation, and represents certain amounts due to RHCI
at October 25, 1994. The note is subordinated and junior to all indebtedness of
the Company. Interest only is payable through September 30, 1996, at which time
principal and interest will be payable in equal quarterly installments with the
final payment due on September 30, 2000.
As part of the acquisition of FPM in October 1993, the Company issued 7%
three year debentures, totalling $2,500,000. These debentures were prepaid with
the proceeds of a 3-year secured term loan on April 28, 1995. The variable rate,
3-year secured term loan by a bank is secured by the stock and assets of RMCI's
subsidiary, FPM Behavioral Health, Inc. and its subsidiaries ("FPM"). The term
loan requires, among other things, that FPM maintain various financial ratios
and a minimum level of stockholders' equity. The term loan is payable in
quarterly installments with the last payment due January 31, 1998.
Under the provisions of the term loan, FPM was required to maintain a fixed
charge coverage ratio of 1.25:1. At June 30, 1995, FPM's fixed charge coverage
ratio was less than the requirement. The bank agreed to reduce the fixed charge
coverage ratio requirement to 1.0:1 at June 30, 1995 and for the period through
June 30, 1996. Management believes FPM's operations in fiscal year 1996 will be
sufficient to maintain compliance with the reduced fixed charge coverage ratio
requirement. Accordingly, amounts due greater than one year payable under the
term loan agreement at March 31, 1996 are classified as long-term in the
accompanying balance sheet.
As part of the acquisition of certain assets of Human Dynamics Institute
("HDI"), the Company issued an 8.25% secured promissory note due June 30, 1997.
This note is secured by the stock of the Company's wholly-owned subsidiary,
FPMBH of Arizona, Inc., which was the acquiring entity of the assets of HDI. It
is payable in 36 equal monthly installments which began July 31, 1994 with the
final installment due June 30, 1997.
On April 26, 1996, the Company amended its Bank Credit Facilities. A
previous Revolving Credit Facility for up to $4,200,000 was replaced by a
$1,500,000 Revolving Master Line of Credit, and a $100,000 Term Loan.
The Master Revolver, which is payable on demand, will expire on October 30,
1996 and the $100,000 Term Loan, which will expire on April 5, 1999, is
repayable by 36 months of equal principal payments plus interest. At March 31,
1996, $647,000 was outstanding under the Master Revolver.
On April 24, 1995, RHCI distributed, in the form of a dividend, all of the
shares of the Company's common stock held by it to the holders of RHCI's common
stock, Class A convertible preferred stock and Class B convertible preferred
stock (the "Distribution").
In addition to the Subordinated Promissory Note and pursuant to a
Distribution Agreement between RMCI and RHCI which governed the Distribution,
RMCI agreed to pay amounts owed to RHCI as of April 24, 1995 (the "Distribution
Date") totalling approximately $1,100,000. Pursuant to the Distribution
Agreement, $600,000 of this amount was payable by RMCI on or before October 21,
1995 or on such other date and on such other terms and conditions as mutually
agreed to by RMCI and RHCI. RMCI paid $275,000 to RHCI on June 30, 1995 in
partial satisfaction of the amount due on October 21, 1995. The remaining
$325,000 together with the balance of the amount outstanding on the Distribution
Date, approximately $500,000, is payable on or before December 31, 1996,
together with interest at 7% per annum accruing from October 21, 1995, or on
such other date and on such other terms and conditions as shall be mutually
agreed to between RMCI and RHCI.
Subsequent to the Distribution Date, RHCI paid additional amounts incurred
by RMCI prior to the Distribution Date and provided certain administrative
services to RMCI pursuant to certain agreements entered into in connection with
the Distribution. RMCI will pay RHCI for these amounts, which at March 31, 1996
totalled approximately $2,000,000, on terms currently being discussed between
the parties.
NOTE 3
The provision for income taxes included in the consolidated statements of
income differs from the amounts computed by applying the normal statutory rates
to income before income taxes because such provision includes a) amounts
reportable as income for federal income tax purposes which are not income for
financial reporting purposes, b) amounts deducted for financial reporting
purposes that are not allowable deductions for federal and state income tax
purposes and c) amounts for state income taxes applicable to profitable
subsidiaries which do not utilize the operating losses generated by unprofitable
subsidiaries to offset taxable income. At March 31, 1996, the Company has
estimated operating loss carry forwards of approximately $2,426,000 for Federal
income tax purposes, which expire from 2005 to 2010 and approximately $3,737,000
for state income tax purposes, which expire from 2005 to 2010, and are available
to reduce future income taxes.
<PAGE>
RAMSAY MANAGED CARE, INC.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company is involved in the management of mental health services and
substance abuse care on behalf of self-insured employers, health maintenance
organizations, insurance companies and government agencies in different states.
The Company not only manages such care but also provides where appropriate the
delivery of care through integrated systems involving clinics and other
providers. These services range from benefit design, case management and claims
processing to fully capitated (at risk) mental health care treatment.
On April 24, 1995, Ramsay Health Care, Inc. distributed, in the form of
a dividend, all of the shares of the Company's common stock held by it to the
holders of Ramsay Health Care, Inc.'s common stock, class A convertible
preferred stock and class B convertible preferred stock. On that date, the
Company commenced a rights offering (the "Rights Offering") of 960,913 shares of
its common stock at a subscription price of $2.00 per share. All of the shares
of common stock offered in the Rights Offering were subscribed and paid for.
The Company's strategy is to expand its operations through
acquisitions, development and joint venture efforts, and currently operates in
13 states. It is expected that any future acquisitions will look to enhance the
volume of the Company's business in various regions of the country.
The Company currently holds licenses to operate HMO's in the states of
Louisiana, Mississippi, and Alabama. On March, 1996, the Company announced that
it had entered into an agreement to sell its HMO operations subsidiary , Apex
Healthcare, Inc. ("Apex"), to an investor group consisting of Berenson Minella &
Company, Wexford Management LLC and the senior management of Apex. The purchase
price for Apex is $4.5 million plus reimbursable items incurred from February
26, 1996 through to closing, subject to certain limitations. The closing of the
sale is subject to receipt of regulatory approvals, third party consents and
other customary closing conditions.
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, certain
items of the Company's consolidated statements of income as a percentage of the
Company's net revenues. The discussion following this table quantifies the
significant fluctuations in amounts reported in the Company's consolidated
statements of operations between periods.
<PAGE>
RAMSAY MANAGED CARE, INC.
Percentage of Net Revenue
Quarter Ended Nine Months Ended
March 31 March 31
1996 1995 1996 1995
---- ---- ---- ----
Net revenues..................... 100.0 % 100.0 % 100.0 % 100.0 %
----- ----- ----- -----
Operating expenses:
Contracted provider services........... 37.4 % 36.3 % 37.3 % 29.5 %
Salaries, wages and benefits........... 43.7 % 41.4 % 48.2 % 43.1 %
Other operating expenses............... 23.0 % 19.1 % 22.7 % 19.3 %
Depreciation and amortization.......... 5.9 % 6.2 % 6.3 % 6.9 %
Interest and other financing changes... 3.0 % (0.7)% 3.4 % 1.5 %
----- ----- ----- -----
Total operating expenses............... 113.0 % 102.3 % 117.9 % 100.3 %
----- ----- ----- -----
Income (loss) before income taxes...... (13.0)% (2.3)% (17.9)% (0.3)%
====== ====== ====== ======
Quarter ended March 31, 1996
Compared to Quarter ended March 31, 1995
Net revenues in the quarter ended March 31, 1996, ("the period") were
$6.1 million compared to $4.4 million in the comparable period of the prior
fiscal year. The increase in net revenues is attributable to new managed care
contracts obtained, in particular in West Virginia effective January 1, 1995 and
North Carolina effective July 1, 1995. Clinical and other clinical service
revenue increased as a result of new clinics opened during the period. In
addition, revenues increased due to HMO operations which began in Louisiana in
June 1995 and Mississippi in February 1996.
Contracted provider services increased to $2.3 million in the quarter
compared to $1.6 million in the prior year period as a result of the increased
number of members whose care is managed by the Company.
Other operating expenses comprising salaries and wages, and general and
administrative expenses increased from $2.7 million to $4.1 million reflecting
the expanded operations base of the Company's managed behavioral health division
("FPM") and the development during the period of the Company's HMO division
("Apex Healthcare"). Significant start-up losses were incurred during the period
in the HMO operations.
On March 6, 1996, the Company announced that it had entered into an
agreement to sell its HMO operations to an investor group consisting of Berenson
Minella & Company, Wexford Management LLC and the senior management of Apex for
$4.5 million plus reimbursable items incurred from February 26, 1996 through
closing, subject to certain limitations. The closing is subject to receipt of
regulatory approvals, third party consents and other customary closing
conditions.
The Company's loss before income taxes and minority interests of $796,000
compared to $101,000 for the prior comparable quarter.
Nine months ended March 31, 1996
Compared to Nine months ended March 31, 1995
Net revenues in the nine months ended March 31, 1996, ("the period") were
$16.6 million compared to $11.3 million in the comparable period of the prior
fiscal year. The increase in net revenues is attributable to new managed care
contracts obtained, in particular in West Virginia effective January 1, 1995 and
North Carolina effective July 1, 1995. Clinical and other clinical service
revenue increased as a result of new clinics opened during the period. In
addition, revenues increased due to HMO operations which began in Louisiana in
June 1995 and in Mississippi in February 1996.
Contracted provider services increased to $6.2 million in the period
compared to $3.35 million in the prior year period as a result of the increased
number of members whose care is managed by the Company.
Other operating expenses comprising salaries and wages, and general and
administrative expenses increased from $7.1 million to $11.8 million reflecting
the expanded operations base of the Company's managed behavioral health division
("FPM") and the development during the period of the Company's HMO division
("Apex Healthcare"). Significant start-up losses were incurred during the period
in the HMO division.
On March 6, 1996, the Company announced that it had entered into an
agreement to sell its HMO operations to an investor group consisting of Berenson
Minella & Company, Wexford Management LLC and the senior management of Apex for
$4.5 million plus reimbursable items incurred from February 26, 1996 through
closing, subject to certain limitations. The closing is subject to receipt of
regulatory approvals, third party consents and other customary closing
conditions.
The Company's loss before income taxes and minority interests of $2.99
million for the period occurred as a result of significant marketing and
development costs in the expansion of the Company's behavioral health managed
care services, and continuing start-up costs associated with the Company's HMO
division.
Liquidity and Capital Resources
General. In October 1994, the Company completed $3,320,000 of a $5,820,000
private placement (the "Equity Investment") of RMCI Common Stock (the "October
1994 Closing") to a corporate affiliate of Paul J. Ramsay, the Chairman of the
Company, and three officers of the Company. The Company received an additional
$2,500,000 in May 1995 pursuant to the second purchase of RMCI Common Stock by
that affiliate of Mr. Ramsay pursuant to the purchase agreement entered into in
October, 1994. In connection with the Rights Offering of 960,913 shares of RMCI
Common Stock at $2.00 per share which ended on June 8, 1995, the Company also
received net proceeds of approximately $823,000.
A portion of the funds received from the October 1994 Closing was used to
meet the $1,300,000 minimum statutory capital requirements relating to obtaining
the license in December 1994 for the operation of an HMO in Louisiana. In
addition, in May 1995, $200,000 was used to meet minimum statutory capital
requirements related to an application for an HMO license in the State of
Alabama. Further, in connection with the Company's grant of an HMO license in
the state of Mississippi, the Company required $250,000 to meet minimum
statutory capital requirements. Statutes and regulations applicable to the
operation of health maintenance organizations will require the Company to
maintain minimum levels of capital and net worth and will limit the ability of
the subsidiaries of the Company which will hold HMO licenses to pay dividends
(to the Company as such subsidiaries' sole stockholder) or make certain
investments. Except in connection with the Louisiana, Alabama and Mississippi
HMO applications described above, the Company cannot quantify the effect of
these statutory capital requirements. However, the imposition of these
requirements will increase the cost of conducting its health maintenance
organization businesses, thereby increasing the Company's cash requirements.
Pursuant to the Distribution Agreement between RMCI and RHCI, RMCI agreed
to pay amounts owed to RHCI as of the Distribution Date. RMCI will also pay RHCI
for services performed and amounts paid on behalf of RMCI subsequent to the
Distribution Date. The terms of repayment related to certain of the amounts owed
to RHCI at March 31, 1996 (excluding the Subordinated Promissory Note),
totalling approximately $2 million are currently being discussed between RMCI
and RHCI. See Note 2 on page 6.
The Company's sources of liquidity primarily will be its cash flow from
operations and the proceeds from a $1,500,000 Revolving Master Line of Credit
described below under "Financing". In addition, the Company received $2,500,000
in May 1995 in connection with the second and final closing under the Equity
Investment. Finally, in June 1995 the Company received additional cash (at $2.00
per share) upon the exercise of the 960,913 rights issued in connection with the
Rights Offering of approximately $823,000 (net of expenses). The Company expects
to use its sources of liquidity for working capital and other general corporate
purposes, including for costs discussed above, costs associated with the
establishment and development of health maintenance organization businesses and
related provider networks in the southeastern region of the United States and
for possible acquisitions of managed mental health care businesses. The Company
will consider the possible establishment and development of health maintenance
organization businesses and any possible acquisitions in light of its sources of
liquidity and cash requirements existing at the time that the development or
acquisition opportunity is presented. Accordingly, the Company anticipates that
it will allocate its resources in such a fashion so as to provide for then
existing development or acquisition costs prior to undertaking future expansion.
There can be no assurance that the Company will expand its operations by
development, acquisition or internal expansion or that any development effort,
acquisition or expansion will be profitable.
In addition, from time to time the Company engages in discussions
concerning possible acquisitions of businesses in the managed mental health care
industry. At the present time, the Company is not party to any letter of intent
or agreement to purchase any such businesses. There can be no assurance that the
Company will enter into any agreement to purchase or will purchase any such
businesses in the future.
Indebtedness. In connection with RMCI's acquisition of all the outstanding
shares of common stock of FPM in October 1993, FPM issued 7% Debentures due
October 31, 1996 (the "Debentures") in the aggregate principal amount of
$2,500,000 to the selling stockholders of FPM, including Martin Lazoritz, Robert
W. Pollack and I. Paul Mandelkern, officers of the Company or its subsidiaries.
Subsequently, on April 28, 1995 these Debentures were prepaid with the
$1,667,000 secured Term Loan described in "Financing" below.
In connection with RMCI's acquisition of HDI, through its wholly-owned
subsidiary FPMBH of Arizona, Inc., RMCI issued a promissory note in the
principal amount of $1,000,000 (the "HDI Note") to Phoenix South Community
Mental Health Centers ("Phoenix South"). Interest accrues on the HDI Note at a
fixed rate of 8.25% per annum and is payable monthly in arrears, together with
equal installments of principal, until the HDI Note matures on June 30, 1997.
The HDI Note is secured pursuant to a Stock Pledge Agreement dated June 30,
1994, pursuant to which Phoenix South has a first priority lien on all of the
common stock of FPMBH of Arizona, Inc. (f/k/a Ramsay HDI). Upon payment in full
of the HDI Note, the Bank will have a first priority lien on such common stock
under the Credit Facility. See "Financing" below.
In addition, in connection with the Distribution, RMCI issued to RHCI the
Subordinated Promissory Note in the principal amount of $6,000,000, evidencing
certain funds advanced to or on behalf of RMCI by RHCI, including in connection
with the acquisition of certain acquired businesses. Prior to its issuance, the
amounts evidenced by the Subordinated Promissory Note were recorded as
intercompany indebtedness between RMCI and RHCI. Interest accrues on the
Subordinated Promissory Note at an annual fixed rate of 8%, payable in quarterly
payments in arrears commencing June 30, 1995. The Subordinated Promissory Note
is payable as to interest only through September 30, 1996, and commencing on
September 30, 1996 principal and interest will be payable in equal quarterly
installments in arrears for a four-year period with the final payment due on
September 30, 2000.
The Subordinated Promissory Note is unsecured and is subordinated and
junior in right of payment to all indebtedness of RMCI and its subsidiaries
incurred in connection with the acquisition of HDI and future acquisitions of
other managed mental health care services businesses, and any other Senior
Indebtedness (as defined in the Subordinated Promissory Note), including
indebtedness arising under the Credit Facility discussed below and any other
bank indebtedness of RMCI or its subsidiaries. At the present time, there is no
Senior Indebtedness outstanding other than the HDI Note and amounts due under
the Credit Facility described below.
As of March 31, 1996, the aggregate amount of principal and interest on
the foregoing obligations payable during the fiscal year of the Company ending
June 30, 1996 and during each of the next four fiscal years of the Company will
be approximately $978,000, $2,331,000, $2,047,000, $1,491,000, and $1,491,000,
respectively. The foregoing amounts take into account the replacement of the
Debentures with the secured Term Loan, but do not take account of any repayments
on the Revolving Credit Facility.
The Company may be required to raise additional funds for working capital,
development and growth beyond its immediate plans and/or to remain competitive
with its larger competitors. Any additional equity financing may result in
substantial dilution to the stockholders of the Company. Except for the Credit
Facility, the Company has made no arrangements to obtain any additional debt
financing, and there can be no assurance that RMCI will be able to obtain any
required additional funds.
Financing. On April 26, 1996, the Company amended its Credit Facilities
with the First Union National Bank of Flroida (the "Bank"). A previous Revolving
Credit Facility for up $4,200,000 was replaced by a $1,500,000 Revolving Master
Line of Credit, and a $100,000 Term Loan.
The Master Revolver, which is payable on demand, will expire on October 30,
1996 and the $100,000 Term Loan, which expires on April 5, 1999, is repayable by
36 months of equal prinicpal payments plus interest. At March 31, 1996, $647,000
was outstanding under the Master Revolver. The Master Revolver bears interest at
the following rates, as applicable and selected by the Company from time to
time: (i) the Bank's LIBOR adjusted rate plus 3.0% or (ii) the Bank's Prime Rate
plus 0.75%. The $100,000 Term Loan bears interest at the Bank's Prime Rate plus
1.0%.
As part of the acquisition of FPM in October 1993, the Company issued 7%
three year debentures, totalling $2,500,000. These debentures were prepaid with
the proceeds of a 3 year secured term loan of the Bank on April 28, 1995. This
variable rate, 3 year secured term loan, the additional term loan of $100,000
(referred to above)and the Master Revolver are secured by a pledge of the stock
of RMCI's subsidiaries (other than the subsidiaries of RMCI conducting or which
will conduct health maintenance organization business), and the accounts
receivable of RMCI's (other than subsidiaries of RMCI conducting or which will
conduct health maintenance organization business).
The Master Revolver Credit Facility contains convenants customary for
facilities of this type, which include,without limitation, convenants which
contain limitations on the ability of the Company and its subsidiaries, subject
to certain exceptions, to (i) assume or incur liens, (ii) alter the nature of
their business or effect mergers, consolidations, or sales of assets, (iii)
incur indebtedness or make investments, or (iv) acquire businesses. In addition,
the Credit Facility will contain financial convenants related to senior debt to
cash flow, interest coverage, fixed charge coverage and minimum stockholders
equity. See Note 2 on page 7.
In connection with the April 26, 1996 ammendment of the Company's Credit
Facility, the Company agreed to repay $1,000,000 of the outstanding principal
due under the 3 year secured term loan of $1,667,000 from proceeds at the
closing of the sales of Apex.
<PAGE>
RAMSAY MANAGED CARE, INC.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits required to be filed as part of this Quarterly Report on Form
10-QSB are as follows:
Exhibit 2 Stock Purchase Agreement
Exhibit 11 Computation of Net Income (Loss) per Share
Exhibit 27 Financial Data Schedule
(b) Current Reports on Form 8-K
During the quarter ended March 31, 1996, the Company filed one Current
Report on Form 8-k with the Commission. The Company's Report dated March 6, 1996
was filed in connection with Item 5, "Other Events" of Form 8-k. No fiancial
statements were required to be filed with The Report.
<PAGE>
RAMSAY MANAGED CARE, INC.
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 thereupon duly authorized.
RAMSAY MANAGED CARE, INC.
Registrant
/s/ Warwick D. Syphers
_______________________
Warwick D. Syphers
Chief Financial Officer
Date: May 20, 1996
EXHIBIT 2
STOCK PURCHASE AGREEMENT
By and Among
APEX HEALTHCARE, INC.,
RAMSAY MANAGED CARE, INC.
and
APEX ACQUISITION CORP.
As of March 5, 1996
<PAGE>
TABLE OF CONTENTS
Page
SECTION I .. PURCHASE AND SALE OF THE SHARES ............................ 1
A . Purchase and Sale of the Shares ............................ 1
B . Purchase Price for Shares .................................. 2
C . Discharge of Indebtedness .................................. 3
SECTION II . REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER .......... 3
A . Organization; Qualification ................................ 3
B . Due Authorization .......................................... 4
C . No Conflicts ............................................... 4
D . Capital Stock .............................................. 5
E . Financial Statements ....................................... 5
F . Changes Since December 31, 1995 ............................ 5
G . Dividends; Discharge of Indebtedness ....................... 6
H . Properties ................................................. 7
I . Litigation ................................................. 8
J . Taxes ...................................................... 8
K . Permits .................................................... 9
L . Equipment .................................................. 9
M . Accounts Receivable ........................................ 9
N . Contracts; Other Obligations and Liabilities ............... 9
O . Enrollment Forms; Subscriber Agreements .................... 10
P . Directors, Officers and Employees .......................... 10
Q . ERISA and Related Matters .................................. 11
R . Labor ...................................................... 14
S . Compensation ............................................... 15
T . Insurance .................................................. 15
U . Restrictions on Business ................................... 15
V . Patents and Trademarks ..................................... 15
W . Power of Attorney .......................................... 16
X . Accounts Payable ........................................... 16
Y . Bank Accounts .............................................. 16
Z . Books and Records .......................................... 16
AA Brokers .................................................... 16
BB Medicare and Medicaid ...................................... 17
CC Health Plan Operations ..................................... 17
DD Provider Agreements ........................................ 18
EE Consents ................................................... 19
FF Broker Agreements .......................................... 19
GG Securities Laws ............................................ 20
<PAGE>
SECTION III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ............ 20
A . Organization; Qualification ................................ 20
B . Due Authorization .......................................... 21
C . No Conflicts ............................................... 21
D . Investment ................................................. 21
SECTION IV . ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER 22
A . Organization; Qualification ................................ 22
B . Due Authorization .......................................... 22
C . No Conflicts ............................................... 23
D . Ownership of Shares, etc ................................... 23
SECTION V .. COVENANTS OF THE COMPANY ................................... 23
A . Negative Covenants ......................................... 23
SECTION VI . COVENANTS OF THE PURCHASER ................................. 26
SECTION VII ADDITIONAL AGREEMENTS ...................................... 26
A . Appropriate Action; Consents; Filings ...................... 26
B . No Shop .................................................... 28
C . Noncompetition ............................................. 29
D . Loan ....................................................... 30
E . Section 338(h)(10) Election and Allocation of Purchase Price 30
F . Tax Matters ................................................ 31
G . Employment Agreements 32
SECTION VIII CLOSING .................................................... 32
A . Time and Place of Closing .................................. 32
B . Delivery of Shares ......................................... 32
SECTION IX . CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDER ........... 33
SECTION X .. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER ............. 34
SECTION XI . INDEMNIFICATION 38
A . Indemnification by the Shareholder ......................... 38
B . Indemnification by the Purchaser ........................... 38
C . Procedure for Indemnification 39
D . Limitation on Indemnification 40
E . Subrogation ................................................ 40
<PAGE>
SECTION XII MISCELLANEOUS .............................................. 41
A . Notices .................................................... 41
B . Survival of Representations ................................ 42
C . Entire Agreement; Modifications ............................ 42
D . Reasonable Efforts ......................................... 42
E . Expenses 42
F . Enforceability ............................................. 42
G . Termination ................................................ 43
H . Definitions ................................................ 44
I . Survival of Covenants and Agreements ....................... 46
J . Return of Documentation .................................... 47
K . Meaning of "Knowledge" ..................................... 47
L . Successors and Assigns ..................................... 47
M . Governing Law .............................................. 47
N . Counterparts ............................................... 47
O . Headings 47
P . Assignment 47
Q . Publicity .................................................. 47
EXHIBITS
Exhibit A Escrow Agreement
Exhibit B Loan Documents
Exhibit C Opinion of Counsel to the Purchaser
Exhibit D Opinion of Counsel to the Shareholder
Exhibit E Nonsolicitation Agreement
<PAGE>
STOCK PURCHASE AGREEMENT
AGREEMENT made as of the 5th day of March, 1996 by and among Apex
Healthcare, Inc., a Delaware corporation (the "Company"), Ramsay Managed Care,
Inc., a Delaware corporation (the "Shareholder") and the holder of all of the
issued and outstanding shares of the common stock, $.01 par value per share, of
the Company (the "Common Stock"), and Apex Acquisition Corp., a Delaware
corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company and its subsidiaries are engaged, among other things,
in the business of owning and operating health maintenance organizations and
related activities in the States of Louisiana and Mississippi (such activities
being hereinafter referred to as the "Business"); and propose to own and operate
a health maintenance organization and related activities in the State of
Alabama;
WHEREAS, the Shareholder is the holder of 1,000 shares of Common Stock,
which shares constitute all of the issued and outstanding shares of capital
stock of the Company (all such shares of Common Stock held by the Shareholder
being hereinafter referred to as the "Shares"); and
WHEREAS, the Purchaser desires to acquire from the Shareholder all of the
Shares and the Shareholder desires to sell all of the Shares to the Purchaser,
on the terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth, and intending to be legally bound, the
parties hereto hereby agree as follows: SECTION 41.
PURCHASE AND SALE OF THE SHARES
A. Purchase and Sale of the Shares . Subject to the terms and conditions of
this Agreement and on the basis of the representations, warranties, covenants
and agreements herein contained, at the Closing (as hereinafter defined), the
Shareholder agrees to sell, assign and convey to the Purchaser, and the
Purchaser agrees to purchase, acquire and accept from the Shareholder, all of
the Shares.
B. Purchase Price for Shares . The purchase price (the "Purchase Price")
for the Shares shall be the sum of (i) $4,500,000, plus (ii) the aggregate of
funds advanced by the Shareholder or its affiliates to the Company and its
subsidiaries for Operating Expenses (as hereinafter defined) incurred and paid
by the Company and its subsidiaries ("Shareholder Funding") during the period
(the "Period") from and including February 26, 1996 to and including the Closing
Date, such adjustment under this clause (ii) for Shareholder Funding not to
exceed an aggregate amount equal to $6,667 multiplied by the number of days
during the Period, plus (iii) Shareholder Funding in excess of an aggregate
amount equal to $8,333 multiplied by the number of days during the Period, plus
(iv) the aggregate of funds advanced in excess of $100,000 by the Shareholder or
its affiliates to the Company or its subsidiaries in payment for shares of
capital stock of, or for contribution to the stated capital of, Apex Healthcare
of Alabama, Inc. ("Apex-Alabama"), plus (v) the aggregate amount of capital
expenditures of the Company and its subsidiaries paid during the Period, plus
(vi) the amount of any increase in restricted regulatory reserves of the Company
and its subsidiaries for Louisiana and Mississippi funded by the Shareholder or
its affiliates after the date hereof, less (vii) amounts paid by the Company
during the Period for medical services provided to a Company Health Plan Member
prior to February 26, 1996. If Shareholder Funding exceeds the amount referred
to in clause (ii), Shareholder Funding shall be deemed to include interest
accruing during the Period on restricted regulatory reserves of the Company and
its subsidiaries, at a rate equal to six percent (6%) per annum. For purposes of
this Section I(B) "Operating Expenses" shall mean operating expenses as that
term is used in the unaudited income statement of the Company for the year ended
June 30, 1995 included in the Descriptive Memorandum delivered to the Purchaser,
except for depreciation and amortization, interest on intercompany indebtedness,
allocated overhead expenses of the Shareholder and any expenses of the
Shareholder or the Company associated with the sale transactions contemplated
under this Agreement. Operating Expenses shall include interest on the Loan (as
hereinafter defined). Expenses associated with obtaining the necessary approvals
for Apex-Alabama to operate a health maintenance organization and related
business in Alabama shall be treated as Operating Expenses or capital
expenditures of the Company or Apex-Alabama, as the case may be. At the Closing,
$220,000 of the Purchase Price shall be paid by wire transfer to the Escrow
Account as defined in the Escrow Agreement (the "Escrow Agreement") among the
Shareholder, the Company, the Purchaser and the Escrow Agent named therein, in
the form attached hereto as Exhibit A, for payment as provided in the Escrow
Agreement, the amount of principal and interest then owing on the Loan shall be
paid by offset of such amount against the Purchase Price, and the balance of the
Purchase Price shall be paid by wire transfer to the account or accounts
designated by the Shareholder.
C. Discharge of Indebtedness . Concurrent with and as part of the Closing,
upon payment by the Purchaser of the Purchase Price as provided in Section I(B),
the Shareholder shall cause all documents and instruments to be executed,
delivered and/or filed as the case may be in recordable form as appropriate,
necessary to fully release and discharge all intercompany debt and any other
indebtedness of the Company to the Shareholder or third parties for borrowed
money, other than capital leases, together with all liens, security interests,
pledges and other encumbrances securing the same. The Shareholder shall cause
the holder of any such indebtedness to third parties for borrowed money to
execute a written release and discharge of such indebtedness.
SECTION II.
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder hereby represents and warrants to the Purchaser as of the
date hereof that, except as set forth in the Company Disclosure Schedule:
A. Organization; Qualification . (i) The Company is duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
full corporate power and authority to own its properties and to conduct the
businesses in which it is now engaged. The Company is qualified to do business
and in good standing in each other jurisdiction where it is presently conducting
business wherein the failure so to qualify would have a material adverse effect
on the businesses or properties of the Company. The Company has full power,
authority and legal right and all necessary consents, approvals, permits,
licenses and authorizations to own its properties and to conduct the Business.
Complete and correct copies of the certificate of incorporation and by-laws of
the Company have been delivered to the Purchaser.
(ii) Set forth in the Company Disclosure Schedule is a complete and
correct list of all of the Company's subsidiaries, showing for each
subsidiary the jurisdiction of its incorporation, each jurisdiction where
it is qualified to do business, the number of shares of each class of its
capital stock authorized, the number of shares of each class issued and
outstanding and the number of shares of each class owned by the Company.
All of the securities of each of the subsidiaries owned by the Company are
free and clear of all liens, charges, pledges, security interests or other
encumbrances and claims, and all of the capital stock of such subsidiaries
owned by the Company have been duly authorized and validly issued and are
fully paid and non-assessable. Each of the Company's subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, has the corporate power and all
necessary authorizations to own all of its properties and assets and to
carry on its business and is duly qualified to do business and is in good
standing in each jurisdiction in which it owns property or conducts
business and in which its failure to be so qualified would materially
adversely affect the business, operations or financial condition of the
Company or any subsidiary. Each of the Company's subsidiaries has full
power, authority and legal right and all necessary consents, approvals,
permits, licenses and authorizations to own its properties and to conduct
its business as presently conducted. Complete and correct copies of the
certificate of incorporation and by-laws of each subsidiary of the Company
have been delivered to the Purchaser.
B. Due Authorization . The execution and delivery of this Agreement by the
Company, the performance by the Company of its covenants and agreements
hereunder and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action. This
Agreement constitutes the valid and legally binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting creditors' rights generally or by general principles of
equity.
C. No Conflicts . Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, violates any provision
of the certificate of incorporation or by-laws of the Company or any of its
subsidiaries or, subject to the receipt of the necessary governmental and
regulatory approvals as set forth in Schedule II(EE) of the Company Disclosure
Schedule, any statute, ordinance, regulation, order, judgment or decree of any
court or Governmental Authority, or conflicts with or will result in any breach
of any of the terms of or constitute a default under or result in the
termination of or the creation of any lien pursuant to the terms of any contract
or agreement to which the Company is a party or by which the Company or any of
its subsidiaries or any of the assets of the Company or any of its subsidiaries
is bound.
D. Capital Stock . The authorized capital stock of the Company consists of
1,000 shares of Common Stock, all of which shares are issued and outstanding.
All of the outstanding shares of Common Stock have been validly issued and are
fully paid and non-assessable. There are no subscriptions, warrants, options,
calls, debt instruments, commitments or agreements to which the Company is bound
relating to the issuance, sale or redemption of shares of the Common Stock or
other securities of the Company.
E. Financial Statements . The Company has delivered to the Purchaser
unaudited consolidated financial statements of the Company for the fiscal year
ended June 30, 1995, and for the six-month period ended December 31, 1995,
together with the related balance sheets and statements of income (the "Company
Financial Statements"). The Company Financial Statements are true and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles applied consistently throughout the periods
involved, other than the absence of notes to the Company Financial Statements.
The Company Financial Statements fully and fairly present the consolidated
financial condition of the Company as at the dates thereof and the consolidated
results of the operations of the Company for the periods indicated. The balance
sheets contained in the Company Financial Statements fairly reflect all assets
and liabilities and contingencies of the Company and its subsidiaries of the
types normally reflected in balance sheets as at the respective dates thereof.
For purposes of this Section II(E), an amount greater than $10,000 with respect
to any item shall be deemed material. A complete and correct copy of the Company
Financial Statements has been delivered to the Purchaser. The Company has not
from and including February 26, 1996 taken any action which would have violated
Section V or would have required the consent of the Purchaser pursuant to
Section V.
F. Changes Since December 31, 1995 . Subsequent to December 31, 1995, there
has not been any material (i) adverse change in the operations, operating
results, business or condition (financial or otherwise) of the Company or any of
its subsidiaries or in the results of the operations of the Company or any of
its subsidiaries, it being understood that changes resulting from continuing
losses in the normal course of business consistent with prior operating results
shall not be deemed a material adverse change; (ii) damage or destruction
(whether or not insured) affecting the properties or business operations of the
Company or any of its subsidiaries; (iii) labor dispute or threatened labor
dispute involving the employees of the Company or any of its subsidiaries; (iv)
adverse development with respect to any permits, licenses or other
authorizations now held by the Company or any of its subsidiaries necessary to
operate the Business; (v) actual or threatened disputes pertaining to the
Company or any of its subsidiaries with any major accounts or referral sources
of the Company or any of its subsidiaries, or actual or threatened loss of
business from any of the major accounts or referral sources of the Company or
any of its subsidiaries; (vi) changes in the methods or procedures for billing
or collection of customer accounts or recording of customer accounts receivable,
reserves for doubtful accounts or contractual allowances with respect to the
Company or any of its subsidiaries; (vii) transaction by the Company or the
Company's subsidiaries not in the ordinary course of business; (viii) sale or
transfer of any of the assets of, or any cancellation of any receivable or
claims by, the Company or the Company's subsidiaries, except sales or transfers
in the ordinary course of business of inventory or services or immaterial
amounts of other tangible personal property or services not required in the
Business; (ix) mortgage, pledge or subjection to lien, charge or encumbrance of
any kind of any asset of the Company or any subsidiary of the Company; (x)
amendment or termination of any contract or agreement to which the Company or
any subsidiary of the Company was a party as of December 31, 1995; (xi) increase
in, or commitment to increase, the compensation payable or to become payable to
any of the directors, partners, officers, employees or agents of the Company or
the Company's subsidiaries (in any capacity whatsoever); (xii) incurring or
assumption of, or taking any property subject to, any liability by the Company
or the Company's subsidiaries, except in the ordinary course of business; or
(xiii) acquisition or lease by the Company or the Company's subsidiaries of or
commitment to acquire or lease, any realty or any substantial item of furniture,
machinery or equipment. For purposes of this Section II(F), an amount greater
than $10,000 with respect to any item shall be deemed material.
G. Dividends; Discharge of Indebtedness . Subsequent to December 31, 1995,
the Company has not declared or paid any dividend or made any other distribution
in respect of the Common Stock, or, directly or indirectly, purchased, redeemed
or otherwise acquired or disposed of any shares of the Common Stock; and the
Company and its subsidiaries have not, except in the ordinary course of
business, paid or discharged any outstanding indebtedness. Subsequent to
December 31, 1995, the Company and its subsidiaries have paid all amounts due
and payable (i) of bank and other indebtedness, (ii) under leases and
contractual obligations and (iii) to any persons in the ordinary course of
business. Subsequent to December 31, 1995, the Company and its subsidiaries have
not (x) incurred any bank or other indebtedness for borrowed money, (y) entered
into any (A) loan agreements or (B) any material leases or material contracts,
obligations or arrangements for the payment of money or property to any person
other than in the ordinary course of business consistent with prior practice of
the Company or such subsidiary, as the case may be, or (z) permitted any
material liens or encumbrances to attach to their assets. For purposes of this
Section II(G), any lease, contract, obligation or arrangement requiring the
potential payment in one or more installments of greater than $10,000, or any
lien or encumbrance securing obligations of greater than $10,000 in the
aggregate, shall be deemed material.
H. Properties . (i) The Company or its subsidiaries lease or own all real
properties and lease or own all other properties and assets used in the
operation of the Business as currently conducted. The Company Disclosure
Schedule contains a description of such properties and assets and the
description is true and complete in all material respects. All such properties
and assets are in all material respects in good condition and repair, consistent
with their respective ages, and have been maintained and serviced in accordance
with normal practices of the Company and as necessary in the normal course of
business. Such owned properties or assets, and the Company's and its
subsidiaries' interests in any of such leased properties or assets, are not
subject to any liens, charges, encumbrances or security interests. None of such
properties or assets (or the uses to which they are put) fails to conform in any
material respect with any applicable law, ordinance or regulation. For purposes
of this Section II(H), any asset valued at greater than $5,000 (valued at the
greater of book value or fair market value) shall be deemed a material asset.
(ii) The Company and its subsidiaries have duly complied with, and to
the knowledge of the Shareholder, all the real estate now owned or leased
by the Company or any of its subsidiaries and the improvements thereon are
in compliance with, the provisions of all federal, state and local
environmental, health and safety laws, codes and ordinances and all rules
and regulations promulgated thereunder as to which a default or failure to
comply might result in a material adverse change in the condition
(financial or otherwise) of the Company or any of its subsidiaries or the
assets of the Company or any of its subsidiaries.
I. Litigation . There are no material claims, disputes, actions, suits,
proceedings or investigations currently filed, commenced or, to the knowledge of
the Shareholder, threatened against or affecting the Company or any of its
subsidiaries or any of the assets of the Company or any of its subsidiaries; no
such material claim, dispute, action, suit, proceeding or investigation has been
filed or commenced since the inception of the Company and the Shareholder has no
knowledge of any basis for a valid material claim. Neither the Company nor any
of its subsidiaries is in default under any, and each of the Company and each of
its subsidiaries has complied with all, statutes, ordinances, regulations,
orders, judgments and decrees of any court or other governmental agency or board
relating to the Company or any of its subsidiaries or the assets of the Company
or any of its subsidiaries as to which a default or failure to comply might
result in any material adverse change in the condition of the Company or any of
its subsidiaries or the assets of the Company or any of its subsidiaries, and
the Shareholder has no knowledge of any basis for any claim for compensation or
damages or otherwise arising out of any violation of the foregoing. For purposes
of this Section II(I), an amount greater than $5,000 with respect to any item
shall be deemed material.
J. Taxes . The Company and each of its subsidiaries have filed or caused to
be filed all tax returns, reports and declarations required to be filed by them
and have paid all taxes ("Taxes"), including, but not limited to, income,
franchise, sales, use, unemployment, withholding, social security and worker's
compensation taxes and estimated income and franchise tax payments, and
penalties and fines due and payable with respect to the periods covered by said
returns, reports or declarations or pursuant to any assessment received by them
in connection with such returns, reports or declarations. Since the inception of
the Company, the taxable income of the Company and its subsidiaries has been
included in the consolidated Federal income tax returns of the Shareholder to
the extent required to be so included under the Internal Revenue Code of 1986,
as amended (the "Code"). No deficiency in payment of any taxes for any period
has been asserted by any taxing authority which remains unsettled at the date
hereof and there is no basis for any additional claims or assessments for taxes.
The Company has made available to the Purchaser for its review complete and
correct copies of the income (or franchise) tax returns filed by it and each of
its subsidiaries.
K. Permits . The Company Disclosure Schedule contains an accurate, correct
and complete list of each material license, permit, certificate, approval,
franchise, registration, accreditation or authorization issued to the Company
and its subsidiaries or used in the Business, including the licenses of the
Company and/or the subsidiaries to operate health maintenance organizations
under the applicable HMO Act. Each of the Company and its subsidiaries has all
material permits, licenses, orders and approvals of all Federal, state or local
governmental or regulatory bodies required for it to conduct the Business as
presently conducted; all such material permits, licenses, orders and approvals
are in full force and effect and, to the knowledge of the Shareholder, no
suspension or cancellation of any of them is threatened; and as of the Closing
none of such permits, license, orders or approvals will be adversely affected by
the consummation of the transactions contemplated by this Agreement. The Company
and its subsidiaries have complied in all material respects with all statutes,
rules and regulations applicable to them, including, without limitation, those
concerned with medical devices, occupational safety, environmental protection
and employment practices, and the Company has not received notice of any
material violation of any such statutes, rules or regulations, corrected or not,
within the last three years.
L. Equipment . The Company Disclosure Schedule contains an accurate,
correct and complete list of all equipment owned or leased by the Company and
its subsidiaries. The equipment of the Company and its subsidiaries is in the
aggregate in all material respects usable in the ordinary course of business.
M. Accounts Receivable . The accounts receivable of the Company and its
subsidiaries are in their entirety bona fide accounts receivable, arising in the
ordinary course of business.
N. Contracts; Other Obligations and Liabilities . Set forth in the Company
Disclosure Schedule is a list and brief description of all (i) material
contracts, agreements, licenses, leases, arrangements (written or oral) and
other documents to which the Company or one or more of its subsidiaries is a
party or by which the Company or one or more of its subsidiaries or any of the
assets of the Company or one or more of its subsidiaries is bound (including, in
the case of loan agreements, a description of the amounts of any outstanding
borrowings thereunder and the collateral, if any, for such borrowings); (ii)
material obligations and liabilities of the Company or any of its subsidiaries
pursuant to uncompleted orders for the purchase of materials, supplies,
equipment and services for the requirements of the Business; and (iii) all
material contingent obligations and liabilities of the Company or any of its
subsidiaries, including, without limitation, any and all Medicare and Medicaid
rebate claims out of the ordinary course of business; all of the foregoing being
hereinafter referred to as the "Contracts." Neither the Company nor any of its
subsidiaries is in material default in the performance of any covenant or
condition under any Contract and no claim of such a material default has been
made. Originals or true, correct and complete copies of all the Contracts have
been provided to the Purchaser and its counsel as of the date hereof. For
purposes of this Section II(O), a Contract is deemed to be "material" if it
(together with any related Contracts) involves the potential payment to or by
the Company in one or more installments of an amount greater than $5,000 and is
not entered into in the ordinary course of business.
O. Enrollment Forms; Subscriber Agreements . The Shareholder has delivered
to the Purchaser copies of the Subscriber Agreements for the twenty (20) largest
subscriber groups by membership. All of the Enrollment Forms and Subscriber
Agreements are in writing and were entered into in the ordinary course of
business and constitute the valid and binding agreements of the parties thereto,
subject to enforcement of applicable bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles. The Company and each of its subsidiaries have
performed all services and obligations on their part to be performed or observed
under each Subscriber Agreement. All forms of Enrollment Forms and Subscriber
Agreements currently in use by the Company or its subsidiaries have been
approved by DOI and otherwise conform to the requirements of the applicable HMO
Act and other applicable laws in all material respects. No approval or consent
is required under any Enrollment Form or any Subscriber Agreement in connection
with the sale of the Shares to the Purchaser hereunder.
P. Directors, Officers and Employees . Set forth in the Company Disclosure
Schedule is a list of the directors and officers of the Company and of each
subsidiary of the Company and their respective positions and salaries as of the
date hereof and of the other employees of the Company and its subsidiaries and
their respective salaries as of the date hereof. Set forth in the Company
Disclosure Schedule is a list of all agreements (whether written or oral) with
regard to compensation or employment between the Shareholder, the Company or any
of the Company's subsidiaries and the Company's employees.
Q. ERISA and Related Matters .
(a) Except as set forth in the Company Disclosure Schedule, neither the
Company, nor any ERISA Affiliate of the Company, is a party to or participates
in or has any liability or contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee pension benefit
plan" or "multiemployer plan" (as those terms are respectively defined in
Sections 3(1), 3(2) and 3(37) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"));
(ii) any retirement or deferred compensation plan, incentive
compensation plan, stock plan, unemployment compensation plan, vacation
pay, severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangements for any
employee, director, consultant or agent, whether pursuant to contract or
arrangement, which does not constitute an "employee benefit plan" (as
defined in Section 3(3) of ERISA); or
(iii) any employment agreement not terminable on 30 days' or less
written notice, without further liability.
Any plan, arrangement or agreement required to be listed on the Company
Disclosure Schedule for which the Company or any ERISA Affiliate of the Company
may have any liability or contingent liability is sometimes hereinafter referred
to as a "Benefit Plan". For purposes of this Section, the term "ERISA Affiliate"
of the Company shall mean any subsidiary of the Company and any other trade or
business, whether or not incorporated, that together with the Company or with
any subsidiary of the Company would be deemed a "single employer" within the
meaning of Section 4001(b)(i) of ERISA.
(b) A true and correct copy of each of the Benefit Plans listed on the
Company Disclosure Schedule, and all contracts relating thereto, or to the
funding thereof, including, without limitation, all trust agreements, insurance
contracts, investment management agreements, subscription and participation
agreements and recordkeeping agreements, each as in effect on the date hereof,
has been delivered to the Purchaser. In the case of any Benefit Plan that is not
in written form, the Purchaser has been supplied with an accurate description of
such Benefit Plan as in effect on the date hereof. A true and correct copy of
the three most recent annual reports and accompanying schedules, the three most
recent actuarial reports, if any, and the most recent summary plan description
and Internal Revenue Service determination letter with respect to each such
Benefit Plan, to the extent applicable, and a current schedule of assets (and
the fair market value thereof assuming liquidation of any asset which is not
readily tradeable) held with respect to any funded Benefit Plan has been
supplied to the Purchaser by the Shareholder, and there have been no material
adverse changes in the financial condition in the respective Plans from that
stated in the annual reports and actuarial reports supplied.
(c) As to all Benefit Plans, except as otherwise specified on the Company
Disclosure Schedule or except as would not have a material adverse effect on the
Company or its subsidiaries:
(i) All Benefit Plans comply, and have been administered in form and
in operation in all material respects, with all requirements of law and
regulations applicable thereto, including without limitation the timely
filing of all annual reports required with respect to such Benefit Plans,
and neither the Shareholder, the Company nor any ERISA Affiliate of the
Company has received any notice from any governmental agency questioning or
challenging such compliance.
(ii) All Benefit Plans that are intended to be qualified under Section
401(a) of the Code comply in form and in operation with all applicable
requirements of Sections 401(a) and 501(a) of the Code; there have been no
amendments to such Benefit Plans which are not the subject of a
determination letter issued with respect thereto by the Internal Revenue
Service; and no event has occurred that will or could give rise to
disqualification of any such Benefit Plan under such sections or to any tax
under Section 511 of the Code; except that no representation is made as to
the satisfaction of any formal plan document qualification requirement with
respect to which the remedial amendment period set forth in Section 401(b)
of the Code, and any regulations, writings or other IRS releases
thereunder, has not expired.
(iii) None of the assets of any Benefit Plan are invested in employer
securities or employer real property, as those terms are defined in Section
407(d) of ERISA.
(iv) There have been no "prohibited transactions" (as described in
Section 406 of ERISA or Section 4975 of the Code) with respect to any
Benefit Plan and neither the Shareholder, the Company nor any ERISA
Affiliate of the Company has otherwise engaged in any prohibited
transactions.
(v) There have been no acts or omissions by the Shareholder, the
Company or any ERISA Affiliate of the Company that have given rise to or
may give rise to fines, penalties, taxes or related charges under Sections
502(c), 502(i) or 4071 of ERISA or Chapter 43 of the Code for which the
Company or any ERISA Affiliate of the Company may be liable.
(vi) None of the payments contemplated by the Benefit Plans would, in
the aggregate, constitute excess parachute payments as defined in Section
280G of the Code.
(vii) There are no actions, suits or claims (other than routine claims
for benefits) pending or threatened involving any Benefit Plans or the
assets of such Plans, and no facts exist which could give rise to any such
actions, suits or claims (other that routine claims for benefits).
(viii) No Benefit Plan is subject to Title IV of ERISA, or to the
requirements of Section 412 of the Code or Section 402 of ERISA, and no
Benefit Plan is a "multiemployer plan" (within the meaning of Section 3(37)
of ERISA).
(ix) All Benefit Plans that are group health plans have been operated
in compliance with the group health plan continuation coverage requirements
of Section 4980B of the Code and Section 601 of ERISA to the extent such
requirements are applicable, and no such group health plan is a
self-insured plan.
(x) Actuarially adequate accruals for all obligations or contingent
obligations under the Benefit Plans are reflected in the Company's
Financial Statements provided to the Purchaser and such obligations include
a pro rata amount of the contributions which would otherwise have been made
in accordance with past practices for the plan years which include the
Closing Date.
(xi) The execution and performance of the transactions contemplated by
this Agreement will not, in and of itself, result in any payment (whether
of severance pay or otherwise), acceleration, vesting, or increase in
benefits under any Benefit Plan.
R. Labor . There have been no material violations of any Federal, state or
local statutes, laws, ordinances, rules, regulations, orders or directives with
respect to the employment of individuals by, or the employment practices or work
conditions of, the Company or any of its subsidiaries, or the terms and
conditions of employment, wages and hours and, to the knowledge of the
Shareholder, no claims of such violations have been asserted. The Company and
its subsidiaries are not engaged in any unfair labor practice or other unlawful
employment practice and there are no charges of unfair labor practices or other
employee-related complaints pending or, to the knowledge of the Shareholder,
threatened against the Company or any of its subsidiaries before the National
Labor Relations Board, the Equal Employment Opportunity Commission, the
Occupational Safety and Health Review Commission, the Department of Labor or any
other Federal, state, local or other governmental authority. There is no strike,
picketing, slowdown or work stoppage or organizational attempt pending or, to
the knowledge of the Shareholder, threatened against or involving the Company or
any of its subsidiaries. No issue with respect to union representation is
pending or, to the knowledge of the Shareholder, threatened with respect to the
employees of the Company or any of its subsidiaries. No union or collective
bargaining unit or other labor organization has ever been certified or
recognized by the Company or any of its subsidiaries as the representative of
any of the employees of the Company or any of its subsidiaries.
S. Compensation . Subsequent to December 31, 1995, there have been no
increases in the compensation payable or to become payable to any of the
employees of the Company or any of its subsidiaries and there have been no
payments or provisions for any awards, bonuses, stock options, loans, profit
sharing, pension, retirement or welfare plans or similar or other disbursements
or arrangements for or on behalf of such employees (or related parties thereof),
in each case, other than in the ordinary course of business or as was required
from time to time by governmental legislation affecting wages. All bonuses
heretofore granted to employees of the Company and its subsidiaries have been
paid in full to such employees.
T. Insurance . Set forth in the Company Disclosure Schedule is an accurate
and complete list (including the name of the insurer, coverage, premium and
expiration date) of all binders, policies of fire, liability, professional
liability, workers compensation, vehicular, unemployment and other insurance,
self insurance programs and fidelity bonds (collectively, "Insurance")
maintained by or on behalf of the Company and its subsidiaries or in which the
Company and its subsidiaries, or any of them, are named insureds. All such
policies are in full force and effect and are of such types and amounts and for
risk, casualties and contingencies, as required by the applicable DOI. There are
no pending or asserted claims against any Insurance as to which any insurer has
denied liability and there are no claims under any Insurance which have been
disallowed or, to the knowledge of the Shareholder, improperly asserted. No
notice of cancellation or nonrenewal with respect to, or material increase of
premium for, any Insurance has been received by the Shareholder, the Company
and/or its subsidiaries. The Company Disclosure Schedule sets forth the claims
experience with respect to the Company and its subsidiaries (both insured and
self insured) from the inception of the Company.
U. Restrictions on Business . Neither the Company nor any of its
subsidiaries is restricted from conducting the Business as authorized by its
applicable licenses, in any location by agreement or court decree.
V. Patents and Trademarks . Set forth in the Company Disclosure Schedule is
a list and brief description of all of the patents, registered and common law
trademarks, service marks, tradenames, copyrights, licenses and other similar
rights of the Company and its subsidiaries and applications for each of the
foregoing. The Company or its subsidiaries, as applicable, owns all right, title
and interest in and to all such proprietary rights. The proprietary rights
listed are all such rights necessary to the conduct of the Business; no adverse
claims have been made and no dispute has arisen with respect to any of such
proprietary rights; and the operation of the Business and the use by the Company
or its subsidiaries of such proprietary rights do not involve infringement or
claimed infringement of any patent, trademark, service mark, tradename,
copyright, license or similar right.
W. Power of Attorney . Neither the Company nor any of its subsidiaries has
granted any power of attorney (revocable or irrevocable) to any person, firm or
corporation for any purpose whatsoever.
X. Accounts Payable . The accounts and notes payable and accrued expenses
are fully and fairly reflected in the Company Financial Statements, and the
accounts and notes payable and accrued expenses incurred by the Company and its
subsidiaries subsequent to December 31, 1995, are in all respects valid claims
that arose in the ordinary course of business. Since December 31, 1995, the
accounts and notes payable and accrued expenses of the Company and its
subsidiaries have been paid on a basis consistent with prior practice.
Y. Bank Accounts . Set forth in the Company Disclosure Schedule attached
hereto is a list of all bank accounts of the Company and its subsidiaries, and a
list of persons having power to sign on behalf of the Company and its
subsidiaries with respect to each such account.
Z. Books and Records . The books and records of the Company and its
subsidiaries are in all material respects complete and correct, have been
maintained in accordance with good business practices and accurately reflect the
basis for the financial position and results of operations of the Company and
its subsidiaries set forth in the Company Financial Statements. All of such
books and records have been made available for inspection by the Purchaser and
its representatives.
AA. Brokers . Other than Dean Witter Reynolds Inc., no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company or the Shareholder.
The Shareholder shall be exclusively liable for all payments owing to Dean
Witter Reynolds Inc. in connection with transactions contemplated by this
Agreement.
BB. Medicare and Medicaid . The Company and each of its subsidiaries have
complied in all material respects with all laws, rules and regulations of the
Medicare, Medicaid and other governmental healthcare programs relating to the
Company, any of its subsidiaries or the Business, and have filed all claims,
invoices, returns, cost reports and other forms, the use of which is required or
permitted by such programs, in the manner prescribed. All claims, returns,
invoices, cost reports and other forms filed by the Company or any of its
subsidiaries with Medicare, Medicaid or any other governmental health or
welfare-related entity since the inception of the Company are true, complete,
correct and accurate in all material respects. No deficiency (either
individually or in the aggregate) in any such claims, returns, invoices, cost
reports and other filings, including claims for over-payments or deficiencies
for late filings, has been asserted or, to the knowledge of the Shareholder,
threatened by any federal or state agency or instrumentality or other provider
reimbursement entities relating to Medicare or Medicaid claims or any other
third-party payor, and, to the Shareholder's knowledge, there is no basis for
any claims or requests for reimbursement of the Company or any of its
subsidiaries. Neither the Company nor any of its subsidiaries has been subject
to any audit relating to fraudulent Medicare procedures or practices nor is
there any inquiry or investigation pending or, to the knowledge of the
Shareholder, threatened against the Company or any of its subsidiaries with
respect to fraudulent Medicare procedures or practices. There is, to the
Shareholder's knowledge, no basis for any claim or request for recoupment or
reimbursement from the Company or any of its subsidiaries by, or for
reimbursement by the Company or any of its subsidiaries of, any federal or state
agency or instrumentality or other provider reimbursement entities relating to
Medicare or Medicaid claims.
CC. Health Plan Operations .
(a) Licensure. Each of the subsidiaries of the Company engaged in the
Business is (i) duly qualified and licensed as a health maintenance
organization under the applicable HMO Act and (ii) has all other licenses,
permits and authorizations necessary to operate as a health maintenance
organization in its respective state of operations.
(b) Compliance with Laws. Each of the Company and its subsidiaries
engaged in the Business is in material compliance with the applicable HMO
Act and insurance, health welfare and/or health care laws, as applicable.
Since the inception of the Company, neither the Company nor any of its
subsidiaries has received any citation, suspension, verification,
limitation, warning or similar matter issued by any applicable Governmental
Authority, including the applicable DOI, which if not resolved to such
Governmental Authority's satisfaction, could have a material adverse effect
on the Company or its subsidiaries. The Company Health Plans have been
submitted to and approved by the applicable DOI and otherwise comply with
the requirements of the applicable HMO Act and applicable insurance, health
welfare and/or health care laws in all material respects. The form of
Company Member Materials currently in use by the Company and the
subsidiaries in connection with the Company Health Plans has been submitted
to and approved by the applicable DOI and otherwise conforms to the
requirements of the applicable HMO Act and applicable insurance, health
welfare and/or health care laws.
(c) Area of Operations. The description of the Company Health Plan
Service Area contained in the Company Disclosure Schedule is an accurate,
correct and complete description of the geographic area in which the
Company and each of its subsidiaries are licensed to operate their
businesses as health maintenance organizations under the applicable HMO
Acts. The Company and its subsidiaries engaged in the Business are
otherwise authorized to operate as duly licensed health maintenance
organizations, without restriction, through the entirety of the applicable
Company Health Plan Service Area. There are no restrictions placed upon the
marketing activities of the Company and its subsidiaries in any part of the
applicable Company Health Plan Service Area except for such restrictions
which are placed on the industry in general.
(d) Listing of Members and Other Patients and Customers. Set forth in
the Company's Disclosure Schedule is an accurate, correct and complete list
of all Company Health Plan Members and patients or customers of the Company
and its subsidiaries who are not Company Health Plan Members.
(e) Operation of Medical Groups, Practices and Clinics. The Company
and its subsidiaries do not operate medical groups, practices or clinics
which provide medical services to licensed physician employers or
independent contractors and other licensed health professionals.
DD. Provider Agreements . The Company Disclosure Schedule sets forth an
accurate, correct and complete list of all persons and entities who are parties
to the Provider Agreements. The Company has delivered to the Purchaser copies of
the Provider Agreements for the twenty (20) largest hospital and physician
providers by revenue. All Provider Agreements (i) are in writing, (ii) were
entered into by the Company or its subsidiaries in the ordinary course of
business and (iii) constitute valid and binding agreements of the parties
thereto. All forms of the Provider Agreements which are currently in use by the
Company and the subsidiaries conform to the requirements of the applicable HMO
Act and any other applicable laws. No approval of the Provider Agreements by any
Governmental Authority is required by law. No approval or consent is required
under any Provider Agreement in connection with the sale of the Shares to the
Purchaser hereunder. No material Provider has given notice to the Shareholder,
the Company or any of the subsidiaries of such Provider's insolvency or of its
intention to file a petition in bankruptcy. To the knowledge of the Shareholder,
there are no circumstances, including the consummation of transactions
contemplated by this Agreement, which are likely to result in the termination,
cancellation or non-renewal of the Provider Agreement for, or the cessation of
business being transacted between the Company and its subsidiaries and a
provider who or which, during any month in 1995, rendered services to greater
than 5% of all Company Health Plan Members.
EE. Consents . The Company Disclosure Schedule sets forth a complete and
accurate list of all approvals, authorizations, consents, orders or other
actions or declarations, filings or registrations (collectively, "Consents")
with, any person, entity, party, court or Governmental Authority which are
required to be made or obtained to permit (i) the Shareholder to sell the Shares
to the Purchaser and to perform the Shareholder's obligations as provided under
this Agreement, (ii) the Shareholder, the Company and its subsidiaries to
execute, deliver and perform this Agreement and consummate the transactions
contemplated hereby, (iii) the change of ownership of control of the Company and
its subsidiaries, and (iv) the Company and its subsidiaries to have the
authority to continue to operate the Business following the change of control of
the Company and its subsidiaries. No other approval, authorization, consent,
order or other action of, or declaration, filing or registration with, any court
or Governmental Authority is required to be made or obtained by or on behalf of
the Shareholder, the Company and the subsidiaries for the Shareholder to sell
the Shares to the Purchaser as contemplated hereunder.
FF. Broker Agreements . The Company Disclosure Schedule sets forth an
accurate, correct and complete list of all persons and entities who are parties
to a Broker Agreement. The Shareholder has delivered to the Purchaser copies of
the Broker Agreements with the twenty (20) largest Brokers of the Company and
its subsidiaries by membership represented. All of the Broker Agreements are in
writing and were entered into in the ordinary course of business and constitute
the valid and binding agreements of the parties thereto. No past due amounts are
owing under any Broker Agreement and, to the knowledge of the Shareholder, each
broker has performed all services, commitments and obligations on its part to be
performed or observed under each Broker Agreement in conformity with all
applicable contractual agreements. All forms of the Broker Agreements which are
currently in use by the Company and its subsidiaries conform in all material
respects to the requirements of the applicable HMO Act and any other applicable
laws. No approval of the Broker Agreements by any Governmental Authority is
required by law. No consent or approval is required under any Broker Agreement
in connection with the sale of the Shares to the Purchaser hereunder.
GG. Securities Laws . The Shareholder and the Company have complied and
will comply with all applicable Federal and state securities law in connection
with the offer, issuance, transfer and sale of the Shares hereunder. Neither the
Shareholder nor the Company nor anyone authorized to act on their behalf has or
will sell, offer to sell or solicit offers to buy the Shares, or solicit offers
with respect thereto from, or enter into any preliminary conversations or
negotiations relating thereto with, any person, so as to bring the issuance and
sale of the Shares under the registration provisions of the Securities Act of
1933 (the "Securities Act") and applicable state securities laws.
SECTION III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Shareholder as of the
date hereof that, except as set forth in the Purchaser Disclosure Schedule:
A. Organization; Qualification . The Purchaser is duly organized, validly
existing and in good standing under the laws of its state of incorporation and
has full corporate power and authority to own its properties and to conduct the
businesses in which it is now engaged. The Purchaser is in good standing in each
other jurisdiction where it is presently conducting business wherein the failure
so to qualify would have a material adverse effect on the business or properties
of the Purchaser. The Purchaser has full power, authority and legal right and
all necessary consents, approvals, permits, licenses and authorizations to own
its properties and to conduct its businesses. Complete and correct copies of the
certificate of incorporation and by-laws of the Purchaser have been delivered to
the Shareholder.
B. Due Authorization . The execution and delivery of this Agreement by the
Purchaser, the performance by the Purchaser of its covenants and agreements
hereunder and the consummation by the Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary corporate action, and this
Agreement constitutes the valid and legally binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws affecting creditors' rights generally or by general principles of
equity.
C. No Conflicts . Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, violates any provision
of the certificate of incorporation or by-laws of the Purchaser or, subject to
receipt of the necessary governmental and regulatory approvals as set forth in
Schedule II(EE) of the Company Disclosure Schedule, any statute, ordinance,
regulation, order, judgment or decree of any court or Governmental Authority, or
conflicts with or will result in any breach of any of the terms of or constitute
a default under or result in the termination of or the creation of any lien
pursuant to the terms of any contract or agreement to which the Purchaser is a
party or by which the Purchaser or any of its assets is bound.
D. Investment . (i) The Purchaser understands that the Shareholder proposes
to deliver to the Purchaser the Shares without compliance with the registration
requirements of the Securities Act; that for such purpose the Shareholder will
rely upon the representations, warranties, covenants and agreements contained
herein; and that such non-compliance with registration is not permissible unless
such representations and warranties are correct and such covenants and
agreements performed.
(ii) The Shareholder understands that, under existing rules of the
Securities and Exchange Commission, the Purchaser may be unable to sell any
of the Shares except to the extent that such Shares may be sold (i)
pursuant to an effective registration statement covering such shares
pursuant to the Securities Act or (ii) in a bona fide private placement to
a purchaser who shall be subject to the same restrictions on any resale.
The Purchaser understands that the Shareholder is not under any obligation
to effect a registration of any of the Shares under the Securities Act.
(iii) The Purchaser is a sophisticated investor familiar with the type
of risks inherent in the acquisition of restricted securities such as the
Shares and the Purchaser's financial position is such that it can afford to
retain its Shares for an indefinite period of time without realizing any
direct or indirect cash return on its investment.
(iv) The Purchaser is acquiring the Shares for its own account and not
with a view to, or for sale in connection with, the distribution thereof
within the meaning of the Securities Act.
SECTION IV
ADDITIONAL REPRESENTATIONS AND
WARRANTIES OF THE SHAREHOLDER
The Shareholder hereby represents and warrants to the Purchaser as of the
date hereof that, except as set forth in the Shareholder Disclosure Schedule:
A. Organization; Qualification . The Shareholder is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to own its properties and to
conduct the businesses in which it is now engaged. The Shareholder is in good
standing in each other jurisdiction where it is presently conducting business
wherein the failure so to qualify would have a material adverse effect on the
business or properties of the Shareholder.
B. Due Authorization . The execution and delivery of this Agreement by the
Shareholder, the performance by the Shareholder of its covenants and agreements
hereunder and the consummation by the Shareholder of the transactions
contemplated hereby have been duly authorized by all necessary corporate action,
and this Agreement constitutes a valid and legally binding obligation of the
Shareholder, enforceable against the Shareholder in accordance with its terms.
C. No Conflicts . Neither the execution and delivery of this Agreement, nor
the consummation of the transactions contemplated hereby, violates the
certificate of incorporation or by-laws of the Shareholder or, subject to the
receipt of the necessary governmental and regulatory approvals as set forth in
Schedule II(EE) of the Company Disclosure Schedule, any statute, ordinance,
regulation, order, judgment or decree of any court or Governmental Authority
applicable to the Shareholder, or conflicts with or will result in any breach of
any of the terms of or constitute a default under or result in the termination
of or the creation of any lien pursuant to the terms of any contract or
agreement to which the Shareholder is a party or by which the Shareholder or any
of the assets of the Shareholder is bound.
D. Ownership of Shares, etc . The Shareholder owns and has good and
marketable title to the Shares, which Shares represent all of the issued and
outstanding shares of capital stock of the Company, free and clear of any lien,
encumbrance, charge, security interest or claim whatsoever (including any
restriction on the right to vote, sell or otherwise dispose of the Shares), and
the Shareholder has the right to transfer the Shares to the Purchaser and, upon
transfer of the Shares to the Purchaser hereunder, the Purchaser will acquire
good and marketable title to the Shares, free and clear of any lien,
encumbrance, charge, security interest or claim whatsoever.
SECTION 105.
COVENANTS OF THE COMPANY
A. Negative Covenants . The Company hereby covenants and agrees with the
Purchaser that, except as hereafter consented to in writing by the Purchaser or
as otherwise set forth in the Company Disclosure Schedule, from and after the
date of this Agreement and until the Closing, the Company shall not (and shall
cause each of its subsidiaries not to):
(i) Make a purchase, sale or lease in respect of the Business, or
introduce any method of management, accounting or operation in respect of
the Business, except in the ordinary course of business which in any event
does not involve the potential payment to or by the Company or any of its
subsidiaries in one or more installments of an amount greater than $5,000.
(ii) Make a capital expenditure or pay an operating expense in one or
more installments, in an amount greater than $5,000 and $7,500,
respectively, without obtaining the consent of Purchaser, which consent
shall not be unreasonably withheld or delayed; provided, however, that the
consent of Purchaser shall not be required for payment of salaries, wages
and payroll items or for payment of amounts due under existing Provider
Agreements, leases and other Contracts.
(iii) Fail to maintain, repair, service or preserve, or in any way
further encumber, its properties, other than inventory sold or used,
accounts receivable collected upon and supplies used, in each case in the
ordinary course of business, after the date hereof, for which, in the case
of inventory and supplies, replacements have been made consistent with
prior practice.
(iv) Make loans or advances or grant pay raises, bonuses or awards,
directly or indirectly, (a) to any officer or director of the Company or
any of its subsidiaries or (b) except as required under existing employee
agreements, to any other employee of the Company.
(v) Declare or pay any dividend or make any other distribution in
respect of the capital stock of the Company, or, directly or indirectly,
purchase, redeem or otherwise acquire or dispose of any shares of the
capital stock of the Company or, except in the ordinary course of business
(which in any event does not involve the payment by the Company of an
amount greater than $5,000), pay or discharge any outstanding indebtedness.
(vi) Fail to use its reasonable best efforts to (a) preserve the
present business organization of the Company and its subsidiaries intact;
(b) keep available the services of the present employees of the Company and
its subsidiaries; and (c) preserve present relationships with entities or
persons having business dealings with the Company and its subsidiaries.
(vii) Fail to maintain the books and records of the Company and its
subsidiaries in accordance with good business practices, on a basis
consistent with prior practice.
(viii) Fail to use its reasonable best efforts to comply in all
material respects with all statutes, ordinances, regulations, orders,
judgments and decrees of every court or governmental entity or agency
applicable to the Company and its subsidiaries and to the conduct of the
Business and perform all of its obligations with respect thereto without
default.
(ix) Fail to maintain and pay all premiums with respect to such
policies of insurance as are currently held in the name of the Company or
any of its subsidiaries.
(x) Make any change materially adverse to the Company or any of its
subsidiaries in the terms of any Contract or fail to perform any of its
obligations with respect thereto without default.
(xi) Enter into any contract, lease or other commitment, written or
oral, which in any event involves the potential payment to or by the
Company or any of its subsidiaries in one or more installments of an amount
greater than $5,000, without obtaining the consent of Purchaser, which
consent shall not be unreasonably withheld or delayed.
(xii) Fail to furnish to the Purchaser, its counsel, accountants and
authorized representatives, such financial, legal and other documents,
records and information relating to the Company and its subsidiaries and
the properties of the Company and its subsidiaries as the Purchaser, its
counsel, accountants and its authorized representatives may from time to
time reasonably request including in connection with the determination of
Shareholder Funding and other amounts affecting the determination of the
Purchase Price.
(xiii) Fail to file any tax returns required to be filed by or with
respect to the Company or any of its subsidiaries, fail to pay any Taxes
that become due, payable or otherwise owing by the Company or any of its
subsidiaries, or pay or determine any taxes pertaining to the Company or
any of its subsidiaries other than in accordance with the past practices of
both the Shareholder and the Company or other than in the ordinary course
of business.
(xiv) Change the management of the Company without the consent of the
Purchaser.
(xv) Fail to make available to the Purchaser the books of account,
records, tax returns, leases, contracts and other documents or agreements
material to the Business as the Purchaser, its counsel, accountants and its
authorized representatives may from time to time reasonably request.
(xvi) Fail to cooperate fully with the Purchaser, do all things
reasonably necessary to assist the Purchaser and use its reasonable best
efforts at its own expense to obtain all consents and approvals necessary
for the transfer of the Shares, including the furnishing of all financial
and other information reasonably required by the party whose consent or
approval is being sought.
(xvii) Issue any shares of Common Stock.
(xviii) Make any amendment to the Company's Certificate of
Incorporation or by-laws.
(xix) Agree to do any of the above.
SECTION VI
COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with the Shareholder that, except
as hereafter consented to in writing by the Shareholder, from and after the date
of this Agreement and until the Closing, the Purchaser shall not:
(i) Fail to furnish to the Shareholder, its counsel, accountants and
authorized representatives, such financial, legal and other documents, records
and information relating to the organization and financial condition of the
Purchaser and availability of cash for the payment of the Purchase Price by the
Purchaser as the Shareholder, its counsel, accountants and its authorized
representatives may from time to time reasonably request.
(ii) Fail to cooperate fully with the Shareholder and do all things
reasonably necessary to assist the Shareholder to obtain all consents and
approvals necessary for the transfer of the Shares, including the furnishing of
all financial and other information reasonably required by the party whose
consent or approval is being sought.
SECTION VII
ADDITIONAL AGREEMENTS
A. Appropriate Action; Consents; Filings . (a) The Shareholder, the Company
and the Purchaser shall use reasonable best efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things necessary
under applicable law or otherwise to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable, (ii)
obtain from any Governmental Authority any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by the
Purchaser or the Company or any of its subsidiaries in connection with the
authorization, execution and delivery of this Agreement and the consummation of
the transactions contemplated in this Agreement, (iii) make all necessary
notifications and filings, and thereafter make any other required submissions,
with respect to this Agreement and the transactions contemplated hereby required
under (A) the HMO Acts and (B) any other applicable law, and (iv) obtain a
complete and unconditional release from liability of, or consent to assignment
by, the Shareholder and/or Ramsay Health Care, Inc. ("RHCI"), as applicable,
under the Lease dated October 6, 1995 between the Shareholder and American
Business Credit Corporation ("ABC"), the Lease dated October 30, 1995 between
the Shareholder and ABC, the Birmingham Lease (as hereinafter defined), and the
Lease dated March 24, 1995, as supplemented, between RHCI and IBM Credit
Corporation (collectively, the "Affiliate Leases"), without any payment by the
Shareholder or RHCI; provided that, the Shareholder, the Purchaser and the
Company shall cooperate with each other in connection with the making of all
such filings, including providing copies of all such documents to the non-filing
party and its advisors prior to filing and, if requested, to accept all
reasonable additions, deletions or changes suggested in connection therewith.
The Shareholder, the Company and the Purchaser shall furnish to each other all
information required for any application or other filing to be made pursuant to
the rules and regulations of any applicable law in connection with the
transactions contemplated by this Agreement.
(b) (i) The Company and its subsidiaries and the Purchaser shall give any
notices to third parties, and use all reasonable efforts to obtain any third
party consents necessary to consummate the transactions contemplated in this
Agreement including those consents required to be disclosed in the Company
Disclosure Schedule or the Purchaser Disclosure Schedule, as the case may be.
(ii) In the event that either party shall fail to obtain any third party
consent described in subsection (b)(i) above, such party shall use all
reasonable efforts, and shall take any such actions reasonably requested by the
other party, to minimize any adverse effect upon the Shareholder, the Company
and the Purchaser, their respective subsidiaries, and their respective
businesses resulting, or which could reasonably be expected to result after the
Closing, from the failure to obtain such consent.
(c) From the date of this Agreement until the Closing, the Shareholder or
the Company shall promptly notify the Purchaser in writing of any pending or, to
the knowledge of the Shareholder, threatened, action, proceeding or
investigation by any Governmental Authority or any other person seeking to
restrain or prohibit the consummation of the transactions contemplated by this
Agreement or otherwise limit the right of the Purchaser to own or operate all or
any portion of the business or assets of the Company or its subsidiaries.
(d) From the date of this Agreement until the Closing, the Purchaser shall
promptly notify the Shareholder in writing of any pending or, to the knowledge
of the Purchaser, threatened action, proceeding or investigation by any
Governmental Authority or any other person seeking to restrain or prohibit the
consummation of the transactions contemplated by this Agreement or otherwise
limit the right of the Purchaser to own or operate all or any portion of the
business or assets of the Company or its subsidiaries.
B. No Shop . Unless or until this Agreement is terminated as provided in
Section XII(G), the Shareholder, the Company and its subsidiaries shall not, and
shall cause their respective directors, officers, agents, investment bankers,
financial advisers, attorneys or other representatives not to, directly or
indirectly, solicit or initiate any discussions or negotiations with,
participate in any negotiations with or provide any information to or otherwise
cooperate in any other way with, or facilitate or encourage any effort or
attempt by any person or entity concerning any sale of any or all of the Company
and its subsidiaries, including a sale of all or any portion of the Shares or of
the businesses of the Company and its subsidiaries, any merger or reorganization
involving the Company and its subsidiaries or any similar transaction involving
the Company and any of its subsidiaries (a "Competing Transaction").
Notwithstanding the foregoing, the parties may discuss any of the foregoing
matters (a) as required by any Contract to which the Company and/or its
subsidiaries or any party hereto is a party or is subject, including any listing
agreement with a national securities exchange or The Nasdaq Stock Market, Inc.,
(b) with any of the Company's or its subsidiaries' officers, directors,
employees, agents or representatives who must know such matters to facilitate
the consummation of the transactions contemplated hereby, (c) as required by any
law to which any party hereto is subject, (d) as required by the terms of this
Agreement, or (e) as otherwise agreed to in writing by the Shareholder and the
Purchaser. Nothing contained in this Section VII(B) shall prohibit the Board of
Directors of the Company from (i) furnishing information to, or entering into
discussions or negotiations with, any person or entity that makes an
unsolicited, bona fide expression of interest in acquiring the Company and its
subsidiaries pursuant to a merger, consolidation, tender offer, share exchange,
business combination, stock or asset purchase or other similar transaction if,
(A) the Board of Directors of the Company, after consultation with counsel,
determines in good faith that such action is required for the Board of Directors
of the Company to comply with its fiduciary duties to the Company's stockholders
under applicable law, (B) the Board of Directors of the Company has no reason to
believe that the expression of interest is not made in good faith, (C) promptly
after furnishing such information to, or entering into discussions or
negotiations with, such person or entity, the Company provides written notice to
the Purchaser to the effect that it is furnishing information to, or entering
into discussions or negotiations with, such person or entity.
C. Noncompetition . (i) In consideration of the consummation of the
transactions contemplated hereunder and the payment by the Purchaser of the
Purchase Price, for a period of twenty-four (24) months commencing on the
Closing Date, neither the Shareholder nor any of its subsidiaries will (x)
engage in the states of Alabama, Louisiana or Mississippi, whether as principal,
agent, consultant, partner, stockholder or other investor (other than an
investment of not more than (i) one percent (1%) of the stock or equity of any
corporation the capital stock of which is publicly traded or (ii) five percent
(5%) of the ownership interest of any limited partnership or other entity) in
the health maintenance organization business as conducted by the Company and its
subsidiaries on the Closing Date, or (y) solicit or entice or endeavor to
solicit or entice away from the Company or its subsidiaries any person who is a
director, officer or employee of the Company or its subsidiaries, either for its
own account or for any person, firm, corporation or other organization, whether
or not such person would commit any breach of his or her contract of employment
by reason of leaving the service of the Company or any of its subsidiaries.
(ii) In the event of a breach or threatened breach by the
Shareholder or any subsidiary of any of the provisions of clause (i) of this
Section VII(C), the Shareholder or such subsidiary hereby consents and agrees
that the Purchaser and the Company shall be entitled to an injunction or similar
equitable relief restraining the Shareholder or such subsidiary from committing
or continuing any such breach or threatened breach or granting specific
performance of any act required to be performed by the Shareholder or such
subsidiary under any of such provisions, without the necessity of showing any
actual damage or that money damages would not afford an adequate remedy and
without the necessity of posting any bond or other security.
D. Loan . The Purchaser agrees to make a loan (the "Loan") to the
Shareholder as described in this Section VII(D) at any time subsequent to the
date of this Agreement at the request of the Shareholder. The Loan shall be in
the principal amount of $400,000 and on the terms set forth in the Loan
Documents attached hereto collectively as Exhibit B. Within twenty-four (24)
hours of a request for the Loan by the Shareholder, the proceeds of the Loan
shall be delivered by wire transfer of immediately available funds to the
account or accounts designated by the Shareholder upon execution of the Loan
Documents by the Shareholder and the Company, as appropriate, and delivery
thereof and any other documents referred to therein to the Purchaser. The
Shareholder shall simultaneously deliver to the Purchaser evidence, reasonably
satisfactory to the Purchaser, of the deposit by Apex-Alabama of $100,000 with
AmSouth Bank, as Escrow Agent under the Escrow Agreement referred to in the Loan
Documents. The Shareholder shall reimburse the Purchaser in the amount of $8,000
for its nonaccountable expenses at the time the Loan is made.
E. Section 338(h)(10) Election and Allocation of Purchase Price . (a) The
Shareholder and the Purchaser agree to make a timely joint election under
Section 338(h)(10) of the Code (and any comparable election under state or local
tax law) with respect to the acquisition of the Shares by the Purchaser, if such
election is requested by the Purchaser. The Purchaser and the Shareholder shall
cooperate fully with each other in the making of such election. In particular,
and not by way of limitation, in order to effect such election, upon the request
of the Purchaser, the Shareholder shall jointly execute with the Purchaser all
necessary copies of Internal Revenue Service Form 8023 and all attachments
required to be filed therewith pursuant to applicable Treasury regulations.
(b) The Purchase Price shall be allocated in accordance with the
methodology set forth in the applicable treasury regulations promulgated under
Section 338(h)(10) of the Code. The parties shall fully cooperate to comply with
all substantive and procedural requirements of Section 338(h)(10) of the Code
and any regulations thereunder, and the allocation shall be adjusted, if and to
the extent necessary, to comply with the requirements of Section 338(h)(10) of
the Code. Neither the Purchaser nor the Shareholder will take, nor permit any
affiliated person or entity to take, for federal, state or local income tax
purposes, any position inconsistent with the election under Section 338(h)(10)
of the Code or, if applicable, such adjusted allocation.
(c) The Purchaser agrees that it will pay and be responsible for, and will
indemnify and save the Shareholder harmless from and against, any incremental
taxes (including but not limited to income, franchise, excise, sales and
transfer taxes) imposed on the Shareholder or any of the Company and its
subsidiaries by reason of a Section 338(h)(10) election. For purposes of the
foregoing sentence, incremental taxes shall mean the excess of (i) the aggregate
amount of taxes actually imposed on the Shareholder and the Company and its
subsidiaries in respect of or as a result of the purchase of the Shares, over
(ii) the aggregate amount of taxes that would have been imposed on the
Shareholder and the Company and its subsidiaries in respect of or as a result of
the purchase of the Shares, had the Shareholder sold the Shares and no Section
338(h)(10) election had been made.
F. Tax Matters . (i) All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees (including any penalties
and interest, but specifically excluding any effect on the income Taxes payable
by the Shareholder as a result of the sale of the Shares) (collectively,
"Transfer Taxes") incurred in connection with this Agreement shall be borne and
paid for equally by the Shareholder and the Purchaser when due, and the
Shareholder will, at its own expense, file all necessary Tax Returns and other
documentation with respect to all Transfer Taxes and fees, and, if required by
applicable law, the Purchaser will join in the execution of any such Tax Returns
and other documentation.
(ii) The Shareholder shall be responsible for the preparation and filing of
its consolidated federal income tax return for the taxable year that includes
the Closing Date, including the Company and its subsidiaries on a consolidated
basis for the period that ends at the close of the Closing Date, and shall be
responsible for the federal income taxes payable by or on behalf of the Company
and its subsidiaries for all periods to the Closing Date. The Purchaser shall be
responsible for the preparation and filing of all tax returns of the Company and
its subsidiaries for periods ending after the Closing Date, and shall be
responsible for the taxes payable by or on behalf of the Company and its
subsidiaries for all such periods.
G. Employment Agreements . The Purchaser and the Company , jointly and
severally, shall indemnify and hold harmless the Shareholder from and against
any and all Damages (as hereinafter defined) arising out of or relating to the
Employment Agreements, as amended, between the Company and each of Kenneth
Burkhardt, Sharon Thompson and Richard Harley, including obligations for salary
continuation, severance pay, bonus and benefits continuation under COBRA upon
any termination of employment under any such Employment Agreement, arising on or
after the Closing Date or resulting from the transactions contemplated hereby
except for those obligations pertaining to stock options issued pursuant to the
1994 Ramsay Managed Care, Inc. Stock Option Plan, which obligations shall be
performed by the Shareholder. The obligations of the parties under this Section
VII(G) shall survive the Closing and continue in effect until expiration of the
applicable statute of limitations period.
H. Affiliate Leases. In the event an unconditional release from liability
of the Shareholder and/or RHCI, as applicable, is not obtained with respect to
any Affiliate Lease, the Purchaser and the Company, jointly and severally, shall
indemnify and hold harmless the Shareholder and RHCI from and against any and
all Damages arising out of or relating to such Affiliate Lease arising on or
after the Closing Date. The obligations of the parties under this Section VII(H)
shall survive the Closing and continue in effect until thirty (30) days
following expiration of the applicable statute of limitations period for claims
under such Affiliate Lease.
SECTION VIII
CLOSING
A. Time and Place of Closing . The closing of the purchase and sale of the
Shares as set forth herein (the "Closing") shall be held at the office of Haythe
& Curley at 237 Park Avenue, New York, New York within ninety (90) days after
the date hereof and in any event within five (5) business days of the date on
which all of the conditions set forth herein to each party's obligations
hereunder have been satisfied or waived (the "Closing Date").
B. Delivery of Shares . Delivery of the Shares shall be made by the
Shareholder to the Purchaser at the Closing by delivering one or more
certificates in negotiable form representing the Shares, each such certificate
to be accompanied by any requisite documentary or stock transfer taxes.
SECTION IX
CONDITIONS TO THE OBLIGATIONS OF THE SHAREHOLDER
The obligations of the Shareholder to consummate the transactions
contemplated by this Agreement at the Closing shall be subject to the following
conditions precedent, any or all of which may be waived by the Shareholder in
its sole discretion, and each of which the Purchaser hereby agrees to use its
reasonable best efforts to satisfy at or prior to the Closing:
(i) Accuracy of Representations and Warranties. The representations and
warranties made by the Purchaser herein shall be true and correct as of the
Closing Date in all material respects with the same force and effect as though
such representations and warranties had been made as of the Closing Date;
provided, however, that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date. On the Closing Date, the Purchaser shall deliver to the Shareholder a
certificate of its chief executive officer dated the Closing Date to such
effect. The Purchaser shall have duly complied with and performed in all
material respects all of its obligations under this Agreement to be complied
with and performed on or before the Closing Date.
(ii) Certificate of Secretary. The Shareholder shall have received
certificates of the Secretary or Assistant Secretary of the Purchaser certifying
(a) that attached thereto is a true and complete copy of the resolutions adopted
by the Board of Directors of the Purchaser authorizing the execution, delivery
and performance of this Agreement, and the consummation of the transactions
contemplated hereby, and (b) as to the incumbency and genuineness of the
signature of each officer of the Purchaser executing this Agreement and any
other documents delivered in connection herewith.
(iii) Good Standing Certificates. The Shareholder shall have received a
good standing certificate for the Purchaser, issued by the Secretary of State or
other appropriate official of its state of incorporation.
(iv) Opinion of Counsel. The Shareholder shall have received an opinion of
Greenberg, Traurig, Hoffman, Lipoff, Rosen & Quentel, counsel to the Purchaser,
delivered to the Shareholder pursuant to the instructions of the Purchaser,
dated the Effective Date, covering the matters set forth in Exhibit C attached
hereto.
(v) Certificate of Officers of the Company. The Shareholder shall have
received certificates from each of Parveez Oliaii, Kenneth Burkhart, Sharon
Thompson and Richard Harley, dated the Closing Date to the effect that to each
such person's knowledge the representations and warranties made by the
Shareholder in Sections II and IV hereof are true and correct as of the Closing
Date in all material respects with the same force and effect as though such
representations and warranties had been made as of the Closing Date.
SECTION X
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
The obligations of the Purchaser to consummate the transactions
contemplated by this Agreement at the Closing shall be subject to the following
conditions precedent, any or all of which may be waived by the Purchaser in its
sole discretion, and each of which the Company and the Shareholder hereby agree
to use their respective reasonable best efforts to satisfy at or prior to the
Closing:
(i) Accuracy of Representations and Warranties. The representations and
warranties made by the Shareholder herein shall be true and correct as of the
Closing Date in all material respects with the same force and effect as though
such representations and warranties had been made as of the Closing Date;
provided, however, that those representations and warranties which address
matters only as of a particular date shall remain true and correct as of such
date; and, provided, further that as used in such representations and warranties
made as of the Closing Date, the term "Business" shall include the health
maintenance organization and related activities in the State of Alabama and the
term "subsidiaries" shall include Apex-Alabama. On the Closing Date, the
Shareholder shall deliver to the Purchaser a certificate of its Chief Executive
Officer dated the Closing Date to such effect. The Shareholder and the Company
shall have complied with and performed in all material respects all of its
obligations under this Agreement to be complied with and performed on or before
the Closing Date.
(ii) Certificate of Secretary. The Purchaser shall have received a
certificate of the Secretary or Assistant Secretary of the Shareholder
certifying (a) that attached thereto is a true and complete copy of the
resolutions adopted by the Board of Directors of the Shareholder authorizing the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby, and (b) as to the incumbency and
genuineness of the signature of each officer of the Shareholder executing this
Agreement and any documents delivered in connection herewith.
(iii) Good Standing Certificates. The Purchaser shall have received good
standing certificates for the Shareholder, the Company and each of the Company's
subsidiaries, issued by the Secretary of State or other appropriate official of
their respective states of incorporation.
(iv) Opinion of Counsel. The Purchaser shall have received an opinion of
Haythe & Curley, counsel for the Shareholder and the Company, and, at the
Shareholder's option, one or more local counsel, delivered to the Purchaser
pursuant to the instructions of the Shareholder and the Company, dated the
Closing Date, covering the matters set forth in Exhibit D attached hereto.
(v) Resignations. The Company shall have delivered to the Purchaser
resignations of all of the directors of the Company and each of its
subsidiaries, such resignations to be effective as of the Closing.
(vi) Release. As of the Closing, the Shareholder shall have delivered a
release and discharge of the Company and its subsidiaries from any and all
claims or liabilities which the Shareholder has or may have against the Company
or its subsidiaries, other than any claims or liabilities arising under this
Agreement.
(vii) Performance. The Shareholder, the Company and the subsidiaries, as
the case may be, shall have performed and complied in all material respects with
all covenants and agreements required by this Agreement to be performed or
complied with by each of them prior to or at the Closing.
(viii) Regulatory Actions. There shall be no regulatory action threatened
or pending which could result in suspension or revocation of or restriction upon
any licenses and permits held by the Company and the subsidiaries.
(ix) Approval and Consents. The Shareholder and the Company and its
subsidiaries shall have obtained the applicable DOI's and any applicable
Governmental Authority's approval and/or consent under the applicable HMO Act
and any other applicable law or regulations, of the sale of Shares to the
Purchaser as provided under this Agreement. All other permits, approvals,
consents or authorizations of any Governmental Authority necessary for the
consummation of the transactions contemplated by this Agreement shall have been
obtained by the appropriate party. Any other consent or other approval to the
transactions contemplated by this Agreement which the Purchaser, the Shareholder
and the Company and its subsidiaries are required to obtain shall have been
obtained and any necessary consent under any Contract shall have been obtained
in writing.
(x) No Changes in the Business of the Company and the subsidiaries. The
Company and its subsidiaries shall have been operated in accordance with past
practice and not in violation of Section V of this Agreement and there shall
have not otherwise occurred any material adverse change in the operations,
operating results, business, or condition (financial or otherwise) of the
Company and its subsidiaries, the respective assets or the Shares from the date
hereof until the Closing Date, it being understood that changes resulting from
continuing losses in the normal cause of business consistent with prior
operating results shall not be deemed a material adverse change. The Shareholder
and the Company shall deliver to the Purchaser year to date income statements
and balance sheets which fully and fairly reflect the financial condition of the
Company through the end of the last month immediately preceding the Closing
Date, which income statements and balance sheets shall confirm that there have
not been any material adverse changes in the financial condition of the Company.
Such financial statements will be true and correct in all material respects and
will be prepared in accordance with generally accepted accounting principles
applied consistently throughout, other than the absence of notes to such
financial statements.
(xi) No Litigation. No suit, action, claim or proceeding before any court
or governmental body will be pending or threatened wherein an unfavorable
judgment, decree or order would: (a) prevent the carrying out of this Agreement
or any of the material transactions contemplated hereby; (b) declare unlawful or
enjoin the transactions contemplated by this Agreement; or (c) cause such
transactions to be rescinded.
(xii) Modification of Contracts. The contract between Apex Healthcare of
Louisiana, Inc. and Ramsay Health Care, Inc. ("RHCI"), which currently expires
December 31, 1996, pursuant to which health care services are provided to
certain employees of RHCI shall have been satisfactorily amended to extend the
term thereof to December 31, 1997 and to provide for termination only for Cause.
(xii) No Change in Regulatory Reserves. The regulatory reserves required to
be maintained under the laws of Mississippi and Louisiana, presently in the
amounts of $250,000 and $1,000,000, respectively, will continue to be held in
the current form of investment thereof and in such amounts (or in any greater
amounts required under regulations, laws, orders or similar rules) in the name
of the Company or one or more of its subsidiaries at Closing.
(xiv) Outstanding Tax Obligations. Before Closing, Shareholder shall have
filed all federal, state and local tax returns for the Company and the Company's
subsidiaries required to be filed by them as of the Closing and have paid in
full or made adequate provision for the payment of all taxes, interest,
penalties, assessments, or deficiencies, if any, for all taxable years ending on
or before the date of Closing, including, without limitation, those shown to be
due and payable by the Company or the Company's subsidiaries on such returns.
(xv) Birmingham Office Lease. At or before Closing, Shareholder shall have
secured the written consent of Taylor and Mathis, Inc., as brokers for
Metropolitan Life Insurance Company (the "Birmingham Landlord"), to the
assignment to the Company of that certain lease by and between Shareholder and
the Birmingham Landlord, dated January 5, 1995, for the office space currently
occupied by the Company at 104 Inverness Center Parkway, Suite 230, Birmingham,
AL 35242.
(xvi) New Orleans Office Lease. At or before Closing, Shareholder shall
have secured the written consent of One Poydras Plaza Venture (the "New Orleans
Landlord") to that certain Rent Sharing Agreement entered into by and between
the Company and Ramsay Health Care, Inc. ("RHCI"), or, in the alternative, a
direct lease between the Company and the New Orleans Landlord for the offices
occupied by the Company in the space leased by RHCI under that certain lease by
and between RHCI and the New Orleans Landlord.
(xvii) Alabama License. Apex-Alabama shall have received all licenses,
approvals, consents and certificates required under the Alabama HMO Act in order
to operate a health maintenance organization in the State of Alabama.
(xviii) Subsidiary Shares. At the Closing, the Shareholder shall cause the
holders of shares of capital stock of any subsidiary of the Company not owned by
the Company to transfer such shares to such person or persons as shall be
designated by the Purchaser.
(xix) Nonsolicitation Agreement. At or before the Closing, Paul J. Ramsay
shall have delivered to the Purchaser the Nonsolicitation Agreement attached
hereto as Exhibit E.
SECTION XI
INDEMNIFICATION
A. Indemnification by the Shareholder . The Shareholder shall indemnify and
hold harmless the Purchaser and the Company from and against any and all losses,
claims, assessments, demands, damages, liabilities, obligations, costs and/or
expenses whatsoever (hereinafter referred to collectively as the "Purchaser's
Damages"), including, without limitation, Purchaser's Counsel Expenses (as
hereinafter defined), sustained or incurred by the Purchaser or the Company as a
result of or arising from (i) the breach of any of the obligations, covenants or
provisions of, or the inaccuracy of any of the representations or warranties
made by, the Shareholder or the Company herein and (ii) claims for medical
malpractice, if and to the extent attributable to medical services provided to a
Company Health Plan Member prior to the Closing Date, but in the case of each
such claim only to the extent that the Purchaser's Damages shall exceed the
applicable deductible under the Company's insurance coverage for such claim and
(iii) amounts paid by the Company subsequent to the Closing for medical services
provided to a Company Health Plan Member prior to February 26, 1996. For
purposes hereof "Purchaser's Counsel Expenses" shall mean reasonable fees and
disbursements of counsel howsoever sustained or incurred by the Purchaser or the
Company, including, without limitation, in any action or proceeding between the
Purchaser or the Company (on the one hand) and the Shareholder (on the other
hand) or in any action or proceeding between the Purchaser or the Company and
any third party.
B. Indemnification by the Purchaser . The Purchaser shall indemnify and
hold harmless the Shareholder from and against any and all losses, claims,
assessments, demands, damages, liabilities, obligations, costs and/or expenses
whatsoever (hereinafter referred to as the "Shareholder's Damages"; the
Shareholder's Damages and the Purchaser's Damages are sometimes referred to
herein as the "Damages"), including, without limitation, Shareholder's Counsel
Expenses (as hereinafter defined), sustained or incurred by the Shareholder as a
result of or arising from the breach of any of the obligations, covenants or
provisions of, or the inaccuracy of any of the representations or warranties
made by, the Purchaser herein. For purposes hereof "Shareholder's Counsel
Expenses" shall mean reasonable fees and disbursements of counsel howsoever
sustained or incurred by the Shareholder, including, without limitation, in any
action or proceeding between the Shareholder (on the one hand) and the Purchaser
or the Company (on the other hand) or in any action or proceeding between the
Shareholder and any third party.
C. Procedure for Indemnification . In the event that any party hereto shall
incur (or reasonably anticipate that it may incur in the case of third party
claims) any Damages in respect of which indemnity may be sought by such party
pursuant to this Section IX or any other provision of this Agreement, the party
indemnified hereunder (the "Indemnitee") shall notify the party providing
indemnification (the "Indemnitor") promptly; provided, however, that any delay
or failure to notify any Indemnitor of any claim shall not relieve it from any
liability except to the extent that the Indemnitor demonstrates that the defense
of such action is prejudiced by such delay or failure to notify. No claim for
indemnification shall be made by the Indemnitee unless and until the aggregate
Damages for all claims for indemnification then or previously made by the
Indemnitee shall have exceeded $25,000, at which time the Indemnitee shall be
entitled to indemnification for all Damages, without regard to such $25,000
threshold. In the case of third party claims, the Indemnitor shall, within 15
days of receipt of notice of such claim, notify the Indemnitee of its intention
to assume the defense of such claim. If the Indemnitor shall assume the defense
of the claim, the Indemnitor shall have the right and obligation (i) to conduct
any proceedings or negotiations in connection therewith and necessary or
appropriate to defend the Indemnitee, (ii) to take all other required steps or
proceedings to settle or defend any such claims and (iii) to employ counsel to
contest any such claim or liability in the name of the Indemnitee or otherwise.
If defendants in any action include the Indemnitee and the Indemnitor, and the
Indemnitee shall have been advised by its counsel that there may be legal
defenses available to the Indemnitee which are different from or in addition to
those available to the Indemnitor, the Indemnitee shall have the right to employ
its own counsel in such action, and, in such event, the fees and expenses of
such counsel shall be borne by the Indemnitor. If the Indemnitor shall not
assume the defense of any such claim or litigation resulting therefrom, the
Indemnitee may defend against any such claim or litigation in an appropriate
manner; provided, however, that the Indemnitee may not settle any such claim or
litigation without the prior written consent of the Indemnitor, which may not be
unreasonably withheld if the Indemnitor receives a full release as a part of
such settlement. Payment of Damages shall be made within 10 days of a final
determination of a claim.
A final determination of a disputed claim shall be (i) a judgment of any
court determining the validity of a disputed claim, if no appeal is pending from
such judgment or if the time to appeal therefrom has elapsed, (ii) an award of
any arbitration determining the validity of such disputed claim, if there is not
pending any motion to set aside such award or if the time within which to move
to set such award aside has elapsed, (iii) a written termination of the dispute
with respect to such claim signed by all of the parties thereto or their
attorneys, (iv) a written acknowledgement of the Indemnitor that it no longer
disputes the validity of such claim, or (v) such other evidence of final
determination of a disputed claim as shall be reasonably acceptable to the
parties.
D. Limitation on Indemnification . The aggregate liability of the
Shareholder for breaches of the representations, warranties, covenants and
agreements of the Shareholder and the Company in this Agreement and the
aggregate liability of the Purchaser for breaches of its representations,
warranties, covenants and agreements in this Agreement shall, except as provided
in the next sentence, in each case be limited to the amount of the Purchase
Price. The aggregate liability of the Shareholder for breaches of the
representations, warranties, covenants and agreements of the Shareholder and the
Company set forth in Section II(O), (CC)(d), (DD) and (FF) shall be limited to
$220,000.
E. Subrogation . The Shareholder shall be subrogated to all rights of the
Purchaser or the Company with respect to any claim for which the Purchaser or
the Company has been indemnified by the Shareholder hereunder, provided, that,
the Purchaser shall not be required to make any claim against the Company or any
other party in order to pursue any claim against the Shareholder and provided
further, that the Shareholder shall not be entitled to any indemnification or
right of contribution from the Company or have any other rights against the
Company in connection with any claim made hereunder.
SECTION XII
MISCELLANEOUS
A. Notices . All notices, requests or instructions hereunder shall be in
writing and delivered personally, by recognized overnight courier or by
registered or certified mail, postage prepaid, return receipt requested, as
follows:
(1) If to the Shareholder (or before the Closing, the Company):
Ramsay Managed Care, Inc.
One Poydras Plaza
639 Loyola Avenue
Suite 1725
New Orleans, Louisiana 70113
Attention: Mr. Warwick D. Syphers
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: John J. Butler, Esq.
(2) If to the Purchaser (or after the Closing, the Company):
Apex Acquisition Corp.
c/o Wexford Management LLC
411 West Putnam Avenue
Greenwich, Connecticut 06830
Attention: Ms. Karen M. Ryugo
with copies to:
Greenberg, Traurig, Hoffman,
Lipoff, Rosen & Quentel
153 East 53rd Street
35th Floor
New York, New York 10022
Attention: Judith D. Fryer, Esq.
and
Berenson Minella & Company
667 Madison Avenue
New York, New York 10021
Attention: Mr. Deven J. Parekh
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered or sent by recognized overnight courier, and three business
days after the date of mailing, if mailed.
B. Survival of Representations . Each representation and warranty of the
parties hereto herein contained shall survive the Closing until the later of (i)
expiration of a period of six (6) months from the Closing Date or (ii) December
31, 1996, except that any representation or warranty relating to title to the
Shares, capitalization of the Company or any tax or ERISA matters will survive
until thirty (30) days following the expiration of the relevant statute of
limitations period applicable to any claims which may be asserted against the
Shareholder and/or the Company, in each case, regardless of any investigation
which may have been made by or on behalf of the Purchaser; and provided further
that nothing in the foregoing shall be deemed to diminish any Indemnitor's
indemnification obligations to an Indemnitee respecting any claim for Damages
under Section XI hereof for which notice to the Indemnitor has been given
pursuant to Section XI hereof prior to the end of such applicable period.
C. Entire Agreement; Modifications . This Agreement and the documents
referred to herein contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby; this Agreement shall only
become binding and effective upon execution and delivery hereof by all of the
parties hereto, and no modification hereof shall be effective unless in writing
and signed by the party against which it is sought to be enforced.
D. Reasonable Efforts . Each of the parties hereto shall use such party's
reasonable efforts to take such actions as may be necessary or reasonably
requested by the other parties hereto to carry out and consummate the
transactions contemplated by this Agreement.
E. Expenses . Each of the parties hereto shall bear its own expenses in
connection with this Agreement and the transactions contemplated hereby.
F. Enforceability . Should any provision of this Agreement be held by a
court or arbitration panel of competent jurisdiction to be enforceable only if
modified, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and treated as though
originally set forth in this Agreement. The parties further agree that any such
court or arbitration panel is expressly authorized to modify any such
unenforceable provision of this Agreement in lieu of severing such unenforceable
provision from this Agreement in its entirety, whether by rewriting the
offending provision, deleting any or all of the offending provision, adding
additional language to this Agreement, or by making such other modifications as
it deems warranted to carry out the intent and agreement of the parties as
embodied herein to the maximum extent permitted by law. The parties expressly
agree that this Agreement as modified by the court or arbitration panel shall be
binding upon and enforceable against each of them. In any event, should one or
more of the provisions of this Agreement be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions hereof, and if such provision or
provisions are not modified as provided above, this Agreement shall be construed
as if such invalid, illegal or unenforceable provisions had never been set forth
herein.
G. Termination .
(i) Either party may terminate this Agreement in the event of a
material breach by the other party. The non-breaching party shall give the
breaching party written notice of the material breach. The notice of breach
must be sent within five (5) days after the non-breaching party learns of
the events giving rise to the breach. If the breaching party does not cure
the breach within fifteen (15) days after receipt of the written notice of
breach, the non-breaching party may terminate this Agreement by sending
written notice to the breaching party, which notice shall be effective on
the date given. The notice of termination must be sent within three (3)
days after the cure period has ended.
(ii) Either party may terminate this Agreement upon five (5) days'
written notice to the other party in the event of the liquidation,
insolvency, bankruptcy or similar proceeding of such other party or upon
any sequestration by any governmental authority of all of the assets of
such other party.
(iii) This Agreement may be terminated in whole or in part at any time
by the mutual written agreement of the parties.
(iv) The Shareholder may terminate this Agreement by written notice to
the Purchaser if, in the exercise of good faith judgment as to its
fiduciary duties to its stockholders as imposed by applicable law and,
after consultation with counsel, the Board of Directors of the Shareholder
determines that such termination is required by reason of any Competing
Transaction.
(v) This Agreement shall automatically terminate in the event that the
Closing shall not have occurred within ninety (90) days following the date
of this Agreement.
(vi) In the case of a termination of this Agreement pursuant to
clauses (i) or (ii) of this Section XII(G), such termination shall be
without prejudice to any remedies which any party may have under applicable
law for breach of contract. In the case of a termination of this Agreement
pursuant to clause (iv) of this Agreement, the Shareholder and the Company
shall be obligated to pay to the Purchaser $375,000. The obligations of the
Purchaser under this Section XII(G)(vi) and under Section XII(J) of this
Agreement shall survive any termination of this Agreement.
H. Definitions . The following capitalized terms used throughout this
Agreement shall have the meaning set forth respectively after each such term.
(a) Broker Agreement. Any contract, agreement, license,
certificate, instrument or other similar document and any oral binding
obligations, writing, contract or agreement entered into between the
Company and/or its subsidiaries and any agent, broker or solicitor,
pursuant to which such agent, broker or solicitor arranges, on behalf
of the Company and/or its subsidiaries, for sales of health plan
benefits to individuals, employers or employer groups.
(b) Company Health Plans. Any or all of the health care benefit
plans offered, sold or maintained by the Company and its subsidiaries
which involve the Company's and/or its subsidiaries' arrangements,
delivery, provision and/or payment of health care services or benefits
to Company Health Plan Members.
(c) Company Health Plan Member(s). Any individual who is enrolled
as a member or family dependent in a Company Health Plan.
(d) Company Health Plan Service Area. A geographic area more
particularly described in the Company Disclosure Schedule in which the
Company and its subsidiaries are duly licensed and designed to provide
or arrange for the provision of health care services for Company
Health Plan Members.
(e) Company Member Materials. Any and all marketing and
advertising materials, schedules of benefits, evidences of coverage,
disclosure brochures or other member materials used by the Company and
its subsidiaries or disseminated to any Company Health Plan Member.
(f) DOI. Department of Insurance for the States of Alabama,
Louisiana or Mississippi.
(g) Enrollment Forms. All properly completed applications and
other documents which are submitted by Company Health Plan Members for
enrollment in a Company Health Plan and which have been accepted by
the Company and/or its subsidiaries.
(h) Cause. For purposes of Section X(xii) hereof, "Cause" with
respect to a party to an agreement shall mean any of the following:
(i) the filing by such party of a voluntary petition in
bankruptcy, or such party's being subject to an involuntary
petition in bankruptcy which is not set aside within one hundred
twenty (120) days of its filing;
(ii) the revocation of such party's governmental
authorizations to perform its services set forth in such
agreement;
(iii) the conviction of such party of a felony; or
(iv) a material breach by such party of such agreement.
(i) Governmental Authority. The federal government, any state,
county, municipal, local or foreign government and any governmental
agency, bureau, commission, authority or body having jurisdiction over
the Company's or any subsidiary's business.
(j) HMO Acts. The Mississippi Health Maintenance Organization,
Preferred Provider Organization and other Prepaid Health Benefit Plans
Protection Act, 1995 Miss. Laws Ch. 613 (S.B. 2669); the Louisiana
Health Maintenance Organization Act, La. St. 22:2001 et seq., and
relevant Louisiana Insurance Code provisions; Alabama Statutes Title
27, Chapter 21A; relevant provisions of the insurance codes or similar
statutes in the States of Alabama, Louisiana and Mississippi;
applicable health welfare and/or health care laws in the States of
Alabama, Louisiana and Mississippi; and the rules and regulations
promulgated thereunder by the respective Governmental Authorities,
including DOI, as amended from time to time.
(k) Provider Agreements. All contracts, agreements, licenses,
options, instruments or other similar documents, and any oral binding
obligations, rights, contracts or agreements with Providers for the
arrangement or provision of medical, health or related services to
Company Health Plan Members.
(l) Providers. Any and all physicians, physician or medical
groups, independent practice associations (IPAs), preferred provider
organizations (PPOs), specialist physicians, pharmacies and
pharmacists, mental health professionals, other medical or health
professionals, hospitals, skilled nursing facilities, extended care
facilities, other health care or services facilities, home health
agencies or alcoholism or drug abuse centers, duly licensed and
qualified to practice and prescribe or administer medications in the
States of Alabama, Louisiana and Mississippi, as applicable, who or
which have contracted with the Company and its subsidiaries to provide
health care or related services to Company Health Plan Members.
(m) Subscriber Agreements. All contracts, agreements, instruments
or other similar documents and any oral binding obligations, rights,
contracts or agreements for the arrangement or provision of health
care services which the Company and/or the subsidiaries have entered
into with (i) eligible individuals who subscribe to a Company Health
Plan, or (ii) certain employers on behalf of their eligible employees
who subscribe to a Company Health Plan.
I. Survival of Covenants and Agreements . Except as expressly provided in
this Agreement, all covenants and agreements made hereunder or pursuant hereto
or in connection with the transactions contemplated hereby shall not terminate
but shall survive the Closing and be
<PAGE>
enforceable until the later of (i) six (6) months after the Closing Date or (ii)
December 31, 1996, at which time they shall expire.
J. Return of Documentation . Following a termination in accordance with
Section XII(G), the Purchaser shall return all agreements, documents, contracts,
instruments and other books and records of the Company and its subsidiaries
provided by the Shareholder, the Company or any of their respective subsidiaries
or representatives to the Purchaser or any representatives of the Purchaser in
connection with the transactions contemplated by this Agreement.
K. Meaning of "Knowledge" . For the purposes of this Agreement "knowledge"
of a party means the actual knowledge of current executive officers of that
party or of current executive officers of any entity in which that party owns
all of the outstanding voting securities, as such knowledge has been obtained in
the normal conduct of the business of such party.
L. Successors and Assigns . This Agreement shall be binding upon and inure
to the benefit of the successors and permitted assigns of the Shareholder, the
Company and the Purchaser, respectively.
M. Governing Law . This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to any
conflict of laws principles which would apply the laws of any other
jurisdiction.
N. Counterparts . This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
O. Headings . The headings in this Agreement are for convenience of
reference only, and shall not be deemed to alter the meaning or interpretation
of any of the terms hereof.
P. Assignment . Until the first filing of an application to a Governmental
Authority for approval of the transactions contemplated by this Agreement, the
Purchaser may assign all of its rights and obligations under this Agreement to
any other entity in which Berenson, Minella & Company and Wexford Management LLC
together hold a majority of the equity interest.
Q. Publicity . The parties agree to cooperate with each other in releasing
information concerning this Agreement and the transactions contemplated hereby.
No such information shall be released publicly without the prior written
agreement of the parties hereto, which agreement shall not be unreasonably
withheld or delayed. Nothing in this section shall be construed to prohibit
either party from furnishing any information to any governmental, regulatory or
administrative agency or authority within the time periods required by
applicable statute or regulation.
* * *
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the date first above written.
APEX HEALTHCARE, INC.
By/s/ Warwick D. Syphers
RAMSAY MANAGED CARE, INC.
By/s/ Warwick D. Syphers
APEX ACQUISITION CORP.
By/s/ Deven J. Parekh
EXHIBIT 11
RAMSAY MANAGED CARE, INC.
COMPUTATION OF INCOME (LOSS) PER SHARE
(unaudited)
Nine Months Ended
March 31 March 31
1996 1995
-------- --------
PRIMARY
Weighted average common shares outstanding.. 6,375,550 3,340,626
--------- ----------
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES............... 6,375,550 3,340,626
========= ==========
Income (Loss) Available to Common
Shareholders......................... $ (2,995,000) $ (90,000)
=========== ==========
INCOME (LOSS) PER SHARE................ $(0.47) $(0.03)
===== =====
FULLY DILUTED
Weighted average common shares
outstanding.............................. 6,375,550 3,340,626
--------- ----------
TOTAL COMMON AND DILUTIVE
COMMON EQUIVALENT SHARES............... 6,375,550 3,340,626
========= ==========
Income (Loss) Available to Common
Shareholders........................ $ (2,995,000) $ (90,000)
========== =======
INCOME (LOSS) PER SHARE................ $(0.47) $(0.03)
===== =====
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 703,000
<SECURITIES> 0
<RECEIVABLES> 1,696,000
<ALLOWANCES> 56,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,393,000
<PP&E> 2,529,000
<DEPRECIATION> 1,152,000
<TOTAL-ASSETS> 17,926,000
<CURRENT-LIABILITIES> 8,694,000
<BONDS> 0
0
0
<COMMON> 64,000
<OTHER-SE> 2,576,000
<TOTAL-LIABILITY-AND-EQUITY> 17,926,000
<SALES> 0
<TOTAL-REVENUES> 16,624,000
<CGS> 0
<TOTAL-COSTS> 14,222,000
<OTHER-EXPENSES> 4,826,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 571,000
<INCOME-PRETAX> (2,995,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,995,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,995,000)
<EPS-PRIMARY> $(0.47)
<EPS-DILUTED> $(0.47)
</TABLE>
