UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): August 1, 2005
REHABCARE GROUP, INC.
(Exact name of Company as specified in its charter)
Delaware 0-19294 51-0265872
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
7733 Forsyth Boulevard
Suite 2300
St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)
(314) 863-7422
(Company's telephone number, including area code)
Not applicable
(Former name or former address if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the Company under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item 2.01 Completion of Acquisition or Disposition of Assets.
Effective August 1, 2005, RehabCare Group, Inc. ("RehabCare"), through
certain of its wholly owned subsidiaries, completed the previously announced
purchase of substantially all of the operating assets of MeadowBrook Healthcare,
Inc. and certain of its subsidiaries ("MeadowBrook") for approximately $36.5
million. The purchase price was funded from a combination of $27.5 million in
cash on hand and credit facilities, plus $9 million in subordinated notes. The
subsidiaries concurrently entered into separate leases with respect to the four
MeadowBrook operating facilities with SunTrust Equity Funding, a wholly owned
subsidiary of SunTrust Bank. SunTrust Equity Funding acquired the real estate
from MeadowBrook in a separate transaction that closed concurrently with
RehabCare's asset purchase.
The press release issued by RehabCare on August 2, 2005 is attached as
exhibit 99.1 to this Form 8-K and is incorporated herein in its entirety.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits. See Exhibit Index
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 4, 2005
REHABCARE GROUP, INC.
By: /s/ Vincent L. Germanese
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Vincent L. Germanese
Senior Vice President,
Chief Financial Officer
and Secretary
Exhibit Index
Exhibit Number Description
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10.1 Asset Purchase Agreement dated June 8, 2005 by and among
RehabCare Group East, Inc., a wholly owned subsidiary of the
Registrant, MeadowBrook Healthcare, Inc., MeadowBrook
Specialty Hospital of Tulsa, LLC, Lafayette Rehab Associates
Limited Partnership, Clear Lake Rehabilitation Hospital,
Inc. and South Dade Rehab Associates Limited Partnership.
99.1 Press Release dated August 2, 2005 issued by RehabCare
Group, Inc.
Exhibit 10.1
ASSET PURCHASE AGREEMENT
------------------------
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into as of this
8th day of June 2005, by and among REHABCARE GROUP EAST, INC., a Delaware
corporation ("Buyer"), MEADOWBROOK HEALTHCARE, INC., a Delaware corporation
("Meadowbrook"), MEADOWBROOK SPECIALTY HOSPITAL OF TULSA, LLC, an Oklahoma
limited liability company ("Meadowbrook Tulsa"), LAFAYETTE REHAB ASSOCIATES
LIMITED PARTNERSHIP, a Delaware limited partnership ("Lafayette Rehab"), CLEAR
LAKE REHABILITATION HOSPITAL, INC., a Texas corporation ("Clear Lake Rehab"),
and SOUTH DADE REHAB ASSOCIATES LIMITED PARTNERSHIP, a Delaware limited
partnership ("South Dade"). Meadowbrook, Meadowbrook Tulsa, Lafayette Rehab,
Clear Lake Rehab, and South Dade are sometimes referred to herein collectively
as the "Sellers," and individually as a "Seller."
RECITALS
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WHEREAS, Sellers are engaged in the business (the "Business") of operating
free-standing inpatient physical rehabilitation hospitals and long-term acute
care hospitals (each a "Hospital" and collectively, the "Hospitals"), with
locations in Miami, Florida, Webster, Texas, Tulsa, Oklahoma and Lafayette,
Louisiana; and
WHEREAS, Sellers desire to sell, assign, convey and transfer to Buyer, and
Buyer desires to acquire from Sellers, substantially all of Sellers' assets
associated with the Business pursuant to the terms and conditions of this
Agreement; and
WHEREAS, each of the parties hereto desires to set forth certain
representations, warranties, covenants and indemnity obligations, and to
establish certain closing conditions, made to induce the other to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
NOW, THEREFORE, in consideration of the premises, the covenants and
agreements herein contained, and other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the parties hereto
agree as follows:
ARTICLE 1
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SALE AND PURCHASE OF ASSETS
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1.1 Description of Purchased Assets.
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(a) At the Closing on the Closing Date (each term as defined in Section
3.1 hereof), subject to the terms and conditions set forth in this
Agreement, Sellers shall sell to Buyer, and Buyer shall purchase from
Sellers, all assets of Sellers, tangible or intangible, personal or
mixed, wherever located and whether or not reflected on the Sellers'
books and financial records, used in the conduct of the Business,
excluding the Excluded Assets (as defined in Section 1.1(b) below),
free and clear of all liens, mortgages, security interests and
encumbrances, privileges, pledges, options, restrictions, liabilities
and defects of title except as provided herein, including without
limitation the assets set forth below (collectively, the "Purchased
Assets"):
(i) All right, title and interest in and to all Leases (as defined in
Section 4.4(b)) of personal property set forth on Schedule
1.1(a)(i) attached hereto, together with all deposits relating
thereto (each hereinafter individually referred to as a "Personal
Property Lease" and collectively, as the "Personal Property
Leases");
(ii) All right, title and interest in and to the leasehold interest in
the real property of the Sellers identified on Schedule
1.1(a)(ii) attached hereto, together with buildings, fixtures and
improvements located thereon or attached thereto (each
hereinafter individually referred to as a "Real Property Lease"
and collectively, as the "Real Property Leases");
(iii) All right, title and interest in and to all property and
equipment and other tangible personal property used or usable by
Sellers in the Business which are set forth on Schedule
1.1(a)(iii), including, without limitation, non-fixture leasehold
improvements, furniture, furnishings, machinery, equipment,
office supplies, computers, terminals, computer equipment,
telephones and telephone systems, together with all manuals,
records, written warranties, licenses and similar documents and
rights relating thereto;
(iv) All right, title and interest in and to all contracts and
agreements, purchase orders, sales contracts, supply and service
contracts, confidentiality agreements, non-compete agreements and
other contract rights, oral or written, of Sellers related to the
Business that are set forth on Schedule 1.1(a)(iv) attached
hereto, which shall be updated as of the Closing Date by mutual
agreement of the parties (collectively, the "Contracts");
(v) All of Sellers' records and files pertaining to customers,
suppliers and recipients of products or services of the Business,
which shall include, without limitation, customer lists, mailing
lists, e-mail address lists, recipient lists, sales records,
correspondence with customers, customer files and account
histories, supply lists and records of purchases from and
correspondence with suppliers;
(vi) All provider agreements and numbers or other similar contracts
and agreements between Sellers and the Centers for Medicare and
Medicaid Services or any other federal or state agency listed on
Schedule 1.1(a)(vi);
(vii) All right, title and interest of Sellers in and to all
intellectual property used in the Business, including: (i) all
patents, trademarks, service marks, artwork designs, trade dress,
logos, trade names, including the trade name "Meadowbrook," and
corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill
associated therewith and all applications, registrations and
renewals in connection therewith, (ii) all copyrightable works,
all copyrights and all applications, registrations and renewals
in connection therewith, (iii) all trade secrets and confidential
business information (including technical data, know-how, mailing
lists, customer files and account histories, customer and supply
lists, pricing and cost information and business and marketing
plans and proposals), (iv) all computer software, including data
and related documentation and any applicable license agreements
with respect thereto; (v) all Internet domain name registrations,
electronic mail addresses attached to such domain names and all
files comprising any Internet web sites of Sellers, all as set
forth on Schedule 1.1(a)(vii) attached hereto (collectively, the
"Intellectual Property");
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(viii) All of Sellers' rights, to the extent assignable or
transferable, to all licenses, permits, approvals, certificates
of exemption, franchises, accreditations and registrations and
other governmental licenses, permits or approvals issued with
respect to the Assets, used with respect to the Business or the
operation of the Hospitals (the "Licenses"), including, without
limitation, the Licenses described on Schedule 1.1(a)(viii);
(ix) All interests in all gross patient accounts receivable of the
Hospitals, including all patient credit balances and allowances
for doubtful accounts and contractual allowances, and all claims,
rights, interests and proceeds related thereto, arising from the
rendering of services to inpatients and outpatients at the
Hospitals, billed and unbilled, recorded and unrecorded, for
services provided by the Hospitals through the Closing (the
"Patient A/R");
(x) The original or true and correct copies of all documents, books,
records, operating manuals, forms, and files in Sellers'
possession with respect to the operation of the Hospitals and the
Purchased Assets, including original patient records (subject to
Sellers' rights of access to such records as provided herein),
medical records, all other medical and financial information
regarding patients of the Hospitals, patient lists, employment
and personnel records relating to the Retained Employees (as
defined herein), personnel policies and manuals, financial
records with respect to the operation of the Hospitals, including
records relating to the Patient A/R (including workpapers and
other documents relating to Patient A/R), equipment records,
construction plans and specifications, and medical and
administrative libraries;
(xi) All telephone numbers and listings used in connection with the
operation of the Business;
(xii) All claims, choses in action, rights of recovery, defenses or
other actions of Sellers against any third party with respect to
the Purchased Assets or Assumed Liabilities (as hereinafter
defined) and all benefits, proceeds or any other amounts payable
to Sellers under any policy of insurance maintained by Sellers in
respect of the Business;
(xiii) Copies of all files, books and records (including computer
records) of Sellers relating to the foregoing items, to the
extent not excluded by Section 1.1(b)(vi) below;
(xiv) All prepaid expenses and other deposits and advance payments and
the like of Sellers with respect to the Business, including,
without limitation, prepaid advertising costs, prepaid rent and
funded letters of credit;
(xv) All inventories of supplies, drugs, food, janitorial and office
supplies and other disposables and consumables located at any of
the Hospitals (the "Inventory"); and
(xvi) The Business as a going concern, including all goodwill thereof.
(b) Excluded Assets.
----------------
Notwithstanding the provisions of Section 1.1(a), Buyer shall not
purchase, nor shall Sellers sell, whether or not relating to the
Business, any other asset of Sellers, including, without limitation,
the following assets (collectively, the "Excluded Assets"):
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(i) Cash and cash equivalents as determined in accordance with GAAP
(as defined herein) on hand at the Closing Date;
(ii) Income and franchise tax returns, information returns, reports,
elections and work papers of Sellers (it being understood that
upon request, Buyer shall have reasonable access to copies of any
such documents relating to the Business subject to any applicable
confidentiality obligations of Sellers with respect to such
documents imposed by applicable law), and any rights to income
tax refunds and prepaid income taxes;
(iii) Any right and interest of Sellers in this Agreement and any
other agreements and instruments to be executed by Sellers in
connection with the sale of the Purchased Assets and other
transactions contemplated by this Agreement;
(iv) Except as otherwise provided herein, any and all of Sellers'
insurance policies, including all rights to coverage, all
proceeds and all prepaid insurance under such policies;
(v) All contracts and agreements of Sellers, whether or not relating
to the Business, other than the Assumed Contracts (as defined
herein);
(vi) Sellers' corporate seals, charters and minutes, stock record
books, and similar corporate records;
(vii) Any employee benefit plans or compensation arrangements, or any
employment, consulting, collective bargaining or benefit
agreements of Sellers; and
(viii) All other assets and rights of Sellers, whether in the Business
or not, as set forth on Schedule 1.1(b).
1.2 Purchase Price.
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The aggregate consideration to be paid by Buyer to Sellers for the
Purchased Assets shall be the amount of Thirty-Five Million Dollars
($35,000,000) plus the Assumed Liabilities (the "Purchase Price") subject
to adjustment as set forth in Section 1.3, payable as follows:
(a) At the Closing, Buyer shall deliver to the Sellers an aggregate amount
in cash (the "Closing Cash Payment") equal to Twenty-Six Million
Dollars ($26,000,000), payable by wire transfer of immediately
available funds to such account or accounts designated by Sellers at
least three business days prior to the Closing Date.
(b) At the Closing, Buyer shall deliver to the Sellers a subordinated
promissory note of Buyer (the "Adjustment Promissory Note") in
substantially the form attached hereto as Exhibit A, having an initial
principal amount of Five Million Dollars ($5,000,000), which
Adjustment Promissory Note shall have a thirty-six (36) month term and
bear interest at the rate of six percent (6%) per annum. The
Adjustment Promissory Note shall be amortized over a sixty (60) month
period and shall be payable semi-annually following the Closing Date
with a balloon payment of all remaining principal and interest at the
end of the term. The Adjustment Promissory Note shall be subject to
offset as set forth in Sections 1.3(a) and 1.3(c) and Section 11.4.
Notwithstanding anything herein to the contrary, in the event of an
offset of the Adjustment Promissory Note as set forth herein, interest
shall not accrue or be payable with respect to such offset amounts.
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(c) At the Closing, Buyer shall deliver to the Sellers a non-interest
bearing subordinated promissory note of Buyer (the "LTACH Promissory
Note") in substantially the form attached hereto as Exhibit B, having
a principal amount of Four Million Dollars ($4,000,000.00). Subject to
Section 1.3(b), the principal amount of the LTACH Promissory Note
shall be payable upon the Sellers' facility located at 3219 South 79th
East Avenue, in Tulsa, Oklahoma (the "Tulsa Facility") receiving final
approval for participation in Medicare as a long-term acute care
hospital. The LTACH Promissory Note shall be subject to cancellation
as set forth in Section 1.3(b).
The Adjustment Promissory Note and the LTACH Promissory Note are
referred to herein collectively as the "Promissory Notes."
1.3 Purchase Price Adjustments.
--------------------------
(a) Closing Working Capital Adjustment
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(i) As used in this Section 1.3(a), the following terms shall have
the following meanings:
a. "Working Capital" means (A) the aggregate value of the
Current Assets less (B) the aggregate value of the Current
Liabilities.
b. "Current Assets" means the current assets of the Sellers
included in the line items set forth on the form of
Statement of Working Capital, as adjusted.
c. "Current Liabilities" means the current liabilities of the
Sellers included in the line items set forth on the form of
Statement of Working Capital, as adjusted.
d. "Statement of Working Capital" means the statement of
Working Capital in substantially the form of Exhibit C
attached hereto.
e. "Target Working Capital" means an amount equal to Zero
Dollars ($0).
(ii) Not less than ten (10) days prior to the Closing Date, the
Sellers shall have delivered to Buyer a statement of the Sellers'
estimate of Working Capital (including related notes and
schedules thereto) in substantially the form of the Statement of
Working Capital, which sets forth a good faith estimate of the
amount of Working Capital as of the Closing Date (the "Estimated
Working Capital") and shall set forth in detail the amounts
underlying such calculation. The calculation of Working Capital
and the statement of Estimated Working Capital shall be prepared
in accordance with generally accepted accounting principles in
the United States, consistently applied throughout the periods
covered by such statements ("GAAP"), subject to the modifications
and limitations set forth on the Statement of Working Capital.
Buyer shall have had the opportunity to comment upon the
statement of Estimated Working Capital, such that the Sellers and
Buyer shall reasonably agree to the statement of Estimated
Working Capital. If the Estimated Working Capital is less than
the Target Working Capital, the Closing Cash Payment shall be
decreased by the amount of such shortfall, and if the Estimated
Working Capital is greater than the Target Working Capital, the
Closing Cash Payment shall be increased by the amount of such
excess, if any.
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(iii) No later than thirty (30) days after the delivery to Buyer of
the audited consolidated financial statements of Sellers as of
and for the fiscal year ended December 31, 2004 (which Sellers
shall cause to be prepared promptly following the earlier of (i)
the receipt by the "Tulsa Facility" (as defined herein) of final
approval for participation in Medicare as a long-term acute care
hospital, or (ii) December 31, 2005, and which, after Sellers'
receipt thereof, shall promptly deliver to Buyer), Buyer shall
calculate the amount of Working Capital and shall prepare and
deliver to the Sellers a statement of Working Capital (including
related notes and schedules thereto) in substantially the form of
the Statement of Working Capital, which shall set forth the
amount of Working Capital as of the Closing Date (the "Closing
Working Capital") and shall set forth in detail the amounts
underlying such calculation (the "Initial WC Statement"). The
calculation of the Closing Working Capital set forth on the
Initial WC Statement shall be prepared in accordance with GAAP
applied in a manner consistent with the preparation of the
Statement of Estimated Working Capital, subject to the
modifications and limitations set forth on the Statement of
Working Capital. Following the delivery of the Initial WC
Statement to the Sellers, Buyer shall afford the Sellers' the
opportunity to examine the underlying records and workpapers
related to the Initial WC Statement, in each case as are
reasonably necessary and appropriate. Buyer shall cooperate with
the Sellers' in such examination and shall make available to the
Sellers' any records under Buyer's reasonable control requested
by the Sellers related to the Initial WC Statement. If within
thirty (30) days following delivery of the Initial WC Statement
to the Sellers, the Sellers' have not given Buyer written notice
of objection to Buyer's calculation of the Closing Working
Capital (which describes in reasonable detail the basis for such
objection, the "Objection Notice"), then the Closing Working
Capital set forth in such Initial WC Statement shall be deemed to
have been accepted by the Sellers, shall become final and binding
upon the parties and shall be the final working capital statement
(the "Final WC Statement"). The Objection Notice shall set forth
in reasonable detail the basis for Sellers' objection(s) to the
Closing Working Capital. If the Sellers provide an Objection
Notice within such thirty (30) day period, then Buyer and the
Sellers shall endeavor in good faith, for a period not to exceed
fifteen (15) days from the date of delivery of such Objection
Notice, to resolve the issues in dispute. Any item not
specifically disputed by the Sellers shall be deemed accepted by
the Sellers and shall become part of the Final WC Statement. If
at the end of such fifteen (15) day period there are any
remaining issues in dispute, then the remaining issues in dispute
may be submitted to an independent, nationally-recognized United
States public accounting firm having no material relationship
with Buyer or the Sellers, jointly selected by Buyer and the
Sellers (the "Accounting Firm"), for determination in accordance
with the terms of this Agreement. Buyer and the Sellers shall
cause the Accounting Firm to use commercially reasonable efforts
to make a final determination (which will be binding and
conclusive on the parties and shall constitute an arbitral award
that is final, binding and unappealable) of the Closing Working
Capital within thirty (30) days after the remaining issues in
dispute are submitted to it, and such final determination
(including any items not specifically disputed by the Sellers
hereunder) shall be the Final WC Statement. If any remaining
issues in dispute are submitted to the Accounting Firm for
resolution, each party will furnish the Accounting Firm with such
workpapers and other documents and information relating to the
disputed issues as the Accounting Firm may request. The fees and
expenses of the Accounting Firm shall be borne one-half by Buyer
and one-half by the Sellers.
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(iv) If the Closing Working Capital (as set forth in the Final WC
Statement) is less than the Estimated Working Capital, then,
subject to the limitations set forth in Section 1.3(d), the
Sellers shall deliver to Buyers an amount equal to the excess of
the Estimated Working Capital over the Closing Working Capital by
wire transfer of immediately available funds to the account or
accounts designated by Buyer to Sellers in writing. If the
Closing Working Capital (as set forth in the Final WC Statement)
is greater than the Estimated Working Capital then, within ten
days after such determination, Buyer shall deliver to Sellers an
amount equal to the excess of the Closing Working Capital (as set
forth in the Final WC Statement) over the Estimated Working
Capital by wire transfer of immediately available funds to the
same account or accounts to which it wired the Closing Cash
Payment, unless Buyer receives written notice three business days
prior to the date it is to wire such amount to Sellers that a
different account or accounts are to be used.
(b) Tulsa LTACH Facility Adjustment.
-------------------------------
(i) In the event that the Tulsa Facility is not approved for
participation in Medicare as a long-term acute care hospital on
or before December 31, 2005, the Purchase Price shall be reduced
by the amount of Four Million Dollars ($4,000,000.00), and Buyer
shall be entitled to reduce the aggregate principal amount of the
LTACH Promissory Note by such amount.
(ii) In the event that the Tulsa Facility is approved for
participation in Medicare as a long-term acute care hospital on
or before December 31, 2005, promptly following receipt of such
approval Buyer shall re-submit claims for reimbursement for
services performed at the Tulsa Facility at the appropriate
Medicare rates applicable to long-term acute care hospitals (the
"LTACH Re-Billing"). On the date that is one hundred twenty (120)
days following the date that Buyer has completed the LTACH
Re-Billing or such earlier date as may be agreed to among the
parties (the "LTACH Adjustment Date"), Buyer and Seller shall
determine the net aggregate dollar amount received or otherwise
credited to Buyer on account of the difference between the
Medicare rates for long-term acute care hospitals and inpatient
rehabilitation hospitals for services provided at the Tulsa
Facility prior to the Closing Date (the "LTACH Adjustment").
Within fifteen (15) days of the determination of the amount of
the LTACH Adjustment, the Purchase Price shall be increased by
the amount of the LTACH Adjustment less the DSO Adjustment (the
"LTACH Purchase Price Adjustment"), and Buyer shall deliver to
Sellers, in immediately available funds, an amount equal to the
LTACH Purchase Price Adjustment. For purposes of this Section
1.3(b), the term "DSO Adjustment" shall be equal to the amount
obtained by dividing 52.5 by the number of days in the period
from September 1, 2004 to the Closing Date, and then multiplying
the resulting quotient by the LTACH Adjustment.
(iii) In the event that the Tulsa Facility is not approved for
participation in Medicare as a long-term acute care hospital on
or before December 31, 2005 and the Buyer shall be entitled to
the purchase price adjustment set forth in Section 1.3(b)(i),
then in the event that the Tulsa Facility is subsequently
approved for participation in Medicare as a long-term acute care
hospital on or before March 31, 2006, the Buyer shall, promptly
following receipt of such approval, commence the LTACH
Re-Billing. On the LTACH Adjustment Date, Buyer and Seller shall
determine the LTACH Adjustment. Within fifteen (15) days of the
determination of the amount of the LTACH Adjustment, the Purchase
Price shall be increased by an amount equal to the LTACH Purchase
Price Adjustment, and Buyer shall deliver to Sellers, in
immediately available funds, an amount equal to the LTACH
Purchase Price Adjustment.
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(c) Medicare Reserve Adjustment.
---------------------------
If and to the extent that the liabilities of Sellers assumed by
Buyer relating to or arising from any governmental health care payment
program, including, without limitation, Medicare and Medicaid, have
exceeded the reserve established for such liabilities set forth in the
Final WC Statement (the "Medicare Reserve"), then, subject to the
limitations set forth in Section 1.3(d), the Purchase Price shall be
reduced by the amount of such excess, and Buyer shall be entitled to
reduce the aggregate principal amount of the Adjustment Promissory
Note by such amount.
(d) Certain Limitations on Adjustments.
----------------------------------
Notwithstanding any other provision of this Agreement to the contrary,
(i) Buyer's sole remedy for the adjustments contemplated pursuant to
Section 1.3(c) is a reduction in the Purchase Price; (ii) Buyer may
reduce the Purchase Price as described in Section 1.3(c) only by
reduction of the amount of the Adjustment Promissory Note, and (iii)
and the total aggregate reductions to the Purchase Price pursuant to
Section 1.3(c) shall not exceed the amount of the Adjustment
Promissory Note.
1.4 Purchase Price Allocation.
-------------------------
On or prior to the Closing Date, Buyer and Sellers shall mutually agree
upon an allocation of the Purchase Price between and among the Purchased
Assets consistent with Section 7.3 of this Agreement. Neither Buyer nor
Sellers shall take a position in any Return (as defined in Section 4.3),
examination or other administrative or judicial proceeding relating to any
Return, that is inconsistent with such allocation.
1.5 Further Assurances.
------------------
Sellers shall execute, acknowledge and deliver to Buyer any and all other
assignments, consents, approvals, conveyances, assurances, documents,
certificates and instruments reasonably requested by Buyer at any time and
shall take any and all other actions reasonably requested by Buyer at any
time for the purpose of more effectively assigning, transferring, granting,
conveying and confirming to Buyer, the Purchased Assets. After consummation
of the transaction contemplated herein, the parties agree to cooperate with
each other in regards to all matters arising from the transition of
ownership of the Purchased Assets and the Business from Sellers to Buyer.
1.6 Certain Consents.
----------------
To the extent that Sellers' rights under any agreement, contract,
commitment, lease, permit, or other Purchased Asset to be assigned to Buyer
hereunder may not be assigned without the consent of another person which
has not been obtained prior to the Closing Date, and which is important to
the ownership, use or disposition by Buyer of a Purchased Asset, this
Agreement shall not constitute an agreement to assign the same if an
attempted assignment would constitute a breach thereof or be unlawful, and
for a period of ninety (90) days following the Closing Date, Sellers, at
their expense, shall use their commercially reasonable efforts to obtain
any such required consent(s) as promptly as possible. If any such consent
shall not be obtained or if any attempted assignment would be ineffective
or would impair Buyer's rights under the Purchased Asset in question so
that Buyer would not in effect acquire the benefit of all such rights and
Buyer determines to proceed with the Closing, Sellers shall, subject to
compliance with applicable law and at Sellers' expense, act after the
Closing as Buyer's agent in order to obtain for the Buyer the benefits
thereunder, and Sellers shall, subject to compliance with applicable law,
cooperate with Buyer in any other reasonable arrangement designed to
provide such benefits to Buyer, including any sublease or subcontract or
similar arrangement.
ARTICLE 2
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ASSUMPTION OF CERTAIN LIABILITIES
---------------------------------
2.1 Assumed Liabilities.
-------------------
At the Closing, Sellers shall assign, and Buyer shall assume and agree to
pay, discharge or perform, as applicable, the following liabilities (other
than for Taxes) relating exclusively to the Business or the Purchased
Assets: (i) Operating Liabilities (as defined herein), and (ii) those
obligations and liabilities accruing after the Closing Date under the
Contracts, Personal Property Leases, Real Property Leases and Intellectual
Property Licenses (collectively, the "Assumed Contracts") transferred and
validly assigned to Buyer in accordance with Section 1.1(a) hereof, but
only to the extent of obligations arising thereunder with respect to events
or periods on and after the Closing Date, (collectively, the "Assumed
Liabilities").
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For purposes of this Agreement, the term "Operating Liabilities" shall mean
(i) all liabilities incurred by Sellers in the ordinary course of business
on or after January 1, 2002 directly related to the day-to-day operations
of the Hospitals, (ii) subject to Section 1.3(c), liabilities of Sellers
relating to or arising from any governmental health care payment program,
including, without limitation, Medicare and Medicaid, and (iii) liabilities
relating to the violation of Environmental Laws (as defined herein) which
arise from or relate to either the operation of the Business prior to the
Closing Date, or the condition prior to the Closing Date of any real
property that is the subject of a Real Property Lease; provided, however,
that in no event shall Operating Liabilities include (i) any Excluded
Liability, (ii) any liability of Sellers associated with financing or
capital raising activities, or (iii) any liability associated with
transactions by Sellers with Affiliates.
2.2 Excluded Liabilities.
--------------------
Notwithstanding the provisions of Section 2.1, Buyer shall not assume, and
Sellers shall remain liable for, any and all liabilities, debts,
obligations, claims and commitments of or against Sellers which are not
specifically set forth herein as being expressly assumed by Buyer (and
regardless of whether set forth on any Schedule hereto), whether the same
are known or unknown, existing, contingent upon future events or
circumstances, accrued, funded, unfunded or otherwise (the "Excluded
Liabilities"), including, without limitation:
(a) any Taxes (as defined in Section 4.3) imposed on Sellers (including
with respect to the Excluded Assets at any time) or relating to the
Business (including the Purchased Assets) for any period (or portion
thereof) ending on or prior to the Closing Date;
(b) any liability or obligation resulting from any formal or informal,
written or unwritten, agreement with respect to employee compensation
(including but not limited to Sellers' payroll obligations), severance
pay, bonus, member distributions, pension, retirement, profit sharing,
health or medical benefit, welfare plan, or any other employee benefit
or fringe benefit plan and any stock option arrangements, warrants or
employment agreements for services for periods on or prior to the
Closing Date;
(c) any liabilities or obligations of Sellers relating to the Excluded
Assets;
(d) any liability or obligation of Sellers arising or incurred in
connection with the negotiation, preparation and execution of this
Agreement and the consummation of the transactions contemplated
hereby, including without limitation, fees and expenses of its
counsel, accountants and other advisors;
(e) any liabilities of Sellers for commissions or fees owed to any finder
or broker retained by Sellers in connection with the transactions
contemplated hereby;
(f) any obligation, liability, injury or damage arising, accruing or
existing prior to the Closing Date with respect to Sellers' employees,
including without limitation any matters arising under laws governing
wages and hours, employment discrimination, sexual harassment,
occupational safety and health, workers' compensation, the payment and
withholding of employment taxes and any alleged violations of law;
9
(g) any liability of Sellers or with respect to the Business for any
violations of any law, regulation or rule to the extent arising from
acts or omissions prior to January 1, 2002, or, with respect to the
Tulsa Facility, prior to the Closing Date, including, without
limitation, applicable health care laws, rules and regulations,
including those relating to the payment or receipt of illegal
remuneration, including 42 U.S.C. ss.1395nn (the Stark Statute), 42
U.S.C. ss.1320a-7a, 42 U.S.C. ss.1320a-7b(a), 42 U.S.C. ss.1320a-7b(c)
and any applicable state laws governing kickbacks and matters similar
to such federal statutes (collectively, the "Fraud and Abuse Laws");
(h) all liabilities, obligations, claims, liens, assessments, charges or
other encumbrances in connection with claims of professional
malpractice at the Hospitals to the extent arising out of or relating
to acts, omissions, events or occurrences prior to the Closing Date;
(i) all liabilities, obligations, claims, liens, assessments, charges or
other encumbrances of Sellers for repayment of funds under the
Hospital Survey and Construction Act of 1946 (Hill-Burton), any grants
or monies provided by the Federal Emergency Management Agency
("FEMA"), or any similar statute or program with respect to the
Hospital;
(j) all liabilities of any kind, known or unknown, associated with any
claim against the Sellers, by HealthSouth Corporation or any of its
subsidiaries or affiliates (collectively "HealthSouth"), including,
without limitation, HealthSouth's claim for indemnification from
Meadowbrook under the Stock Purchase Agreement between Meadowbrook and
HealthSouth dated November 2, 2001, related to the case styled General
Medicine, P.C. v. HealthSouth Corporation;
(k) all liabilities of any kind, known or unknown, associated with any
claim against the Sellers by General Medicine or any of its
subsidiaries or affiliates, including, without limitation, any
liability or claim related to the case styled General Medicine, P.C.
v. Horizon/CMS Health Care Corporation, Case Number CV-96-72624;
(l) all liabilities for any claim of liability of indebtedness of any kind
owed by any of the Sellers or their affiliates to HealthSouth; and
(m) any liabilities associated with the Sellers' dormant subsidiaries and
affiliates.
ARTICLE 3
---------
CLOSING AND CLOSING DATE
------------------------
3.1 Closing.
-------
The closing ("Closing") of the sale of the Purchased Assets and other
transactions contemplated by this Agreement shall take place on or before
July 31, 2005, or on such other date ("Closing Date"), mutually agreeable
by the parties, not later than September 30, 2005, at such location as the
parties shall mutually agree; provided that all conditions precedent and
other matters required to be completed as of the Closing Date have been or
will be completed on the Closing Date. The Closing shall be deemed to have
occurred and to be effective as between the parties as of 12:01 a.m. on the
next day after the Closing Date.
10
3.2 Simultaneous Closing.
--------------------
All actions taken at the Closing shall be deemed to be performed
simultaneously and the Closing shall not be deemed to have occurred until
all required actions of the parties pursuant to this Agreement have been
performed. The parties shall deliver such additional documents and take
such additional actions as may reasonably be deemed necessary to complete
the transactions contemplated by this Agreement.
ARTICLE 4
---------
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
Each of the Sellers, jointly and severally, hereby represent and warrant to
Buyer on the date of this Agreement, and again on and as of the Closing Date, as
follows:
4.1 Status of Sellers.
-----------------
(a) Existence and Status.
--------------------
Sellers are duly organized, entitled to conduct business, validly
existing and in good standing under the laws of their respective
states of incorporation or organization.
(b) Articles of Incorporation, Bylaws; Articles or Organization, Operating
----------------------------------------------------------------------
Agreements; Partnership Agreements of Sellers.
----------------------------------------------
Sellers have provided to the Buyer true and accurate copies of (i) as
applicable, the currently effective Articles of Incorporation and
Articles of Organization of Sellers and all amendments, restatements
or other filings with respect thereto, (ii) as applicable, the
currently effective Bylaws and Operating Agreements of the Sellers,
and (iii) as applicable, the currently effective Partnership
Agreements of Sellers. All amendments to, and articles of merger and
other filings with respect to, the Articles of Incorporation, Articles
of Organization, Bylaws, Operating Agreements or Partnership
Agreements of the Sellers (such documents being referred to herein as
the "Organizational Documents") were made in accordance with the
Organizational Documents (as in effect before the amendment of such
Organizational Documents or filings with respect thereto), and
applicable law of Sellers without violation of any preemptive rights,
and each Seller has otherwise complied with its Organizational
Documents as in effect at the applicable time.
(c) Corporate Power of Sellers.
--------------------------
Each Seller has the power to own and lease the Purchased Assets and
otherwise to conduct the Business as currently conducted.
(d) Ownership Interests.
-------------------
Except as set forth on Schedule 4.1(d), Sellers have no subsidiaries
or any equity securities of, investment in or loans or advances to any
business enterprise or person or any agreements or commitments for
such (other than trade terms extended to customers in the ordinary
course of business), or are subject to any arrangement that could be
treated as a partnership for federal income tax purposes.
(e) Foreign Qualification.
---------------------
Schedule 4.1(e) lists the jurisdiction in which each Seller is
qualified to do business as a foreign corporation, and nothing
(including the nature of or the manner in which Sellers conduct their
business, the character or location of the properties which Sellers
own, lease or use or the actions or location of employees or agents)
either requires any of the Sellers to be qualified in any other
jurisdiction or subjects any of the Sellers to any cost, restriction
or penalty for failing to qualify.
11
(f) Authorization.
-------------
(i) Each Seller has the right, power and authority to enter into this
Agreement and each other agreement, instrument or other document
contemplated hereunder (collectively, the "Other Agreements") to
which it is a party, and to consummate the transactions
contemplated by, and otherwise to comply with and perform its
obligations under, this Agreement and each of the Other
Agreements referred to herein;
(ii) The execution and delivery by each Seller of this Agreement and
the Other Agreements to which it is a party, and the consummation
by each Seller of the transactions contemplated by, and other
compliance with and performance of its obligations under, this
Agreement and each of the Other Agreements, have been duly
authorized by all necessary corporate, company or partnership
action, as applicable, on the part of each Seller in compliance
with the Organizational Documents (each as amended) of Sellers
and applicable law; and
(iii) This Agreement and each of the Other Agreements to which each
Seller is a party, constitute the valid and binding agreements of
Sellers that are enforceable against Sellers in accordance with
their terms.
(g) Absence of Violations or Conflicts.
------------------------------------
Except as disclosed in Schedule 4.1(g), the execution and delivery of
this Agreement and the Other Agreements by each of the Sellers and the
consummation of the transactions contemplated by, or other compliance
with or performance under, this Agreement and the Other Agreements do
not and will not with the passage of time or giving of notice or both:
(i) constitute a violation of, be in conflict with, constitute a
default or require any payment under, permit a termination of,
require any consent or approval under, or result in the creation
or imposition of any lien, encumbrance or other adverse claim or
interest upon any of the Purchased Assets under (A) any contract,
agreement, commitment, undertaking or understanding to which any
of the Purchased Assets are subject or bound, including the
Assumed Contracts, (B) any judgment, decree or order of any
governmental authority to which any of the Sellers or any of the
Purchased Assets are subject or bound, (C) any applicable law, or
(D) any governing or applicable agreements, instruments or other
documents to which any of the Sellers (including the
Organizational Documents (each as amended)) is a party; or
(ii) create or result in a Material Adverse Effect (as defined in
Section 12.21) to or cause the acceleration of the maturity of,
any Assumed Liabilities.
(h) No Governmental Consents Required.
---------------------------------
Except as set forth on Schedule 4.1(h), no consent, approval, order or
authorization of, or registration, declaration or filing with, any
governmental authority on the part of any of the Sellers is required
in connection with the execution or delivery of this Agreement, the
Other Agreements or the consummation of the transactions contemplated
by, or other compliance with or performance under, this Agreement or
the Other Agreements.
12
4.2 Financial Matters.
-----------------
(a) Sellers' Financial Statements.
-----------------------------
Schedule 4.2(a) sets forth true and complete copies of: (i) the
audited consolidated financial statements of Sellers as of and for the
fiscal years ended December 31, 2003 and 2002 (the "Audited
Financials"), (ii) the unaudited consolidated financial statements of
Sellers as of and for the fiscal year ended December 31, 2004 (the
"Unaudited Financials"), and (iii) the unaudited consolidated
financial statements of Sellers for the fiscal quarter ended March 31,
2005 (the "Interim Financials"). The Audited Financials, the Unaudited
Financials and the Interim Financials, are collectively referred to in
this Agreement as the "Sellers' Financial Statements." The Audited
Financials were prepared in accordance with the books and records of
Sellers (which books and records are correct and complete) and are
true, complete and accurate in all material respects, fairly and
accurately present the financial condition and results of operations
of Sellers as of their dates and the results of operations of Sellers
for the respective periods then ended and have been prepared in
accordance with GAAP applied on a consistent basis throughout the
periods covered by such statements. The Unaudited Financials and the
Interim Financials were prepared (and the Pre-Closing Financial
Statements as required by Section 6.9 will be prepared) in accordance
with the books and records of Sellers (which books and records are
current and complete) and are (and with respect to the Pre-Closing
Financial Statements will be) true, complete and accurate in all
material respects, fairly and accurately present the financial
condition of Sellers as of their respective date and have been
prepared in accordance with GAAP (except for the footnotes and annual
recurring year-end adjustments) applied on a consistent basis for the
periods covered therein. The statements of income and retained
earnings and statements of cash flows included in the Sellers'
Financial Statements do not reflect the operations of any entity or
business not intended to constitute a part of the Business after
giving effect to the transactions contemplated hereby.
(b) Absence of Undisclosed Liabilities.
----------------------------------
Except as and to the extent expressly reflected or reserved in
Sellers' Financial Statements or as set forth on Schedule 4.2(b) or to
the extent incurred in the ordinary course of business since March 31,
2005, there are no other liabilities of any nature relating to the
Purchased Assets, whether accrued, direct, indirect, absolute,
contingent, changing, known, unknown, determinable, indeterminable,
liquidated, unliquidated or otherwise and whether due or to become
due, relating to any existing or prior act, omission, condition or
state of facts.
(c) Absence of Certain Changes.
--------------------------
Except as set forth on Schedule 4.2(c), since December 31, 2004, there
has not been any activity with respect to Sellers' other than in the
ordinary course of business and, without limiting the foregoing, there
has not been:
(i) any Material Adverse Effect;
(ii) any commitment to make a capital expenditure with respect to the
Purchased Assets (exclusive of expenditures for repair or
maintenance in the ordinary course of business) that would
otherwise result in a post-closing liability to Buyer;
(iii) any incurrence of any extraordinary loss or knowing waiver of
any rights of substantive value by Sellers in connection with any
aspect of the Business, whether or not in the ordinary course of
business;
(iv) any cancellation, termination or material amendment by Sellers of
any contract or agreement to which Sellers are a party or by
which Sellers are bound;
(v) any failure on the part of Sellers to operate the Business in the
ordinary course so as to preserve its business organization
intact, including the services of Sellers' present officers,
professional staff and employees relating to the Business and the
goodwill of Sellers' suppliers, customers and others having
business relations with Sellers relating to the Business;
13
(vi) any sale, assignment or transfer (including, without limitation,
any collateral assignment or the granting or permitting of any
lien, encumbrance or other claim) of any of the Purchased Assets
other than in the ordinary course of business and consistent with
past practices;
(vii) any amendment, modification, waiver or cancellation of any debt
owed to, or claim of, Sellers, or settlement by Sellers of any
dispute involving any payment or other obligation due to or owed
by Sellers to be made or performed after the Closing Date which
constitutes a Purchased Asset or an Assumed Liability; or
(viii) any agreement by or commitment of Sellers to do or permit any
of the foregoing.
4.3 Taxes.
-----
Notwithstanding anything in this Agreement to the contrary, this Section
4.3 shall not apply with respect to any Tax or Taxes (as such terms are
defined in this Section 4.3) to the extent that from and after Closing, the
Purchased Assets are not subject to a lien for such Tax or Taxes, and Buyer
or its affiliates are not liable for such Tax or Taxes.
(a) Definitions.
-----------
For purposes of this Agreement:
(i) the term "Code" shall mean the Internal Revenue Code of 1986, as
amended. All citations to the Code or to the regulations
promulgated thereunder shall include any amendments or any
substitute or successor provisions thereto;
(ii) the term "Returns" shall mean, collectively, all reports,
declarations, estimates, returns, information statements, claim
for refund and similar documents relating to, or required to be
filed in respect of, any Taxes of Sellers, including any
amendment thereof; and
(iii) the term "Taxes" shall mean, with respect to Sellers (A) all
income, net income, gross income, gross receipts, sales, use, ad
valorem, franchise, profits, license, lease, service, service
use, withholding, employment, payroll, excise, severance,
transfer, documentary, mortgage, registration, stamp, occupation,
environmental, premium, property, windfall, profits, customs,
duties, and other taxes, fees, assessments or charges of any kind
whatever, together with any interest, penalties and other
additions with respect thereto, imposed by any federal,
territorial, state, local or foreign government; and (B) any
penalties, interest, or other additions to tax for the failure to
collect, withhold, or pay over any of the foregoing, or to
accurately file any Return; and the term "Tax" shall mean any one
of the foregoing Taxes. When used with reference to specified
persons (for example and without limitation, "Taxes of Sellers"),
the terms "Taxes" and "Tax" shall include only amounts of, or in
respect of, Taxes for which such person is, or could become,
liable in whole or part (including, without limitation, any
obligation in connection with a duty to collect, withhold, or pay
over any Taxes, any obligation to contribute to the payment of
any Taxes determined on a consolidated, combined, or unitary
basis, any liability as a transferee, or any liability as a
result of any express or implied obligation to indemnify or pay
the Tax obligations of another person).
14
(b) Returns Filed and Taxes Paid.
----------------------------
Except as set forth on Schedule 4.3(b), Sellers duly filed or caused
to be filed, on or before the due date thereof (as appropriately
extended) with the appropriate taxing authorities, all Returns that
they were required to file, and each such Return (including any
amendment thereto) is true, correct, and complete in all material
respects and were prepared in substantial compliance with all
applicable laws and regulations. All Taxes of Sellers due with respect
to, or shown to be due on, each such Return (or amendment) or
subsequent assessment with regard thereto, have been timely paid.
There is no valid basis for the assessment of any deficiency with
regard to any such Return and except as set forth on Schedule 4.3(b),
there are no extensions of time to file which are pending. No other
Taxes of Sellers are due with respect to any taxable periods or
portions of periods ending on or before the Closing Date. There are no
liens, attachments, or similar encumbrances on any of the Purchased
Assets of Sellers with respect to any Taxes, other than liens for
Taxes that are not yet due and payable. Sellers have collected or
withheld all Taxes that they are required to collect or withhold.
(c) Audit History and Other Proceedings.
-----------------------------------
Except as set forth on Schedule 4.3(c), there are no pending or, to
the Knowledge of Sellers threatened (either in writing or verbally,
formally or informally) audits, investigations, claims, suits or other
proceedings for or relating to any material liability in respect of
Taxes of Sellers. No material deficiencies for Taxes of Sellers have
been claimed, proposed or assessed by any taxing or other governmental
authority and there are no matters under discussion with any
governmental authorities with respect to Taxes, that could result in
any additional amount of Taxes of Sellers and that could reasonably be
expected to affect the Business or the Purchased Assets. No extension
of a statute of limitations (whether arising by reason of a waiver,
claim for refund, or otherwise) in respect of such Taxes is in effect
and there are no requests for rulings or determinations in respect of
Taxes of Sellers pending with any governmental authority.
(d) Unpaid Taxes.
------------
As of March 31, 2005, unpaid Taxes of the Sellers did not exceed the
reserve for Tax Liability (rather than any reserve for deferred taxes
established to reflect timing differences between book and Tax income)
set forth on the face of the most recent balance sheet of Sellers as
of March 31, 2005 (rather than in the notes thereto) and do not exceed
the reserve as adjusted for the passage of time through the Closing
Date (other than Taxes incurred as a result of the transactions
contemplated by this Agreement) in accordance with the past custom and
practice of the Sellers in filing their Tax Returns.
4.4 Title to and Condition of Purchased Assets.
------------------------------------------
(a) Title to Purchased Assets.
-------------------------
Except as set forth on Schedule 4.4(a): (i) Sellers have good and
marketable title to all of the Purchased Assets; and (ii) none of the
Purchased Assets are subject to any lien, claim or other encumbrance
whatsoever, except (A) liens for taxes not yet due and payable, (B)
liens imposed by law and incurred in the ordinary course of business
for obligations not yet due and payable to landlords, carriers,
warehousemen, laborers, materialmen and the like, and (C) liens to
secure repayment of the indebtedness of Sellers under any of the Debt
Instruments (as defined in Section 4.6(a) and more fully described on
Schedule 4.6(a) hereto) (collectively, the "Permitted Liens").
(b) Leases; Subleases.
-----------------
For purposes of this Agreement, "Lease" means any written or oral
lease, sublease or rental agreement (and any related contract and
agreement) included as a Personal Property Lease or Real Property
Lease, and all amendments, modifications and supplements thereof and
waivers and consents thereunder pursuant to which Sellers lease,
sublease or rent any real or personal property included in the
Purchased Assets, either as lessor, lessee, landlord or tenant.
Schedule 1.1(a)(i) and Schedule 1.1(a)(ii) together list all Leases
included in the Purchased Assets, except those which (i) can be
canceled by Sellers upon 30 or fewer days' notice without penalty or
the acceleration of rentals, (ii) do not grant an option to purchase
the leased property, and (iii) in each case, involve an annual rental
of $5,000 or less. Schedule 1.1(a)(i) and Schedule 1.1(a)(ii) describe
all oral Leases required to be disclosed in such schedules, and true
and complete copies of all written Leases required to be disclosed
have been heretofore delivered to Buyer. With respect to each of the
15
Leases: (A) neither any Seller nor, to the Knowledge of Sellers, any
other party is in default in connection with any Lease; (B) no act or
event has occurred which, with notice or lapse of time or both, would
constitute a default under any Lease with respect to any Seller or, to
the Knowledge of Sellers, any other party; (C) there is no basis for
any claim of default under any Lease with respect to any Seller or, to
the Knowledge of Sellers, any other party; (D) no Seller has given or
received any notice of cancellation or termination in connection with
any Lease; (E) each Lease is the valid and binding agreement of the
Seller(s) who is/are party thereto, and, to the Knowledge of Sellers,
the other party thereto which is in full force and effect and is
enforceable in accordance with its terms, except, with respect to such
other party, to the extent that such enforceability may be limited by,
or subject to: (i) the effect of any applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws affecting the enforcement of creditors' rights generally;
(ii) the availability of the remedies of specific performance or
injunctive relief, which may be subject to the discretion of the court
before which any proceeding for such remedies may be brought; and
(iii) the exercise by any court of equitable judicial discretion
before which any proceeding may be brought; (F) except as disclosed on
Schedule 4.4(b), no Lease will be affected by, or require the consent
of or payment to any other party to avoid an event of default, an
event of termination or other adverse effect with respect to such by
reason of the transactions contemplated by this Agreement; and (G)
each Lease is a "true" lease for federal income tax purposes.
(c) Adequacy; Condition.
-------------------
Except as set forth on Schedule 4.4(c): (i) the Purchased Assets are
fit for use in the business of Sellers as presently conducted; (ii)
the Purchased Assets are in good repair and operating condition,
normal wear and tear excepted, and structurally and mechanically
sound, as applicable; (iii) Sellers are in material compliance with
all applicable building, zoning, land use or other similar statutes,
laws, ordinances, regulations, permits, health and safety codes or
other requirements in respect of any of the Purchased Assets subject
to a Lease (and Sellers' current use of such properties does not
constitute a nonconforming use) and Sellers have not received any
notice alleging such a violation; (iv) to the Knowledge of Sellers,
except as disclosed on Schedule 4.20, none of the Purchased Assets
subject to a Lease has ever been used as a landfill or otherwise been
used for the disposal, storage or treatment of any waste, trash,
garbage, industrial by-product, chemical or hazardous substance of any
nature; (v) Sellers have not caused the installation of any of such
property with asbestos insulation or any electrical equipment
containing polychlorinated biphenyls and, to the Knowledge of Sellers,
none of the Purchased Assets subject to a Lease contains asbestos
insulation or electrical equipment containing polychlorinated
biphenyls; and (vi) to the Knowledge of Sellers, there are no
outstanding requirements or recommendations by fire underwriters or
rating boards, any insurance companies or holders of mortgages or
other security interests requiring or recommending any repairs or work
to be done with reference to any of the Purchased Assets subject to a
Lease.
(d) All Necessary Properties.
------------------------
With the exception of the Excluded Assets, the Purchased Assets
constitute all of the real property, personal property, intangible
property, rights and other assets of every kind and nature whatsoever
owned, leased, held or used by Sellers in connection with the
operation of the Business as presently conducted and the consummation
of the transactions contemplated by this Agreement (provided that all
consents relating to the Purchased Assets have been obtained) will not
alter the rights or impair the ability of Buyer to use such Purchased
Assets in the conduct of the Business as it is now being conducted.
(e) Inventories.
-----------
The Inventory of Sellers with respect to the Business, as of December
31, 2004, is set forth on Schedule 4.4(e) hereof, which schedule shall
be updated as of the Closing Date. The Inventory of Sellers are of a
quality and quantity that is consistent with Sellers' historical
practices as of the date hereof and are sufficient for the conduct of
the business of Sellers in the ordinary course. All Inventory of
Sellers is recorded on the books of the Business at the lower of cost
or market value determined in accordance with GAAP.
16
(f) Receivables.
-----------
All of the Sellers' receivables (including accounts receivable, loans
receivable and advances) which have arisen in connection with the
Business and which are reflected in the Sellers' Financial Statements,
and all such receivables which shall arise from the date hereof until
the Closing Date, have arisen only from bona fide transactions in the
ordinary course of business. To the Knowledge of Sellers, there are no
facts or circumstances generally (other than general economic
conditions) which would result in any material increase in the
uncollectability of such receivables as a class in excess of the
reserves therefore set forth in the Seller's Financial Statements.
4.5 Intellectual Property; Patents; Trademarks, Trade Names.
-------------------------------------------------------
All Intellectual Property and all contracts, agreements, commitments,
arrangements, undertakings and understandings relating to the use or
license of technology, know-how or processes by Sellers that are part of
the Purchased Assets (the "Intellectual Property Licenses") are listed in
Schedule 1.1(a)(vii). Except as disclosed in Schedule 4.5 with respect to
all Intellectual Property that is included in the Purchased Assets; (a)
Sellers own, or have the sole and exclusive right to use, all Intellectual
Property, whether under Intellectual Property Licenses or otherwise, used
in or necessary for the ordinary conduct of the Business; (b) the
consummation of the transactions contemplated by this Agreement will not
alter or impair any such rights; (c) all of the Intellectual Property is
free and clear of all assignments, encumbrances, charges or to the
Knowledge of Sellers claims for infringement, and none is subject to any
outstanding order, decree, judgment, stipulation or charge, (d) to the
Knowledge of Sellers, there is no unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property rights of
Sellers, or any Intellectual Property right of any third party to the
extent licensed by or through Sellers, by any third party, relating in any
way to any of the Purchased Assets, (e) to the Knowledge of Sellers,
Sellers' use of the Purchased Assets does not infringe upon or otherwise
violate the rights of others, and no one has asserted to Sellers that
Sellers' use of the Purchased Assets infringes the patents, trade secrets,
trade names, trademarks, service marks, copyrights or other intellectual
property rights of any other person or entity, and (f) to the Knowledge of
Sellers, the transfer of the Intellectual Property to, and use by, Buyer
pursuant to the transaction contemplated by this Agreement will not violate
or infringe on the rights of others with respect to any of such
Intellectual Property.
4.6 Loans and Contracts.
-------------------
(a) Indebtedness.
------------
Schedule 4.6(a) sets forth a complete and accurate list or description of
all instruments or other documents ("Debt Instruments") relating to any
direct or indirect indebtedness for borrowed money of Sellers, as well as
indebtedness by way of capital leases, lease-purchase arrangements,
guarantees, undertakings on which others rely in extending credit and all
conditional sales contracts, chattel mortgages and other security
arrangements with respect to personal property used or owned by Sellers.
(b) Contracts.
---------
(i) Sellers have delivered or made available to Buyer true, complete
and accurate copies of all of the Contracts requiring an
aggregate annual expenditure or receipt in excess of Fifty
Thousand Dollars ($50,000) (the "Material Contracts"). Schedule
1.1(a)(iv) indicates each of the Contracts which constitutes a
Material Contract. All Material Contracts are legal, valid,
binding, in full force and effect and enforceable against
Sellers, and, to the Knowledge of Sellers, against each other
party thereto. There does not exist under any Material Contract
any violation, breach or event of default, or event or condition
that, after notice or lapse of time or both, would constitute a
violation, breach or event of default thereunder, on the part of
Sellers or, to the Knowledge of Sellers, any other person. The
enforceability of all Material Contracts will not be affected in
any manner by the execution, delivery or performance of this
Agreement (except that any Material Contract assumed by Buyer may
be enforceable by Buyer and not Sellers), and, except as set
forth on Schedule 4.6(b), no Material Contract contains any
assignment or change in control or similar terms or conditions
that will become applicable as a result of the consummation of
the transactions contemplated by this Agreement.
17
(ii) Except as set forth on Schedule 4.6(b), no Material Contract has
been materially delayed or decreased or terminated, or to the
Knowledge of Sellers, has any party to such contract threatened
to materially delay or decrease or terminate, or given notice of
its intention to materially delay or decrease or terminate its
usage of Sellers' services under any Material Contract.
(iii) Except as set forth on Schedule 4.6(b), all consents (if they
are required) needed to enable Buyer to assume the Material
Contracts and continue the Business without interruption shall be
received prior to the Closing. The Material Contracts listed on
Schedule 4.6(b) hereto require consent before the assignment to
the Buyer.
(c) Insurance.
---------
All insurance policies of Sellers now in force (including
comprehensive general liability, personal and professional liability,
automobile, boiler and machinery, fire and lightning, marine,
endowment, life, and worker's compensation) ("Insurance Policies") and
any self-insurance arrangements of Seller are listed in Schedule
4.6(c), and such policies will be valid through Closing, and true and
complete copies of such policies have been provided or made available
to Buyer. All such policies are in full force and effect and provide
insurance in such amounts and against such risks as is customary for
companies engaged in businesses comparable to the Business. Sellers'
loss history under the Insurance Policies for the three years prior to
the date hereof has been provided to Buyer. Except as set forth on
Schedule 4.6(c), all of Sellers' Insurance Policies are
occurrence-based policies.
(d) Status.
------
Except as disclosed on Schedule 4.6(d): (i) Sellers have not assigned
any of their rights or obligations under (and are not otherwise
restricted for any reason from enjoying the full benefits under) any
Intellectual Property License, Debt Instrument, Contract or Lease;
(ii) neither Sellers nor, to the Knowledge of Sellers, any other party
is in material default in connection with any Intellectual Property
License, Debt Instrument, Contract or Lease; (iii) to the Knowledge of
Sellers, no act or event has occurred which, with notice or lapse of
time or both, would constitute a material default under any
Intellectual Property License, Debt Instrument, Contract or Lease;
(iv) to the Knowledge of Sellers, there is no basis for any claim of
material default under any Intellectual Property License, Debt
Instrument, Contract or Lease; (v) there is no outstanding notice of
cancellation or termination received by Sellers in connection with any
Intellectual Property License, Debt Instrument, Contract or Lease;
(vi) each Intellectual Property License, Debt Instrument, Contract or
Lease is the valid and binding agreement of the parties thereto which
is in full force and effect and is enforceable in accordance with its
terms except, with respect to such other party, to the extent that
such enforceability may be limited by, or subject to: (A) the effect
of any applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting the
enforceability of creditors' rights generally, (B) the availability of
specific performance or injunctive relief, which may be subject to the
discretion of the court before which any proceeding for such remedies
may be brought, and (C) the exercise by any court of equitable
judicial discretion before which any proceeding may be brought; and
(vii) Sellers have not received any communication proposing any
termination, material amendment or change to any Intellectual Property
License, Debt Instrument, Contract or Lease.
18
4.7 Officers and Directors Employment Relationships.
-----------------------------------------------
Schedule 4.7 sets forth a true and complete list of all of the officers and
directors of each of the Sellers, specifying their office and annual rate
of compensation, and a true and complete list of employees of each of the
Sellers as of the date of this Agreement, setting forth each such
employee's title, compensation and date of hire. Schedule 4.7 sets forth
Sellers' policies and practices with respect to scheduling and eligibility
of employee compensation increases and bonuses. Except as set forth on
Schedule 4.7, all of the Sellers' employees are "at will" employees. Except
as set forth on Schedule 4.7, Sellers are not a party to any oral (express
or implied) or written: (i) employment agreement or (ii) agreement that
contains any severance or termination pay obligations, with any employee.
Sellers shall deliver true and correct copies (or, if not written, accurate
descriptions of the parties and terms) of such employment agreements to
Buyer prior to the Closing.
4.8 Employee and Fringe Benefit Plans.
---------------------------------
(a) Schedule 4.8 is a complete and accurate list of all employee benefit
plans and collective bargaining, labor and employment agreements or
other similar arrangements in effect which the Sellers, and any of
their ERISA Affiliates maintain, sponsor, contribute to, are liable
for (directly or indirectly) or are bound, legally or otherwise,
including, without limitation, any profit-sharing, deferred
compensation, bonus, payroll, sick leave, consulting, stock option,
stock purchase, pension, retainer, consulting, retirement, vacation,
change of control, disability, severance, welfare or incentive plan
policy, agreement, practice or arrangement; any plan, agreement or
arrangement providing for fringe benefits or perquisites to employees,
officers, directors or agents of the Sellers and any of their ERISA
Affiliates, including but not limited to benefits relating to
employer-supplied automobiles, clubs, medical, dental,
hospitalization, life insurance and other types of insurance, retiree
medical, retiree life insurance and any other type of benefits for
retired and terminated employees; any employment agreement; and any
other "employee benefit plan" (within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA") through the date of this Agreement) (herein referred to
individually as "Plan" and collectively as "Plans"). For purposes of
this Agreement, "ERISA Affiliate" means all persons and entities which
are treated as being under common control with the Sellers, their
subsidiaries or any ERISA affiliate under Section 414(b), (c), (m) or
(o) of the Code.
(b) True and complete copies of the following documents with respect to
any Plan of the Sellers, their subsidiaries, and each ERISA Affiliate,
as applicable, have been delivered to the Buyer: (i) the most recent
Plan document and trust agreement (including any amendments thereto
and prior plan documents, if amended within the last two years), (ii)
the last two IRS Form 5500 filings and schedules thereto, (iii) the
most recent IRS determination letter, (iv) all summary plan
descriptions, (v) a written description of each material non-written
Plan, (vi) each written communication to employees intended to
describe a Plan or any benefit provided by such Plan, (vii) the most
recent actuarial report, and (viii) all correspondence with the IRS,
the Department of Labor and the Pension Benefit Guaranty Corporation
("PBGC") concerning any controversy. Each report described in clause
(vii) accurately reflects the funding status of the Plan to which it
relates and subsequent to the date of such report there has been no
adverse change in the funding status or financial condition of such
Plan.
(c) Each Plan is and has been maintained in compliance in all material
respects with applicable law, including but not limited to ERISA, and
the Code and with any applicable collective bargaining agreements or
other contractual obligations.
(d) Except as reflected on Schedule 4.8, with respect to any Plan that is
subject to Section 412 of the Code ("412 Plan"), there has been no
failure to make any contribution, pay any amount due or meet the
minimum funding standards as required by Section 412 of the Code,
Section 302 of ERISA or the terms of any such Plan. No 412 Plan has
incurred a minimum funding deficiency within the meaning of Section
412 of the Code whether or not waived. The assets of the Sellers,
their subsidiaries, and ERISA Affiliates are not now, nor will they
after the passage of time, be subject to any lien imposed under Code
Section 412(n) or ERISA Section 302 by reason of a failure of the
Sellers, any subsidiary, or any ERISA Affiliate to make timely
installments or other payments required under Code Section 412. Except
as reflected on Schedule 4.8, Sellers do not maintain any deferred
compensation plan subject to Section 409A of the Code.
19
(e) Except as reflected on Schedule 4.8, there are no pending or, to the
Knowledge of Sellers, threatened claims, actions or lawsuits, other
than routine claims for benefits in the ordinary course, asserted or
instituted against (i) any Plan or its assets, (ii) any ERISA
Affiliate with respect to any 412 Plan, or (iii) any fiduciary with
respect to any Plan for which the Sellers, their subsidiaries, or any
ERISA Affiliate may be directly or indirectly liable, through
indemnification obligations or otherwise.
(f) Except as reflected on Schedule 4.8, during the last two years there
have been no amendments to any Plan, no written interpretation or
announcement (whether or not written) by the Sellers, any subsidiary,
or any ERISA Affiliate relating to any Plan, there have been and are
no negotiations, demands, or proposals which are pending that concern
any Plan, nor has any Plan been established, which resulted in or
could result in a material increase in (i) the accrued or promised
benefits of any employees of the Sellers, or any subsidiary, or any
ERISA Affiliate and (ii) any material increase in the level of expense
incurred in respect thereof.
(g) Except as reflected on Schedule 4.8, the Sellers, their subsidiaries,
and their ERISA Affiliates has funded or will fund each Plan in
accordance with the terms of such Plan through the Closing Date,
including the payment of applicable premiums on any insurance contract
funding a Plan, for coverage provided through the Closing Date.
(h) Each Plan that is intended to be a tax qualified plan under Section
401(a) of the Code ("Tax Qualified Plan") has been determined by the
Internal Revenue Service to qualify under Section 401 of the Code, and
the trusts created thereunder have been determined to be exempt from
tax under the provisions of Section 501 of the Code, and nothing has
occurred, including the adoption of or failure to adopt any Plan
amendment, which would adversely affect its qualification or
tax-exempt status.
(i) Any surrender, finance or penalties charges (and the total dollar
amount thereof) that would be imposed on the investments held by any
Tax Qualified Plan (including plans with a cash or deferred
arrangement under Section 401(k) of the Code) on the liquidation of
the investments in such plans is reflected on Schedule 4.8.
4.9 Labor Relations.
---------------
Sellers are (and, at all times since January 1, 2002, have been) in
material compliance with all federal, state, local and other applicable
laws respecting employment and employment practices, terms and conditions
of employment and wages and hours. Except as set forth on Schedule 4.9,
there is (and, at all times since January 1, 2002, has been) no unfair
labor practice, complaint, charge or other matter against or involving
employees, former employees or agents of Sellers pending or threatened
before any governmental authority. There is no (and, at all times since
January 1, 2002, has not been) labor strike, dispute, organizing effort,
slow down, stoppage or other labor difficulty pending, involving or, to the
Knowledge of Sellers, threatened, against or affecting the employees,
former employees or agents of Sellers. No grievance which might have an
adverse effect on Sellers or on the conduct of the Business nor any
arbitration proceeding arising out of or under collective bargaining
agreements relating to employees of Sellers is pending, and no claim
therefor exists. There is (and, at all times since January 1, 2002, has
been) no collective bargaining agreement which is binding on Sellers.
20
4.10 Litigation.
----------
Except as set forth on Schedule 4.10, Sellers are not (and, to the
Knowledge of Sellers at all times have not been) (i) engaged in, a party
to, subject to or, to the Knowledge of Sellers, threatened with any claim,
enforcement action, administrative proceeding, legal or equitable action,
or other proceeding of any kind (whether as plaintiff, defendant or
otherwise and regardless of the forum or the nature of the opposing party)
which seeks damages, an injunction or other relief against Sellers; or
(iii) a party to or subject to any judgment, order or decree against
Sellers, the Business or the Purchased Assets. Sellers have not received
notice of any investigation, threatened or contemplated, by any federal or
state governmental authority or agency, involving any claim or demand
against Sellers, the Business (including the Hospitals) or the Purchased
Assets, which claim or demand remains unresolved. To the Knowledge of
Sellers, no circumstances exist involving the safety aspects of the
Business and operations that would create an obligation upon Sellers to
report such circumstances to any state, local or federal governmental
authority or agency. There has been no reservation of rights by any
insurance carrier, and, to the Knowledge of Sellers, no such reservation is
threatened, concerning the coverage of Sellers with respect to any matter
described in this Section 4.10.
4.11 Compliance with Laws.
(a) Generally.
---------
Except as set forth in Schedule 4.11(a) attached hereto, and except
with respect to compliance with Environmental Laws which is addressed
under Section 4.20 below, Sellers are in full compliance in all
respects with all applicable laws, rules, regulations including,
without limitation, the Health Care Laws (as defined below),
ordinances or orders of any court or federal, state, county, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, except for those laws, rules, regulations, ordinances
or orders, the failure with which to comply would not reasonably be
expected to have a Material Adverse Effect, and Sellers have not
received any notice, written or otherwise, of noncompliance with
respect thereto. Since January 1, 2002, all financial records and
other documents required to be maintained by Sellers have been
continuously maintained by Sellers, and all patient records have been
continuously maintained by Sellers for such period or periods required
by applicable law. For purposes of this Agreement, the term "Health
Care Laws" shall mean all applicable federal, state or local health
care laws, rules and regulations, including without limitation those
relating to the payment or receipt of illegal remuneration, including
42 U.S.C. ss. 1320a-7b(b) (the Medicare/Medicaid anti-kickback
statute), 42 U.S.C. 1395nn (the Stark Statute), 42 U.S.C. ss.
1320a-7a, 42 U.S.C. ss. 1320a-7b(a), 42 U.S.C. ss. 1320a-7b(c) and any
applicable state laws governing kickbacks and matters similar to such
federal statutes.
(b) Permits.
-------
Without limiting the foregoing: (i) Sellers have all material
occupancy certificates and other material licenses, permits, approvals
and certificates, including, without limitation, certificates of need
("Permits") required in connection with their ownership, possession,
use, occupancy or operation of any of the Purchased Assets and the
Hospitals owned, leased or used by each of them; (ii) all of the
Permits are in full force and effect; and (iii) each of the Sellers
are (and have been) in material compliance with the Permits. Schedule
4.11(b) sets forth a complete and accurate listing of all Permits
required for the conduct of Sellers' business, except for those
Permits, the failure of which to obtain, would not reasonably be
expected to have a Material Adverse Effect. Sellers are currently
complying in all material respects with their respective obligations
under each of the Permits, agree to continue to do so through the
Closing Date, and all such Permits are in full force and effect. No
notice from any authority in respect to the threatened, pending or
possible revocation, termination, suspension or limitation of any of
the Permits has been given to Sellers, nor do Sellers have actual
knowledge of the proposed or threatened issuance of any such notice.
All reasonable steps have been taken to correct all deficiencies
identified in any state licensing survey reports received by the
Sellers in the two (2) year period prior to the Execution Date and a
description of any uncorrected deficiency is set forth in Schedule
4.11(b) attached hereto.
21
4.12 Transactions with Affiliates.
----------------------------
With respect to the Purchased Assets, except as disclosed on Schedule 4.12,
no officer or director of Sellers, nor any "affiliate" or "associate" (as
such terms are defined in the rules and regulations of the Securities and
Exchange Commission under the Securities Act of 1933, as amended) of any of
the foregoing:
(a) has been a party to any lease, sublease, contract, agreement,
commitment, understanding or other arrangement of any kind whatsoever,
involving any such person and Sellers;
(b) owns directly or indirectly, in whole or in part, any property that
Sellers use or otherwise have rights in respect of; or
(c) has any cause of action or other claim whatsoever against, or owed any
amounts to, Sellers other than (i) for compensation (including fringe
benefits) to officers and employees disclosed pursuant to Section 4.7
and for reimbursement of ordinary and necessary expenses incurred in
connection with employment by Sellers; and (ii) as otherwise disclosed
pursuant to this Agreement.
4.13 Accreditation/Surveys.
---------------------
Except as set forth on Schedule 4.13, the Hospitals are currently
accredited by the Joint Commission on Accreditation of Healthcare
Organizations (the "JCAHO"). All reasonable steps have been taken to
correct all deficiencies referenced in the Hospitals' most recent JCAHO
accreditation survey report, the Hospitals' fire marshal's surveys for the
past two (2) years and the Hospitals' boiler inspection reports for the
past two (2) years and a description of any uncorrected deficiency is set
forth on Schedule 4.13 attached hereto.
4.14 Medicare and Medicaid; Third Party Payors.
-----------------------------------------
Except as set forth on Schedule 4.14, Sellers have not received notice that
any of the Hospitals are subject to any restriction or limitation on the
receipt of payment under Title XVIII of the Social Security Act
("Medicare") and Title XIX of the Social Security Act ("Medicaid"). The
Hospitals are "providers" with valid and current provider agreements and
with one or more provider numbers with Medicare, Medicaid, Tricare/CHAMPUS
and successor programs (the "Government Programs") through intermediaries.
Except as set forth on Schedule 4.14, each of the Hospitals is in
compliance with the conditions of participation for the Government Programs
in all material respects. Except as set forth on Schedule 4.14, there is
not pending, nor to the actual Knowledge of Sellers or the Hospitals
threatened, any proceeding or investigation under the Government Programs
involving Sellers, the Hospitals or any of the Purchased Assets. The
Hospital located in Tulsa, Oklahoma and the Hospital located in Lafayette,
Louisiana satisfy the Medicare requirements for qualification as a
long-term care hospital, including, without limitation, the required
average inpatient length of stay for Medicare inpatients. The consummation
of the transactions contemplated by this Agreement and the Other Agreements
does not and will not with the passage of time result in the failure by the
Hospital located in Tulsa, Oklahoma and/or the Hospital located in
Lafayette, Louisiana to satisfy the Medicare requirements for qualification
as long-term care hospitals.
4.15 Cost Reports.
------------
To the Knowledge of Sellers, Sellers have timely filed, caused to be timely
filed and, as to reports due after the Closing, such Sellers shall timely
file, all of the Seller Cost Reports and other reports of every kind
whatsoever that are required, by law, contract, or otherwise, to have been
filed or made with respect to the purchase of services of the Hospitals by
third party payors, including but not limited to Government Programs, and
other insurance carriers, and all such reports are or will be complete and
accurate when filed. Except as disclosed on Schedule 4.15, to the Knowledge
of Sellers, each of the Hospitals are and have been in compliance with
filing requirements with respect to the Seller Cost Reports. The Seller
Cost Reports do not claim, and none of the Hospitals has received, payment
or reimbursement in excess of the amount provided or allowed by applicable
law or any applicable agreement, except where excess reimbursement was
noted on the cost report. Except as disclosed on Schedule 4.15 there are no
material claims, actions or appeals pending before any commission, board or
agency, including any fiscal intermediary or carrier, federal, state or
local governmental body or entity, or the Center for Medicare and Medicaid
Services, with respect to the Seller Cost Reports, on or before the date of
this Agreement. Except as set forth on Schedule 4.15, there are no facts or
circumstances which may reasonably be expected to give rise to any material
disallowance under the Seller Cost Reports.
22
4.16 Exclusion from Government Programs.
----------------------------------
Since January 1, 2002, except as listed on Schedule 4.16, none of the
Hospitals and no employee, independent contractor, officer or director of
the Hospitals have been (i) excluded from participating in any federal
health care program (as defined in 42 U.S.C. ss.1320a-7b(f)), (ii) subject
to sanction pursuant to 42 U.S.C. ss.1320a-7a or 1320a-8, or (iii)
convicted of a crime described at 42 U.S.C. ss.1320a-7b.
4.17 Compliance Program.
------------------
Except as described on Schedule 4.17, (a) Sellers are not a party to a
Corporate Integrity Agreement with the Office of Inspector General of the
Department of Health and Human Services, (b) Sellers have no ongoing
reporting obligations pursuant to any Settlement Agreement entered into
with any governmental entity, and (c) since January 1, 2002, Sellers have
not received any complaints (written complaints, complaints submitted using
the compliance "hotline" or complaints communicated during exit interviews)
from employees, independent contractors, vendors, physicians, or any other
person that would indicate that Sellers have violated any law or
regulation.
4.18 Medical Staff.
-------------
Except as set forth on Schedule 4.18 attached hereto, there are no pending
or, to the Knowledge of Sellers, threatened appeals, challenges,
disciplinary or corrective actions, or disputes involving applicants to the
Hospitals' medical staffs, current members of the Hospitals' medical staffs
or affiliated health professionals.
4.19 Hill Burton and FEMA Grant Obligations.
--------------------------------------
Hospitals have no outstanding obligations under any loans, grants or loan
guarantees pursuant to the Hospital Survey and Construction Act of 1946
(Hill-Burton) or made by FEMA, and the transactions contemplated hereby
will not result in any obligation on Purchaser to repay any such loans,
grants or loan guarantees.
4.20 Environmental.
-------------
(a) Except as set forth on Schedule 4.20, neither the Sellers, the Real
Property Owners nor any predecessor in interest has caused or
permitted materials to be treated, stored, disposed of, released as
that term is defined in 42 U.S.C. ss.9601(22), deposited or recycled
on, under or at any of the Real Properties (as defined herein) or any
real property which is the subject of a Real Property Lease, which
materials, if present, would require investigation, clean-up, removal,
response or remedial action or would create any other obligations
under Environmental Laws ("Response").
(b) Except as set forth on Schedule 4.20, there are not now, nor have
there ever been, underground or above-ground storage or disposal tanks
or other facilities on, under, or at any of the Real Properties or any
real property which is the subject of a Real Property Lease which
contained Hazardous Substances or other materials which, if found to
have leaked or to be present in soil, groundwater or surface water,
would require Response under Environmental Laws.
(c) Except as set forth on Schedule 4.20, there are no past or existing
conditions which would subject the Real Property Owners, Sellers or
Buyer to damages, penalties, actions, injunctive relief, expenses
(including capital expenditures) or Response costs under Environmental
Laws or which require or are likely to require Response pursuant to
Environmental Laws by the Real Property Owners, Sellers or Buyer.
There are no Hazardous Substances in or on any of the Real Properties
or any real property which is the subject of a Real Property Lease or
used or generated in any operation of the Business, including, but not
limited to, the operation of the Hospitals.
23
(d) Neither the Real Property Owners nor Sellers are subject to any
judgment, decree, order, or formal or informal commitment, or citation
related to or arising out of Environmental Laws, nor have the Real
Property Owners or Sellers been named, listed or subject to any
request for information as potentially responsible party by any
governmental body or agency in a matter arising under any
Environmental Laws. To the Knowledge of the Sellers, the Real Property
Owners and Sellers possess all permits, licenses and approvals
required under Environmental Laws.
For purposes of this Agreement, the term "Environmental Laws" means
all federal, state and local laws, statutes, regulations, ordinances,
codes, rules and other governmental restrictions, requirements and
policies that regulate, impose standards of liability or conduct
concerning Hazardous Substances and or relating to the response to
Hazardous Substances, emission of air pollutants, discharge of water
pollutants or process waste water, or otherwise relating to the
environment or Hazardous Substances and solid waste including, but not
limited to, the Federal Clean Air Act, the Federal Resource
Conservation and Recovery Act, the Federal Comprehensive Environmental
Response, Compensation and Liability Act, ("CERCLA") or their state or
local counterparts now or at any time hereafter in effect. "Hazardous
Substance" shall include the meaning assigned to it in CERCLA and, in
addition, shall include fuel oil, petroleum, any petroleum-based
product, pollutant, contaminant, asbestos, hazardous materials waste
and any other substances which are regulated in any manner under
Environmental Laws.
4.21 Real Property.
-------------
(a) Schedule 4.21(a) attached hereto contains a true, correct and complete
list of the real property utilized by the Sellers in connection with
the Business and the Clear Lake Excess Property (the "Real
Properties") and name of the sole owner of each such Real Property
(the "Property Owner").
(b) Except as set forth on Schedule 4.21(b) attached hereto, the Property
Owners (i) to the Knowledge of Sellers, are the sole owners in fee
simple of the Real Properties and have not assigned, pledged, leased,
transferred or otherwise encumbered their interests in the Real
Properties, (ii) have the right to sell the Real Properties, (ii) are
entitled to prepay any existing financing and to obtain a release
thereof as a lien against the Real Properties and will do so prior to
or in connection with the Closing contemplated hereunder. Except as
set forth in Schedule 4.21(b), Sellers have no knowledge of any person
or entity with any right of first refusal, option or similar rights to
acquire any interest in the Real Properties or any portion thereof.
(c) Except as set forth on Schedule 4.21(c) attached hereto, there is no
pending or, to the Knowledge of the Sellers, threatened, condemnation
or eminent domain proceeding with respect to the Real Properties or
any portion thereof or interest therein or with respect to property
adjacent thereto.
(d) Except as set forth on Schedule 4.21(d) attached hereto, to the
Knowledge of the Sellers, there are no taxes or betterment assessments
other than ordinary real estate taxes pending or payable against the
Real Properties, and there are no contingencies existing under which
any assessment for real estate taxes may be retroactively filed
against the Real Property; there are no taxes or levies, permit fees
or connection fees which must be paid respecting existing curb cuts,
sewer hook-ups, water-main hook-ups or services of a like nature. All
taxes and assessments associated with the Real Properties which are
due and payable have been paid in full.
24
(e) To the Knowledge of Sellers, adequate water, gas and electrical
supply, storm and sanitary sewerage facilities and all other required
or reasonably desired public utilities are available for the Real
Properties and are either extended to the boundary thereof or pass
through adjoining land subject to validly existing easement or similar
rights permitting such use.
(f) Except as set forth in Schedule 4.21(f), to the Knowledge of Sellers,
the buildings, plants, improvements, structures and fixtures located
on the Real Properties including without limitation, heating,
ventilation and air conditioning systems, plumbing and electrical
systems, roof, structure, foundation and floors are free from material
defects and are in good operating condition and repair adequate for
their present use in the operation of the Business, subject to normal
wear and tear.
(g) Except as set forth in Schedule 4.21(g), to the Knowledge of Sellers,
the Real Properties are in compliance, in all material respects, with
all applicable statutes, ordinances, rules and regulations, federal,
state and local (including, but not limited to, applicable zoning and
other land use restrictions) to the extent required. To the Knowledge
of Sellers, all obligations of the Property Owners or the Real
Properties with regard to applicable covenants, easements and
restrictions against the Real Properties have been and are being
performed in a proper and timely manner. No notice from any county,
township or other governmental authority has been received by the
Sellers or Property Owners, or has been served upon the Real Property,
regarding (i) the proposed institution of, or change in, the zoning
for the Real Property, (ii) the need for any work, repair,
construction, alteration or installation on or in connection with the
Real Properties which has not been substantially completed, (iii) the
lack of compliance of the Real Properties, or the business presently
conducted thereon by the Sellers, with any applicable statutes,
ordinances, rules or regulations, federal, state or local (including,
but not limited to, applicable zoning and other land use
restrictions), (iv) any pending public improvements, liens or special
assessments to be made in respect of, or assessed against, the Real
Property, or (v) any claims, causes of action, lawsuits or legal
proceedings pending or threatened regarding the ownership, use or
possession of the Real Properties
(h) Schedule 4.21(h) sets forth each written or oral sale agreement,
lease, sublease or rental agreement to which the Real Properties are
subject (the "Real Property Agreements"). Schedule 4.21(h) describes
all oral Real Property Agreements required to be disclosed on such
schedule, and true and complete copies of all written Real Property
Agreements required to be disclosed have been heretofore delivered to
Buyer. With respect to each of the Real Property Agreement: (A)
neither any Property Owner, Seller nor, to the Knowledge of Sellers,
any other party is in default in connection with any Real Property
Agreement; (B) no act or event has occurred which, with notice or
lapse of time or both, would constitute a default under any Real
Property Agreement with respect to any Property Owner or Seller or, to
the Knowledge of Sellers, any other party; (C) there is no basis for
any claim of default under any Real Property Agreement with respect to
any Property Owner or Seller or, to the Knowledge of Sellers, any
other party; (D) no Property Owner or Seller has given or received any
notice of cancellation or termination in connection with any Real
Property Agreement; (E) each Real Property Agreement Lease is the
valid and binding agreement of the Property Owners and Seller(s) who
is/are party thereto, and, to the Knowledge of Sellers, the other
party thereto which is in full force and effect and is enforceable in
accordance with its terms, except, with respect to such other party,
to the extent that such enforceability may be limited by, or subject
to: (i) the effect of any applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar
laws affecting the enforcement of creditors' rights generally; (ii)
the availability of the remedies of specific performance or injunctive
relief, which may be subject to the discretion of the court before
which any proceeding for such remedies may be brought; and (iii) the
exercise by any court of equitable judicial discretion before which
any proceeding may be brought; (F) except as disclosed on Schedule
4.21(h), no Real Property Agreement will be affected by, or require
the consent of or payment to any other party to avoid an event of
default, an event of termination or other adverse effect with respect
to such by reason of the transactions contemplated by this Agreement.
25
(i) Sellers have delivered or made available to Buyer full and complete
copies of all maintenance records, service reports, warranties and
other records in the possession of Sellers or Property Owners
regarding the Real Properties and, to the Knowledge of Sellers, have
disclosed to Buyer all capital expenditures with respect to the Real
Properties for the past three years.
4.22 Commissions.
-----------
Except for First Albany Capital, whose fees will be paid by Sellers, no
person, firm or corporation is entitled to any commission or broker's or
finder's fee in connection with the transactions contemplated by this
Agreement by reason of any act or omission of Sellers.
4.23 Generally.
---------
No representation or warranty by Sellers in this Agreement or in any
Exhibit, Schedule or closing certificate furnished or to be furnished to
Buyer pursuant to this Agreement and the related agreements referred to
herein or in connection with the transactions contemplated herein or
therein by this Agreement contains or will contain any untrue statement of
a material fact, or omits or will omit to state a material fact, necessary
to make the statements herein or therein not misleading.
ARTICLE 5
---------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Sellers as of the date of
this Agreement as follows:
5.1 Status of Buyer.
---------------
(a) Corporate Existence and Status.
------------------------------
Buyer is a corporation duly incorporated, organized, entitled to
conduct business and validly existing in good standing under the laws
of the State of Delaware.
(b) Corporate Power.
---------------
Buyer has the corporate power to own and lease its properties and
otherwise to conduct its business.
(c) Authorization.
-------------
(i) Buyer has the right, power and authority to enter into this
Agreement and the related agreements referred to herein to which
it is a party and to consummate the transactions contemplated by,
and otherwise to comply with and perform its obligations under,
this Agreement and the related agreements referred to herein;
(ii) The execution and delivery by Buyer of this Agreement and the
related agreements referred to herein to which Buyer is a party
and the consummation by Buyer of the transactions contemplated
by, and other compliance with and performance of its obligations
under, this Agreement and the related agreements referred to
herein have been duly authorized by all necessary corporate
action on the part of Buyer in compliance with governing or
applicable agreements, instruments or other documents (including
its Certificate of Incorporation and Bylaws (each as amended))
and applicable law; and
26
(iii) Each of this Agreement, the Promissory Notes and the related
agreements referred to herein to which Buyer is a party
constitutes the valid and binding agreement of Buyer that is
enforceable against Buyer in accordance with its terms.
(d) Absence of Violations or Conflicts.
----------------------------------
The execution and delivery of this Agreement by Buyer and the
consummation of the transactions contemplated by, or other compliance
with or performance under, this Agreement, the Promissory Notes and
the related agreements referred to herein do not and will not with the
passage of time or giving of notice or both:
(i) constitute a violation of, be in conflict with, constitute a
default or require any payment under, permit a termination of,
require any consent or approval under, or result in the creation
or imposition of any lien, encumbrance or other adverse claim or
interest upon any of the properties of Buyer under (A) any
material contract, agreement, commitment, undertaking or
understanding to which Buyer is a party or to which Buyer or any
of its assets or properties are subject or bound, (B) any
judgment, decree or order of any governmental authority to which
Buyer or any of its properties are subject or bound, (C) any
applicable law, or (D) any governing or applicable agreements,
instruments or other documents to which Buyer is a party
(including Articles or Certificate of Incorporation and Bylaws
(each as amended)); or
(ii) create, or cause the acceleration of the maturity of, any debt,
obligation or liability of Buyer.
(e) No Governmental Consents Required.
---------------------------------
Except as set forth on Schedule 5.1(e), no consent, approval, order or
authorization of, or registration, declaration or filing with, any
governmental authority on the part of Buyer is required in connection
with the execution or delivery of this Agreement, the Promissory Notes
and the related agreements referred to herein of therein, or the
consummation of the transactions contemplated by, or other compliance
with or performance under, this Agreement, the Promissory Notes and
the related agreements referred to herein by Buyer.
5.2 Commissions and Fees.
--------------------
Except for LSC Healthcare Partners, Inc., whose fees will be paid by the
Buyer, no person, firm or corporation is entitled to any commission or
broker's or finder's fee in connection with the transactions contemplated
by this Agreement by reason of any act or omission of Buyer.
5.3 Financial Capacity.
------------------
Buyer has, or has access to, sufficient funds to pay the Purchase Price as
required by this Agreement, and to make all other necessary payments in
connection with this Agreement.
5.4 Generally.
---------
No representation or warranty by Buyer in this Agreement or in any Exhibit,
Schedule or closing certificate furnished or to be furnished to Sellers
pursuant to this Agreement, the Promissory Notes and the related agreements
referred to herein or therein, or in connection with the transactions
contemplated herein or therein, contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material
fact, necessary to make the statements herein or therein not misleading.
27
ARTICLE 6
---------
COVENANTS OF SELLERS
--------------------
6.1 Conduct of Business by Sellers.
------------------------------
From the date hereof to the Closing Date, except as set forth on Schedule
6.1, and except for transactions contemplated by this Agreement or which
are expressly approved in writing by Buyer, Sellers shall refrain from:
(a) subjecting any of the Purchased Assets to any lien, encumbrance or
other claim of any kind;
(b) modifying, amending, altering or terminating (whether by written or
oral agreement, or any manner of action or inaction) any of the
Assumed Contracts;
(c) entering into any new contract or commitment, or incur or agree to
incur any liability or assume any obligation, except in the ordinary
course of business (which ordinary course of business shall include
renewals of any Lease or Contract), pursuant to which contract,
commitment, liability or obligation the total to be paid in the future
exceeds $100,000, and is not terminable by Sellers without cause with
ninety (90) days or less notice;
(d) increasing compensation payable or to become payable or making any
bonus payment to or otherwise entering into one or more bonus
agreements with any employee, except in the ordinary course of
business in accordance with Sellers' customary personnel policies;
(e) selling, assigning, leasing, or otherwise transferring or disposing of
any Purchased Assets, other than in the ordinary course of business,
unless there is comparable replacement thereof;
(f) acquiring (whether by purchase or lease), or agreeing to acquire, any
property, plant, equipment, other than in the ordinary course of
business if such asset or assets, in the aggregate, have a fair market
value exceeding $100,000; or
(g) taking or permitting any other action that, if taken or permitted
immediately prior to the execution of this Agreement, would constitute
a breach of or an exception to the representations and warranties in
ARTICLE 4 hereof or the covenants in ARTICLE 6, ARTICLE 7 and ARTICLE
8 hereof.
6.2 Affirmative Covenants Relating to Sellers.
-----------------------------------------
From the date hereof to the Closing Date, Sellers shall use their
reasonable best efforts to ensure that Sellers shall:
(a) maintain Sellers' property, liability and professional insurance in
amounts and with coverage at least as great as the amounts and
coverage in effect on the date of this Agreement;
(b) keep in Sellers' employ the present officers and key employees,
including the professional staff, of Sellers to preserve the goodwill
of those having business relations with Sellers;
(c) maintain the books, accounts and records of Sellers in a manner
consistent with past practice;
28
(d) allow, subject to applicable laws, rules and regulations, upon the
prior consent of Sellers, which consent shall not be unreasonably
withheld, Buyer and Buyer's employees, attorneys, auditors,
accountants and other authorized representatives, free and full access
during Sellers' normal business hours to the facilities, plants,
properties, books, records, documents and correspondence of Sellers,
including, but not limited to, historical financial information with
respect to the Assumed Contracts and employment records with respect
to the Retained Employees, in order that Buyer may have full
opportunity to make such investigation as Buyer may desire of the
Business; provided, however, that such access shall not unreasonably
interfere with the operations of Sellers, and any contractual
confidentiality requirements between Buyer and Sellers existing prior
to this Agreement shall remain in full force and effect, as
supplemented hereby, except as otherwise required by law (including
any required disclosure of the execution of this Agreement);
(e) (i) comply with all applicable law relating to Sellers, or to the
conduct of the Business, and (ii) conduct such Business in such a
manner so that on the Closing Date the representations and warranties
contained in this Agreement shall be materially true as though such
representations and warranties were made on and as of such date,
except for changes permitted or contemplated by the terms of this
Agreement;
(f) provide Buyer with prompt written notice of any change in the assets,
operations, liabilities, earnings, business or condition (financial or
otherwise) of Sellers which would have a Material Adverse Effect;
(g) operate the Business only in the ordinary course with the objective of
preserving Sellers' business organization intact; and
(h) make and continue to make or cause to be made all repairs and
maintenance that may be reasonably necessary to maintain the Purchased
Assets in as good as condition as they exist as of the date hereof.
6.3 Consents and Closing Conditions.
-------------------------------
Sellers shall use their commercially reasonable best efforts (a) to obtain
such third party and governmental consents, authorizations, approvals,
releases and terminations as may be required hereunder, and to take such
other actions as may be appropriate in order to fulfill the closing
conditions contained in Section 9.1 hereof, and (b) to cause the
representations and warranties of Sellers in ARTICLE 4 to be materially
true and correct on and as of the Closing Date.
6.4 Negotiations with Others.
------------------------
During the period from the date of this Agreement to the Closing Date, or
until such date as this Agreement may be terminated in accordance with its
terms, neither Sellers nor any of Sellers' managers, officers, counsel,
accountants, auditors or other agents retained by or acting on behalf of
Sellers, will (i) seek, solicit, initiate, encourage or otherwise
facilitate (including by way of furnishing information) the submission of
inquiries, proposals or offers from any corporation, partnership, person or
other entity or group (other than Buyer) relating to the possible
acquisition of stock or equity interests of Sellers or the possible
purchase of all or substantially all of the Purchased Assets, or any tender
or exchange offer, merger, reverse merger, consolidation, business
combination, recapitalization, spin-off, liquidation, dissolution, or
similar transaction involving, directly or indirectly, Sellers (each an
"Acquisition Proposal"), (ii) enter into, participate or cooperate in or
consider or pursue any discussions or negotiations regarding or that
reasonably may be expected to lead to an Acquisition Proposal or furnish to
any person or entity information concerning Sellers for purposes of
facilitating any Acquisition Proposal, or (iii) otherwise solicit or
cooperate in any way with, or assist, participate in, facilitate or
encourage any effort or attempt by any person to make or enter into an
Acquisition Proposal. Sellers shall notify Buyer in writing within 24 hours
following receipt of any unsolicited Acquisition Proposal or request for
information from any third party. Such written notification shall describe
in reasonable detail any such occurrence and identify the person or persons
involved.
29
6.5 Non-Compete Agreement.
---------------------
Sellers and each of John W. McRoberts, Janet L. Nicoll, John E. Lee,
Michael D. Martin and the Barbara H. Martin Trust shall enter into a
Non-Compete, Non-Solicitation and Confidentiality Agreement with the Buyer
in substance and form mutually agreed to among the parties (the
"Non-Compete Agreement").
6.6 Elimination of Indebtedness.
---------------------------
Prior to or contemporaneously with the Closing, the Sellers shall take all
actions necessary and appropriate to discharge any and all liens, claims,
mortgages, security interests and encumbrances affecting the Purchased
Assets and Sellers shall deliver UCC termination statements or other
evidence of such discharge to Buyer, which evidence shall be reasonably
satisfactory to Buyer.
6.8 Pre-Closing Financial Statements.
--------------------------------
Within twenty (20) calendar days following the end of each calendar month
prior to Closing, Sellers shall deliver to Buyer complete copies of the
unaudited balance sheet and related unaudited statements of income with
respect to the operation of the Business for each month then ended,
together with a year-to-date compilation and the notes, if any, related
thereto, which presentation shall be consistent with the provisions of
Section 4.2 which are applicable to the Sellers' Financial Statements.
6.9 Required Approvals.
------------------
Sellers shall reasonably cooperate with Buyer and its representatives and
attorneys: (a) in obtaining all consents, approvals, authorizations,
clearances, certificates of need and licenses required to carry out the
transactions contemplated by this Agreement, including, without limitation,
the approvals of governmental and regulatory authorities necessary to
provide for the assignment of the Medicare and Medicaid provider numbers of
Hospitals to Buyer or its designee(s), and (b) in the preparation of any
document or other material which may be required by any governmental agency
as a predicate to or result of the transactions contemplated herein.
6.10 Cost Report Matters.
-------------------
(a) Sellers shall prepare and timely file, or cause to be prepared and
filed, all Seller Cost Reports relating to the periods ending prior to
the Closing Date or required as a result of the consummation of the
transactions described herein. All terminating Seller Cost Reports
shall be submitted to Buyer fifteen (15) days prior to filing and
shall be filed by Sellers in a manner that is consistent with (i)
prior cost reports filed by Seller with respect to the Hospitals, and
(ii) applicable laws, rules and regulations.
(b) Buyer shall forward to Sellers any and all correspondence relating to
the Patient A/R, the Seller Cost Reports or rights to settlements and
retroactive adjustments on the Seller Cost Reports ("Agency
Settlements") within five (5) business days of receipt by Buyer. Buyer
shall not reply to any such correspondence without Sellers' written
approval. Buyer shall remit any receipts relating to the Patient A/R,
the Seller Cost Reports or the Agency Settlements within ten (10)
business days after receipt by Buyer (except those receipts to be
retained by Buyer for Transition Patients) and will forward any demand
for payments within ten (10) business days. If Sellers decline to
pursue any appeal with respect to any Seller Cost Reports which may
have a financial impact on Buyer, Buyer shall have the right, but not
the obligation to pursue the appeal on behalf of Sellers, Sellers
shall take all steps reasonably necessary to enable Buyer to pursue
such appeal and Sellers shall be entitled to any recovery thereon
which is attributable to the period prior to the Closing Date.
30
(c) Upon reasonable notice and during normal business office hours, Buyer
will reasonably cooperate with Sellers in regard to (i) the
preparation, filing, handling, and appeals of the Seller Cost Reports,
and (ii) any cost report disputes and/or other claim adjudication
matters relative to governmental program reimbursement.
6.11 Name Change.
-----------
On or prior to the Closing Date, at Sellers' cost and expense, each Seller
shall make all appropriate filings and take all other actions necessary or
appropriate to change each Sellers name to a name that does not use the
tradename "Meadowbrook," "Lafayette Rehab Associates," "Clear Lake
Rehabilitation Hospital," or "South Dade Rehab Associates" or any
combination or derivation thereof, to the reasonable satisfaction of Buyer
and shall deliver evidence of same to the Buyer.
ARTICLE 7
---------
COVENANTS REGARDING TAX MATTERS
-------------------------------
7.1 Returns and Payment of Taxes.
----------------------------
Each party shall be responsible for filing Forms W-2 with respect to the
2005 taxable year in accordance with the "Standard Procedure" described in
Rev. Proc. 2004-53, IRB 2004-34 (August 18, 2004). The responsibility for
all other information Returns shall be allocated similarly. Seller shall be
responsible for payment of any sales or use tax liability or other Taxes
resulting from the sale of the Purchased Assets as contemplated by this
Agreement. Sellers, at their expense, shall be responsible for the
preparation of all Returns required to be filed after the Closing Date with
respect to the Business that relate to taxable periods ending on or before
the Closing Date, and Sellers shall be responsible for payment in full of
all Taxes shown to be due thereon. All ad valorem taxes on personal or
movable property shall be prorated as of the Closing Date. Prior to the
Closing Date, Sellers shall not make any material tax elections and all
Returns shall be prepared consistent with past practices.
7.2 Cooperation and Records Retention.
---------------------------------
Sellers shall cause their accountants and other representatives to provide
to Buyer on a timely basis the information (including but not limited to
all work papers and records relating to Sellers that Sellers or their
accountants or other representatives have within their control and that may
be reasonably necessary in connection with the preparation of any and all
Returns required to be filed by Buyer or any other examination by any
taxing authority or administrative proceeding relating to Taxes. Sellers
agree that they will reasonably cooperate with Buyer, its accountants and
its other representatives, in a prompt and timely manner, in connection
with the preparation and filing of any and all Returns required to be filed
by Buyer or any other examination by any taxing authority or administrative
proceeding relating to Taxes. Sellers and Buyer shall retain or cause to be
retained, until the applicable statutes of limitations (including any
extensions and carryovers) have expired, copies of all Returns for all tax
periods beginning before the Closing Date, together with supporting work
schedules and other records or information that may be relevant to such
Returns.
7.3 Purchase Price Allocation.
-------------------------
Buyer and Sellers shall allocate the Purchase Price and the Assumed
Liabilities among the Purchased Assets for all purposes (including, without
limitation, the preparation of Form 8594) in a manner consistent with Code
Section 1060 and the regulations thereunder. Buyer and Sellers shall each
file asset acquisition statements on Form 8594 with their respective
federal income tax returns or other returns of income for the taxable year
that includes the first date assets are sold, which asset acquisition
statement shall be jointly prepared by Buyer and Sellers. All allocations
set forth on Form 8594 shall be acceptable to Buyer and Sellers. All
allocations contained on Form 8594 shall be subject to adjustment to
reflect (i) Sellers' selling expenses as a reduction of sales proceeds,
(ii) Buyer's acquisition expenses as an addition to the Purchase Price, and
(iii) any adjustments to the Purchase Price as defined in this Agreement,
except as required by law. Buyer and Sellers shall file all Returns and
information reports in a manner consistent with the allocation set forth on
the Form 8594.
31
ARTICLE 8
---------
ADDITIONAL COVENANTS OF THE PARTIES
-----------------------------------
8.1 Obligations Concerning Employees.
--------------------------------
(a) Subject to the satisfactory completion of Buyer's employment screening
process, Buyer shall offer employment at Closing to substantially all
of the employees of Sellers, and the employees accepting such
employment offer shall be referred to herein as the "Retained
Employees."
(b) On or prior to the Closing Date, at such time as shall be reasonably
acceptable to Buyer, Sellers shall notify all of the employees of
Sellers that the assets of Sellers are being sold to Buyer, that
certain employees will be offered employment by Buyer, and that any
decisions by Buyer regarding its hiring procedures or the hiring of
Sellers' employees will be communicated to the employees by Buyer.
(c) As soon as practicable after the Closing Date, Sellers shall issue to
all employees of Sellers as of the Closing Date payroll checks for all
earned salary, wages, incentive bonuses and other compensation and
benefits (net of usual withholdings) owed or accruing to such
employees for their services rendered through the Closing Date.
Sellers shall pay or otherwise discharge (and hold Buyer harmless with
respect to) all vacation pay, sick leave, personal days, incentive
bonuses, post-employment pay and severance payments of employees of
Sellers accrued as of the Closing Date.
(d) Sellers shall comply with all provisions of federal and state law
relating to the continuation of health insurance benefits for
terminated employees and their family members covered by Sellers'
applicable health plans. Sellers shall be responsible for providing
Worker Adjustment and Retraining Notification Act, 29 U.S.C. ss. 2101
et. seq. ("WARN Act") notices, if and to the extent required, in
connection with any terminations of Sellers' employees effected
pursuant to this Agreement, and shall be solely responsible for, and
will, hold Buyer harmless from, any WARN Act liability arising as a
result of any employee termination(s) occurring on or prior to the
Closing Date.
8.2 Excluded Assets and Excluded Liabilities; Misdirected Payments.
--------------------------------------------------------------
(a) Any asset (including Accounts Receivable) or any liability, all other
remittances and all mail and other communications that constitute, or
relate to, an Excluded Asset or an Excluded Liability and that is or
comes into the possession, custody or control of Buyer (or its
successors-in-interest or assigns, or its respective Affiliates) shall
forthwith be transferred, assigned or conveyed by Buyer (or its
respective successors-in-interest or assigns and its respective
Affiliates) to Sellers. In no event shall Buyer (and its respective
successors-in-interest and assigns and its respective Affiliates) have
any right, title or interest in or obligation or responsibility with
respect to such asset or liability except that Buyer shall hold such
asset in trust for the benefit of Sellers. Buyer shall have no right
to set-off such funds against other obligations asserted by Buyer to
be owed by Sellers hereunder or otherwise.
32
(b) Any asset or any liability, all other remittances and all mail and
other communications that constitute or relate to a Purchased Asset,
or an Assumed Liability and that is or comes into the possession,
custody or control of Sellers (or any of their respective
successors-in-interest or assigns, or their respective Affiliates)
shall forthwith be transferred, assigned or conveyed by Sellers (or
their respective successors-in-interest or assigns and their
respective Affiliates) to Buyer. In no event shall Sellers (and their
respective successors-in-interest and assigns and its respective
Affiliates) have any right, title or interest in or obligation or
responsibility with respect to such Purchased Asset or Assumed
Liability except that Sellers shall hold such asset in trust for the
benefit of Buyer; Sellers shall have no right to set-off such funds
against other obligations asserted by Sellers to be owed by Buyer
hereunder or otherwise.
(c) To the extent any funds are mistakenly forwarded to Sellers (or one of
their respective Affiliates) by any third parties on account of
services performed by or on behalf of the Hospitals from and after the
Closing Date, Sellers shall remit such misdirected funds to Buyer
within ten (10) business days after receipt thereof, to an account(s)
designated by Buyer. In no event shall Sellers (and their respective
successors-in-interest and assigns and their respective Affiliates)
have any right, title or interest in or obligation or responsibility
with respect to such funds except that Sellers shall hold such funds
in trust for the benefit of Purchaser; Sellers shall have no right to
set-off such funds against other obligations asserted by Sellers to be
owed by Buyer hereunder or otherwise.
(d) All costs incurred in forwarding assets or liabilities to the
appropriate party pursuant to this Section 8.2 shall be shared equally
by the parties.
8.3 Medical Staff Matters.
---------------------
Buyer acknowledges and agrees that the consummation of the transactions
contemplated by this Agreement at Closing shall, to the Knowledge of
Sellers, have no effect on (i) the rules and regulations, structure and
appointments of the medical staffs at the Hospitals, or (ii) the medical
staff memberships and respective clinical privileges of existing members of
such medical staffs as of the Closing Date.
8.4 Consents and Closing Conditions.
-------------------------------
Buyer shall use its reasonable best efforts (a) to obtain such third party
and governmental consents, authorizations, approvals, releases and
terminations as may be required hereunder, and to take such other actions
as may be appropriate in order to fulfill the closing conditions contained
in Section 9.2 hereof, and (b) to cause the representations and warranties
of Buyer in Article 5 to be true and correct on and as of the Closing Date.
8.5 Post-Closing Access to Information.
----------------------------------
Sellers and Buyer acknowledge that following the Closing, each party may
need access to information or documents in the control or possession of the
other party for the purposes of concluding the transactions contemplated
herein, audits, compliance with governmental requirements and regulations,
and the prosecution or defense of third party claims. Accordingly, Sellers
and Buyer agree that for a period of three (3) years after Closing, each
will make reasonably available to the other's agents, independent auditors,
counsel, and/or governmental agencies, upon written request and at the
expense of the requesting party, such documents and information as may be
available for periods prior and subsequent to Closing to the extent
necessary to facilitate concluding the transactions herein contemplated,
audits, compliance with governmental requirements and regulations, and the
prosecution or defense of claims.
8.6 Use of Controlled Substance Permits.
------------------------------------
To the extent permitted by applicable law, Buyer shall have the right, for
a period not to exceed one hundred twenty (120) days following the Closing
Date, to operate under the licenses and registrations of Sellers relating
to controlled substances and the operations of Hospital pharmacies, until
Buyer is able to obtain such licenses and registrations for itself. In
furtherance thereof, Sellers shall execute and deliver to Buyer at or prior
to the Closing a limited power of attorney in form and substance reasonably
acceptable to Buyer. Buyer shall apply for all such licenses and permits as
soon as reasonably possible before and after Closing and shall diligently
pursue such applications. Buyer shall fully indemnify and hold Sellers
harmless from and against all losses incurred, paid or required to be paid
by Sellers, resulting in whole or in part from the use of such licenses and
permits by Buyer.
33
8.7 Transition Services.
-------------------
Prior to the Closing Date, Buyer and Sellers shall negotiate in good faith
the terms and conditions of a mutually agreeable transition services
agreement (the "Transition Services Agreement"), pursuant to which Buyer
and Sellers shall, among other things, have reasonable access to the
personnel and resources of the other party following the Closing Date.
8.8 Purchase of Real Properties.
---------------------------
In the event that the conditions set forth in Section 9.1(e) or 9.2(d) have
not been satisfied on or prior to July 31, 2005, (i) Buyer shall negotiate
in good faith with the Property Owners with respect to the lease of the
Lafayette, Louisiana facility and the purchase of the remaining Real
Properties. In addition, Buyer, Sellers and the Property Owners shall take
all actions necessary or appropriate to make all filings and notices
required to be made pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act and pursuant to any applicable state laws as a result of
the transactions contemplated by this Agreement.
8.9 Transfer of Real Property.
-------------------------
(a) If requested by Buyer at any time prior to Closing, Sellers shall
cause Clear Lake Health Associates Limited Partnership to convey to
Buyer or its designee at Closing that certain parcel of land
consisting of approximately 3.3 acres located near the Hospital in
Webster, Texas (the "Clear Lake Excess Land") by special or limited
warranty deed, for no additional consideration. In addition to the
foregoing, Sellers shall cause Clear Lake Health Associates Limited
Partnership (i) to pay all transfer or other taxes associated with the
transfer of the Clear Lake Excess Land, (ii) to supply to any title
company selected by Buyer or its designee any affidavit or indemnity
reasonably requested by such title company in order to provide title
insurance, in such amounts and in such form as requested by and
acceptable to Buyer, (iii) to pay all liens or other charges
outstanding with respect to the Clear Lake Excess Land, such that
Buyer or its designee shall take title free and clear of all liens,
except for current year taxes and assessments, (iv) to make
commercially reasonable efforts to cure any title or survey objection
made by Buyer in good faith, and (v) otherwise to close such
transaction in a manner consistent with commercial real estate
practices customary in Webster, Texas.
(b) If requested by Buyer at any time prior to Closing, Sellers shall
cause MJR Holding Company, Inc to subdivide that certain parcel of
land on which the Hospital in Lafayette, Louisiana is located into two
separate legal lots, and to convey to Buyer or its designee at Closing
one of such parcels consisting of approximately 2.0 acres not
currently utilized in connection with the operation of such Hospital
(the "Lafayette Excess Land") by special or limited warranty deed, for
no additional consideration. In addition to the foregoing, Sellers
shall cause MJR Holding Company, Inc. (i) to pay all transfer or other
taxes associated with the transfer of the Lafayette Excess Land, (ii)
to supply to any title company selected by Buyer or its designee any
affidavit or indemnity reasonably requested by such title company in
order to provide title insurance on such subdivided parcel, in such
amounts and in such form as requested by and acceptable to Buyer,
(iii) to pay all liens or other charges outstanding with respect to
the Lafayette Excess Land, such that Buyer or its designee shall take
title free and clear of all liens, except for current year taxes and
assessments, (iv) to make commercially reasonable efforts to cure any
title or survey objection made by Buyer in good faith, and (v)
otherwise to close such transaction in a manner consistent with
commercial real estate practices customary in Lafayette, Louisiana.
(c) With respect to the Clear Lake Excess Land and the Lafayette Excess
Land, Sellers are not aware of, nor have Sellers or any of their
respective affiliates engaged in, any development proposals regarding
such parcels that are currently in process or that have been approved
or disapproved by the applicable governmental authority nor are the
Sellers or any of their respective affiliates aware of any
restrictions on the use or development of such parcels or any options
to lease or sell or otherwise transfer any interest in such parcels or
either of them.
34
8.10 Real Property Repairs.
---------------------
On or prior to the Closing, the Sellers shall, at the Sellers' sole cost
and expense and to the reasonable satisfaction of Buyer, take all measures
necessary or appropriate (i) fully to remediate and repair (x) mold and
related damage in the kitchen area of the Hospital in Miami, Florida and,
(y) water damage around the windows at the Hospital in Tulsa, Oklahoma, and
(ii) to cause the Hospital in Webster, Texas to implement the
recommendations contained in the Facility Accessibility Agreement report
prepared by The Access Partnership, L.P., dated March 23, 2004, with
respect to accessible parking and ramps. In the event Sellers fail to have
effected the foregoing by Closing, Buyer may withhold from the Purchase
Price and retain in escrow, 120% of the costs to effect those items that
Sellers have not effected by Closing (with such costs to be estimated by
Buyer in its sole discretion) and Buyer may complete such items and be
entitled to draw upon the escrow from time to time to pay the costs to
complete such items. Any unused portion of such escrowed funds shall be
disbursed to Sellers upon completion of such items and Sellers promptly
shall pay to Buyer any deficiency in the amount of such funds necessary to
pay for the items not completed by Sellers by Closing.
8.11 Tulsa Facility Syndication.
--------------------------
The Sellers shall not, at any time prior to or following the Closing,
consummate the proposed syndication to physicians of membership interests
representing approximately 15% of the equity ownership of Meadowbrook
Tulsa, and Sellers shall take all actions necessary or appropriate to
insure that there shall be no minority ownership of Meadowbrook Tulsa on
the Closing Date.
ARTICLE 9
---------
CONDITIONS TO CLOSING
---------------------
9.1 Buyer's Conditions to Closing.
-----------------------------
The obligations of Buyer to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment to Buyer's reasonable
satisfaction of each of the following conditions on or prior to the Closing
Date:
(a) Continued Truth of Warranties.
-----------------------------
The representations and warranties of Sellers contained herein shall
be true in all material respects on and as of the Closing Date with
the same force and effect as though made as of such date, except for
any variations permitted by this Agreement.
(b) Performance of Covenants.
------------------------
Sellers shall have performed in all material respects all covenants
and obligations and complied in all material respects with all
conditions required by this Agreement to be performed or complied with
by each of them on or prior to the Closing Date.
(c) No Material Adverse Effect.
--------------------------
There shall have been no change in the Real Properties or assets,
operations, liabilities, earnings, business or condition (financial or
otherwise) of Sellers having a Material Adverse Effect since January
1, 2005.
(d) Consents, Approvals and Authorizations.
--------------------------------------
The parties shall have obtained all consents, licenses, approvals,
permits, waivers, authorizations of governmental entities and third
parties necessary (a) for the effective assignment to Buyer of all
Assumed Contracts on the same terms and conditions as presently apply
to Sellers, without any transfer premium or penalty whatsoever to be
paid by Buyer, and (b) for the valid execution, delivery and
performance of this Agreement and the operation of the Business by
Buyer.
35
(e) Lease Agreements.
----------------
Buyer shall have entered into long-term lease agreements for each of
the Real Properties on terms and conditions satisfactory to Buyer in
its sole and absolute discretion.
(f) Action or Proceeding.
--------------------
No action or proceeding before a court of any other governmental
agency or body shall have been instituted or threatened which would
restrain or prohibit the transactions contemplated by this Agreement.
(g) Closing Documents.
-----------------
Sellers shall have delivered all documents required to be delivered by
each of them at the Closing, as more specifically set forth in ARTICLE
10, in each case in form and substance satisfactory to Buyer.
9.2 Sellers' Conditions to Closing.
------------------------------
The obligations of Sellers to consummate the transactions contemplated by
this Agreement shall be subject to the fulfillment to Sellers' reasonable
satisfaction of the following conditions on or prior to the Closing Date:
(a) Continued Truth of Warranties.
-----------------------------
The representations and warranties of Buyer herein contained shall be
true in all material respects on and as of the Closing Date with the
same force and effect as though made as of such date, except for any
variations permitted by this Agreement.
(b) Performance of Covenants.
------------------------
Buyer shall have performed in all material respects all covenants and
obligations and complied in all material respects with all conditions
required by this Agreement to be performed or complied with by it on
or prior to the Closing Date.
(c) Consents, Approvals and Authorizations.
--------------------------------------
The parties shall have obtained all consents, licenses, approvals,
permits, waivers, authorizations of governmental entities and third
parties necessary for the valid execution, delivery and performance of
this Agreement and the operation of the Business by Buyer.
(d) Sale of Real Properties.
-----------------------
The Property Owners shall have consummated the sale of the Real
Properties on terms and conditions satisfactory to the Property Owners
in their sole and absolute discretion.
(e) Action or Proceeding.
--------------------
No action or proceeding before a court of any governmental agency or
body shall have been instituted or threatened which would restrain or
prohibit the transactions contemplated by this Agreement.
(f) Closing Documents.
-----------------
Buyer shall have delivered the Purchase Price and all documents
required to be delivered by it at the Closing, as more specifically
set forth in ARTICLE 10, in form and substance reasonably satisfactory
to Sellers.
ARTICLE 10
----------
DOCUMENTS TO BE DELIVERED AT CLOSING
------------------------------------
10.1 Documents to be Delivered by Sellers.
------------------------------------
At the Closing, Sellers shall:
(a) Execute and deliver to Buyer any and all instruments of sale,
assignment and transfer and other documents reasonably requested by
Buyer in order to effect the transfer of the Purchased Assets to Buyer
to effect the assumption of the Assumed Liabilities by Buyer or
otherwise to facilitate the transactions contemplated hereby;
36
(b) Deliver to Buyer a certificate of incumbency and copies of the
resolutions adopted by, as applicable, the board of directors and
shareholders, the managers and members. and the partners of the
Sellers, authorizing the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, duly
certified as of the Closing Date by the Secretary of Sellers;
(c) Deliver to Buyer a certificate of Sellers, dated as of the Closing
Date, to the effect that the representations and warranties of Sellers
as contained in ARTICLE 4 of this Agreement are true and correct in
all material respects as of such Closing Date, and that the covenants
of Sellers as contained in ARTICLE 6, ARTICLE 7 and ARTICLE 8 of this
Agreement required to be performed or complied with in all material
respects on or prior to the Closing Date have been so performed or
complied with;
(d) Deliver to Buyer a certificate of good standing or its equivalent,
dated not more than ten (10) days prior to the Closing Date, attesting
to the good standing of Sellers, as applicable, as corporations or
limited liability companies under the laws of their states of
incorporation or organization;
(e) To the extent any assignments, consents or approvals shall be
necessary to any of the transactions herein contemplated, including
but not limited to the transfer of the Client Contracts from Sellers
to Buyer, deliver to Buyer copies of all such assignments, consents or
approvals;
(f) Deliver to Buyer the definitive Non-Compete Agreements duly executed
by all parties thereto;
(g) Deliver to Buyer the definitive Transition Services Agreement duly
executed by all parties thereto;
(h) Deliver to Buyer such other instruments, certificates, consents or
other documents as are reasonably necessary to carry out the
transactions contemplated by this Agreement and to comply with the
terms hereof.
10.2 Documents to be Delivered by Buyer.
----------------------------------
At the Closing, Buyer shall:
(a) Execute and deliver to Sellers any and all documents identified in
Section 10.1(a), to the extent appropriate in order to effect the
transactions contemplated hereby;
(b) Deliver to Sellers a certificate of Buyer, dated as of the Closing
Date, to the effect that the representations and warranties of Buyer
as contained in ARTICLE 5 of this Agreement are true and correct in
all material respects as of such Closing Date and that the covenants
of Buyer as contained in ARTICLE 7 and ARTICLE 8 of this Agreement
required to be performed or complied with in all material respects on
or prior to the Closing Date have been so performed or complied with;
(c) To the extent any consents or approvals shall be necessary to any of
the transactions herein contemplated, Buyer shall deliver to Sellers
upon request copies of all such consents or approvals as obtained by
Buyer;
(d) Deliver to Sellers the Closing Cash Payment and the Adjustment
Promissory Note and the LTACH Promissory Note;
37
(e) Deliver to Sellers the definitive Transition Services Agreement duly
executed by all parties thereto;
(f) Deliver to Sellers a Guaranty Agreement duly executed by RehabCare
Group, Inc. ("RHB") pursuant to which RHB shall guarantee the
obligations of Buyer hereunder; and
(g) Deliver to Sellers such other instruments, certificates, consents or
other documents as are reasonably necessary to carry out the
transactions contemplated by this Agreement and to comply with the
terms hereof.
ARTICLE 11
----------
INDEMNIFICATION
---------------
11.1 Indemnification of Buyer.
------------------------
Subject to the provisions of this Article 11, by execution of this
Agreement, Sellers hereby acknowledge that Sellers shall jointly and
severally indemnify Buyer and its officers, directors, employees, agents,
representatives, affiliates, successors and assigns (collectively, the
"Buyer Parties") and hold each of them harmless from and against and pay on
behalf of or reimburse such Buyer Parties in respect of the following:
(a) any and all loss, liability or damage (including judgments and
settlement payments) (a "Loss"), incurred by Buyer incident to,
arising in connection with or resulting from any misrepresentation,
breach, nonperformance or inaccuracy of any representation, warranty
or covenant of Sellers made or contained in this Agreement or in any
Exhibit, Schedule, certificate or other document executed and
delivered to Buyer by Sellers under or pursuant to this Agreement or
the transactions contemplated herein;
(b) any and all Losses relating to any of the Excluded Assets or any of
the Excluded Liabilities;
(c) any Taxes imposed on the Sellers, the Hospitals or any of the Sellers'
Assets; and
(d) any and all reasonable costs and expenses and all other Losses
incurred in claiming, contesting or remedying any breach,
misrepresentation, nonperformance or inaccuracy described in this
Section 11.1, or in enforcing the Buyer Parties' rights to
indemnification hereunder, including, by way of illustration and not
limitation, all reasonable legal and accounting fees, other reasonable
professional expenses and all filing fees and reasonable collection
costs incident thereto and all such reasonable fees, costs and
expenses incurred in defending claims which, if successfully
prosecuted, would have resulted in a Loss.
11.2 Indemnification of Sellers.
--------------------------
Subject to the provisions of this Article 11, by execution of this
Agreement, Buyer hereby acknowledges that Buyer shall indemnify Sellers and
their respective agents, representatives, affiliates, successors and
assigns (collectively, the "Seller Parties") and hold each of them harmless
from and against and pay on behalf of or reimburse such Seller Parties in
respect of the following
(a) any and all Losses incurred by Sellers incident to, arising in
connection with or resulting from any misrepresentation, breach,
nonperformance or inaccuracy of any representation, warranty or
covenant by Buyer made or contained in this Agreement or in any
Exhibit, Schedule, certificate or other document executed and
delivered to Sellers by Buyer under or pursuant to this Agreement or
the transactions contemplated herein;
38
(b) any and all Losses relating to the Assumed Liabilities or related to
the ownership, possession or use of the Purchased Assets by Buyer from
and after the Closing; and
(c) any and all reasonable costs and expenses and all other Losses
incurred in claiming, contesting or remedying any breach,
misrepresentation, nonperformance or inaccuracy described in this
Section 11.2, or in enforcing the Seller Parties' rights to
indemnification hereunder, including, by way of illustration and not
limitation, all reasonable legal and accounting fees, other reasonable
professional expenses and all filing fees and reasonable collection
costs incident thereto and all such reasonable fees, costs and
expenses incurred in defending claims which, if successfully
prosecuted, would have resulted in a Loss.
11.3 Notice of and Procedures for Collecting Indemnification.
-------------------------------------------------------
(a) Initial Claim Notice.
--------------------
When either Buyer, on the one hand, or Sellers, on the other hand,
becomes aware of a situation which may result in damages for which it
would be entitled to be indemnified hereunder, Buyer, on the one hand,
or Sellers, on the other (the "Indemnitee") shall submit promptly a
written notice (the "Initial Claim Notice") to the other party from
which indemnification may be forthcoming pursuant to Section 11.1 or
11.2 (the "Indemnitor") to such effect after first becoming aware of
such matter and shall furnish the Indemnitor with such information as
is available demonstrating a right or possible right to receive
indemnity. If the potential claim is predicated on, or later results
in, the filing by a third party of any action at law or in equity (a
"Third Party Claim"), the Indemnitee shall provide promptly to the
Indemnitor a supplemental Initial Claim Notice not later than twenty
(20) calendar days prior to the date on which a responsive pleading
must be filed, and shall also furnish a copy of such claim (if made in
writing) and of all documents received from the third party in support
of such claim. In addition, each Initial Claim Notice shall name, when
known, the person or persons making the assertions which are the basis
for such claim. Failure by the Indemnitee to deliver an Initial Claim
Notice or an update thereof in a timely manner shall not relieve the
Indemnitor of any of its obligations under this Agreement except to
the extent of actual and material prejudice to the Indemnitor.
(b) Rights of Indemnitor.
--------------------
If, prior to the expiration of 30 calendar days from the mailing of an
Initial Claim Notice (the "Claim Answer Period"), the Indemnitor shall
request in writing that such claim not be paid, the same shall not be
paid, and the Indemnitor shall settle, compromise or litigate in good
faith such claim, and employ attorneys of its choice to do so;
provided, however, that Indemnitee shall not be required to refrain
from paying any claim which has matured by court judgment or decree,
unless appeal is taken therefrom and proper appeal bond posted by the
Indemnitor, nor shall it be required to refrain from paying any claim
where such action would result in the foreclosure of a lien upon any
of its assets or a default in a lease or other contract except a lease
or other contract which is the subject of the dispute. The Indemnitee
shall cooperate fully to make available to the Indemnitor and its
attorneys, representatives and agents, all pertinent information under
its control. The Indemnitee shall have the right to elect to settle or
compromise all other contested claims with respect to which the
Indemnitor has not, within the Claim Answer Period, acknowledged in
writing (i) liability therefor, and (ii) its election to assume full
responsibility for the settlement, compromise, litigation and payment
of such claim.
(c) Final Claims Statement.
----------------------
At such time as damages for which the Indemnitor is liable hereunder
are incurred by Indemnitee by actual payment thereof or by entry of a
final judgment, the Indemnitee shall forward a Final Claims Statement
to the Indemnitor setting forth the amount of such damages in
reasonable detail on an itemized basis. The Indemnitee shall
supplement the Final Claims Statement with such supporting proof of
loss (e.g. vouchers, canceled checks, accounting summaries, judgments,
settlement agreement, etc.) as the Indemnitor may reasonably request
in writing within thirty (30) calendar days after receipt by
Indemnitor of a Final Claims Statement. All amounts reflected on a
Final Claims Statements shall be paid promptly by the Indemnitor to
the Indemnitee and the Indemnitee shall have the right to immediate
payment of proceeds from insurance policies paid to Indemnitor in
connection with the claim for which the indemnification right arose.
39
11.4 Payment of Claims for Indemnification.
-------------------------------------
Any amounts payable to Buyer Parties pursuant to the provisions of Section
11.1 shall be the responsibility of the Sellers and shall be paid promptly
upon notice of Buyer to the Sellers of incurrence of such loss, liability,
cost, expense or damage and an explanation of the losses for Buyer's demand
for indemnification under Section 11.1 of this Agreement. In its sole and
absolute discretion, Buyer may elect to satisfy such payment obligation of
the Sellers by offsetting all or a portion of the principal and interest,
if any, due and owing to the Sellers pursuant to the Adjustment Promissory
Note. Any amounts payable to Seller Parties pursuant to the provisions of
Section 11.2 of this Agreement shall be the responsibility of Buyer and
shall be paid promptly upon notice of Shareholder to Buyer of incurrence of
such loss, liability, cost, expense or damage and an explanation of the
losses for Sellers' demand for indemnification under Section 11.2 of this
Agreement.
11.5 Survival of Indemnification.
---------------------------
Any other provision hereof to the contrary notwithstanding, the parties
agree that the representations, warranties and covenants of the parties
contained in this Agreement and any certificates delivered pursuant to this
Agreement shall survive for a period of thirty-six (36) months after the
Closing Date for purposes of this Article 11, regardless of any
investigation made by either party prior to the date hereof or prior to the
Closing Date. Buyer Parties, on the one hand, and Seller Parties, on the
other hand, shall only be entitled to indemnification under this Article 11
for breaches of representations, warranties and covenants if a written
notice describing the claim for which indemnification is sought is signed
by an executive officer of Buyer or by a duly authorized representative of
Sellers, as the case may be, and is submitted to Buyer or such authorized
representative, not later than thirty-six (36) months following the Closing
Date in accordance with Section 11.3 hereof. Any claim for indemnification
pursuant to this Article 11 not made prior to the expiration of such
thirty-six (36) month period shall be extinguished, and all
representations, warranties and covenants with respect to which no claim is
made prior to the expiration of such thirty-six (36) month period shall
expire and be of no further force and effect. Notwithstanding any provision
of this Section 11.5 to the contrary, the time limitations set forth in
this Section 11.5 shall not apply to the survival of any claim (i) by
either party for actual fraud or intentional misrepresentation, and (ii) by
Buyer Parties with respect to any claim for indemnification for loss
relating to: (A) any of the Excluded Assets or any of the Excluded
Liabilities; and (B) any claim relating to a breach of the representations
and warranties contained in Section 4.1(f), 4.3, 4.4(a) and 4.22.
11.6 Certain Limitations.
-------------------
The parties hereto agree that no violations or breaches under any one or
more of the representations and warranties of the Sellers and the Buyer set
forth in this Agreement shall support a claim for Losses unless and until
such Losses attributable to all violations and breaches exceed on a
cumulative and aggregate basis the sum of Two Hundred Fifty Thousand
Dollars ($250,000); provided, however, that if such Losses exceed the sum
of Two Hundred Fifty Thousand Dollars ($250,000), the Sellers or the Buyer,
as the case may be, shall be obligated to indemnify the party entitled to
indemnification for cumulative and aggregate Losses including such initial
sum of Two Hundred Fifty Thousand Dollars ($250,000). Notwithstanding any
other provision of this Article 11, Buyer and Sellers shall each be
entitled to indemnification hereunder only to a maximum aggregate amount
equal to the outstanding principal amount of the Adjustment Promissory
Note. The minimum and maximum dollar limitations on indemnification
provided for in this Section 11.6 shall not apply with respect to claims
for indemnity (i) by either party for actual fraud or intentional
misrepresentation, and (ii) by Buyer Parties with respect to any claim for
indemnification for loss relating to: (A) any of the Excluded Assets or any
of the Excluded Liabilities; and (B) any claim relating to a breach of the
representations and warranties contained in Section 4.1(f), 4.3, 4.4(a) and
4.22. Additionally, the minimum dollar limitations on indemnification
provided for in this Section 11.6 shall not apply with respect to claims
for indemnity by Buyer Parties with respect to any claim for
indemnification for loss relating to any claim relating to a breach of the
representations and warranties contained in Section 4.20
40
ARTICLE 12
----------
MISCELLANEOUS
-------------
12.1 Notices.
-------
Any notices or other communications required or permitted hereunder to any
party hereto shall be sufficiently given when delivered in person, when
received by telegraphic or other electronic means (including facsimile) or
overnight courier, or three (3) calendar days after being deposited in the
United States mail, with postage prepaid thereon, certified or registered
mail, return receipt requested, addressed as follows:
In the case of Buyer:
RehabCare Group, Inc.
7733 Forsyth Boulevard, Suite 2300
St. Louis, Missouri 63105
Attn: Donald A. Adam, Senior Vice President
Facsimile No. (866) 812-2832
With a copy to:
Thompson Coburn LLP
One US Bank Plaza
St. Louis, Missouri 63101
Attn: Andrew J. Klinghammer, Esq.
Facsimile No. (314) 552-7000
In the case of the Sellers:
MeadowBrook Healthcare
1200 Corporate Drive, Suite 340
Birmingham, AL 35242
Attn: John W. McRoberts
Facsimile No.
With a copy to:
Sirote & Permut
2311 Highland Avenue South, 500
Birmingham, AL 35205
Attn: John Cooper, Esq.
Facsimile No. (205) 930-5101
or such substituted address as any party shall have given notice to the
others in writing in the manner set forth in this Section 12.1.
41
12.2 Amendment.
---------
This Agreement may be amended or modified in whole or in part only by an
agreement in writing executed by all parties hereto and making specific
reference to this Agreement.
12.3 Waiver; Investigation.
---------------------
The parties hereto may, by written agreement: (a) extend the time for the
performance of any of the obligations or other acts of the parties hereto;
(b) waive any inaccuracies in the representations contained in this
Agreement; (c) waive compliance with, or modify, any of the covenants or
conditions contained in this Agreement; and (d) waive or modify performance
of any of the obligations of any of the parties hereto; provided, however,
that no such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition shall operate as a waiver of,
or an estoppel with respect to, any subsequent insistence upon such strict
compliance other than with respect to the matter so waived or modified.
Buyer acknowledges that its officers, employees and authorized
representatives and agents have been given an opportunity to examine the
agreements, instruments, documents and other information relating to
Sellers that they have requested to examine. Any inspection, preparation,
or compilation of information or Schedules, or audit of the receivables,
payables, properties, financial condition, or other matters relating to
Sellers conducted by or on behalf of Buyer pursuant to this Agreement shall
in no way limit, affect, or impair the ability of Buyer to rely upon the
representations, warranties, covenants, and agreements of Sellers set forth
herein or seek indemnification for any matter as set forth in ARTICLE 11
hereof.
12.4 Termination.
-----------
This Agreement may be terminated by the parties hereto prior to Closing as
follows:
(a) by mutual written consent of Buyer and Sellers;
(b) upon written notice from Buyer to Sellers if any of the conditions
precedent to Buyer's obligations hereunder shall have become incapable
of fulfillment through no fault of Buyer;
(c) upon written notice from Sellers to Buyer if any of the conditions
precedent to Sellers' obligations hereunder shall have become
incapable of fulfillment through no fault of Sellers;
(d) by Buyer, on the one hand, or Sellers, on the other hand, in the event
of a breach by the other party to this Agreement of any
representation, warranty or agreement contained herein, which breach
is not cured to the reasonable satisfaction of the non-breaching party
within fifteen (15) business days after written notice thereof is
given to the breaching party by the non-breaching party or is not
waived by the non-breaching party during such period; or
(e) at the election of Buyer or Sellers if the Closing has not occurred on
or prior to September 30, 2005.
In the event of such termination as provided above, this Agreement
shall forthwith terminate and there shall be no liability on the part
of Sellers or Buyer or their respective officers or directors, except
for liabilities arising from a breach of this Agreement prior to such
termination; provided, however, that the provisions of the
confidentiality agreement between the parties shall continue in full
force and effect.
42
12.5 Counterparts and Facsimile Signatures.
-------------------------------------
This Agreement may be executed in one or more counterparts, all of which
taken together shall constitute one instrument. The parties hereto agree
that this document may be executed and the signatures transmitted to the
other party by facsimile or similar electronic transmission. Upon such
transmission and receipt by the other party, such facsimile signature shall
be as effective as an original. Notwithstanding the preceding sentence, the
parties agree that they will transmit original signature pages to each
other promptly after Closing.
12.6 Binding on Successors and Assigns.
---------------------------------
This Agreement shall be binding upon, inure to the benefit of and be
enforceable by and against the parties hereto and their respective
successors and assigns in accordance with the terms hereof. No party hereto
may assign its interest under this Agreement without the prior written
consent of the other parties hereto; provided, however, that Buyer may
assign its interest herein to any affiliate or subsidiary of Buyer without
obtaining the prior consent of Sellers.
12.7 Severability.
------------
In the event that any one or more of the provisions contained in this
Agreement or any application thereof shall be invalid, illegal or
unenforceable in any respect, the validity, legality or enforceability of
the remaining provisions of this Agreement and any other application
thereof shall not in any way be affected or impaired thereby; provided,
however, that to the extent permitted by applicable law, any invalid,
illegal, or unenforceable provision may be considered for the purpose of
determining the intent of the parties in connection with the other
provisions of this Agreement.
12.8 Headings.
--------
The headings in the sections and subsections of this Agreement and in the
Schedules are inserted for convenience only and in no way alter, amend,
modify, limit or restrict the contractual obligations of the parties.
12.9 Expenses of Litigation.
----------------------
In the event of any litigation arising from the breach of this Agreement,
the prevailing party in such litigation shall be entitled to recover
reasonable attorneys' fees and costs, including appeals.
12.10 List of Exhibits and Schedules.
------------------------------
As mentioned in this Agreement, there are attached hereto or delivered
herewith, the following Exhibits and Schedules:
EXHIBITS
--------
Section
Exhibit Document Reference
------- -------- ---------
A Adjustment Promissory Note 1.2(b)
B LTACH Promissory Note 1.2(c)
C Statement of Working Capital 1.3(a)
43
SCHEDULES
---------
Schedule
No. Schedule Caption
-------- ----------------
1.1(a)(i) Personal Property Leases
1.1(a)(ii) Real Property Leases
1.1(a)(iii) Personal Property
1.1(a)(iv) Contracts
1.1(a)(vi) Provider and Related Agreements
1.1(a)(vii) Intellectual Property
1.1(a)(viii) Licenses
1.1(b) Excluded Assets
4.1(d) Ownership Interests
4.1(e) Foreign Qualifications
4.1(g) Violations or Conflicts
4.1(h) Governmental Consents of Sellers
4.2(a) Sellers' Financial Statements
4.2(b) Undisclosed Liabilities
4.2(c) Certain Changes
4.3(b) Tax Matters
4.3(c) Audit History
4.4(a) Title to Purchased Assets
4.4(b) Leases
4.4(c) Adequacy
4.4(e) Inventories
4.5 Exceptions to Intellectual Property
4.6(a) Indebtedness
4.6(b) Material Contract Notices
4.6(c) Insurance
4.6(d) Status
4.7 Officers and Directors
4.8 Employee and Fringe Benefit Plans
4.9 Labor Relations
4.10 Litigation
4.11(a) Compliance with Laws
4.11(b) Permits
4.12 Transactions With Affiliates
4.13 Accreditation/Surveys
4.14 Medicare and Medicaid Notice
4.15 Cost Reports
4.16 Exclusions from Government Programs
4.17 Compliance Programs
4.18 Medical Staff
4.20 Environmental Matters
4.21(a) Real Properties
4.21(b) Exceptions to Title
4.21(c) Real Property Proceedings
4.21(d) Real Estate Taxes
4.21(f) Real Property Defects
4.21(g) Real Property Compliance
4.21(h) Real Property Agreements
5.1(e) Government Consents of Buyer
6.1 Conduct of Business
Each of the foregoing Exhibits and Schedules is incorporated herein by this
reference and expressly made a part hereof.
44
12.11 Expenses.
--------
Except as otherwise provided herein, each of the parties hereto shall bear
its own expenses incurred in connection with this Agreement and the
transactions herein contemplated, including, but not limited to, legal and
accounting fees and expenses.
12.12 Further Assurances and Cooperation.
----------------------------------
Sellers shall execute, acknowledge and deliver to Buyer any and all other
assignments, consents, approvals, conveyances, assurances, documents and
instruments reasonably requested by Buyer at any time and shall take any
and all other actions reasonably requested by Buyer at any time for the
purpose of more effectively assigning, transferring, granting, conveying
and confirming to Buyer, the Purchased Assets. After consummation of the
transactions contemplated herein, the parties agree to cooperate with each
other in regard to all matters arising from the purchase by Buyer of the
Purchased Assets.
12.13 Confidentiality and Publicity.
-----------------------------
The parties hereto shall hold in confidence the information contained in
this Agreement and all information related to this Agreement, which is not
otherwise known to the public, shall be held by each party hereto as
confidential and proprietary information and shall not be disclosed without
the prior written consent of the other parties. Accordingly, Buyer and
Sellers shall not discuss with, or provide nonpublic information to, any
third party (except for such party's attorneys, accountants, directors of
an affiliate of any party hereto, and other consultants and professional
advisors) concerning this transaction prior to the Closing, except: (i) as
required in governmental filings, securities filing or judicial,
administrative or arbitration proceedings; or (ii) pursuant to public
announcements made with the prior written approval of Sellers and Buyer.
12.14 Fair Meaning.
------------
This Agreement shall be construed according to its fair meaning and as if
prepared by all parties hereto.
12.15 Gender and Number and Construction.
----------------------------------
All references to the neuter gender shall include the feminine or masculine
gender and vice versa, where applicable, and all references to the singular
shall include the plural and vice versa, where applicable. Unless otherwise
expressly provided, the word "including" followed by a listing does not
limit the preceding words or terms and shall mean "including, without
limitation."
12.16 Tax Effect.
----------
Neither of the parties (nor such party's counsel or accountants) has made
or is making any representations to any other party (nor such party's
counsel or accountant) concerning any of the tax effects of the
transactions provided for in this Agreement and each party hereto
represents that it has obtained, or may obtain, independent tax advice with
respect thereto and upon which it, if so obtained, has solely relied.
12.17 Time is of the Essence.
----------------------
Time is of the essence for all dates and time periods set forth in this
Agreement and each performance called for in this Agreement.
12.18 Entire Agreement.
----------------
All prior negotiations and agreements among the parties hereto are
superseded by this Agreement, and there are no representations, warranties,
understandings or agreements other than those expressly set forth herein or
in an Exhibit or Schedule delivered pursuant hereto, except as modified in
writing concurrently herewith or subsequent hereto.
45
12.19 Governing Law.
-------------
This Agreement shall be governed by and construed and interpreted according
to the laws of the State of Missouri, determined without reference to
conflicts of law principles. To the extent permitted by law, each of the
parties hereto hereby irrevocably submits to the nonexclusive jurisdiction
of any Missouri state court or United States federal court, in either case
sitting in Missouri over any suit, action or other proceeding brought by
any party arising out of or relating to this Agreement, and each of the
parties hereto irrevocably agrees that all claims with respect to any such
suit, action or other proceeding may be heard and determined in such
courts.
12.20 Transfer and Sales Tax.
----------------------
Notwithstanding any provisions of law imposing the burden of such taxes on
the Sellers or the Buyer, as the case may be, the Sellers shall be
responsible for and shall pay (a) all sales, use and transfer taxes, and
(b) all governmental charges, if any, upon the sale or transfer of any of
the Assets hereunder. If the Sellers shall fail to pay such amounts on a
timely basis, the Buyer may pay such amounts to the appropriate
governmental authority or authorities, and the Sellers shall promptly
reimburse the Buyer for any amounts so paid by the Buyer.
12.21 Material Adverse Effect.
-----------------------
For the purposes of this Agreement, the term "Material Adverse Effect"
shall mean any material adverse change in or loss to the Purchased Assets,
the Real Properties or the operations, liabilities, earnings, relationships
with existing clients, business or condition (financial or otherwise) of
the Business which have been or could reasonably be expected to be,
individually or in the aggregate with other changes, materially adverse to
the Business, the Purchased Assets or the Real Properties; provided,
however, that the following shall not be considered a "Material Adverse
Effect": (i) changes, events, violations, inaccuracies, circumstance and
effects that are caused by conditions affecting the United States economy
as a whole or affecting the industry in which a Seller competes as a whole,
which conditions do not affect such Seller in a disproportionate manner, or
(ii) the loss of employees resulting from the announcement and pendency of
the transactions contemplated hereby.
12.22 Knowledge of Sellers.
--------------------
For the purposes of this Agreement, the term "Knowledge of Sellers" shall
mean the actual knowledge, after due and reasonable inquiry, of John W.
McRoberts, John E. Lee III, Janet L. Nicoll, Kevin Hawkins, Laura Irway,
Matt McGlynn, Charlotte Raymor, Ginger Bauer, Claudia McCready and Nick
Zaunbrecher.
[SIGNATURE PAGE FOLLOWS]
46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives on the day and year first
above written.
BUYER: SELLERS:
MEADOWBROOK HEALTHCARE, INC.
REHABCARE GROUP EAST, INC.
By /s/John W. McRoberts
By /s/Vincent L. Germanese -----------------------------------
---------------------------- Name:John W. McRoberts
Title:President
MEADOWBROOK SPECIALTY HOSPITAL OF
TULSA, LLC
By /s/John W. McRoberts
-----------------------------------
Name:John W. McRoberts
Title:President
LAFAYETTE REHAB ASSOCIATES LIMITED
PARTNERSHIP
By /s/John W. McRoberts
-----------------------------------
Name:John W. McRoberts
Title:President
CLEAR LAKE REHABILITATION HOSPITAL,
INC.
By /s/John W. McRoberts
-----------------------------------
Name:John W. McRoberts
Title:President
SOUTH DADE REHAB ASSOCIATES LIMITED
PARTNERSHIP
By /s/John W. McRoberts
-----------------------------------
Name:John W. McRoberts
Title:President
47
<
Exhibit 99.1
CONTACT: RehabCare Group, Inc.
Vincent L. Germanese
Chief Financial Officer
Betty Cammarata, Director,
Investor Relations
Press: David Totaro, Senior Vice
President, Corporate Marketing &
Communications
(314) 863-7422
Financial Dynamics
Gordon McCoun/Theresa Kelleher
Press: Sean Leous
(212) 850-5600
FOR IMMEDIATE RELEASE
TUESDAY, AUGUST 2, 2005
REHABCARE GROUP COMPLETES PURCHASE OF MEADOWBROOK HEALTHCARE
- Acquisition Brings Continuum of Care Opportunities
To Four Potential Target Markets -
ST. LOUIS, MO, August 2, 2005--RehabCare Group, Inc. (NYSE:RHB) today announced
that it has completed the purchase of the operating assets of MeadowBrook
Healthcare Inc. for approximately $36.5 million. The purchase price was funded
from a combination of $27.5 million in cash on hand and credit facilities, plus
$9 million in subordinated notes. The Company has concurrently entered into
leases with respect to the four MeadowBrook facilities with SunTrust Equity
Funding ("STEF"), a wholly-owned subsidiary of SunTrust Bank. STEF acquired the
real estate from MeadowBrook and affiliates in a separate transaction that
closed concurrently with the Company's asset purchase.
Based in Birmingham, AL, MeadowBrook operates freestanding acute
rehabilitation hospitals and long-term acute care hospitals ("LTACHs") in Miami,
FL, Houston, TX, Tulsa, OK and Lafayette, LA. MeadowBrook generated revenue in
2004 of approximately $53 million. RehabCare expects the acquisition to
contribute $21 million to $25 million in net revenue and $0.01 to $0.03 to
earnings per diluted share during the balance of 2005.
-MORE-
REHABCARE GROUP COMPLETES
PURCHASE OF MEADOWBROOK HEALTHCARE PAGE 2
John H. Short, Ph.D., President and CEO of RehabCare, commented, "We are
pleased to finalize the purchase of MeadowBrook Healthcare, which represents our
largest transaction to date since we redefined the Company's strategy in 2003.
MeadowBrook brings us four potential target markets to complement the five that
we currently have. It will also bring us back office and information systems to
support the seven freestanding rehabilitation hospitals that we expect to have
in place by early 2006, including our recently announced Arlington, TX and
Amarillo, TX facilities. We will continue to focus on using joint ventures and
acquisitions such as this to deliver the post-acute continuum of rehabilitative
care to additional target markets."
RehabCare Group, Inc., headquartered in St. Louis, MO, is a leading
provider of contract therapy and program management services for hospital
inpatient rehabilitation, skilled nursing units, and outpatient therapy programs
in conjunction with more than 900 hospitals and skilled nursing facilities in 38
states, the District of Columbia and Puerto Rico. RehabCare is pleased to be
included in the Russell 2000 and Standard and Poor's Small Cap 600 indices.
This release contains forward-looking statements that are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Forward-looking statements involve known and unknown risks and
uncertainties that may cause RehabCare's actual results in future periods to
differ materially from forecasted results. These risks and uncertainties may
include, but are not limited to, the ability of RehabCare to consummate
acquisitions; RehabCare's ability to integrate acquisitions, including
MeadowBrook, and client partnering relationships within the expected timeframes
and to achieve the revenue and earnings levels from such acquisitions and
relationships at or above the levels projected; changes in governmental
reimbursement rates and other regulations or policies affecting governmental and
third party reimbursement for services provided by RehabCare; the operational,
administrative and financial effect of RehabCare's compliance with other
governmental regulations and applicable licensing and certification
-MORE-
REHABCARE GROUP COMPLETES
PURCHASE OF MEADOWBROOK HEALTHCARE PAGE 3
requirements; RehabCare's ability to attract new client relationships or to
retain and grow existing client relationships through expansion of RehabCare's
contract therapy and hospital rehabilitation services offerings and the
development of alternative product offerings; the ability of new management of
InteliStaf Holdings, Inc., an unconsolidated affiliate of RehabCare, to complete
its business assessment of InteliStaf on a timely basis and to institute a
business restructuring to improve revenues and earnings; the results of
RehabCare's impairment analysis to be conducted with respect to the carrying
value of its investment in InteliStaf; the future financial results of
RehabCare's other unconsolidated affiliates; the adequacy and effectiveness of
RehabCare's operating and administrative systems; RehabCare's ability to attract
and the additional costs of attracting administrative, operational and
professional employees; significant increases in health, workers' compensation
and professional and general liability costs; litigation risks of RehabCare's
past and future business, including RehabCare's ability to predict the ultimate
costs and liabilities or the disruption of its operations; competitive and
regulatory effects on pricing and margins; and general and economic conditions,
including efforts by governmental reimbursement programs, insurers, healthcare
providers and others to contain healthcare costs.
NOTE: More information on RehabCare can be found on the World Wide Web at
http://www.rehabcare.com
-END-