AGES HEALTH SERVICES INC.
800 Hingham Street, Suite 103S
Rockland, Massachusetts 02370
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 30, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders
("Meeting") of Ages Health Services Inc. ("Company") will be held on
April 30, 1997 at Rockland, MA at __ a.m. local time for the following
purposes:
1. To consider and vote on a proposal to sell the Company's assets,
settle its remaining liabilities and change the nature of the Company's
business, all as described in the attached Proxy Statement.
2. To consider and vote on a proposal to amend the Company's
Articles of Organization to change its name. If the proposal described in
Item 1 above is not approved, this proposal will not be presented to the
Meeting.
3. To elect a Board of Directors to serve until the next Meeting of
Stockholders and until their successors are elected.
4. To act upon such other business as may properly come before the
Meeting or any adjournment or postponement thereof.
In order to ensure a quorum, it is important that stockholders
representing a majority of the voting power of all stock outstanding be
present in person or represented by their proxies. Therefore, whether you
expect to attend the Meeting in person or not, please sign, fill out, date
and return the enclosed proxy card in the self-addressed, postage paid
envelope enclosed. If you attend the Meeting and prefer to vote in person,
you can revoke your proxy.
By Order of the Board of Directors
Kuno Laren
President
__________, 1997
Rockland, Massachusetts
AGES HEALTH SERVICES INC.
PROXY STATEMENT
This Proxy Statement is being furnished to the holders of the Common
Stock, no par value ("Common Stock") of Ages Health Services Inc.
("Company") and the holders of the Series A Preferred Stock, no par value,
of the Company ("Preferred Stock") in connection with the solicitation of
proxies by the Company's Board of Directors for use at an Annual Meeting of
the holders of Common Stock and Preferred Stock ("Stockholders") of the
Company ("Meeting") scheduled to be held on April 30, 1997 at __a.m. local
time at Rockland, MA and at any adjournments or postponements thereof. At
the Meeting the Stockholders will be asked to consider and vote upon a
proposal to sell substantially all of the operating assets of the Company
("Sale") to Arbour Elder Services, Inc. ("Arbour"), a wholly-owned subsidiary
of Universal Health Services, Inc., pursuant to an Asset Purchase Agreement
dated as of February 1, 1997 by and between the Company and Arbour
("Agreement"), to settle the Company's remaining liabilities and to change
the nature of the Company's business. In addition, should the foregoing
proposal be approved, the Stockholders will be asked to consider and act
upon a proposal to amend the Company's Articles of Organization to change
its name to AHSI Inc., since under the Agreement, the name "Ages" is to be
sold to Arbour. Finally, the Stockholders will elect directors for the
ensuing year.
FOR A DESCRIPTION OF CERTAIN MATTERS THAT SHOULD BE CONSIDERED BY
STOCKHOLDERS IN CONNECTION WITH THE SALE AND THE SUBSEQUENT CHANGE IN THE
NATURE OF THE COMPANY'S BUSINESS, SEE "SALE OF ASSETS-RISK FACTORS." UNDER
MASSACHUSETTS LAW, STOCKHOLDERS WILL NOT HAVE DISSENTERS' RIGHTS OF
APPRAISAL IN CONNECTION WITH THE SALE. SEE "SALE OF ASSETS-DISSENTERS'
RIGHTS."
A proxy in the form accompanying this Proxy Statement ("Proxy") when
properly executed and returned will be voted in accordance with the
directions specified on the Proxy, and otherwise in accordance with the
judgment of the person designated therein as proxy. Any Proxy which does
not withhold authority to vote or on which no other instructions are given
will be voted FOR the Sale (and the related settlement of liabilities and
change in the nature of the Company's business), FOR the amendment to the
Articles of Organization, and FOR the election of the nominees for director
named herein. Any Proxy may be revoked by a later Proxy properly executed
and delivered to the Company or by voting in person at the Meeting.
This Proxy Statement and the related Notice and form of Proxy are
being mailed to Stockholders of record on _________, 1997 ("Record Date") on
or about ___________, 1997. The Company's Annual Report on Form 10-KSB for
the year ended September 30, 1996, and the amendment thereto (collectively
"Annual Report"), are being mailed to Stockholders contemporaneously with
this Proxy Statement. Portions of the Annual Report are incorporated herein
by reference.
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no other business to come before the Meeting. If any other
business should properly come before the Meeting, the Proxies named in the
Proxy will vote thereon in accordance with their best judgment.
A list of Stockholders entitled to vote at the Meeting will be
available for examination by any Stockholder for any purpose germane to the
Meeting will be available at the Meeting.
SUMMARY
The following is a summary of more complete information contained in
this Proxy Statement, including a copy of the Agreement, which is annexed as
Exhibit A and the Financial Statements and related Notes thereto appearing
elsewhere or incorporated by reference herein. The summary should be read
in conjunction with such more complete information, and is qualified in its
entirety by such other information.
THE MEETING
The Meeting will be held on April 30, 1997 for the purposes of (i)
considering and voting on the Sale; (ii) considering and voting on an
amendment to the Company's Articles of Organization to change its name; and
(iii) electing directors for the ensuing year.
The accompanying Proxy is being solicited by the Company, for use in
connection with the Meeting, and at any adjournments or postponements
thereof.
PROPOSED SALE
GENERAL. At the Meeting, holders of the Company's Common Stock and
Preferred Stock will be asked to consider and vote on a proposal to approve
the Sale and the resulting settlement of the Company's obligations and
change in the Company's business. If the Sale is approved and consummated,
the nature of the Company's business will be changed as described herein.
See "Sale of Assets."
The Company has entered into the Agreement with Arbour to sell
substantially all of its operating assets. These assets include, but are
not limited to, contractual rights, licenses and permits (to the extent
transferable), equipment, leases, intangible and intellectual property and
certain of its accounts receivable. The purchase price for the assets is
$1,100,000, plus an amount equal to up to $800,000 (depending upon the
amount of accounts receivable actually collected) and the assumption by
Arbour of approximately $760,000 of the Company's liabilities at January 31,
1997. The accounts receivable to be sold were determined at the January 31,
1997 closing, and are estimated to be approximately $1,920,000, after a
reserve of $570,000. Arbour will be entitled to receive the first $1,000,000
of accounts receivable collected, and the Company will retain up to $800,000
of the next accounts receivable collected. The Company is to retain certain
nominal non-operational assets and will remain liable for the repayment of
all other liabilities. At January 31, 1997, the Company had accrued total
liabilities equal to approximately $2,037,000. The Company believes,
however, that it has valid offsetting claims against approximately $750,000
worth of these liabilities that it will attempt to settle for substantially
less than their book value. There can be no assurance, however, that the
Company will be successful in these efforts. Due to the uncertainty of the
collections of accounts receivable and the success of settlement efforts, a
precise determination of the cash the Company will retain is not possible,
but the Company estimates it will have between $500,000 and $1,300,000.
The transaction contemplates that Arbour will provide management
services to the Company pursuant to a Management Agreement dated February 1,
1997 and be responsible for all operating expenses arising after such date
in return for all revenues generated after such date. The Company will
remain responsible for legal, accounting, and limited administrative
expenses associated with public filings and other steps necessary to
accomplish this transaction. The closing of the transaction is subject to
the approval of the stockholders.
REASONS FOR SALE. The Board of Directors, in response to operating losses
over the past several fiscal years, requested management to develop a plan
to return the Company to profitability. Such plan has been developed. The
inherent uncertainty of the success of the plan, and developments in the
healthcare industry toward increasing managed care payors who favored
healthcare providers with access to the full continuum of in-patient and
out-patient services led the Board of Directors to consider a sale of the
business as an alternative intended to enhance stockholder values.
BUSINESS FOLLOWING SALE. Following the Sale, the Company will cease to be
engaged in any active business operations. As a result of the Sale and the
satisfaction of its remaining liabilities, the Company will serve as a
vehicle to effect one or more acquisitions of other business(es), whether by
merger, exchange of stock, purchase of assets or other business combination
("Business Combination") with another business which may be operating or
beginning operations ("Acquired Business"). The Business Combination may be
effected through use of the Company's cash, stock, debt or a combination
thereof.
SEE "SALE OF ASSETS-RISK FACTORS" FOR CERTAIN CONSIDERATIONS IN
CONNECTION WITH THE COMPANY SEEKING TO CHANGE ITS BUSINESS AND SEEKING A
BUSINESS COMBINATION.
AMENDMENT OF ARTICLES OF ORGANIZATION. If the Sale is approved, the
Stockholders will be asked to approve an amendment to the Company's Articles
of Organization to change its name to AHSI Inc.
ELECTION OF DIRECTORS. The Stockholders will also vote on the election of a
Board of Directors comprised of three (3) persons. The persons elected will
serve until the next Meeting of Stockholders and election of their
successors. See "Election of Directors."
OTHER BUSINESS. At the date of this Proxy Statement, the Board of Directors
of the Company does not know of any business to be presented at the Meeting
other than those matters which are set forth in the Notice. If any other
business should properly come before the Meeting, it is intended that the
shares of Common Stock and Preferred Stock represented by any Proxy will be
voted with respect to such business in accordance with the judgment of the
person named in the Proxy.
REQUIRED VOTE; QUORUM. The close of business on ___________, 1997 ("Record
Date") has been fixed as the record date for determining the holders of the
Company's Common Stock and Preferred Stock entitled to vote at the Meeting.
The presence, in person or by Proxy, of the holders of a majority of the
outstanding shares of Common Stock and Preferred Stock, entitled to vote at
the Meeting is necessary to constitute a quorum for the transaction of
business at the Meeting. The Company has two classes of stock outstanding,
Common Stock, no par value ("Common Stock"), and Series A Preferred Stock,
("Preferred Stock"). The holders of each of the two classes of stock are
entitled to vote as a single class on all matters. On the Record Date,
there were outstanding 2,508,100 shares of Common Stock and 250 shares of
Preferred Stock. Each Stockholder will be entitled to one vote for each
share of Common or Preferred Stock owned.
Under Massachusetts law, approval of the Sale requires the affirmative
vote of a majority of the issued and outstanding stock entitled to vote
thereon, approval of the amendment to the Articles of Organization requires
the affirmative vote of a majority of the shares outstanding and entitled to
vote thereon and election of directors requires the affirmative vote of a
plurality of the shares voting on each proposition.
Votes at the Meeting will be tabulated by an Inspector of Election
appointed by the Company.
PROXIES. Solicitation of Proxies will be primarily by mail, but Proxies may
also be solicited personally, by telephone or facsimile by officers,
directors and other persons employed by the Company. The Company will make
arrangements with brokerage firms, banks and other nominees to forward proxy
materials to beneficial owners of shares and will reimburse such nominees
for their reasonable costs. The cost of solicitation will be borne by the
Company.
All properly signed and submitted Proxies will be voted. Where a
choice has been specified by the Stockholder as provided on the Proxy, the
Proxy will be voted (or withheld) in accordance with such specification. If
a Proxy does not specify otherwise, it will be voted FOR the Sale (including
the related settlement of liabilities, change in the business of the
Company and amendment to the Company's Articles of Organization), and FOR
the election of management's slate of directors. Any Stockholder giving a
Proxy may revoke it at any time prior to its use at the Meeting by giving
the Company written notice of the revocation, by signing and delivering to
the Secretary of the Company a Proxy bearing a later date, or by personally
voting at the Meeting.
PROPOSAL 1
SALE OF ASSETS
AGREEMENT OF SALE. The Company has entered into an Asset Purchase Agreement
("Agreement") dated as of February 1, 1997 with Arbour Elder Services, Inc.
("Arbour"). Pursuant to the Agreement the Company is to sell substantially
all of its operating assets. The assets being sold include certain accounts
receivable, contractual and lease rights, licenses and permits to the extent
permitted by law, equipment, and intellectual property rights. The purchase
price for the assets is $1,100,000 in cash of which $100,000 was paid on the
signing of the Agreement and the assumption of liabilities arising under
assigned contracts after February 1, 1997 and additional liabilities up to
$760,000. Arbour shall be entitled to retain the first $1,000,000 of
accounts receivable collected and the Company shall retain the next $800,000
accounts receivable collected. Arbour shall retain any accounts receivable
collected in excess of $1,800,000. The parties may retain a billing and
collection firm to bill and collect the accounts receivable and each party
will pay the costs of billing and collections as to the accounts receivable
to which each is entitled.
The consummation of the sale and purchase ("Closing") is subject to
the satisfaction of certain conditions including the approval of the
Stockholders and obtaining all required governmental, and other, consents.
The Agreement terminates if the Closing does not occur by July 31, 1997. It
is expected that the Closing will occur not later than July 31, 1997, but
will occur earlier if all conditions to the Closing are satisfied earlier.
Under the Agreement, each party made warranties and representations of a
kind usually made in such agreements to the other.
In connection with the Agreement, the Company and Arbour entered into
a Management Agreement ("Management Agreement") pursuant to which Arbour,
effective February 1, 1997, assumed the responsibility for the management
for the nursing home programs and outpatient mental health clinics operated
by the Company. The services to be performed by Arbour include all services
necessary for the operation of such business, such as hiring and firing
personnel, payment of salaries and all other operating expenses, purchasing
of supplies and supervising the operations. Arbour, as manager and for its
compensation, is entitled to retain all revenues from the services rendered,
but is obligated to pay all of the expenses incurred in connection
therewith. To the extent that the expenses exceed the revenues, the
difference is to be a loan from Arbour to Company. If the Closing occurs,
the loan to the Company will be forgiven. If the Closing does not occur,
this loan will be repaid to Arbour with interest within 90 days after the
termination of the Agreement.
As part of the Sale, Anders Laren, President and a director of the
Company and the owner of approximately 2.72% of the Common Stock, has
entered into an agreement with Arbour pursuant to which he has agreed not to
compete in the operation of mental health facilities or programs in the
states of Massachusetts, Connecticut and Rhode Island for a period of 3
years following February 1, 1997 and to provide such consulting services as
Arbour may request during the 30 days following February 1, 1997. Mr. Laren
will be compensated for his consulting services at the rate of $100 per hour
and will receive $9,000 per month (or an aggregate of $216,000) for two
years for his agreement not to compete. Mr. Laren has been employed by the
Company pursuant to an employment agreement under which he receives a base
salary of $121,000 per annum and a bonus equal to 30% of net profits (as
defined therein) in excess of $700,000. No bonus has been earned during the
term of the employment agreement, which continues from year to year unless
terminated. Anders Laren has agreed, if the Sale closes, to terminate the
employment agreement effective February 1, 1997.
Kuno Laren, an officer, director and beneficial owner of 39.22% of
the outstanding Common Stock and 100% of the outstanding Preferred Stock has
agreed to vote the stock beneficially owned by him in favor of the Sale.
COMPANY'S REASONS FOR THE SALE. In considering the Sale, the Board of
Directors considered the Company's results of operations over the past
several fiscal years and the general development and direction of the health
services industry in which it operates. These considerations were made
against a background of advantages and disadvantages of the Sale to the
Stockholders.
The Company's operations have not been profitable for the past three
fiscal years. The Company had net losses applicable to Common Stock of
$1,033,904, $1,500,484 and $769,617 for the fiscal years ending September
30, 1996, 1995 and 1994, respectively.
These continuing losses are attributable to many factors, including,
without limitation, start up costs related to new programs or efforts to
expand the Company's geriatric services programs and the increasing time,
money and effort needed to collect the Company's Medicaid and Medicare
claims, the major payors billed by the Company. The Company believes it
succeeded in its goal of developing a high quality outpatient network of
providers on a regional basis and more recently has focused on
reorganization efforts to become profitable. While management had developed
a plan intended to return the Company to profitability by the end of the
1997 fiscal year, there could be no assurance that the plan would be
successful or that future developments in the healthcare industry would not
render the plan ineffective.
Management of the Company also determined it was necessary to respond to
the increasing movement of its Medicare and Medicaid patients into managed care
plans. Management felt that this trend was likely to continue and grow and
that, to remain competitive, the Company would need to be part of a network of
providers able to provide a full continuum of inpatient and outpatient
services. Management did not believe it had the capital resources to build
this continuum of services on its own in a timely way and that increasing
managed care would likely place increasing pressure on the Company's revenues
and profit margins.
Based on this analysis, the Board of Directors determined that an
effective method to maximize stockholder values would be to seek to sell the
business and refocus the Company's operations in a different business. Such
decision resulted in the negotiation and execution of the Agreement.
In determining whether to accept Arbour's offer to purchase the
Company's assets, the Board of Directors considered among other things the
following advantages and disadvantages of the Sale to the Stockholders:
1. The Stockholders would have the opportunity to vote on the Sale
and the change in the nature of the Company's business.
2. The payment of the purchase price in the Sale will be made in
cash. A substantial portion of it will be paid on the consummation of the
Closing. The amount is sufficient to allow the Company to settle all of its
liabilities not being assumed by Arbour. Part of the assets retained by the
Company is $800,000 of accounts receivable in excess of $1,000,000. The
Company is reasonably certain that a substantial portion of the retained
accounts receivable will be collected, although no assurance can be given
that any portion will in fact be collected.
3. Although no independent valuation of the Company's business has
been obtained, the Board of Directors believes the purchase price is
consistent with the price being paid in the health services industry for
companies with similar revenues and operations as the Company.
4. Since the Company will not be liquidating and dissolving, the
holders of the Preferred Stock, all of whom are affiliates of Kuno Laren, an
officer, director and principal stockholder of the Company, will not receive
the liquidation preference applicable to such shares. The liquidation
preference is $1,000 per share or an aggregate of $250,000.
Among the disadvantages of the Sale considered by the Board of
Directors are the following:
1. There are certain risks inherent in the Company continuing as an
"acquisition company" seeking a Business Combination. Certain of these are
described under the caption "Sale of Assets-Risk Factors" on pages __ to __
of this Proxy Statement. In particular, the Stockholders will not have any
vote on the Acquired Business and the future operations will be dependent
upon current management who may not have experience in the industry in which
the Acquired Business will operate or upon individuals associated with the
Acquired Business whose background and experience are not described since
they are not yet known.
2. The Stockholders will not be receiving any liquidating dividends
or other payments on account of their ownership of the Common Stock; rather,
they will be dependent upon the ability of management to acquire an Acquired
Business and the future success of such business.
3. There has been no independent appraisal of the business or assets
of the Company. The purchase price has been determined solely through
negotiations between the Company and representatives of Arbour. Anders Laren,
President of the Company, a stockholder and a director, and Kuno Laren, a
principal stockholder and director, represented the Company. Although Anders
Laren will receive payment for the covenant not to compete (See "Sale of Assets
Agreement of Sale"), since the payment is less than the amount he would have
received under his employment agreement, the Board of Directors does not
believe that he had any conflict of interest in negotiating the Agreement with
Arbour.
BUSINESS FOLLOWING SALE. Following the Sale, the Company will cease to be
engaged in any active business operation. The Company will seek to consummate
a Business Combination with an Acquired Business.
PRO FORMA FINANCIAL INFORMATION
The following Pro Forma Condensed Balance Sheet of the Company as of December
31, 1996 reflects the financial position of the Company after giving effect to
the disposition of the assets and assumption of the liabilities discussed
pursuant to the Agreement with Arbour and assumes the transaction occurred on
December 31, 1996. The following Pro Forma Condensed Statements of Operations
for the fiscal year ended September 30, 1996 and three months ended December
31, 1996 assume that the transaction occurred on October 1, 1995 and are based
on the operations of the Company for the year ended September 30, 1996 and the
three months ended December 31, 1996, respectively. These Statements of
Operations assume no new business will have been acquired in the relevant
period.
PRO FORMA FINANCIAL INFORMATION
AGES HEALTH SERVICES INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
(Unaudited)
Pro Forma Adjustments
----------------------------
Historical Ages (a) Other Pro Forma
------------ ----------- ------------- ---------
Net patient service revenue $ 7,214,781 $ 7,214,781 $ 0 $ 0
Cost of patient services 5,295,567 5,295,567 0 0
---------------------------------------------------------
Gross profit on patient services 1,919,214 1,919,214 0 0
---------------------------------------------------------
General and administrative expenses 2,767,182 2,767,182 132,000 (b) 132,000
Amortization of acquisition-related costs 45,902 45,902 0 0
---------------------------------------------------------
Operating expenses 2,813,084 2,813,084 132,000 132,000
---------------------------------------------------------
Operating loss (893,870) (893,870) (132,000) (132,000)
Interest expense, net 110,034 110,034 19,800 (b) 19,800
---------------------------------------------------------
Net loss (1,003,904) (1,003,904) (151,800) (151,800)
Preferred stock dividends (30,000) 0 0 (30,000)
---------------------------------------------------------
Net loss applicable to common stock $(1,033,904) $(1,003,904) $(151,800) $(181,800)
=========================================================
Net loss per share of common stock $ (.40) $ (.07)
=========== =========
Weighted average number of shares of common
stock outstanding 2,580,100 2,580,100
<FN>
- --------------------
<F1> (a) To eliminate the revenue and expenses of Ages Health Services Inc.
("Ages") for the entire period.
<F2> (b) To reflect costs that would not have been eliminated due to the sale of
assets and liabilities.
</FN>
PRO FORMA FINANCIAL INFORMATION
AGES HEALTH SERVICES INC.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
(Unaudited)
Pro Forma Adjustments
---------------------------
Historical Ages (a) Other Pro Forma
----------- ----------- ------------ ---------
Net patient service revenue $ 1,623,037 $ 1,623,037 $ 0 $ 0
Cost of patient services 1,244,221 1,244,221 0 0
---------------------------------------------------------
Gross profit on patient services 378,816 378,816 0 0
---------------------------------------------------------
General and administrative expenses 672,007 672,007 33,000 (b) 33,000
Amortization of deferred financing costs 1,029 1,029 0 0
---------------------------------------------------------
Operating expenses 673,036 673,036 33,000 33,000
---------------------------------------------------------
Operating loss (294,220) (294,220) (33,000) (33,000)
Interest expense, net 37,800 37,800 4,950 (b) 4,950
---------------------------------------------------------
Net loss (332,020) (332,020) (37,950) (37,950)
Preferred stock dividends (7,500) 0 0 (7,500)
---------------------------------------------------------
Net loss applicable to common stock $ (339,520) $ (332,020) $(37,950) $ (45,450)
=========================================================
Net loss per share of common stock $ (.13) $ (.02)
=========== =========
Weighted average number of shares of common
stock outstanding 2,580,100 2,580,100
<FN>
- --------------------
<F1> (a) To eliminate the revenue and expenses of Ages Health Services Inc.
("Ages") for the entire period.
<F2> (b) To reflect costs that would not have been eliminated due to the sale of
assets and liabilities.
</FN>
PRO FORMA FINANCIAL INFORMATION
AGES HEALTH SERVICES INC.
PRO FORMA CONDENSED BALANCE SHEET AT DECEMBER 31, 1996
(Unaudited)
Pro Forma Adjustments
-------------------------------
Historical Ages (a) Other (d) Pro Forma (d)
----------- ----------- --------------- -------------
Assets
Current:
Cash and cash equivalents $ 164,078 $ 0 $ 1,100,000 (b) $ 1,264,078
U.S. Treasury Notes 985,630 0 0 985,630
Accounts receivable, less allowance for uncollectible accounts
of $570,000 1,920,140 1,920,140 800,000 (b) 800,000
Prepaid expenses 53,793 53,793 0 0
Current portion of long-term note receivable related to
discontinued operations 5,000 5,000 0 0
Deferred taxes 15,000 0 (15,000)(c) 0
--------------------------------------------------------------
Total current assets 3,143,641 1,978,933 1,885,000 3,049,708
--------------------------------------------------------------
Property and equipment, net of accumulated depreciation
of $249,180 189,271 189,271 0 0
--------------------------------------------------------------
Deferred financing costs, net of accumulated amortization
of $2,059 6,178 6,178 0 0
--------------------------------------------------------------
Long-term note receivable related to discontinued operations,
less current portion 13,512 13,512 0 0
--------------------------------------------------------------
$ 3,352,602 $ 2,187,894 $ 1,885,000 $ 3,049,708
==============================================================
Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $ 1,427,956 $ 0 $ (494,685)(b) $ 933,271
Accounts payable 322,683 0 0 322,683
Dividends payable 17,500 0 0 17,500
Accrued expenses 861,386 0 (273,465)(b) 587,921
Current portion of long-term debt and loans payable 203,922 0 (16,922)(b) 187,000
--------------------------------------------------------------
Total current liabilities 2,833,447 0 (785,072)(b) 2,048,375
Long-term debt and loans payable, less current portion 313,747 0 (5,747)(b) 308,000
Deferred income taxes 15,000 0 (15,000)(c) 0
--------------------------------------------------------------
Total liabilities 3,162,194 0 (805,819) 2,356,375
--------------------------------------------------------------
Commitments and contingencies
Stockholders' equity 190,408 2,187,894 2,690,819 693,333
--------------------------------------------------------------
$ 3,352,602 $ 2,187,894 $ 1,885,000 $ 3,049,708
==============================================================
<FN>
- --------------------
<F1> (a) To eliminate the assets of Ages Health Services Inc. ("Ages") sold in
connection with the asset purchase agreement with Arbour Elder Services,
Inc.
<F2> (b) To reflect proceeds from the sale of assets consisting of $1,100,000 in
cash plus retention of $800,000 of accounts receivable collections after
the buyer's receipt of the first $1,000,000 of accounts receivable
collected, and assumption by the buyer of $30,819 of future payments on
capital leases and approximately $760,000 of the Company's other liabilities.
<F3> (c) To reflect the elimination of deferred taxes.
<F4> (d) Does not reflect any adjustment for liabilities (totalling approximately
$750,000) which the Company believes it may be able to settle at amounts
less than their book value.
</FN>
The unaudited pro forma condensed financial statements have been prepared by
the Company based upon assumptions deemed proper by it. The unaudited pro
forma condensed financial statements are not necessarily indicative of the
future financial position or results of operations or actual results that
would have occurred had the transaction been if effect as of the dates
presented.
The unaudited pro forma condensed financial statements should be read in
conjunction with the Company's historical financial statements and related
notes included in the Annual Report.
RISK FACTORS. If the Sale is approved by Stockholders and consummated as
described in this Proxy Statement, the Company will become an acquisition
company whose initial purpose will be to seek a Business Combination with an
Acquired Business. As such, such business is subject to certain risks. THE
STOCKHOLDERS WILL NOT GET TO VOTE SEPARATELY ON ANY POTENTIAL BUSINESS
COMBINATION. CONSEQUENTLY THE FOLLOWING RISK FACTORS, AMONG OTHER INFORMATION
CONTAINED ELSEWHERE IN THIS PROXY STATEMENT SHOULD BE CONSIDERED BY
STOCKHOLDERS IN DETERMINING WHETHER TO APPROVE THE SALE.
SPECULATIVE NATURE OF PROPOSED OPERATIONS. The success of the business
after the Sale will depend to a great extent on the operations, financial
condition and management of the company or companies with which the Company may
merge or which it may acquire. The success of such future businesses will be
dependent upon management of the Acquired Business and its business operations,
none of which are now known and which therefore are not disclosed to
Stockholders in this Proxy Statement. Therefore, Stockholders, to an extent,
are being asked to approve an investment for which full and complete disclosure
cannot presently be made.
NO OPERATING HISTORY. The Company will change the nature of its
operations after the Sale. The Company has no operating history in the new
line of business which has yet to be determined. There can be no assurance that
future operations will be profitable. The Company has not yet identified an
Acquired Business nor entered into any negotiations or agreements to make any
acquisition.
POTENTIAL DILUTION. It is possible that a Business Combination will
require the Company to issue additional securities including Common Stock will
may result in dilution to the existing Stockholders.
NO BUSINESS PLAN. The Company has not identified a candidate for an
Acquired Business and therefore cannot describe the specific risks presented by
such business. Such business may involve unproven products, technology or
marketing strategy, the success or profitability of which cannot be assured.
Since the Stockholders will not be required to vote on the specific Business
Combination, the specific risks thereof may not be disclosed to Stockholders
until after the Business Combination has been effected. Stockholders,
therefore, in approving the Sale, are being asked to approve the
change of business without the full disclosure which they would receive under
certain other circumstances.
SCARCITY OF, AND COMPETITION FOR, BUSINESS TARGETS. After the Sale, the
Company will be an insignificant participant in the business of seeking mergers
with, and acquisitions of, other businesses. In addition, the Company will
have limited assets and other resources to support an acquisition. There are a
large number of established and well financed entities, including venture
capital firms, which are active in seeking companies of the kind the Company
will be seeking. Nearly all of such competitors have greater financial and
other resources than the Company and therefore the Company will be at a
competitive disadvantage in such transactions.
ADDITIONAL FINANCING REQUIRED. If the Company is successful in
concluding a Business Combination, it is likely that the Company will require
additional financing for the acquisition or the business operations of the
Acquired Business. There can be no assurance that any such financing would
be available to the Company, if at all or on satisfactory terms.
DISSENTERS' RIGHTS. Under Massachusetts law, Stockholders who vote against
the Sale will not have dissenters' rights of appraisal or any other
statutory rights.
NO VALUATION, OR FAIRNESS OPINION, OBTAINED. The Board of Directors has not
obtained any valuation of the assets of the Company, or its business as a
going concern. In determining to accept the offer of Arbour, the Board of
Directors relied on the facts that the purchase price, based on its
knowledge of value and investigations concerning value, was consistent with
amounts being paid for companies with revenues and assets similar to the
Company and on the lack of any benefits to the insiders of the Company.
While Anders Laren will be paid an aggregate of $216,000 for a two year non-
compete agreement, the Board of Directors, in light of the existence of his
employment agreement, did not view the payment as a conflict of interest or
a substantial benefit to a related party.
TAX TREATMENT OF SALE. The Sale will be reported as a sale of assets for
federal income tax purposes. The Company expects to recognize a tax loss
as a result of the sale.
FINANCIAL INFORMATION ABOUT THE COMPANY. Accompanying this Proxy Statement,
and incorporated herein by reference, is a copy of the Company's Annual
Report for the year ended September 30, 1996. The Annual Report contains
financial information for the Company's most recently completed fiscal year,
and certain financial information regarding its prior fiscal year ended
September 30, 1995. Stockholders are referred to the Annual Report for
financial information regarding the Company.
PROPOSAL 2
AMENDMENT TO THE ARTICLES OF ORGANIZATION
If the Sale is approved by Stockholders, there will be submitted to
the Meeting a proposal to amend the Articles of Organization of the Company
to change its name to AHSI Inc. Under the Agreement, part of the assets to
be sold to Arbour includes intellectual property rights. These rights
include the Company's rights in and to the name "Ages Health Services" and
variations thereof. As a result, if the Sale is approved and consummated,
the Company will have to change its corporate name to a name which does not
include "Ages" as part thereof. Since the Company intends to change the
nature of the business, management recommends that "Health Service" also be
eliminated from the new name. It is recommended that the Articles of
Organization be amended to change the Company's name to AHSI Inc.
PROPOSAL 3
ELECTION OF DIRECTORS
At the Meeting, the Stockholders will be asked to vote upon the
election of three persons to serve as directors until the next annual
meeting and until their successors are duly elected. Messrs. Anders Laren,
Kuno Laren and Peter Clegg, all of whom are presently directors and compose
the entire board of directors, have been nominated by the Board of Directors
to continue to serve as such.
Nominees for Director.
Name Age Position with the Company
- ----------------------------------------------------------------------
Anders Laren 37 President, Chief Executive Officer, Clerk
(Secretary) and Director
Kuno Laren 72 Director
Peter W. Clegg 52 Director
Anders Laren joined the Company as Vice President and Secretary in May
1991 and has been Chairman of the Board and Chief Executive Officer since
May 1992. He was elected as a Director of the Company in June 1992. Mr.
Laren was appointed President of the Company in May 1993. Prior to joining
the Company, Mr. Laren was an associate with the law firm of Shearman &
Sterling from 1986 to 1991. Mr. Laren holds a J.D. from Fordham University
School of Law. He is a member of the New York bar and the Massachusetts
bar. Anders Laren is the son of Kuno Laren.
Kuno Laren has been a Director of the Company since February 1991. He
has been engaged in investment banking for more than ten years. He is a
director of several public and private companies, including Grant Enterprise
Ltd., Kalex Corp., and Tarlind Inc., each of which is a stockholder of the
Company. Kuno Laren is the father of Anders Laren.
Peter W. Clegg has been a Director of the Company since February 1993.
He is a business consultant with The August Group. He is also a major
general U.S. Army Reserve and currently serves as Commanding General, 94th
Regional Support Command, Fort Devens, Massachusetts. Mr. Clegg was a Vice
President of the Bank of Boston from 1986 to 1989.
Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information as of January 31,
1997 with respect to each beneficial owner of five percent (5%) or more of
the outstanding shares of Common Stock and Series A Preferred Stock of the
Company, each officer and director of the Company and all officers and
directors as a group. Unless otherwise indicated, the address of each such
person or entity is c/o Ages Health Services Inc., 800 Hingham Street, Suite
103S, Rockland, MA 02370.
Common Stock (no par value):
Name and Address Number of Shares Percentage
- ---------------------------------------------------------
Grant Enterprise Ltd. 796,000 30.85%
320 Lexington Avenue
New York, NY 10016
Kalex Corp. 140,000 5.43%
320 Lexington Avenue
New York, NY 100016
Tarlind Inc. 76,000 2.94%
320 Lexington Avenue
New York, NY 10016
Kuno Laren* ** 1,012,000 39.22%
320 Lexington Avenue
New York, NY 10016
Anders Laren** 70,300 2.72%
Peter W. Clegg -- --
Dr. Jonathan D. Lieff -- --
Robert A. Conway -- --
All officers and directors 1,082,300 41.95%
as a group (5 persons)
Series A Preferred Stock (no par value):
Name and Address Number of Shares Percentage
- ---------------------------------------------------------
Grant Enterprises 87 35%
320 Lexington Avenue
New York, NY 10016
Kalex Corp. 70 28%
320 Lexington Avenue
New York, NY 10016
Kuno Laren* ** 93 37%
320 Lexington Avenue
New York, NY 10016
______________________________
<F*> Kuno Laren, a director of the Company, is a director and principal
shareholder of Tarlind, Inc., Kalex Corp. and Grant Enterprises Ltd.,
and thus is presumed to be the beneficial owner of all shares of the
Company owned by such companies.
<F**> Anders Laren is the son of Kuno Laren. Each of Anders Laren and Kuno
Laren disclaim beneficial ownership of the shares of Common Stock
and/or Preferred Stock attributed to the other.
Directors and Executive Officers
The following are the directors and executive officers of the Company:
Position with the
Name Age Company
- --------------------------------------------------------
Anders Laren 37 President, Chief Executive Officer,
Clerk (Secretary) and Director
Kuno Laren 72 Director
Peter W. Clegg 52 Director
Jonathan D. Lieff, M.D. 51 Medical Director
Robert A. Conway 49 Vice President of Operations
Biographical information regarding Messrs. Laren appears under the caption
"Nominees for Director".
Peter W. Clegg has been a Director of the Company since February 1993.
He is a business consultant with The August Group. He is also a major
general U.S. Army Reserve and currently serves as Commanding General, 94th
Regional Support Command, Fort Devens, Massachusetts. Mr. Clegg was a Vice
President of the Bank of Boston from 1986 to 1989.
Jonathan D. Lieff, M.D., joined the Company as Medical Director and
Chief of Psychiatry in October 1990. He currently serves as a member of the
hospital staff of several hospitals in Massachusetts, including St.
Elizabeth's Hospital, Baptist Hospital, Arbour Hospital and Human Resource
Institute, positions he has held since 1985. Dr. Lieff has approximately 22
years of experience as a practitioner and has published numerous articles in
national journals. Dr. Lieff founded and currently serves as the Consulting
Editor to the American Journal of Geriatric Psychiatry. Dr. Lieff holds a
B.A. from Yale College (1966) and an M.D. from Harvard Medical School
(1972). He is board certified by the American Board of Psychiatry and
Neurology with added qualification in Geriatric Psychiatry.
Robert A. Conway has served as the Company's Vice President of
Operations since November, 1995. Prior to that, Mr. Conway provided
substance abuse/counseling services through Northeast Health Management
Services, a company he founded in 1989. From June, 1992 through November
1994 he served as the director of management and development for Brookside
Hospital. Mr. Conway holds a BA from the University of Massachusetts (1970)
and a masters degree in education from Cambridge College (1983).
Executive Compensation.
Summary Compensation Table - Executives and Officers
The following table sets forth all cash compensation for services
rendered in all capacities to the Company for the fiscal years ended
September 30, 1996, 1995, and 1994, paid to the Company's Chief Executive
Officer, the four other most highly compensated executive officers at the
end of the above fiscal years whose total compensation exceeded $100,000
during the above fiscal years, although they were not executive officers at
the end of such years. In fiscal 1994, 1995, and 1996, the Company paid no
bonus, other annual compensation, restricted stock awards, options, stock
appreciation rights or long term incentive payments to officers or
executives.
Annual Compensation
-------------------
Name and Principal Position Year Salary
- -------------------------------------------------
Anders Laren 1994 $116,750
President, Chief Executive 1995 $121,000
Officer and Director 1996 $121,000
Kuno Laren 1994 -0-*
Director 1995 $ 48,000
1996 $ 48,000
Dr. Jonathan D. Lieff 1994 $180,000
Medical Director 1995 $180,000
1996 $180,000
Executives as a 1994 $409,250
group (4 individuals 1995 $481,417
in 1994 and 6 individuals 1996 $483,830
in 1995 and 6 individuals
in 1996).
<F*> The Company paid $42,000 to Kumala Corp. for the consulting services of
Kuno Laren in fiscal 1994. No such payments were made thereafter.
Employment Agreements
The Company entered into an employment agreement with Anders Laren on
January 1, 1994 to serve as Chief Executive Officer through December 31,
1997. The agreement provides for a base annual salary of $121,000 plus a
bonus entitling Mr. Laren to 30% of the Company's profits before interest
and taxes, as defined, in excess of $700,000, and 10% of such excess over
$800,000. No bonus was earned in fiscal 1994, 1995, or 1996 under the
agreement. The Company also entered into an agreement with Dr. Jonathan D.
Lieff on January 1, 1994 to serve as the Company's Medical Director. The
agreement provides for a base annual salary of $180,000 and is terminable
upon six months notice after June 30, 1996.
Option Grants
No stock options were granted to the executive officers named in the
foregoing compensation table during the fiscal year ended September 30,
1996.
Option Year End Values
The following is certain information regarding options exercised by
the executive officers named in the foregoing compensation table during the
year ended September 30, 1996 and the fiscal year end value of unexercised
options as such date:
Number of Value of
Unexercised Unexercised
Options at in-the-Money
9/30/96 Options
Shares --------------------------------
Acquired on Value Exercisable/ Exercisable
Name Exercise (#) Realized ($) Unexercisable Unexercisable
- -----------------------------------------------------------------------------------
Anders Laren None - 0/5,000 $0/$0
(Options)
Peter W.Clegg None - 0/5,000 $0/$0
(Options)
Dr. Jonathan D. Lieff None - 0/2,500 $0/$0
(Options)
Stock Options and Stock Appreciation Rights
Stock Option Plans
In June 1993, the Board of Directors and stockholders adopted and
approved the 1993 Employee Incentive Stock Option Plan (the "Employee Plan")
and the 1993 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan," and with the Employee Plan are collectively referred to herein as the
"Plans"). The Plans are administered by the Board of Directors or by a
committee appointed by the Board. Pursuant to the Plans, options to acquire
an aggregate of 241,000 shares of Common Stock may be granted (181,000
shares pursuant to the Employee Plan and 60,000 share pursuant to the
Directors' Plan). The Plans provide for grants to employers, consultants,
and directors of the Company.
The Employee Plan authorizes the Board to issue incentive stock
options ("ISOs"), as defined in Section 422A of the Internal Revenue Code.
The Directors Plan authorizes only stock options that do not conform to the
requirements of the Code section ("non-ISOs"). Consultants and directors
who are not also employees of the Company may be granted only non-ISOs. The
exercise price of each ISO may not be less than 100% of the fair market
value of the Common Stock at the time of grant, except that in the case of a
grant to an employee who owns 10% or more of the outstanding stock of the
Company or a subsidiary or parent of the Company (a "10% Stockholder"), the
exercise price shall not be less than 110% of the fair market value on the
date of the grant. The exercise price of each non-ISO granted under the
Director Plan shall be as determined by the Board of Directors in its
discretion and may be less than the fair market value of the Common Stock on
the date of the grant.
In July 1994, the Board of Directors granted stock options under the
Employee Plan to purchase 25,000 shares of Common Stock at a price equal to
the fair market value of the shares on the date of grant ($1.32 per share).
Subsequently, options to purchase 15,000 share were terminated. The
remaining options become exercisable to purchase 2,000 shares beginning on
or after January 29, 2000. No options shall be exercisable unless at the
time of such exercise (i) the fair market value of the common stock equals
or exceeds $3.50 per share and (ii) the individual is employed by the
Company. No options granted under the Employee Plan were exercisable in
fiscal 1994, 1995 or 1996. In February 1995 the Board of Directors granted
stock options under the Directors' Plan to purchase 5,000 shares of common
stock at a price equal of the fair market value of the shares on the date of
grant ($.9375 per share). The options become exercisable to purchase 1,000
shares beginning on or after August 17, 1997 with additional 1,000 shares
becoming available each year thereafter through August 17, 2001. No options
shall be exercisable unless at the time of such exercise (1) the fair market
value of the Common Stock equals or exceeds $3.50 per share and (ii) the
individual is a Director of the Company. No options granted under the
Directors Plan were exercisable in fiscal 1994, 1995 or 1996.
Meetings of the Board of Directors
There were 5 meetings of the Company's Board of Directors during the
1996 fiscal year. Anders Laren, Peter W. Clegg and Kuno Laren were present
at such meetings. The Company has one formal committee, the Audit
Committee, consisting of Kuno Laren and Peter W. Clegg.
Director Compensation
Outside directors may be paid an honorarium for attending meetings of
the Board of Directors in an amount which management anticipates will not
exceed $500 per meeting of the Board of Directors of the Company. Mr. Clegg
received $1,325 for fees and expenses related to attending meetings held in
fiscal 1996.
Section 16(a) Reporting
Under the securities laws of the United States, the Company's
directors, its executive and certain other officers, and any other persons
holding ten percent or more of the Company's Common Stock must report on
their ownership of the Company's Common Stock and any changes in that
ownership to the Securities and Exchange Commission and to the National
Association of Securities Dealers, Inc.'s Automated Quotation System.
Specific due dates for these reports have been established. During the year
ended September 30, 1996 all reports for all transactions were filed on a
timely basis.
Certain Relationships and Related Transactions
The Company has an aggregate of 250 shares of Series A Preferred Stock
issued and outstanding. Until June 24, 1996, all of the Series A Preferred
Stock was owned by Grant Enterprises Ltd. ("Grant"), a principal
stockholder of the Company. On June 24, 1996, Grant made distributions of
Preferred Stock to Kalex Corporation (70 shares) and to Kuno Laren (93
shares). Grant retained 87 shares of Preferred Stock. The
Preferred Stock pays a cumulative dividend equal to 12% per annum of the
liquidation value ($1,000 per share). The Company has also borrowed money
from Grant at various times for working capital. The Company repaid a note
for $198,000 to Grant in accordance with its terms in fiscal 1995. Interest
at the rate of 1% per month on the outstanding balance under the note was
paid to Grant, aggregating $25,060 and $5,940 for fiscal 1994 and 1995,
respectively. Kuno Laren, a director and principal stockholder of the
Company is a director and principal stockholder of Grant and is the father
of Anders Laren. Kuno Laren was made an employee of the Company and was
paid $48,000 in each of fiscal 1995 and 1996 to provide services with
respect to potential acquisitions, institutional financing and stockholder
relations.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors is not
aware of any other business which may be brought before the Meeting. If any
other business properly comes before the Meeting, the person named as
Proxy will vote the shares covered by such Proxy as he determines in
his judgment.
STOCKHOLDER PROPOSALS
In Order to be included in the proxy material for the Company's next
annual meeting of stockholders, stockholder proposals must be received by
the Company on or before _______, 1997.
APPENDIX A
ASSET PURCHASE AGREEMENT
among
ARBOUR ELDER SERVICES, INC.
AND
AGES HEALTH SERVICES INC.
Dated as of February 1, 1997
TABLE OF CONTENTS
Section Page
- ------- ----
1. Purchase and Sale of Assets. 1
1.1 Assets Conveyed 1
1.2 Excluded Assets 5
2. Payment of the Purchase Price and Assumption of Liabilities 5
2.1 Effective Date and Closing Date 5
2.2 Purchase Price 6
2.3 Prorations 6
2.4 Liabilities Assumed by Purchaser 7
2.5 Liabilities Retained by the Seller 7
2.6 Instruments of Conveyance and Transfer of Books and
Records 10
3. Representations and Warranties of the Seller 12
3.1 Organization, Capitalization, Authorization, Etc. 12
3.2 Capitalization 12
3.3 Ownership of Assets 13
3.4 The Seller's Authority and No Conflict 13
3.5 Compliance with Laws 13
3.6 Real Property 14
3.7 Financial Statements, Books and Records, and Change in
Condition 14
3.8 Absence of Undisclosed Liabilities 16
3.9 Tax Returns and Audits 16
3.10 Premises 17
3.11 Trade Names, Trademarks, Copyrights, Etc. 18
3.12 Tangible Personal Property. 19
3.13 Existing Employment and Other Contracts, ERISA 20
3.14 Insurance Policies 22
3.15 Litigation 22
3.16 Contracts, Obligations and Commitments 22
3.17 Medicare, CHAMPUS and Medicaid 23
3.18 Filing of Reports 24
3.19 Licenses 24
3.20 No Broker 24
3.21 No Misleading Statements 24
3.22 Employee Matters 25
4. Representations and Warranties of the Purchaser 25
4.2 Authority and No Conflict 25
4.3 Defaults, Consents, Etc. 26
4.4 No Broker 26
5. Obligations Before and After Closing 27
6. Conditions Precedent to the Purchaser's Performance 29
6.1 Accuracy of Representations and Warranties 30
6.2 Performance 30
6.3 Certification by the Seller 30
6.4 Opinion of the Seller's Counsel 30
6.5 Absence of Litigation 30
6.6 Legal Prohibition 31
6.7 Consents, Approvals, Permits, Licenses, etc. 31
6.8 Transfer of Licenses 32
6.9 Non-Competition Agreements 32
6.10 Consulting Agreement 32
6.11 Notice Letter 33
6.12 Compliance with Management Agreement 33
6.13 Seller's Stockholder Approval 33
6.14 Tail Insurance 33
7. Conditions Precedent to the Seller's Performance 33
7.1 Accuracy of the Purchaser's Representations and
Warranties 34
7.2 Performance; Authorization 34
7.3 Certificates 34
7.4 Absence of Litigation 34
7.5 Consents 34
7.6 Stockholder Approval of this Agreement 35
7.7 Delivery of Documents 35
8. Covenants of the Seller 35
8.1 Employee Notification 35
9. Joint Covenants 36
9.1 Access to Books and Records 36
9.2 Allocation of Purchase Price 37
9.3 Control and Rights 38
10. The Closing and Termination 38
10.1 Closing 38
10.2 Termination 38
11. Survival of Representations; Indemnification 39
11.1 Survival of Representations, Etc. 39
11.2 Indemnification by the Seller 39
11.3 Indemnification by the Purchaser 42
11.4 Procedure for Indemnification 42
11.5 Limitations on Indemnification Rights 43
12. Entire Agreement; Modification, Waiver 44
13. Further Assurance 44
14. Successors and Assigns; Assignment 44
15. Notices 44
16. Governing Law 45
17. Guarantee 45
ASSET PURCHASE AGREEMENT
AGREEMENT, made as of the 1st day of February 1997, by and
between Arbour Elder Services, Inc., a Massachusetts corporation
("Purchaser"), and Ages Health Services Inc., a Massachusetts corporation
(the "Seller").
W I T N E S S E T H :
WHEREAS, the Seller is in the business of operating mental health
nursing home programs ("Programs") and outpatient clinics ("Clinics") in
Massachusetts, Connecticut, and Rhode Island; and
WHEREAS, Purchaser desires to purchase and the Seller desires to sell
certain of the assets of the Seller ("Assets" as hereinafter defined), upon
the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter contained, the parties hereto agree as follows:
1. Purchase and Sale of Assets.
1.1 Assets Conveyed. At the closing of the transaction
contemplated hereby (the "Closing") on the Closing Date (as
hereinafter defined), and upon the basis of the representations,
warranties, covenants and agreements contained herein, the Seller
shall sell, transfer, assign, convey and deliver to the Purchaser, and
the Purchaser shall purchase on the terms set forth herein, all of the
Seller's right, title and interest in and to the Assets (as
hereinafter defined), except for the Excluded Assets (as hereinafter
defined) as provided for in Section 1.2 free and clear of all liens,
charges, claims, pledges, security interests, equities, and
encumbrances of any nature whatsoever (collectively "Liens"), except
for "Permitted Encumbrances." Permitted Encumbrances shall mean (a)
liens of current taxes not yet due and payable; (b) those easements,
rights of way, servitudes, restrictions, liens and other matters
described in Schedule 3.3 hereto; (c) Liens created by the Purchaser
and (d) the Assumed Liabilities (as defined below). The "Assets"
shall mean all those personal, tangible and intangible properties and
the real property and improvements of the Seller including, without
limitation, those set forth below and as more particularly described
in the Schedules to this Section 1.1, including the going concern
value of the Seller in the conduct of the operations of the Seller, if
any, with the exception of the Excluded Assets (as hereinafter
defined), and such other exceptions as are specifically set forth
below or described in such Schedules:
(a) Accounts Receivable: the first $1,000,000 of cash
collected from the Accounts Receivable of the Seller as of the
Effective Date, less collection fees allocable thereto, and all
cash collected from Accounts Receivable of the Seller in excess
of $1,800,000, it being agreed and understood that the Seller
shall be entitled to receive the cash collected from Accounts
Receivable in excess of $1,000,000 up to $1,800,000, less
collection fees allocable hereto (the "Seller's Collections").
The Purchaser and Seller shall mutually agree upon a party or
parties (the "Billing Party") to bill the Accounts Receivable,
distribute any collections as provided herein and report on each
distribution to each party hereto. Prior to the Closing Date,
Purchaser shall hold the Seller's Collections in trust for
Seller and shall pay all such sums collected to the Seller at
Closing. Thereafter, Purchaser shall pay any remaining Seller's
Collections to Seller on a weekly basis as collected by wire
transfer or by check in accordance with Seller's instructions,
and shall provide Seller with weekly statements on collections
relating to the Accounts Receivable of the Seller. The
Purchaser or Seller or their respective representatives shall
have the right to reasonably review any records relevant to
verifying distributions and collections. Accounts Receivable
shall include services performed on or before the Effective
Date, regardless of when the clinician bills for such services.
The Accounts Receivables shall be determined as of the
Effective Date and shall be set forth on Schedule 1.1(a), as
agreed upon by the parties on the Effective Date, and shall be
revised for all Accounts Receivables related to Services
performed prior to the Effective Date but billed after the
Effective Date.
(b) Contractual Rights: all assignable rights and
benefits of the Seller under all contracts set forth on Schedule
1.1(b) hereto;
(c) Licenses and Permits: to the extent permitted by
applicable law and regulation, all licenses and permits held or
used by the Seller in connection with the ownership of the
Assets and the conduct of the operations of the Assets including
but not limited to those which are listed on Schedule 1.1(c)
hereto;
(d) Equipment: all machinery, equipment, fixtures,
computers, computer hardware and software, tools, supplies,
construction in progress, furniture, vehicles and other tangible
personal property and assets of the Seller, including without
limitation those described in Schedule 1.1(d) hereto and all
assignable rights pursuant to contracts related thereto;
(e) Leases: all the assignable interest of and the
rights and benefits accruing to the Seller as lessee under (i)
the leases of the several Premises used by the Seller in the
operation of the Seller's business, and all leasehold
improvements and fixtures relating thereto, including without
limitation those described in Schedule 1.1(e) hereto, and (ii)
all leases or rental agreements covering machinery, equipment,
computers, computer hardware and software, tools, supplies,
furniture and fixtures, vehicles and other tangible personal
property and assets used in the business of the Seller,
including without limitation those described in Schedule 1.1(e)
hereto;
(f) Records: to extent permitted by applicable law or
regulations all operating data and records of the Seller
relating to the current business of the Seller, including
without limitation, client lists and records (including
treatment records), referral sources, operating guides and
manuals, projections, copies of financial, accounting and
personnel records, correspondence and other similar documents
and records, but excluding the corporate records of the Seller
and records unrelated to the ongoing business transferred to the
Purchaser;
(g) Intellectual Property: all of the intangible and
intellectual property of the Seller used or useful in the
operation of the Seller's business, including without limitation
all software (including without limitation all source codes and
object codes), methods, plans, research data, marketing plans
and strategies, forecasts, trademarks, service marks, trade
names, licenses (if transferable), copyrights, permits and
other similar intangible property and rights relating to the
business of Seller, including without limitation all such
property and rights listed in Schedule 1.1(g); and
(h) Other Assets: all other personal properties and
assets of every kind and nature, tangible or intangible
(including warranties with respect to such assets) owned by the
Seller and used or held for use in connection with the normal
and customary operation of the business of the Seller,
including, without limitation, any fixtures, installations,
machinery, prepaid expenses, equipment, vehicles, furniture,
supplies, office equipment, or other personal property.
1.2 Excluded Assets. Notwithstanding anything to the contrary
contained herein, the following Assets of the Seller are specifically
excluded from the Assets being conveyed hereunder, and shall remain
the property of the Seller.
(i) Cash (including deposits in bank accounts on the
Effective Date and checks received at the Seller's lock box
accounts on or before the Effective Date) and Treasury notes on
hand as of the Effective Date. The Seller warrants that the
Cash from the lock box accounts shall be used to pay outstanding
payroll taxes, to the extent any cash remains, Seller shall use
such Cash to pay any other operating expenses of Seller accruing
or occurring before the Effective Date;
(ii) Seller's Collections;
(iii) Insurance proceeds related to the liabilities not
assumed by Purchaser;
(iv) All rights related to that certain Compromise and
Settlement Agreement by and between Seller and Alpha Geriatric
Services, Inc. dated April 13, 1993; and
(v) Employment Agreement dated January 1, 1994, between
the Seller and Anders Laren.
2. Payment of the Purchase Price and Assumption of Liabilities.
2.1 Effective Date and Closing Date: The "Effective Date"
shall mean the date as of which the parties execute this Agreement.
The "Closing Date" shall mean the date which is not more than twenty
(20) days after the receipt by Seller of the shareholder approval as
set forth in Section 7.7; provided, however, that the Closing Date
shall not occur more than one hundred eighty (180) days after the
Effective Date, unless otherwise agreed to by both parties. The
parties hereto shall each endeavor to accomplish the Closing with
ninety (90) days of the Effective Date. The Closing Date can be
changed upon mutual agreement of the parties.
2.2 Purchase Price. As consideration for the Purchase of the
Assets, the Purchaser shall pay to the Seller on the Closing Date, by
wire transfer, cash in the amount of $1,100,000, less the advance
amount of $100,000 which is paid as of the Effective Date (the
"Purchase Price"). In addition, the Purchaser shall (i) assume the
Assumed Purchaser's Liabilities (as hereinafter defined) as
specifically set forth in Section 2.4 in an amount not to exceed
$760,000, and (ii) pay to the Seller the Seller's Collections as held
by the Purchaser in trust for the Seller pursuant to Section 1.1(a).
The Purchase Price, the Assumed Liabilities and the Seller's
Collections shall all be subject to adjustment as set forth in Section
2.3 herein. The Purchaser shall deliver to the Seller an assignment
and assumption agreement, together with other documentation reasonably
requested by the Seller evidencing the assumption of such liabilities.
2.3 Prorations. Within ten (10) days prior to the Closing
Date (the "Determination Date"), the Seller and Purchaser shall
determine whether either party, pursuant to this Agreement or the
Management Agreement (as hereinafter defined) has paid any liabilities
that are the responsibility of the other party (the "Determination"),
including without limitation (i) compensation paid by Purchaser to
Seller's employees relating work performed for the Seller before the
Effective Date, (ii) any amounts paid by Purchaser pursuant to those
contracts and leases, being assumed by the Purchaser, relating to
matters and the operation of the Seller's business prior to the
Effective Date, (iii) ad valorem taxes, if any, on the Assets, (iv)
all utilities servicing any of the Assets including without limitation
water, sewer, telephone, electricity, and gas service, and (v) any
other expense or payment made by either party relating to liabilities
that are the responsibility of the other party. The reconciliation as
required by this Section shall be treated as an adjustment to the
Purchase Price, the Assumed Liabilities and the Seller's Collections.
Once the Determination is completed, the liabilities and expenses each
party paid on behalf of the other party shall be netted and the net
amount shall be added to or subtracted from the Purchase Price, the
Assumed Liabilities and the Seller's Collections as set forth in
Section 2.2. In the event the determination results in a reduction of
the amounts set forth in Section 2.2, such reduction shall first be
applied to the Cash Payment as set forth in Section 2.2(i) and then to
the Seller's Collections. To the extent one party pays any
liabilities of the other party after the Determination Date, the
parties agree to reimburse each other for such amounts paid within
sixty (60) days of the Closing Date.
2.4 Liabilities Assumed by Purchaser. On and as of the Closing
Date, Purchaser shall assume and agree to timely pay, perform and
discharge and hold Seller harmless from the following Liabilities:
(a) any and all obligations of the Seller relating to the Assets
(other than those excluded in Section 1.2) accruing from and after the
Effective Date; (b) any and all obligations of the Seller under the
Employment Agreements, Leases and other Agreements set forth on
Schedule 2.4 arising from and after the Effective Date; and (c)
additional liabilities up to $760,000 (the "Assumed Purchaser
Liabilities") that are validly existing and ascertainable as of the
Effective Date, and identified by Seller to Purchaser, subject to the
Determination as set forth in Section 2.3.
2.5 Liabilities Retained by the Seller. The Seller shall
remain obligated to pay all Liabilities relating to the Assets which
are not specifically assumed by Purchaser pursuant to Section 2.4 and
Schedule 2.4, and, therefore, the Seller shall continue to be
obligated to pay, perform and discharge such debts, obligations and
liabilities (other than those debts, obligations and liabilities of
the Seller specifically referred to in Section 2.4, Schedule 2.4
hereof or assumed by Purchaser pursuant to the Management Agreement)
and hold Purchaser harmless from:
(i) any and all obligations for the payment of any long
term indebtedness;
(ii) any and all liabilities of the Seller relating to
the Seller for acts or omissions, including medical malpractice,
occurring through the Effective Date;
(iii) any and all claims of the United States Government
under the Medicare program, or any state under Medicaid
programs, or of any other third party payors, arising out of the
activities of the Seller's business through the Effective Date;
(iv) federal and state income taxes, if any, payable with
respect to any activities of the Seller through the Effective
Date;
(v) sales and other taxes (including, without limitation,
use taxes) payable with respect to the business or operations of
the Seller through the Closing Date or the transactions
contemplated hereby;
(vi) any other debt, obligation or liability of the
Seller whether or not such debt, obligation or liability is
disclosed on the financial statements as hereinafter defined;
(vii) any liability or obligation to any employee or
former employee of the Seller or to any third party, under any
pension, insurance, bonus, profit-sharing or other employee
benefit plan or arrangement or any obligation relating to
salaries, bonuses, vacation or severance pay, including, without
limitation, any liabilities to employees not reflected on
Schedule 2.4 hereto relating to the activities and obligations
of the Seller through the Effective Date;
(viii) the Seller's obligations and liabilities arising
under this Agreement;
(ix) any liabilities of the Seller to any of its
shareholders arising out of any action by the Seller in
connection with the transaction contemplated herein;
(x) any obligation related to the Seller's agreements
with: (1) HealthPartners Funding, L.P. (including the buyout and
any penalties associated with the buyout of the HealthPartners'
Agreement); (2) the Compromise and Settlement Agreement by and
among Ages, Alpha Geriatric Services, Inc. and Massachusetts
Osteopathic Foundation, Inc.; (3) obligations pursuant to that
certain Settlement Agreement by and between Ages and the
Commonwealth of Massachusetts regarding Medicaid billing; and
(4) commercial short-term financing arrangement with Paine
Webber; and
(xi) any accrued but unpaid payroll tax obligations of
the Seller relating to the activities and operations of the
Seller prior to the Effective Date.
2.6 Instruments of Conveyance and Transfer of Books and
Records.
2.6.1. On the Effective Date the Seller shall deliver to
the Purchaser the following:
(i) a letter from HealthPartners agreeing to waive
the thirty (30) day termination notice as set forth in the
HealthPartner's Agreement;
(ii) an executed and binding Settlement Agreement
with the Commonwealth of Massachusetts settling, for the
sum of $125,000, the ongoing investigation of the Seller
by the Commonwealth of Massachusetts for Medicaid billing;
(iii) a fully executed Management Agreement by and
between the Seller and the Purchaser, in form
substantially similar to Exhibit D hereto, whereby the
Purchaser shall manage the business operations of the
Seller from the Effective Date until the Closing Date (the
"Management Agreement");
(iv) a fully executed Promissory Note, Security
Agreement and UCC-1 Financing Statement granting the
Purchaser a first priority security interest (subject to
the interest of HealthPartners) in the assets of the
Seller, as required by the terms of the Management
Agreement in a form substantially similar to Exhibit E
hereto;
(v) letter signed by Kuno Laren and Anders Laren,
as Shareholders of the Seller, agreeing to vote pursuant
to proxy to approve the transaction as contemplated by
this Agreement;
(vi) Good Standing Certificate for Seller from the
Commonwealth of Massachusetts;
(vii) Certificates by the Seller. The Purchaser
shall have received certificates dated the Effective Date
signed by the President or Vice President certifying that
the Seller is authorized to execute this Agreement and the
Management Agreement; and
(viii) Opinion of Counsel. Purchaser shall have
received favorable opinion of Counsel for Seller, dated
the Effective Date, substantially in the form as set forth
in Exhibit A.
2.6.2 On the Effective Date, Purchaser shall deliver to
Seller:
(i) the Management Agreement executed by Purchaser;
(ii) a Consulting Agreement substantially in the
form of Exhibit C hereto (the "Consulting Agreement")
executed by Purchaser;
(iii) a letter from Seller to Purchaser in the form
of Exhibit D hereto identifying the Assumed Purchaser
Liabilities and signed by Purchaser; and
(iv) by wire transfer, cash in the amount of
$100,000 which shall be treated as an advance against the
Purchase Price payable at Closing.
2.6.3. At the Closing, the Seller shall deliver to the
Purchaser such deeds, bills of sale, endorsements, assignments
and other instruments of sale, conveyance, transfer and
assignment, reasonably satisfactory in form and substance to the
Purchaser and its counsel as may be reasonably requested by the
Purchaser in order to convey to the Purchaser good title to the
Assets, as set forth in Section 1.1. The Seller shall also
deliver on the Effective Date, copies of all agreements
pertaining to the business of the Seller, copies of accounting
records with respect to the Seller's business and all other
records to be transferred to the Purchaser pursuant to Section
1(f) hereof other than the Excluded Assets.
3. Representations and Warranties of the Seller.
In order to induce the Purchaser to enter into and perform this
Agreement, the Seller represents, warrants and agrees as set forth in this
Section 3. Except for Sections 3.1.2, 3.2, 3.3 and 3.4, which shall be made
on the Closing Date as well as the Effective Date, the representations and
warranties as set forth in this Section relate to the activities and
operations of the Seller through the Effective Date of this Agreement.
3.1 Organization, Capitalization, Authorization, Etc.
3.1.1 Organization. The Seller is a corporation duly
organized, validly existing and in good standing under the laws
of the Commonwealth of Massachusetts with all the requisite
power and authority to execute, deliver and perform this
Agreement and to hold the properties, rights and assets and to
carry on the businesses now conducted by it.
3.1.2 Governing Documents. Copies of the Certificate of
Incorporation and By-Laws of the Seller have heretofore been
delivered to the Purchaser and are true, complete and correct.
3.2 Capitalization. The authorized capital stock of the Seller
consists of (a) 4,500,000 shares of Common Stock, without par value,
of which 2,580,100 shares are issued and outstanding, and (b) 100,000
shares of Preferred Stock, without par value, of which 250 shares are
issued and outstanding. Except as set forth on Schedule 3.2 hereto,
no contract, commitment or undertaking of any kind has been made for
the issuance of any additional shares of capital stock of the Seller.
3.3 Ownership of Assets. On the Closing Date, except as set
forth on Schedule 3.3 hereto, the Seller is the legal and beneficial
owner of the Assets, free and clear of any claims, charges, equities,
liens (including tax liens), security interests and encumbrances,
except the Permitted Encumbrances and any liens placed on the assets
by the Purchaser pursuant to the Management Agreement (as hereinafter
defined), and the Seller has full right, power and authority to sell,
transfer, assign, convey and deliver all of the Assets.
3.4 The Seller's Authority and No Conflict. The Seller has the
full right, power and authority to execute, deliver and carry out the
terms of this Agreement and all documents and agreements necessary to
give effect to the provisions of this Agreement, and this Agreement
has been duly authorized, executed and delivered by the Seller. To
the best of Seller's knowledge, the consummation of the transactions
contemplated hereby will not result in any material conflict, breach
or violation of, or default under, any applicable statute, or any
judgment, order, decree, mortgage, agreement, deed of trust, indenture
or other instrument to which the Seller is a party or by which Seller
is bound. All action and other authorizations prerequisite to the
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement have been or will have been taken or
obtained by the Seller as of the Closing Date. This is a valid and
binding agreement of the Seller enforceable in accordance with its
terms.
3.5 Compliance with Laws. Except as discussed on Schedule 3.5,
to the best of Seller's knowledge, in connection with the conduct of
the operation and the conduct of its business, and in connection with
the lease of the Premises (as hereinafter defined) and ownership of
assets of the Seller, the Seller has complied with all applicable
statutes and regulations of all governmental authorities having
jurisdiction over it except where the failure to so comply would not
have a material adverse effect on the business or properties of the
Seller. The Seller has not received any notice of any violations of
applicable laws.
3.6 Real Property. Schedule 1.1(e) hereto identifies all
interests in real property held by the Seller, together with the
nature of such interest. None of such interests are shared. The
Seller does not hold any fee title in any real property and holds only
the leasehold estates in the properties identified on Schedule 1.1(e).
Such properties are referred to herein as "Premises" (as hereinafter
defined). The Seller's occupation, possession and use of the Premises
has not been disturbed in any material respect and no written claim
has been asserted or, to the knowledge of Seller, threatened, adverse
to the respective rights of the Seller.
3.7 Financial Statements, Books and Records, and Change in
Condition.
3.7.1 Financial Statements Provided. Copies of the
financial statements of the Seller listed on and annexed to
Schedule 3.7.1 hereto have been initialled for identification
and delivered to the Purchaser. The annual financial statements
have been prepared in accordance with the accrual basis method
of accounting throughout the periods indicated, and fairly
present its financial position as at the respective dates of the
balance sheets included in the financial statements and the
results of its operations for the respective periods indicated.
The interim financial statements which are listed on Schedule
3.7.1 hereto, have been prepared in accordance with the accrual
basis method of accounting according to procedures consistently
applied to such statements from month to month since September
30 1996, and, subject to normal year end adjustments, fairly
present its financial position as of the date thereof in
accordance with generally accepted accounting principles.
3.7.2 Absence of Changes. Except as disclosed on
Schedule 3.7.2 hereto, since September 30, 1996, there has not
been any (a) transaction by the Seller except in the ordinary
course of business as conducted during the twelve-month period
ending on that date; (b) capital expenditure exceeding $2,000;
(c) material adverse change in the condition (financial or
otherwise), business or liabilities or assets of the Seller,
other than disclosed in the financial information provided to
Purchaser through September 30, 1996, and Schedule 3.7.1; (d)
destruction, damage to, or loss of any asset (whether or not
covered by insurance) that materially and adversely affects the
condition, financial or otherwise, or business of the Seller;
(e) labor disputes or other event or condition relating to
employment or labor matters of any character materially and
adversely affecting the condition, financial or otherwise, or
assets, of the Seller; (f) change in accounting methods or
practices (including, without limitation, changes in
depreciation or amortization policies or rates) by the Seller;
(g) revaluation of the Seller's assets; (h) sale or transfer of
any asset of the Seller except in the ordinary course of
business; (i) amendment or termination of any material contract,
agreement, or license to which the Seller is a party; (j) loan
by the Seller to any person or entity, or guaranty of any loan;
(k) mortgage, pledge, or other encumbrance of any asset of the
Seller, except as set forth in Schedule 3.3 and the Permitted
Encumbrances; (l) waiver or release of any right or claim of the
Seller except in the ordinary course of business; (m) any
distribution, setting aside, payment of a dividend or
distribution (whether in cash, securities, other property or any
combination thereof) to any stockholder or in respect of any
capital stock of the Seller; (n) any change in the
capitalization of the Seller; or (o) any material obligation or
liability (absolute or contingent) incurred by the Seller or to
which it has become subject except current liabilities incurred
in the ordinary course of business and obligations under
contracts entered into in the ordinary course of business.
3.8 Absence of Undisclosed Liabilities. The Seller does not
have any material debt, liability or obligation of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to
become due, which is not reflected or reserved against in the
financial statements of the Seller except for (a) those which are not
required by generally accepted accounting principles to be so
reflected, (b) those which were incurred in the ordinary course of
business and are usual and normal in amount both individually and in
the aggregate, and (c) those discussed on Schedule 3.8.
3.9 Tax Returns and Audits. Within the times and in the manner
prescribed by law, the Seller has filed all Federal, state and local
tax returns required by law and has paid all taxes, assessments, and
penalties due and payable. There are no present disputes as to taxes
of any nature payable by the Seller. The Seller has not received
notice of, nor is it otherwise aware of, an audit or examination; nor
is it a party to any action or proceeding by any governmental
authority for assessment or collection of taxes, excise taxes,
charges, penalties or interest; nor has any claim for assessment and
collection been asserted against it, except as set forth on Schedule
3.9 hereto. The Seller has accrued or paid or will have caused to be
paid on or prior to the Closing Date, all applicable corporate
franchise taxes, income taxes, unemployment taxes, payroll taxes,
social security taxes, occupation taxes, property taxes, excise taxes,
sales and use taxes, and all other taxes of every kind, character or
description required to be paid, except for taxes which are not yet
due and subject to a proration in accordance with Section 2.2 hereof.
3.10 Premises.
3.10.1 Premises Schedule. Schedule 1.1(e) contains a
complete and accurate description of all premises leased by the
Seller (the leased property as set forth on Schedule 1.1(e)
shall be referred to as the "Premises"). The Seller
acknowledges that the condition and usefulness of the Premises
in Rockland is material to the Purchaser's decision to purchase
the Assets. The Seller has not utilized or stored any hazardous
substances on the Premises other than those substances used in
the ordinary course of the Seller's operation of the business.
3.10.2 Environmental Protection. To the best of
Seller's knowledge as of the date hereof, except as set forth on
Schedule 3.10.2, the Seller is not liable for cleanup or
response costs, with respect to the emission, discharge, or
release of any Hazardous Substance, arising under the
Environmental Laws due to its operation of the Premises.
As used herein, "Environmental Laws" means the Resource
Conservation Recovery Act, the Comprehensive Environmental
Responsibility Compensation and Liability Act, the Superfund
Amendments and Reauthorization Act, the Toxic Substances Control
Act, the Hazardous Materials Transportation Act, the Clean Air
Act, the Clean Water Act, and other similar Federal and state
laws, as amended, together with all regulations issued or
promulgated thereunder, relating to pollution, the protection of
the environment or the health and safety of workers or the
general public. The term "Hazardous Substances" means any toxic
or hazardous substance or other pollutant of any nature as
defined and/or regulated by Environmental Laws (including,
without limitation, asbestos and waste products of the
operations of the Seller).
3.10.3 Compliance with Building Codes, Zoning Laws, Etc.
The Seller has no knowledge of any existing violations of any
Legal Requirements materially and adversely affecting the
Premises or any construction, use or occupancy of the
improvements to the Premises, other than as shown on Schedule
3.10.3 hereto. As used herein, the term "Legal Requirements"
means all laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits,
licenses, authorizations, directions and requirements of any
Federal, state or local governmental authority, ordinary or
extraordinary, which now are applicable to the Premises or any
part thereof, or any of the adjoining sidewalks, or any use or
condition of the Premises or any part thereof.
3.10.4 Access. Except as set forth on Schedule 3.10.4,
to the best of Seller's knowledge, the rights-of-way of all
roads necessary for full utilization of the Premises for their
intended purposes have either been acquired by the appropriate
Federal, state or local governmental authority or have been
dedicated to public use and accepted by such governmental
authority, and all such roads shall have been completed.
3.10.5 Covenants. Except as set forth on Schedule
3.10.5, to the best of Seller's knowledge, the Premises and all
buildings and other improvements located thereon are in
compliance, in all material respects, with all covenants,
conditions, and restrictions of record which affect such
property and such improvements.
3.11 Trade Names, Trademarks, Copyrights, Etc. Schedule 1.1(g)
contains a schedule of all trade names, trademarks, service marks,
copyrights, or applications for patents, and trade secrets used by the
Seller or in which it has any rights or licenses, together with a
brief description of each. Except as set forth on Schedule 1.1(g),
the Seller has not infringed, and is not now infringing, any trade
name, trademark, service mark, copyright, patent or trade secret
belonging to a third party and has not received any notice of
infringement upon or conflict with the asserted rights of others.
Except as set forth on Schedule 1.1(g) hereto, none of such names,
marks, copyrights or patents, however, are registered with the United
States Patent and Trademark Office or the United States Copyright
Office. Except as disclosed in Schedule 1.1(g), the Seller is not a
party to any license, agreement, or arrangement, whether as licensor,
licensee, or otherwise, with respect to any trade name, trademark,
service mark, copyright, patent or trade secret. There are no trade
names, trademarks, service marks, copyrights, patents or applications
for patents and trade secrets other than those listed on Schedule
1.1(g) which are necessary for the conduct of the business of the
Seller as now being conducted, the loss of which could materially and
adversely affect the prospects, operations or condition, financial or
otherwise, of the Seller. The Seller is not a party to any
outstanding options, licenses or agreements of any kind relating to
the foregoing. No director, officer, stockholder, or, to the best of
the Seller's knowledge, employee, of the Seller or any predecessor has
any interest in any of the foregoing rights.
3.12 Tangible Personal Property. Schedules 1.1(d) and 1.1(e)
contains a complete and accurate description (including location) of
all tangible personal property owned by, in the possession of, or used
by the Seller in connection with its business with a value in excess
of $5,000. Except as disclosed in such Schedules 1.1(d) and 1.1(e),
no personal property used in connection with the business is held
under any lease, security agreement, conditional sales contract, or
other title retention or security arrangement, or is other than in its
possession and control. To the best of the Seller's knowledge, the
tangible personal property reflected on such Schedules 1.1(d) and
1.1(e) constitutes all such tangible personal property reasonably
necessary for the conduct of the Seller's business.
3.13 Existing Employment and Other Contracts, ERISA.
(a) Schedule 3.13 contains a list of all employment
contracts, consulting agreements and collective bargaining
agreements to which the Seller is a party or by which it is
bound; all such contracts and arrangements are in full force and
effect and the Seller is not in default under any of them.
Notwithstanding anything to the contrary, Purchaser shall not be
obligated in any way under such contracts and arrangements
(except for those contracts being assumed by Purchaser pursuant
to Section 2.4). There is neither pending nor, to the best of
the Seller's knowledge, threatened, any actions, suits,
proceedings or claims, or to its knowledge, any basis therefor
or threat thereof with respect to any contract, agreement,
covenant or obligation referred to in the preceding sentence;
including, without limitation, any claim for money due for
allegedly unpaid vacation time or sick pay. The Seller views
its relationship with its employees as satisfactory, and there
are no labor controversies pending or, to the best of the
Seller's knowledge, threatened between the Seller and the
employees of the Seller.
As used in this Section, the "Seller" shall include the
Seller and any member of a controlled group or affiliated
service group, as defined in Sections 414(b), (c), (m) and (o)
of the Internal Revenue Code of 1986, as amended (the "Code"),
of which the Seller is a member.
Schedule 3.13 hereto includes a complete and accurate list
of all employee welfare benefit and employee pension benefit
plans including but not limited to deferred compensation plans,
incentive plans, bonus plans or arrangements, stock option
plans, stock purchase plans, golden parachute agreements,
severance pay plans, dependent care plans, cafeteria plans,
employee assistance programs, scholarship programs, employment
contracts and other similar plans, agreements and arrangements
that are currently in effect as of the Effective Date, for the
benefit of directors, officers, employees, or former employees
(or their beneficiaries) of the Seller. The Seller has
delivered to the Purchaser, as to each plan, agreement or
arrangement listed in Schedule 3.13, as applicable, a complete
and accurate copy of (a) each plan, agreement or arrangement
listed, (b) the trust, group annuity contract or other document
which provides the funding for the plan, agreement or
arrangement, (c) the three most recent annual Form 5500 reports,
if applicable, (d) the most current summary plan description,
booklet, or other descriptive written materials, and each
summary of material modifications prepared after the last
summary plan description, (e) the most recent Internal Revenue
Service ("IRS") determination letter and all rulings or
determinations requested from the IRS subsequent to the date of
that exemption letter and (f) all other correspondence from the
IRS or the Department of Labor received which relates to one or
more of the plans, agreements or arrangements and are still
pending.
Every employee welfare benefit plan and every employee
pension benefit plan which has been or is sponsored by,
participated in by or contributed to by the Seller: (a) is in
substantial compliance with all reporting and disclosure
requirements; (b) has had the appropriate Form 5500 filed,
timely, for each year of its existence; (c) has no issue pending
(other than the payment of benefits in the normal course) nor
any issue resolved adversely to the Seller which may subject the
Seller to the payment of a penalty, interest, tax or other
amount; and (d) can be unilaterally terminated or amended on no
more than ninety (90) days notice. No notice has been received
by the Seller of an increase or proposed increase in any
employee welfare benefit or employee pension benefit plan listed
in Schedule 3.13.
No plan, arrangement or agreement with any one or more
employees will cause the Seller to have liability for severance
pay as a result of the Purchaser acquiring the Assets. The
Seller does not provide employee post-retirement medical or
health coverage or contribute to or maintain any employee
welfare benefit plan which provides for health benefit coverage
following termination of employment except as is required by
Section 4980B(f) ("COBRA") of the Code have fully complied with
the funding requirements and there is no accumulated funding
deficiency in any one or more of those plans.
(b) The Seller shall have paid all compensation owed to
the employees of the Seller through the Effective Date other
than as set forth on Schedule 3.13 hereto.
3.14 Insurance Policies. Schedule 3.14 contains a description
of all insurance policies held by the Seller concerning its business
and the Premises. All such policies have the respective limits set
forth in Schedule 3.14.
3.15 Litigation. Except as disclosed in Schedule 3.15, there
is no suit, action, arbitration, or legal, administrative, or other
proceeding, or governmental investigation pending or the Seller's
knowledge threatened against or affecting the Seller, any of the
business, assets, or condition, financial or otherwise, of the Seller
or any of the transactions contemplated by this Agreement. The Seller
is not in default of any order, writ, injunction or decree of any
Federal, state, local, or foreign court, department, agency or
instrumentality.
3.16 Contracts, Obligations and Commitments. Except as set
forth on Schedule 3.16 hereto, the Seller does not have any existing
material contract, obligation or commitment (written or oral) of any
nature, including, without limitation, the following: (a) loan or
other agreements, notes, indentures, or instruments relating to or
evidencing indebtedness for borrowed money or mortgaging, pledging or
granting or creating a lien or security interest or other encumbrance
on any of its assets or any agreement or instrument evidencing any
guaranty by the Seller of payment or performance by any other person;
(b) any contract or series of contracts with the same person for the
furnishing or purchase of equipment, goods or services in excess of
$1,000; (c) any joint venture contract or arrangement or other
agreement involving a sharing of profits or expenses to which it is a
party or by which it is bound; (d) agreements which will limit the
freedom of Purchaser to compete in any line of business or in any
geographic area or with any person; or (e) agreements providing for
disposition of the assets with value greater than $2,000 of the Seller
or agreements of merger or consolidation to which it is a party or by
which it is bound.
The Seller has substantially complied with all the material
provisions of its contracts and commitments listed on Schedule 3.16
hereto, and of all other material contracts and commitments to which
it is a party, and there is no default under any thereof except as set
forth on Schedule 3.16.
3.17 Medicare, CHAMPUS and Medicaid. All Clinics and Programs
are the subject of an existing Medicare contract with the Federal
Government with the fiscal intermediary whose name is set forth on
Schedule 3.17 hereto, are certified for participation in the Medicare
program, CHAMPUS program and Medicaid Program and are parties to such
agreements with other third party payors as are set forth on Schedule
3.17 hereto, all of which are in full force and effect and no default
or event has occurred thereunder which, with the giving of notice, the
passage of time, or both, would constitute a default thereunder.
3.18 Filing of Reports. Other than claims or reports
pertaining to individual patients, the Seller has timely filed or
caused to be timely filed all reports of every kind whatsoever
required by law or by written or oral contract or otherwise to be made
with respect to the purchase of services by third-party payors,
including, but not limited to, Medicare, Medicaid and CHAMPUS programs
and other insurance carriers, and all such reports are, or will be if
filed prior to the Effective Date, complete and accurate in all
material respects.
3.19 Licenses. The Clinics, Programs and other business units
of the Seller have all material contracts, licenses, permits,
consents, franchises and approvals required by law or governmental
regulations or that are necessary from all applicable Federal, state
and local authorities and any other regulatory agencies for the lawful
conduct of its business, and it is not in default in any material
respect under such licenses, permits, consents and approvals.
3.20 No Broker. The Seller represents and warrants it has not
dealt with any broker or finder in connection with any of the
transactions contemplated by this Agreement and, insofar as it knows,
no other broker or other person is entitled to any commission or
finder's fee in connection with any of such transactions.
3.21 No Misleading Statements. This Agreement and the
information and schedules referred to herein and the written
information that has been furnished to the Purchaser in connection
with the transactions contemplated hereby do not include any untrue
statement of a material fact and do not omit to state any material
fact necessary to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading.
3.22 Employee Matters. The Seller acknowledges that it has no
information that the Purchaser would not qualify for successor status
under Rev. Proc. 84-77. Pursuant to that pronouncement, the parties
agree the Purchaser shall follow procedures consistent with successor
status. In addition, both parties shall file 941's for the quarter
during which the sale takes place, reflecting the wages and deposits
made during its period of ownership.
4. Representations and Warranties of the Purchaser.
In order to induce the Seller to enter into and perform this
Agreement, the Purchaser represents and warrants as follows:
4.1.1 Organization. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, and has all requisite power and
authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. The Purchaser is duly
qualified to transact business as a foreign corporation in each state
in which the nature of the business conducted by it or its ownership
or leasing of property make such qualification necessary.
4.2 Authority and No Conflict. The Purchaser has the full
power and authority to execute, deliver and carry out its obligations
under this Agreement and all documents and agreements necessary to
give effect to the provisions of this Agreement. This Agreement has
been duly authorized, executed and delivered by the Purchaser, and the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not result in any conflict, breach or
violation of, or default under, any statute, judgment, order, decree,
mortgage, agreement, deed of trust, indenture, corporate charter,
bylaws, or other instrument to which the Purchaser is a party or by
which it is bound. All action and other authorizations prerequisite
to the execution of this Agreement and the consummation of the
transactions contemplated by this Agreement have been taken or prior
to the Closing Date will have been obtained by the Purchaser. This is
a valid and binding agreement of the Purchaser enforceable in
accordance with its terms.
4.3 Defaults, Consents, Etc. The execution and delivery of
this Agreement and the consummation of the transactions contemplated
hereby will not result in a material violation by the Purchaser of, or
constitute a default by the Purchaser under, any material contractual
obligation of the Purchaser or any legal requirement applicable to the
Purchaser. No approval, consent, authorization or other order of, and
no declaration, filing, registration, qualification or recording with,
any governmental authority or any other person, including, without
limitation, any party to any contractual obligation of the Purchaser,
is required to be made by or on behalf of the Purchaser for the
execution, delivery or performance of this Agreement by the Purchaser
except for those contemplated hereby or which have been or will be
obtained or for which waivers will be obtained prior to the Closing.
There are no administrative or court actions, suits or proceedings of
any kind now pending or threatened that, if adversely decided, would
have a material adverse effect on Purchaser's ability to carry out the
terms of this Agreement or consummate the transactions contemplated
hereby.
4.4 No Broker. The Purchaser represents and warrants that it
has dealt with no broker or finder in connection with any of the
transactions contemplated by this Agreement and, insofar as it knows,
no broker or other person is entitled to any commission or finder's
fee in connection with any of such transactions.
5. Obligations Before and After Closing.
A. From and after the Effective Date until the Closing Date,
the Seller agrees that:
5.1.1 Access to Premises and Information. The Purchaser
and its counsel, accountants, and other representatives will have
reasonable access during normal business hours upon reasonable notice
to the Seller and to all properties, books, accounts and records,
contracts and documents of or relating to the business of the Seller
provided that such access shall not interfere with the operation of
the business of Seller. The Seller will furnish or cause to be
furnished to the Purchaser and the Purchaser's representatives all
data and information concerning the business, finances, and properties
of the Seller that may reasonably be requested.
5.1.2 Conduct of Business in Ordinary Course. The Seller
agrees as follows: from the Effective Date until the Closing Date,
the Seller will (i) not increase any compensation payable to any
employees or consultants; (ii) not create any material obligation or
liability (absolute or contingent); (iii) not enter into, amend or
terminate any material contract, agreement, permit or lease without
the prior written consent of the Purchaser; (iv) not amend the Charter
or By-Laws of the Seller; (v) not enter into any commitment to borrow
money or mortgage, pledge, or subject to lien, charge or encumbrance
any assets or properties except in the ordinary course of business or
as contemplated hereunder; (vi) not sell or transfer any of the assets
of the Seller or cancel any debt or claim except in the ordinary
course of conduct of business or as contemplated hereunder; (vii) not
cancel or decrease any insurance policy relating to its business
(viii) not interfere with any material obligations under contracts,
leases and documents relating to or affecting conduct of its
respective business, all in the same manner as heretofore performed;
(ix) use its reasonable best efforts to maintain and preserve its
properties, assets and business organizations intact, its good will
and relationships with its present officers, employees, suppliers,
medical staff and others having a business relationship with it, and
maintain all material licenses and permits requisite to the conduct of
its business as now conducted; (x) not commit to any capital; (xi)
make no change in its existing banking and safe deposit arrangements
or grant any powers of attorney; and (xii) not issue any securities or
right to purchase any securities of the Seller or make any
declarations setting aside or payment of any dividend, or other
distribution (whether in cash, securities, other property or any
combination thereof) or in respect of any capital stock of the Seller.
The above restrictions shall not apply to the $100,000 cash advance on
the Purchase Price paid to the Seller on the Effective Date.
5.1.3 Further Authorization. The Seller will take, or cause to
be taken, such further actions as may be necessary or appropriate to
authorize the execution, delivery and performance of this Agreement by
it.
5.1.4 Management Agreement. The Seller shall comply with all
terms and conditions of the Management Agreement from and after the
Effective Date until the termination of this Agreement or the Closing
Date.
B. The Seller and the Purchaser agree that:
5.2.1 Consents. The Seller and the Purchaser will use their
reasonable best efforts to obtain all consents, waivers, and the like,
which are necessary to consummate the transactions contemplated
hereby.
5.2.2 Public Announcements. The Seller and the Purchaser agree
to consult with each other before issuing any press release or
otherwise making any public statements with respect to the
transactions contemplated by this Agreement, except with the consent
of the other party, and shall not issue any such press release or make
any such public statement prior to such consent, except to the extent
that either party is advised that it must make such disclosure
pursuant to applicable securities laws or stock exchange rules or
which may be otherwise required by applicable law.
C. Purchaser agrees that:
5.3.1 Confidentiality. Except as permitted by the Seller, the
Purchaser shall not divulge any information it may have acquired in
the course of its due diligence review of the Seller and the business
of the Seller unless and until all the transactions contemplated
hereby have been consummated. Notwithstanding the foregoing, the
Purchaser may divulge any information concerning the Seller and the
business of the Seller which is in the public domain, or which is
required of the Purchaser in connection with any governmental tribunal
or hearing or which is otherwise necessary or appropriate to disclose
to its lenders or prospective lenders, provided such lenders are
similarly bound by such obligation to keep such information
confidential.
5.3.2 Further Authorization. The Purchaser will take, or cause
to be taken, such further actions as may be necessary or appropriate
to authorize the execution, delivery and performance of this Agreement
by it.
6. Conditions Precedent to the Purchaser's Performance.
The obligations of the Purchaser under this Agreement are subject to
the satisfaction, at or before the Closing Date, of all the conditions set
out below. The Purchaser may waive any or all of these conditions in whole
or in part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver by the Purchaser of any of the
Purchaser's other rights or remedies, at law or in equity, if the Seller is
in default of any of the representations, warranties, or covenants contained
in this Agreement, except to the extent that such defaults are expressly
waived.
6.1 Accuracy of Representations and Warranties. Except as
otherwise permitted by this Agreement, all representations and
warranties by the Seller in this Agreement will be true in all
material respects on the Closing Date as made on the Effective Date.
6.2 Performance. The Seller will have substantially performed,
satisfied, and complied in all material respects with all covenants,
agreements, and conditions required by this Agreement to be performed
or complied with by it on or before the Closing Date.
6.3 Certification by the Seller. The Purchaser will have
received certificates, dated the Closing Date, signed by the president
or vice president and secretary or assistant secretary of the Seller,
respectively, certifying, in such detail as the Purchaser and its
counsel may reasonably request, that the conditions specified in
Sections 6.1 and 6.2 hereof have been fulfilled, including, but not
limited to, certified copies of all resolutions of the Seller
pertaining to corporate authorization of the execution, delivery and
performance of this Agreement.
6.4 Opinion of the Seller's Counsel. The Purchaser shall have
received from counsel to the Seller its favorable opinion that the
Shareholders have duly approved the transaction set forth in this
Agreement pursuant to the proxy.
6.5 Absence of Litigation. No material action, suit, or
proceeding before any court or any governmental body or authority,
challenging the transactions contemplated by this Agreement or to
their consummation, will have been instituted on or before the Closing
Date.
6.6 Legal Prohibition. On the Closing Date, no injunction or
order shall be in effect prohibiting consummation of the transactions
contemplated hereby or which would make the consummation of such
transactions unlawful and no action or proceeding shall have been
instituted and remain pending before a court, governmental body or
regulatory authority to restrain or prohibit the transactions
contemplated by this Agreement. No Federal, state or local statute,
rule or regulation shall have been enacted the effect of which would
be to prohibit, the consummation of the transactions contemplated
hereby or prohibit the ability of Purchaser to own or operate the
Clinics and Programs.
6.7 Consents, Approvals, Permits, Licenses, etc. All
authorizations, consents, waivers, approvals, orders, registrations,
qualifications, designations, declarations, filings or other action
required with or from any Federal, state or local governmental or
other regulatory authority or third party in connection with the
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated thereby shall have been
duly obtained and shall be reasonably satisfactory to Purchaser and
its counsel, and copies thereof shall be delivered to the Purchaser no
later than three (3) days prior to the Closing Date. No such consent
or approval (a) shall be conditioned on the modification, cancellation
or termination of any assumed contract, or (b) shall impose on
Purchaser any material condition or provision or requirement with
respect to the Seller or its operation that is substantially more
restrictive than or substantially different from the conditions
imposed upon such operation prior to Closing Date, unless Purchaser
gives its prior written approval. With respect to any assumed
contract, the assignment of which by its terms requires prior consent
of the parties thereto, if such consent is not obtained prior to the
Closing Date, the Seller agrees to make all reasonable attempts to
transfer any and all economic benefits of such assumed contracts to
Purchaser as of the Closing Date.
6.8 Transfer of Licenses. The parties understand and agree
that the Clinic license necessary for the Seller to operate the Clinic
in a manner consistent with the intent of this Agreement may not be
issued as of the Closing Date. The Seller agrees to facilitate the
transfer of the license and shall request such transfer from the
appropriate department of the Massachusetts Department of Health on or
immediately after the Effective Date of this Agreement. The Closing
shall be contingent upon the transfer of the license to the Purchaser
or Purchaser not having received any indications from the
Massachusetts Department of Health that: (i) the Clinic cannot remain
operational during the licensure procedure; and (ii) that the Clinic
license may be subject to restrictions or limitation that would
prohibit the Purchaser from operating the Clinic in the same manner as
the Clinic was operated prior to the Effective Date.
6.9 Non-Competition Agreements. The Seller shall have executed
and delivered to the Purchaser a Non-Competition Agreement,
substantially in the form of Exhibit B hereto.
6.10 Consulting Agreement. Mr. Anders Laren, a shareholder and
President of the Seller, shall have executed and delivered to the
Purchaser on the Effective Date a Consulting Agreement, substantially
in the form of Exhibit C hereto. Mr. Laren shall be in compliance
with the terms of such Consulting Agreement.
6.11 Notice Letter. The Seller shall deliver to the Purchaser
a notice letter issued to Alpha Geriatric Services, Inc., the IRS and
the Massachusetts Department of Revenue at least fourteen (14) days
prior to the Closing Date, notifying Alpha, the IRS and the
Massachusetts Department of Revenue of the pending sale. All notices
must be satisfactory to Counsel for the Purchaser and must specify the
notice of levy and the final notice received by the Seller from the
Massachusetts Department of Revenue and the IRS, respectively.
6.12 Compliance with Management Agreement. Seller has
materially complied with all terms and conditions of the Management
Agreement up through the Closing Date.
6.13 Seller's Stockholder Approval. Seller shall deliver to
Purchaser appropriate assurances that the Stockholders of the Seller
have approved this transaction pursuant to a proxy vote.
6.14 Tail Insurance. Seller shall procure tail coverage for
professional liability claims relating to all periods prior to the
Effective Date.
7. Conditions Precedent to the Seller's Performance.
The obligations of the Seller under this Agreement are subject to the
satisfaction, at or before the Closing Date, of all the following
conditions. The Seller may waive any or all of these conditions in whole or
in part without prior notice; provided, however, that no such waiver of a
condition shall constitute a waiver of any of the Seller's other rights or
remedies, at law or in equity, if the Purchaser is in default of any of the
representations, warranties or covenants contained in this Agreement, except
to the extent that such defaults are expressly waived.
7.1 Accuracy of the Purchaser's Representations and Warranties.
All representations and warranties by the Purchaser contained in this
Agreement or in any written statement delivered by the Purchaser under
this Agreement will be true in all material respects on and as of the
Closing Date as though such representations and warranties were made
on and as of that date.
7.2 Performance; Authorization. The Purchaser will have
performed, satisfied and complied with all covenants, agreements and
conditions required by this Agreement, the Management Agreement and
the Consulting Agreement, to be performed or complied in all material
respects with by it on or before the Closing Date.
7.3 Certificates. The Seller will have received certificates,
dated the Closing Date, signed by the president or vice president and
secretary or assistant secretary of the Purchaser certifying, in such
detail as the Seller may reasonably request, that the conditions
specified in Sections 7.1 and 7.2 hereof have been fulfilled,
including, but not limited to, certified copies of all resolutions of
the Purchaser pertaining to authorization of the execution, delivery
and performance of this Agreement by the Purchaser.
7.4 Absence of Litigation. No action, suit, or proceeding
before any court or any governmental body or authority pertaining to
the transactions contemplated by this Agreement or to their
consummation, will have been instituted or threatened on or before the
Closing Date.
7.5 Consents. All agreements and consents necessary to permit
the consummation by the Seller, of the transactions contemplated by
this Agreement shall have been obtained by the Seller, and the
Purchaser, respectively, and delivered to the Seller, and the
Purchaser, respectively, and no Federal, state or other authority
having jurisdiction over the transactions contemplated hereby shall
have taken any action to enjoin or prevent the consummation of such
transactions. As to any assumed contract the assignment of which by
its terms requires prior consent of the parties thereto, if such
consent is not obtained prior to or on the Closing Date, the Seller
shall deliver to Purchaser written documentation setting forth
arrangements for the transfer of the economic benefit of such assumed
contracts to Purchaser as of the Closing Date under terms and
conditions acceptable to all the parties hereto.
7.6 Stockholder Approval of this Agreement. From and after the
Effective Date of this Agreement, the Seller shall make its best
effort to secure all necessary Shareholder approval as required by the
Corporate Charter and Bylaws of the Seller and the laws of the
Commonwealth of Massachusetts. The Seller must obtain Shareholder
Approval within one hundred and eighty (180) days of the Effective
Date.
7.7 Delivery of Documents. The Purchaser shall have delivered
to the Seller the Purchase Price and Seller's Collections (as
collected as of the Closing Date) and shall assume the Assumed
Purchaser's Liabilities (subject to the adjustment as set forth in
Section 2.3) ("Closing Payment").
8. Covenants of the Seller.
8.1 Employee Notification. In the event any notices or other
compliance actions are required under "The Worker Adjustment and
Retraining Notification Act," the Seller shall be responsible for the
same.
9. Joint Covenants.
9.1 Access to Books and Records.
(a) Seller's Access. Following the Closing Date, the
Purchaser shall permit the Seller and its affiliates and
representatives and representatives of Medicare or contractual
cost reimbursement entities and taxing authorities, (including,
without limitation, their counsel and auditors), upon reasonable
notice and during normal business hours, to have reasonable
access to, and examine and make copies of, all books and records
of the Seller, including all medical records and medical charts
of any patient admitted to the Clinics or Programs of Seller,
which related to events occurring prior to the Closing or events
required in order to complete audits or maintain or defend
positions in connection with any investigation, liquidation or
proceeding or any other reasonable business purpose. For a
period of seven (7) years after the Closing, the Purchaser
agrees that, prior to the destruction or disposition of any such
books or records, the Purchaser shall provide not less than
forty-five (45) days', nor more than ninety (90) days', prior
written notice to the Seller of such proposed destruction or
disposal; provided, however, Purchaser agrees to maintain
patient records for the period required by the applicable
federal or state laws. If the Seller desires to obtain any of
such documents, it may do so by notifying the Purchaser in
writing at any time prior to the date scheduled for such
destruction or disposal. In such event, the Purchaser shall not
destroy such documents and the parties shall then promptly
arrange for the delivery of such documents to the Seller, its
successors or assigns. All out-of-pocket costs associated with
the delivery of the requested documents shall be paid by the
Seller. The Purchaser shall cooperate with the Seller in the
defense of any litigation related to the Clinics and Programs
including the provisions of witnesses and records in a timely
manner as reasonably requested by the Seller;
(b) Confidentiality. The Seller and the Purchaser shall
hold, and shall cause their respective affiliates, employees,
auditors, attorneys, representatives and other advisors and
agents to hold, in strict confidence, unless compelled to
disclose by judicial or administrative process, or, in the
opinion of their respective counsel, by other requirements of
law, Post-Closing Information (as defined below) concerning the
other party and shall not release or disclose such information
to any other person, except to their respective employees,
auditors, attorneys, representatives and other advisors and
agents, provided such person shall have first been advised of
the confidentiality provision of this Section 9.1(b). For
purposes hereof, "Post-Closing Information" shall mean all
information concerning the Seller, the Purchaser or their
respective affiliates, wherever obtained except information (i)
generally available to the public other than as a result of a
disclosure by the party receiving such information; (ii)
available to the party receiving such information on a non-
confidential basis prior to disclosure; or (iii) available to
the party receiving such information on a non-confidential basis
from a source other than the Seller, the Purchaser or their
respective affiliates or representatives, as the case may be,
provided that such source is not known, and by reasonable effort
could not be known, to be bound by a confidentiality agreement
with the Seller or the Purchaser, as the case may be, or
otherwise prohibited from transmitting the information by a
contractual, legal or fiduciary obligation.
9.2 Allocation of Purchase Price. The Purchase Price, Seller's
Collections and Assumed Liabilities shall be allocated in its entirety
among the Assets in accordance with Schedule 9.2 hereto and as
required by Section 1060 of the Code and Treasury Regulations
promulgated thereunder. The Seller and Purchaser shall file all
information and tax returns (and any amendments thereto) in a manner
consistent with this Section 9.2 and comply with the applicable
information reporting requirements of Section 1060 of the Code and
Treasury Regulations promulgated thereunder. If, contrary to the
intent of the parties hereto as expressed in this Section 9.2, any
taxing authority makes or proposes an allocation different from that
contained in this Section 9.2, the Seller and Purchaser shall
cooperate with each other in good faith to contest such taxing
authority's allocation (or proposed allocation), provided, however,
that, after consultation with the party adversely affected by such
allocation (or proposed allocation), another party hereto may file
such protective claims or returns as may reasonably be required to
protect its interests.
9.3 Control and Rights. To the extent a claim or cause of
action arises after the Closing Date relating to the contracts and
agreements assumed by Purchaser pursuant to this Agreement, Seller
shall, upon request of Purchaser and at Purchaser's sole cost and
expense, exert all rights Seller may have pursuant to Seller's
contracts or agreements on behalf of and to the benefit of the
Purchaser.
10. The Closing and Termination.
10.1 Closing. Assuming the satisfaction or the waiver of
satisfaction of the conditions contained herein, the Closing will take
place at the offices of Gersten, Savage, Kaplowitz, Frederick and
Curtin, 101 East 52nd Street at New York, NY 10002 on the Closing
Date, or at such other time and place as the parties hereto may
mutually agreed.
10.2 Termination. This Agreement will terminate pursuant to
the following conditions:
(a) This Agreement will automatically terminate one
hundred eighty (180) days after the Effective Date unless the
conditions to Closing is set forth in Section 6 and Section 7
are satisfied within such one hundred eighty (180) day period,
unless the parties mutually agree to extend this Agreement.
(b) Termination of Management Agreement.
11. Survival of Representations; Indemnification.
11.1 Survival of Representations, Etc. The several
representations and warranties of the parties contained in this
Agreement (or in any document delivered in connection herewith) have
been relied upon by the Purchaser and the Seller, as the case may be,
notwithstanding any investigation made by the Purchaser or the Seller,
shall survive the Closing Date and shall remain operative and in full
force and effect for a period of two (2) years following the Closing
Date; provided, however, that the respective representations and
warranties of the parties regarding brokers' fees in Sections 3.20 and
4.4 hereof shall continue for the applicable statute of limitations;
and, provided further that the representations and warranties of the
Seller contained in Section 3.9 hereof and the covenants of the Seller
hereof shall survive until the date which is six months after the
expiration of the statute of limitations applicable to any period
ending on or before the Closing Date covered by such representation
and warranty.
11.2 Indemnification by the Seller. The Seller shall defend
and indemnify the Purchaser and hold the Purchaser wholly harmless
from and against any and all losses, liabilities, damages, costs
(including, without limitation, court costs and costs of appeal) and
expenses (including, without limitation, reasonable attorneys' fees)
that the Purchaser incurs as a result of, or with respect to:
(a) any inaccuracy in or breach of any representation or
warranty of the Seller contained in this Agreement;
(b) any claim, cause of action, liability or obligation
(actual or alleged), of any nature whatsoever of the Seller
arising out of or relating to the use or operation of the
business of the Seller prior to the Effective Date, or any act
or omission of the Seller, or any of their agents, employees, or
officers, occurring prior to the Effective Date, including,
without limitation, any claim or cause of action arising out of
or relating to any act of medical malpractice or battery,
occurring prior to or on the Effective Date.
(c) Retention of Purchase Price and Seller's Collections.
In the event the rights granted to Purchaser, pursuant to
Section 6, are waived or inapplicable, Purchaser shall be
permitted to retain all or a portion of the Purchase Price and
the Seller's Collections as set forth in Section 2.2 and 1.1(a),
respectively, in an amount (and only to the extent of such
amount) as set forth in a notice, if any, given to Seller by
Purchaser in accordance with Sections 10.1 of this Agreement on
or prior to the date that the Purchase Price and Seller's
Collections are required to be paid to Seller by Purchaser
pursuant to Section 2.1. To the extent that no such notice is
given by Purchaser, Purchaser shall pay to Seller the Purchase
Price and the Seller's Collections on the date the Purchase
Price and the Seller's Collections are due. To the extent that
the amount set forth in such notice is less than the Purchase
Price and the Seller's Collections are due the Seller, Purchaser
shall pay to Seller the difference between the Purchase Price
and the Seller's Collections that was payable and the amount set
forth in such notice . If the Purchaser does retain all or a
portion of the Purchase Price and the Seller's Collections and
if the claim set forth in such notice is based upon potential
loss anticipated in good faith, upon the incurrence by the
Purchaser of the resulting actual loss, Purchaser shall pay to
Seller an amount, if any, equal to the amount of the retained
Purchase Price and Seller's Collections minus the amount of such
actual loss incurred by the Purchaser . Except in accordance
with the immediately preceding sentence, if any portion of the
Purchase Price and Seller's Collections is retained by Purchaser
and, subsequently, paid to Seller, the amount so paid shall bear
interest at the rate per annum equal to the prime rate as
reported by The Wall Street Journal from time to time plus two
percent (2%) for the period commencing from the date the
Purchase Price and the Seller's Collections are due in
accordance Section 2.2 until the date the retained Purchase
Price is paid to Seller. Any retention by Purchaser of the
Purchase Price and Seller's Collections or a portion thereof
shall be deemed to be a payment to Purchaser in respect of the
fulfillment by Seller of its indemnification obligations under
this Agreement and such retention shall be in accordance with
the terms and conditions of such indemnification obligations.
In the event the Purchaser retains a portion of the Purchase
Price and Seller's Collections as permitted in this Section, the
parties agree that the Seller's acceptance of the remaining
portion of the Purchase Price and Seller's Collections shall not
be deemed a waiver of Seller's arbitration rights regarding such
retained Purchase Price and Seller's Collections.
(d) In the event of a dispute among the parties involving
the Purchaser's rights as set forth in Section 11.2(c), the
parties agree to settle such dispute by arbitration in
accordance with the rules of the American Arbitration
Association - Commercial Rules as then existing in Boston,
Massachusetts. The decision of the arbitrators shall be final
and binding upon the parties, and the parties hereby waive any
right to appeal such decision. Each party shall pay its own
expenses of arbitration and one-half of the expenses of the
arbitrators. To the extent possible, the parties agree to
expedite the Arbitration proceedings.
11.3 Indemnification by the Purchaser. The Purchaser shall
defend and indemnify the Seller and hold the Seller wholly harmless
from and against any and all losses, liabilities, damages, costs
(including, without limitation, court costs and cost of appeal) and
expenses (including, without limitation, reasonable attorneys' fees of
one counsel) that the Seller incurs as a result of, or with respect
to:
(a) any inaccuracy in or breach of any representation,
warranty, covenant or agreement of the Purchaser contained in
this Agreement;
(b) any claim, cause of action, liability or obligation
(actual or alleged), of any nature whatsoever of the Purchaser
arising out of or relating to any act or omission of Purchaser,
or any of its agents, employees, or officers, occurring on or
after the Effective Date, including, without limitation, any
claim or cause of action arising out of or relating to any act
of medical malpractice or battery, occurring after the Effective
Date.
11.4 Procedure for Indemnification. The following procedure
shall apply with respect to any claims or proceedings covered by the
foregoing agreements to indemnify and hold harmless:
(i) The party who is seeking indemnification (the
"Claimant") shall give written notice to the party from whom
indemnification is sought (the "Indemnitor") promptly after the
Claimant learns of the claim or proceeding but not later than
two (2) years from the Closing Date; provided that the failure
to give such notice shall not relieve the Indemnitor of its
obligations hereunder if the Claimant uses its best efforts to
mitigate Claimant's damages, except to the extent it is actually
damaged thereby.
(ii) With respect to any third-party claims or
proceedings as to which the Claimant is entitled to
indemnification, the Indemnitor shall have the right to select
and employ counsel of its own choosing to defend against any
such claim or proceeding, to assume control of the defense of
such claim or proceeding, and to compromise, settle or otherwise
dispose of the same, if the Indemnitor deems it advisable to do
so, all at the expense of the Indemnitor; provided, however that
the Claimant may employ counsel, of its own choosing, at its
sole expense. The parties will fully cooperate in any such
action, and shall make available to each other any books or
records useful for the defense of any such claim or proceeding.
The Claimant may elect to participate in the defense of any such
third party claim, and may, at its sole expense, retain separate
counsel in connection therewith. Subject to the foregoing the
Claimant shall not settle or compromise any such third party
claim without the prior consent of the Indemnitor, which consent
shall not be unreasonably withheld.
11.5 Limitations on Indemnification Rights. Indemnification
shall be due only to the extent of the loss or damage actually
suffered (i.e., reduced by any offsetting or related asset or service
received and by any recovery from any third party, such as an
insurer). No claim for indemnification by Claimant under this
Agreement may be made more than two (2) years after the Closing Date,
except that any claim for breach of the representations or covenants
set forth in Section 3.9 of this Agreement may be made six months
after the expiration of the statute of limitations applicable to any
tax period of the Seller ending on or before the Closing Date and the
claims based on breach of representations or covenants contained in
Sections 3.20 and 4.4 may be made within six months of expiration of
statute of limitations.
12. Entire Agreement; Modification, Waiver.
This Agreement constitutes the entire agreement between the parties
pertaining to the subject matter contained in it and supersedes all prior
and contemporaneous agreements, representations, and understandings of the
parties. No supplement, modification, or amendment of this Agreement will
be binding unless executed in writing by all of the parties. No waiver of
any of the provisions of this Agreement will be deemed, or will constitute,
a waiver of any other provisions, whether or not similar, nor will any
waiver constitute a continuing waiver. No waiver will be binding unless
executed in writing by the party making the waiver.
13. Further Assurances.
The parties from time to time will execute and deliver such additional
documents and instruments and take such additional actions as may be
necessary to carry out the transactions contemplated by the Agreement.
14. Successors and Assigns; Assignment.
This Agreement will be binding on, and inure to the benefit of, the
parties hereto and their respective heirs, legal representatives, successors
and assigns.
15. Notices.
All notices, requests, demands and other communications required or
permitted to be given or made under this Agreement will be in writing and
will be delivered personally or will be sent postage prepaid by United
States registered or certified mail, return receipt requested or by
overnight courier service as follows:
(a) To the Seller at: Ages Health Services Inc.
320 Lexington Avenue
New York, NY 10016
Attention: President
with a copy to: Edward Curtin, Esq.
Gersten, Savage, Kaplowitz & Curtin
101 East 52nd Street
New York, NY 10022
(b) To the Purchaser at: Arbour Elder Services, Inc.
49 Robinwood Avenue
P.O. Box 9
Jamaica Plain, MA 02130
Attention: CEO/Managing Director
with a copy to: Universal Health Services, Inc.
Universal Corporate Center
367 South Gulph Road
P.O. Box 61558
King of Prussia, PA 19406-0958
Attention: General Counsel
16. Governing Law.
This Agreement will be construed in accordance with, and governed by,
the laws of the Commonwealth of Massachusetts.
17. Guarantee.
HRI Clinics, Inc. (the "Guarantor") hereby unconditionally and
absolutely guarantees the due and punctual payment by the Purchaser of the
Purchase Price as set forth in Section 2.2, the Seller's Collections as set
forth in Section 1.1(a) and the Assumed Liabilities as set forth in Section
2.4 herein pursuant to the terms and conditions of this Agreement (the
"Obligation"). The Guarantor hereby waives (a) promptness and diligence,
(b) notice of acceptance and notice of incurrence of the Obligation by the
Purchaser, (c) notice of any actions taken by the Seller, (d) all other
notices, demands, protests, and other formalities of every kind in
connection with the enforcement of the Obligation, the omission of or delay
in which, but for the provisions of this Section 17, might constitute
grounds for relieving the Guarantor of its obligations under this Section
17, and (e) any requirement that the Seller exhaust any right or take any
action against the Purchaser or any other person.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
February 1, 1997.
SELLER:
AGES HEALTH SERVICES INC.
By:/s/ Anders Laren
Name: Anders Laren
Title: President
PURCHASER:
ARBOUR ELDER SERVICES, INC.
By:/s/______________________________
Name:
Title:
HRI CLINICS, INC.
(HRI Clinics, Inc. is only a party to
this Agreement for the purposes of
Section 17 herein.)
By:/s/______________________________
Name:
Title:
[EXHIBITS AND SCHEDULES ARE NOT ATTACHED]
EXHIBITS
A - Opinion of Seller's Counsel
B - Form of Non-Competition Agreement
C - Form of Consulting Agreement
D - Management Agreement
E - Loan and Security Agreement
SCHEDULES
1.1(a) Accounts Receivables
1.1(b) Contracts
1.1(c) Licenses and Permits
1.1(d) Equipment
1.1(e) Leases
1.1(g) Intellectual Property
1.2 Excluded Assets
2.4 Assumed Liabilities
3.2 Capitalization
3.3 Assets
3.5 Compliance with Laws
3.7.1 Financial Statements
3.7.2 Absence of Changes
3.8 Undisclosed Liabilities
3.10.2 Environmental Protection
3.10.3 Compliance with Building Codes
3.10.4 Access
3.10.5 Covenants
3.13 Employment Contracts and Plans
3.14 Insurance Policies
3.15 Litigation
3.16 Contracts and Contract Defaults
9.2 Allocation of Purchase Price
SCHEDULE 9.2
Allocation of Purchase Price
The parties hereby agree that the Purchase Price shall be allocated as
follows:
First, on a dollar-for-dollar basis, to the current assets less
current liabilities assumed by the Purchaser; and second, to tangible assets
as follows: Equipment - $400,000.
In the event that the Purchase Price available for allocation to the
tangible assets is more or less than $400,000, then the amount shall be
allocated to the tangible assets as reflected in the second paragraph.
GENERAL PROXY - ANNUAL MEETING OF STOCKHOLDERS OF AGES HEALTH SERVICES INC.
The undersigned hereby appoints Kuno Laren, with full power of
substitution, proxy to vote all of the shares of Common Stock of the
undersigned and with all of the powers the undersigned would possess if
personally present, at the Annual Meeting of Stockholders of Ages Health
Services Inc. ("Company") to be held at ___________________________________,
on _____________________ at _________ and at all adjournments thereof, upon
the matters specified below, all as more fully described in the Proxy
Statement dated _______________________ and with the discretionary powers upon
all other matters which come before the meeting or any adjournment thereof.
This Proxy is solicited on behalf of Ages Health Services Inc.'s Board of
Directors.
1. To approve the sale of the Company's assets, settlement of its remaining
liabilities and change in the nature of the Company's business:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Only in the event that Proposal No. 1 is approved, to approve an amendment
to the Company's Articles of Organization to change its name to AHSI Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To elect directors for a term of one year. Nominees: Anders Laren, Kuno
Laren and Peter W. Clegg.
[ ] FOR ALL NOMINEES [ ] WITHHELD FOR ALL NOMINEES
INSTRUCTION: To withhold authority to vote for any individual, write
that nominee's name in the space provided below:
_____________________________________________________________________________
4. In their discretion, upon such other matter or matters that may properly
come before the meeting, or any adjournments thereof.
(Continued and to be signed on the other side)
(Continued from other side)
Every properly signed proxy will be voted in accordance with the
specifications made thereon. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 and 3.
The undersigned hereby acknowledges receipt of a copy of the accompanying
Notice of Meeting and Proxy Statement and hereby revokes any proxy or proxies
heretofore given.
Please mark, date, sign and mail your proxy promptly in the envelope provided.
Date: _______________________ , 1997
____________________________________
(Print name of Stockholder)
____________________________________
(Print name of Stockholder)
____________________________________
Signature
____________________________________
Signature
Number of Shares ___________________
Note: Please sign exactly as name
appears in the Company's
records. Joint owners should
each sign. When signing as
attorney, executor or
trustee, please give title as
such.