AGREEMENT TO PURCHASE ASSETS
AGREEMENT dated as of the 14th day of May, 1999, among Health Fitness
Rehab of Iowa, Inc., and Duffy & Associates Physical Therapy Corp., both Iowa
corporations, Health Fitness Corporation and Sports & Orthopedic Physical
Therapy, Inc., both Minnesota corporations, and Midlands Physical Therapy, Inc.,
a Nebraska corporation (collectively referred to as the "Sellers"), and
HEALTHSOUTH Corporation, a Delaware corporation ("HEALTHSOUTH").
W I T N E S S E T H:
WHEREAS, the Sellers desire to sell to HEALTHSOUTH, and HEALTHSOUTH
desires to purchase and acquire, substantially all of the business and assets of
the Sellers' rehabilitation and therapy businesses as follows: K.A.M. Physical
Therapy at One West Charles Street, Oelwein, Iowa 50662, K.A.M. Physical Therapy
Palmer Lutheran Health Center at 112 Jefferson Street, West Union, Iowa 52175,
K.A.M. Physical Therapy People's Memorial Hospital at 1600 First Street East,
Independence, Iowa 50644 and K.A.M. Physical Therapy Southwest Health Center at
1100 Fifth Avenue, Plattville, Wisconsin 53818, all owned by Health Fitness
Rehab of Iowa, Inc.; Duffy and Associates Physical Therapy at Schneider's
Square, 925 East First Street, Suite L, Ankeny, Iowa 50021 and Duffy and
Associates Physical Therapy at Apple Valley Shopping Center, 7120 University
Avenue, Des Moines, Iowa 50311-1437, both owned by Duffy and Associates Physical
Therapy Corp.; Sports and Orthopedic Physical Therapy, at the Medical Arts
Building, 825 Nicollet Mall, Suite 1420, Minneapolis, Minnesota 55402, Sports
and Orthopedic Physical Therapy at Minneapolis Heart Institute Building, 920
East 28th Street, Suite 620, Minneapolis, Minnesota 55407, both owned by Sports
and Orthopedic Physical Therapy, Inc.; Midlands Physical Therapy, at York
General Hospital, 2222 Lincoln Avenue, York, Nebraska 68467; Midlands Physical
Therapy at Henderson Community Hospital, 1621 Front Street, Henderson, Nebraska
68371, and Midlands Physical Therapy at Fillmore County Hospital, 1325 H Street
Geneva, Geneva, Nebraska 68361, all owned by Midlands Physical Therapy, Inc.;
(collectively, the "Sellers' Business"), all upon the terms and subject to the
conditions hereinafter set forth; and
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the contemplated payment by HEALTHSOUTH to the Sellers of the
purchase price herein provided for, and other good and valuable consideration,
the receipt and sufficiency of all of which are hereby acknowledged, the Sellers
and HEALTHSOUTH hereby agree as follows:
Section 1. Terms of the Sale and Purchase of Assets.
The sale of the properties, assets and business of the Sellers'
Business to be sold hereunder and the acquisition thereof by HEALTHSOUTH shall
be made and be effective as of the close of business on May 14, 1999 (the
"Effective Date") and shall be based on the respective representations,
warranties and agreements of the Sellers on the one hand, and HEALTHSOUTH, on
the other hand.
1.1. Included and Excluded Assets. (a) Sellers hereby sell, transfer,
assign, convey, release and deliver to HEALTHSOUTH, effective as of the close of
business on the Effective Date, all of the properties, assets and business of
the Sellers' Business, including all assets utilized in or related to the
Sellers' Business as a composite going concern, whether or not any of such
assets have any value for accounting purposes, including, specifically, but
without limiting the generality of the foregoing; but excluding the assets
specifically excluded below in Section 1. l(b) of this Agreement:
(i) All assets listed on Exhibit A.
(ii) All of the Sellers' rights to the use of the trade names
"Duffy & Associates Physical Therapy, K.A.M. Physical Therapy, Midlands
Physical Therapy, and Sports & Orthopedic Physical Therapy" and any
variations thereof; provided that Sellers shall have the right, for a
period of 90 days after the Closing, to continue to use the names (i)
"Sports & Orthopedic Physical Therapy" in connection with Sellers'
physical therapy clinics located at Professional Building, 3250 West
66th Street, Suite 120, Edina, Minnesota 55435, and at Northwest
Racquet Swim and Health Club, 5525 Cedar Lake Road, Lower Level, St.
Louis Park, Minnesota 55416, and (ii) "Midlands Physical Therapy" in
connection with Sellers' physical therapy clinics located at Columbus
Physical Therapy, 2457 33rd Avenue, Suite G, Columbus, Nebraska 68601,
and at Freemont Physical Therapy, 1900 East Military, Suite 248,
Freemont, Nebraska 68025.
(iii) Goodwill, customer and patient lists, telephone numbers,
trade secrets, patents, copyrights (or, to the extent licensed by
Sellers, Sellers' license rights thereto to the extent assignable),
trademarks, service marks, advertising and marketing ideas, and all
other intellectual property rights used in the marketing or the
performance of physical therapy services by the Sellers and all books
and records relating thereto.
(iv) Subject to Section 1.9 of this Agreement, Sellers' rights
under all contracts, leases and agreements set forth or referred to in
Exhibit B to this Agreement and any and all prepayments, deposits and
similar assets associated with such contracts, leases and agreements,
and all licenses, certificates of need and other regulatory approvals
(to the extent transferable) relating to or necessary for the operation
of the Sellers' Business.
All such assets described in this Section 1.1(a), excluding those
assets described in Section 1.1 (b), are referred to as the "Purchased Assets."
(b) There shall be excluded from the properties and assets of the
Sellers' Business transferred and conveyed to HEALTHSOUTH hereunder, the minute
books, stock records and related internal records of the Sellers and the
Sellers' cash, accounts receivable, and other claims to payment, insurance
coverages, employee benefit plan assets, securities, and any prepayments,
deposits or similar assets associated with contracts not assumed by HEALTHSOUTH.
All other books and records of the Sellers related to the Sellers' Business,
together with all the other assets to be acquired pursuant to this Agreement,
shall be delivered at the respective locations specified in the first Recital
above to HEALTHSOUTH or such person as HEALTHSOUTH may specify, upon the
execution and delivery of this Agreement.
1.2. Patient Information and Financial Information. The agreements
between the parties evidenced by this Agreement have been reached based on
financial and other information about the Sellers' Business to be acquired
hereunder as of March 31, 1999, provided HEALTHSOUTH by the Sellers. The summary
of patient visits attached to this Agreement as part of Exhibit C is sometimes
referred to herein as the "Sellers' Patient Information". The unaudited balance
sheet of the Sellers' Business and the unaudited income statement of the
Sellers' Business are also attached to this Agreement as part of Exhibit C and
are sometimes referred to herein as the "Sellers' Financial Information".
1.3. Considerations. In exchange for the transfer referred to in
Section 1.1, HEALTHSOUTH will provide the Sellers with the following
considerations:
(a) The total purchase price for all of the Purchased Assets to be
conveyed, sold, transferred, assigned and delivered to HEALTHSOUTH under this
Agreement by the Sellers is $3,575,000 plus the assumption of the Sellers'
liability (i) for any sick leave or vacation benefits of the Sellers' employees
on Exhibit E, all of which will be employed by HEALTHSOUTH, and (ii) under the
contracts, leases and agreements of the Sellers described in (b) below. Such
$3,575,000 shall be payable, through payment to the Parent Corporation, in good
funds to Sellers upon execution and delivery of this Agreement.
(b) Subject to Section 1.9 of this Agreement, HEALTHSOUTH shall assume
the contracts, leases and agreements of the Sellers relating to the Sellers'
Business which are listed on Exhibit B attached to this Agreement, provided that
HEALTHSOUTH shall not be deemed to assume any liability which may be incurred by
reason of any breach of or default under any such contract, lease or agreement
which occurred prior to the Effective Date of this Agreement. To the extent that
there are any breaches or defaults under any such contract, lease or agreement,
a description of the same will be disclosed on Exhibit D, and HEALTHSOUTH shall
not be deemed to assume any liability therefor. The Sellers, at their expense,
shall provide HEALTHSOUTH with valid and enforceable assignments to all such
contracts, leases and agreements. HEALTHSOUTH shall cooperate as may reasonably
be required in obtaining such assignments. HEALTHSOUTH shall also assume all
legal obligations after the Effective Date with respect to the maintenance of
patient records of Sellers' Business.
(c) Except as expressly provided in Section 1.3(b) above, HEALTHSOUTH
shall not be deemed to assume any liability of the Sellers whatsoever. Without
limiting the generality of the foregoing, HEALTHSOUTH shall not be deemed to
have assumed, nor shall HEALTHSOUTH assume, any liability based upon or arising
out of any tortious or wrongful actions of the Sellers or any liability for the
payment of (i) any taxes of the Sellers arising out of transactions occurring on
or prior to the Effective Date of this Agreement; (ii) any taxes of the Sellers
arising in connection with the transactions contemplated by this Agreement;
(iii) except as expressly provided in Exhibit E, any salary, wage, benefit,
bonus, vacation pay, sick leave, insurance, employment tax or similar liability
of Sellers to any employee, officer, director or other person or entity
allocable to services performed on or prior to the Effective Date of this
Agreement; or (iv) any liabilities arising prior to the Effective Date in
connection with any malpractice or other liability arising in connection with
the Sellers' physical therapy practices. HEALTHSOUTH shall have no liability
whatsoever, for contributions or otherwise, for any pension, employee benefit or
profit sharing plan of the Sellers for the benefit of Sellers' employees,
officers or directors.
(d) Except as otherwise agreed by the parties, the parties agree that
the cash portion of the purchase price shall be allocated and reported to the
Internal Revenue Service and similar governmental agencies as follows:
Equipment, furnishings, supplies,
deposits, leasehold improvements
and fixtures $100,000
Goodwill $3,475,000
1.4. Bill of Sale. Contemporaneously with the execution and delivery of
this Agreement, the Sellers shall execute and deliver a Bill of Sale and such
other necessary transfer documents required by law to transfer the Purchased
Assets to HEALTHSOUTH.
1.5. Non-Competition Agreement. Contemporaneously with the execution
and delivery of this Agreement, the Sellers and HEALTHSOUTH shall execute and
deliver a Non-Competition Agreement, providing that the Sellers will not enter
into competition with the outpatient orthopedic physical therapy business (as
defined therein) to be operated by HEALTHSOUTH during the term of such
Non-Competition Agreement.
1.6. Lease or Lease Assignment. Contemporaneously with the execution
and delivery of this Agreement, HEALTHSOUTH shall be provided by the Sellers at
their cost and expense, with a valid and enforceable lease or lease assignment
enabling HEALTHSOUTH, as lessee, to occupy the space currently occupied by the
Sellers located at: One West Charles Street, Oelwein, Iowa 50662; 112 Jefferson
Street, West Union, Iowa 52175; People's Memorial Hospital at 1600 First Street
East, Independence, Iowa 50644; 1100 Fifth Avenue, Plattville, Wisconsin 53818;
Schneider's Square, 925 East First Street, Suite L, Ankeny, Iowa 5002 1; Apple
Valley Shopping Center, 7120 University Avenue, Des Moines, Iowa 50311-1437;
Medical Arts Building, at 825 Nicollet Mall, Suite 1420, Minneapolis, Minnesota
55402; Minneapolis Heart Institute Building, 920 East 28th Street, Suite 620,
Minneapolis, Minnesota 55407; York General Hospital, 2222 Lincoln Avenue, York,
Nebraska 68467; Henderson Community Hospital, 1621 Front Street, Henderson,
Nebraska 68371; and at Fillmore County Hospital, 1325 H Street Geneva, Geneva,
Nebraska 68361 at the same rental paid by Sellers. Such lease or lease
assignment shall be in form and substance satisfactory to HEALTHSOUTH and its
counsel.
1.7. Costs and Expenses. Each of the parties to this Agreement shall
pay all of the costs and expenses incurred by it in connection with the
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, whether or not they may be deemed to have been incurred in the
ordinary course of business, HEALTHSOUTH shall not be liable for or required to
pay, either directly or indirectly, any of the following liabilities or expenses
incurred by the Sellers: (a) fees and expenses of any person for financial
services or services as a finder rendered to the Sellers in connection with the
sale contemplated by this Agreement; (b) fees and expenses of legal counsel
retained by the Sellers for services rendered to the Sellers in connection with
the sale contemplated by this Agreement; (c) fees and expenses of auditors and
accountants retained by the Sellers for services rendered to the Sellers in
connection with the sale contemplated by this Agreement; (d) fees and expenses
incurred by the Sellers in connection with the making of this Agreement or any
fees or expenses for the assignment of any lease or agreement to HEALTHSOUTH; or
(e) taxes or other similar charges incurred by the Sellers or in connection with
the making of this Agreement or the transfer of property to HEALTHSOUTH.
1.8. Further Instruments of Conveyance. The Sellers agree to execute
and deliver, from time to time hereafter, at the request of HEALTHSOUTH, all
such further instruments of conveyance, assignment and further assurance as may
reasonably be required in order to vest in and confirm to HEALTHSOUTH full and
complete title to, and the right to use and enjoy, the properties, assets,
contracts and business hereby agreed to be, and intended to be, conveyed and
transferred to HEALTHSOUTH. HEALTHSOUTH agrees to execute and deliver, from time
to time hereafter, at the request of the Sellers, all such further instruments
of conveyance, assignment, and further assurance as may be reasonably required
to assume the liabilities which have been specifically assumed by HEALTHSOUTH
in the content of this Agreement to Purchase Assets and which was intended by
the parties to be assumed by HEALTHSOUTH.
1.9. Assignments and Consents. Nothing contained in this Agreement
shall be construed as an attempt to agree to assign any contract which by law is
nonassignable without the consent of the other party or parties thereto, unless
such consent shall be given. The Sellers shall obtain all such necessary
assignments and consents of the parties to any such contracts and shall pay all
reasonable costs and expenses for obtaining such assignments and consents.
Until any such required consent is obtained, Sellers shall cooperate
with HEALTHSOUTH in any reasonable arrangement designed to provide HEALTHSOUTH
with all of the benefits and obligations of Sellers under such contract,
including appointing HEALTHSOUTH to act as its agent to perform all of Sellers'
obligations under such contract and to collect all compensation payable to
Sellers pursuant thereto as though such contract were assigned to and assumed by
HEALTHSOUTH.
1.10. Documents to be Provided by Sellers at Closing. Contemporaneously
with the execution and delivery of this Agreement, the Sellers agree to furnish
HEALTHSOUTH with copies of the following documents:
(a) Certificates of good standing (with tax certifications)
for each of the Sellers from the proper official of the states of each
Seller's organization.
(b) Resolutions, duly adopted by the Board of Directors of
each of the Sellers, authorizing and adopting this Agreement and the
sale, transfer and transactions provided for herein, certified by the
Secretary of each Seller.
(c) Consents, executed and delivered by all persons and
entities necessary to authorize the transactions contemplated herein,
to authorize the assignment of agreements listed on Exhibit B, or to
release liens or encumbrances on assets to be transferred to
HEALTHSOUTH.
(d) Lien searches by the proper officials of the States of
Iowa, Nebraska, Minnesota and Wisconsin and each of their political
subdivisions, showing all liens and encumbrances, if any, on the
property and assets of the respective Sellers, which liens and
encumbrances shall be paid in full, released and removed by the Sellers
upon transfer of such property and assets to HEALTHSOUTH.
1.11. Legal Opinion. Contemporaneously with the execution and delivery
of this Agreement, the Sellers agree to furnish to HEALTHSOUTH the opinion,
dated as of the date of the execution of this Agreement, of legal counsel for
the Sellers in customary form and substance satisfactory to HEALTHSOUTH and
attached hereto as Exhibit G.
In rendering its opinion such counsel may rely on title certificates,
abstracts or policies, and certificates of public officials and Sellers as to
factual matters not independently established by such counsel, provided that
such counsel does not know that such reliance is unreasonable.
1.12. Transition of Business. Subject to the terms of this Agreement,
all parties hereto agree to cooperate and to use their best efforts in the
transition and change of ownership of the Purchased Assets and business being
transferred hereunder.
1.13. Confidential Information. The Sellers and HEALTHSOUTH each
acknowledge and agree that the terms and conditions of this Agreement and the
Non-Competition Agreement are confidential and, except as required by law, will
not be disclosed to any third party without the prior written consent of the
Sellers and HEALTHSOUTH which consent shall not be unreasonably withheld or
delayed; provided that the parties may disclose the terms and conditions hereof
to their third-party licensed accountants and attorneys, provided such third
parties agree to maintain the confidentiality of such information and will not
disclose it to any other third parties.
1.14. Pro-ration of Fixed Fees. Amounts received from customers of the
Sellers' Business as payment of a fixed fee for a given period (e.g. per month)
during which the Effective Time occurs shall be pro rated between Sellers' and
HEALTHSOUTH based on the number of days in such period prior to the Effective
Time and the number of days in such period after the Effective Time,
respectively, and the party receiving such fee shall promptly remit to the other
party such other party's pro rata share of such fee.
Section 2. Representations and Warranties of the Sellers.
In the following representations and warranties the plural term Sellers
shall be defined to include each and every Seller that is a party to this
Agreement. All parties agree and understand that each Seller is making every
representation and warranty. As such, the Sellers, jointly and severally, hereby
represent and warrant to HEALTHSOUTH, except as disclosed in Exhibit D, as
follows:
2.1. Corporate Authority and Existence. The Sellers are corporations
duly organized, validly existing and in good standing under the laws of their
respective States. The Sellers have all necessary power to own all of their
properties and assets and to carry on their business as now being conducted. The
Sellers have all necessary power and are duly authorized to convey, assign and
transfer the properties, assets and business specified in this Agreement.
2.2. Ownership of Sellers. Except as disclosed on Exhibit D, the
Sellers do not own equity in, or control, directly or indirectly, any other
entity, nor are the Sellers a party to any joint venture or partnership, which
is directly or indirectly involved in the ownership or operation of a physical
therapy or occupational medicine clinic, or which provides services similar to
the Sellers' Business. All of the assets and business of the Sellers' physical
therapy clinic business, except for the assets described in Section 1.1(b) are
being transferred to HEALTHSOUTH.
2.3. No Conflicting Obligations: Sellers. The Sellers have full
corporate power and authority to execute, deliver and perform this Agreement and
all agreements executed and delivered by it pursuant to this Agreement, and have
taken all action required by law, their Articles or Certificates of
Incorporation, their Bylaws or otherwise, to authorize the execution, delivery
and performance of this Agreement and such related documents. The execution and
delivery of this Agreement does not and, subject to the receipt of consents to
assignments of leases and other contracts where required, the consummation of
the sale contemplated hereby will not, violate any provisions of the Articles or
Certificates of Incorporation or Bylaws of the Sellers or any provisions of, or
result in the acceleration of, any obligation under any mortgage, lien, lease,
agreement, instrument, order, arbitration award, judgment or decree, to which
the Sellers are a party, or by which they are bound, or constitute a default
thereunder, or result in the creation of any lien, charge, or encumbrance upon
any of the property or assets of any of the Sellers. This Agreement and the
Non-Competition Agreement have both been duly executed and delivered by the
Sellers and constitute the legal, valid and binding obligations of the Sellers,
enforceable in accordance with their respective terms. The Bill of Sale and the
Consent to Assignment of Lease Agreement have been duly executed and delivered
by the Sellers and constitute the legal, valid and binding obligations of the
Sellers, enforceable in accordance with their respective terms.
2.4. Authority of Sellers. The Sellers have full corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby.
2.5. Accuracy of Patient Information and Financial Information. The
Sellers have heretofore furnished HEALTHSOUTH with complete copies of the
Sellers' Patient Information and the Sellers' Financial Information. All the
Sellers' Patient Information is true and correct and presents fairly the number
of legitimate, billed patients treated by the Sellers for the periods indicated
and the result of patient operations for the periods indicated. The Sellers'
Financial Information has been prepared in accordance with generally accepted
accounting principles consistently followed throughout the periods indicated and
fairly and, with material accuracy, presents the financial condition of the
Sellers' Business at such date and the results of operation for the periods
included therein.
2.6. Contracts. Exhibit B to this Agreement sets forth a list of all
contracts, leases and agreements which shall be assumed by HEALTHSOUTH. All such
contracts, leases and agreements listed in Exhibit B are valid and effective in
accordance with their respective terms, and there is not under any such
documents any existing defaulter breach, or any condition or event which with
notice or lapse of time, or both, would constitute a default or breach. All
payments and actions required by the Sellers through the date of the execution
and delivery of this Agreement pursuant to such contracts, leases and agreements
have been paid and performed. The Sellers warrant that all such agreements are
for the benefit of the Sellers' Business, regardless of whether they are in the
name of the Sellers, and, subject to receipt of necessary consents, the Sellers
have the authority to transfer such agreements to HEALTHSOUTH.
2.7. Buildings and Operations. The buildings and operations of the
Sellers' Business located at: One West Charles Street, Oelwein, Iowa 50662; 112
Jefferson Street, West Union, Iowa 52175; 1600 First Street East, Independence,
Iowa 50644; 1100 Fifth Avenue, Plattville, Wisconsin 53818; Schneider's Square,
925 East First Street, Suite L, Ankeny, Iowa 50021; Apple Valley Shopping
Center, 7120 University Avenue, Des Moines, Iowa 50311-1437; Medical Arts
Building, at 825 Nicollet Mall, Suite 1420, Minneapolis, Minnesota 55402;
Minneapolis Heart Institute Building, 920 East 28th Street, Suite 620,
Minneapolis, Minnesota 55407; York General Hospital, 2222 Lincoln Avenue, York,
Nebraska 68467; Henderson Community Hospital, 1621 Front Street, Henderson,
Nebraska 68371; and at Fillmore County Hospital, 1325 H Street Geneva, Geneva,
Nebraska 68361, do not violate or conflict with any restrictive covenant, zoning
ordinance, lease restriction, administrative regulation, or provision of law in
effect which in any material respect interferes with or prevents the continued
use of such buildings and operations for rehabilitation and therapy purposes or
which would materially affect the value of such continued use thereof for
rehabilitation and therapy purposes.
2.8. Liens and Encumbrances. The Sellers own all of the assets,
properties and business being transferred to HEALTHSOUTH pursuant to Section 1.1
of this Agreement, free and clear of any liens, claims, charges, exceptions or
encumbrances. All inventories, supplies, equipment, furniture and other tangible
assets listed on Exhibit A to this Agreement currently are used by or are useful
to the Sellers in the ordinary course of business of the Sellers' Business and
are in good operating condition (ordinary wear and tear excepted) and in a state
of reasonable maintenance and repair.
2.9. Litigation. There is no litigation, governmental investigation or
other proceeding pending or, so far as is known to the Sellers or their officers
threatened against or relating to the Sellers, their properties or business, or
the transaction contemplated by this Agreement and, so far as is known to the
Sellers or their officers, no basis for any such action exists.
2.10. No Liability for Sellers' Contracts. Prior to the execution and
delivery of this Agreement, the Sellers have delivered to HEALTHSOUTH true and
complete copies of all material contracts, obligations and commitments of the
Sellers related to the Sellers' Business, each of which is listed on Exhibit B
attached to this Agreement. The Sellers are not a party to any written or oral:
(a) contract with any labor union; (b) bonus, pension, profit sharing,
retirement, stock purchase, hospitalization, insurance or similar plan providing
for employee benefits to employees of the Sellers' Business for which
HEALTHSOUTH shall become liable; (c) contract for the future purchase of
materials, supplies or equipment for the Sellers' Business for which HEALTHSOUTH
shall become liable except for contracts entered into in the ordinary course of
business involving less than $5,000; or (d) contract related to the Sellers'
Business for the performance of services for or by the Sellers or the Parent
Company for which HEALTHSOUTH shall become liable.
2.11. Material Changes. Except as set forth in Exhibit D to this
Agreement, since March 1, 1999, the Sellers have not (a) incurred any material
obligation or liability (absolute, accrued, contingent or otherwise) related to
Sellers' Business; (b) sold or transferred any of the assets used in connection
with the Sellers' Business, or canceled any debts or claims or waived any rights
related to the Sellers' Business, except in the ordinary course of business; (c)
increased the compensation of any officer, employee, consultant or agent in
connection with Sellers' Business; (d) authorized any capital expenditures in
connection with Sellers' Business in excess of $5,000 in the aggregate; (e)
except for this Agreement, entered into any material transaction in connection
with Sellers' Business, other than in the ordinary course of business; (f)
experienced damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting any of the properties, assets or business
used in connection with Sellers' Business, or experienced any other material
adverse change in the assets or business of Sellers' Business, except for
industry-wide changes affecting the physical therapy business generally in the
states where Sellers' Businesses are located and except for general economic
conditions.
2.12. Taxes. The Sellers have not been notified that any income tax
returns of the Sellers are currently under audit by the Internal Revenue Service
or any state or local tax agency, and any such prior audits have been finally
and fully concluded and all taxes owed or claimed to be owed pursuant thereto
have been paid in full. No agreements have been made by the Sellers for the
extension of time or the waiver of the statute of limitation for the assessment
of any tax. The Sellers represent and warrant that all taxes of the Sellers
shall be paid in full as they become due and payable (unless properly bonded and
appealed) and no liens or other encumbrances shall attach to the assets and
business transferred to HEALTHSOUTH as a result of non-payment or late payment
of any tax.
2.13. Agency Reports. The Sellers have filed all Medicare reports and
similar state and federal documents and are in good standing with the United
States Department of Health and Human Services which includes the Health Care
Financing Administration ("DHHS") and any similar state agencies. None of the
Sellers have ever been reprimanded or sanctioned by DHHS or any similar state
agency for any alleged fraud, abuse or other wrongful conduct. Neither DHHS, nor
any similar state agency, have asserted any claim or, to the best knowledge of
the Sellers, any basis for asserting any claim for monies due or to become due
from the Sellers.
2.14. Insurance. The Sellers have policies of insurance on their
facilities, equipment and inventory with extended coverage in connection with
the Sellers' Business in amounts deemed by the management of the Sellers to be
sufficient. Valid policies in such amounts will be outstanding and duly in force
through the date of the execution and delivery of this Agreement, unless a
termination thereof is consented to by HEALTHSOUTH. Exhibit F to this Agreement
sets forth certain information on the buildings and operations of the Sellers
for HEALTHSOUTH's use in adding the property occupied by the Sellers' Business
to HEALTHSOUTH's risk management insurance policies.
2.15. Material Changes in Patient Information. Since March 31, 1999,
there has not been any material adverse change in the assets or business of the
Sellers' Business or in the type or number of Sellers' rehabilitation and
therapy patients. The Sellers are unaware of any event which may materially
change the type or number of Sellers' rehabilitation or therapy patients after
the consummation of the transactions contemplated by this Agreement, except for
industry-wide changes affecting the physical therapy business generally in the
states where Sellers' Businesses are located and except for general economic
conditions.
2.16. Commissions or Fees. Other than those paid for by the Seller,
which will be disclosed in Exhibit D, there are no claims for brokerage
commissions or finder's fees in connection with the transactions contemplated by
this Agreement resulting from any action taken by the Sellers or by their
officers or directors or by any of them or their agents.
2.17. Compliance with Laws. To their best knowledge, the Sellers have
complied with all federal, state and local laws, regulations and ordinances
relating to the Sellers' Business, including, without limitation, the Federal
Environmental Protection Act, the Occupational and Safety Hazards Act, Medicare
and Medicaid rules and regulations, all federal, state and local licensing and
health laws and requirements and other similar statutes and no notice of any
pending inspection or violation of any such act or statute has been received by
the Sellers in connection with the Sellers' Business.
2.18. Tax Identification Number. None of the Sellers are a foreign
partnership, corporation, entity or individual pursuant to the Internal Revenue
Code and HEALTHSOUTH is not required to withhold any part of the purchase price,
or otherwise comply with Section 1445 of the Internal Revenue Code. The Sellers'
federal tax identification numbers are
Health Fitness Corporation Tax ID No. 41-1580506
Health Fitness Rehab of Iowa, Inc. Tax ID No. 41-1867536
Duffy & Associates Physical Therapy Corp. Tax ID No. 42-1261572
Sports & Orthopedic Physical Therapy, Inc. Tax ID No. 41-1628014
Midlands Physical Therapy, Inc. Tax ID No. 47-0616859
2.21 Creditors of Sellers' Business. The Sellers covenant and agree
that all of the creditors of Sellers' Business will be paid in full by Sellers
prior to the Effective Date of this Agreement, or within such other period as is
normally permitted by such creditors in the ordinary course of business. If
requested in writing by HEALTHSOUTH, Sellers shall furnish HEALTHSOUTH with
proof of payment of all creditors of Sellers' Business. The Sellers agree to
indemnify and hold HEALTHSOUTH harmless from any loss or expense, including
reasonable attorneys' fees, arising out of their failure to pay, when due, the
creditors of Sellers' Business. The Sellers may, if in good faith and upon
reasonable grounds, dispute the amount or validity of any such debts, and
contest and defend same, and in good faith diligently conduct any necessary
proceedings to prevent and avoid same. Nothing in this Section shall require
Sellers to pay creditors of Sellers' Business for goods or services received (in
conjunction with the operation of the Sellers' Business transferred to
HEALTHSOUTH) after the Effective Date, which obligations shall be paid by
HEALTHSOUTH.
Section 3. Representations and Warranties of HEALTHSOUTH.
HEALTHSOUTH hereby represents and warrants to the Seller and the
Shareholders as follows:
3.1. HEALTHSOUTH is a corporation, duly organized, validly existing and
in good standing under the laws of Delaware.
3.2. HEALTHSOUTH has full corporate power and authority to own all of
its properties and assets and to carry on its business as it is being conducted
at the date of the execution of this Agreement and to enter into this Agreement,
the Non-Competition Agreement and the Consent to Assignment of Lease Agreement.
3.3. HEALTHSOUTH has full corporate power and authority to execute,
deliver and perform this Agreement and all agreements executed and delivered by
it pursuant to this Agreement, and has taken all action required by law, its
Certificate of Incorporation or Bylaws, or otherwise, to authorize the
execution, delivery and performance of this Agreem6nt and such related
documents. The execution and delivery of this Agreement does not and, subject to
the receipt of consents to assignments of leases and other contracts by Sellers
to HEALTHSOUTH where required, the consummation of the sale contemplated hereby
will not, violate any provisions of its Certificate of Incorporation of Bylaws
or any provisions of, or result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, instrument, order, arbitration award, judgment
or decree, to which HEALTHSOUTH is a party, or by which it is bound.
3.4. This Agreement, the Non-Competition Agreement and the Consent to
Assignment of Lease Agreement have been duly authorized, executed and delivered
by HEALTHSOUTH and constitutes the legal, valid and binding obligations of
HEALTHSOUTH, and to the best knowledge of HEALTHSOUTH, enforceable against
HEALTHSOUTH in accordance with their respective terms.
3.5. There is no material litigation, governmental investigation or
other proceeding pending or, so far as is known to HEALTHSOUTH, threatened
against or relating to HEALTHSOUTH, its properties of business or the
transaction contemplated by this Agreement, which would affect this transaction,
and, so far as is known to HEALTHSOUTH, no basis for any such action exists.
3.6. There are no claims for brokerage commissions or finders' fees in
connection with the transactions contemplated by this Agreement resulting from
any action taken by HEALTHSOUTH or by any of its employees or agents for which
the Seller or Shareholders will be liable.
Section 4. Covenants of HEALTHSOUTH.
4.1. HEALTHSOUTH agrees to indemnify and hold harmless the Seller and
the Shareholders from and against any and all taxes, expenses, liabilities and
damages (including reasonable attorneys' fees) arising (i) from the liabilities
under the contracts, leases and agreements assumed by HEALTHSOUTH, which
liabilities accrue after the Effective Date of this Agreement, and (ii) from the
operation of the Seller's Business by HEALTHSOUTH after the execution and
delivery of this Agreement.
Section 5. Covenants of the Sellers.
5.1. Preservation of Sellers' Business. For a period of five years from
the Effective Date, the Sellers will not intentionally or knowingly take any
action detrimental to the business organization of the Sellers' Business, the
goodwill of the patients, employees, suppliers, customers and others associated
with the Sellers' Business; provided nothing in this Section shall prohibit
Sellers from engaging in those activities specifically permitted in Section l(b)
of the Non-Competition Agreement.
5.2. Indemnification for Transactions Prior to Closing. The Sellers
agree to indemnify and hold harmless HEALTHSOUTH and its affiliates from and
against any and all taxes, expenses, liabilities and damages (including
reasonable attorneys' fees) arising from the transaction of the Sellers'
Business or its practices prior to the close of business on the Effective Date.
5.3. Employees. The Sellers hereby covenant and agree to indemnify
HEALTHSOUTH with respect to any and all liability that for whatever reason may
accrue to HEALTHSOUTH in connection with any employee payment or benefit
described herein allocable to services performed on or prior to the date of the
execution and delivery of this Agreement, except for the accrued sick leave and
vacation benefits for the employees listed in Exhibit E who are hired by
HEALTHSOUTH, which accrued sick leave and vacation benefits shall be assumed by
HEALTHSOUTH in accordance with its standard policies and procedures concerning
sick leave and vacation benefits for similar employees. All persons listed on
Exhibit E shall be offered employment by HEALTHSOUTH as "at will" employees of
HEALTHSOUTH, at the rate of pay as set out on Exhibit E, regardless of any
contracts or agreements any such employees may have with the Sellers.
HEALTHSOUTH shall not assume any contracts or agreements between the employees
of Sellers listed on Exhibit E and the Sellers or any other entity, and the
Sellers shall be responsible for termination of all such contracts and
agreements, and any liability resulting therefrom. The Sellers represent and
warrant that the persons listed on Exhibit E are citizens of the United States
of America or are otherwise authorized to work in the United States in the
Sellers' Business. Notwithstanding anything to the contrary contained in this
Agreement, if HEALTHSOUTH assumes any vacation or sick leave by reason of
HEALTHSOUTH hiring any employee listed on Exhibit E, and such employee
voluntarily terminates his or her employment with HEALTHSOUTH within 90 days
after the date of this Agreement, the Sellers shall reimburse HEALTHSOUTH for
any monies it pays to such employee for vacation or sick leave termination
benefits. Effective as of the Effective Date, all employees of Sellers' Business
shall cease to be participants in or otherwise covered by Sellers' employee
benefit plans. HEALTHSOUTH shall include all employees of the Sellers' Business
that accept employment with HEALTHSOUTH ("Hired Employees") in its applicable
employee benefit plans.
As this pertains to any 401K issues, the Hired Employees may roll-over
any existing 401K funds into the HEALTHSOUTH 401K plan immediately upon their
employment by HEALTHSOUTH. However, the Hired Employees will be allowed to begin
contributing into the HEALTHSOUTH 401 K plan only upon completing the
eligibility requirements of that plan.
Hired employees shall be given credit for all service with Sellers
under HEALTHSOUTH's applicable employee benefit pension plans in which they
become participants for purposes of participation. Any pre-existing conditions
of Hired Employees shall be waived by HEALTHSOUTH's medical and/or dental plans
to the extent that they were waived by the Sellers' medical and/or dental plans.
This Section 5.3 is an agreement solely between Sellers and HEALTHSOUTH, and
nothing in this Section, whether expressed or implied, confers upon any employee
of Sellers or any other person, any rights or remedies.
Section 6. Access to Information and Documents.
6.1. Books and Records. The Sellers and HEALTHSOUTH hereby agree to
comply with all applicable provisions of 42 U.S.C. Section 1395x(v)(1) I, which
is incorporated herein by reference, and all similar federal and state statutes
concerning providing information to the Secretary of the United States
Department of Health and Human Services and the Comptroller General of the
United States General Accounting Office, or their authorized representatives.
Disclosure pursuant to this Section shall not be construed as a waiver of any
other legal right to which any party may be entitled under law or regulation.
6.2. Sharing of Information. For a period of four years after the date
of the execution and delivery of this Agreement, or for such longer period as
may exist under any applicable statute of limitations, the Sellers and
HEALTHSOUTH shall, during normal business hours, afford the other parties and
their counsel and accountants, full access to the books, records and other data
retained by such parties pursuant to this Agreement, as may reasonably be
requested.
Section 7. Nature and Survival of Representations, Warranties and Covenants.
7.1. Survival of Representations, Warranties and Covenants. All
statements contained in this Agreement or in any Exhibit attached hereto, any
agreement executed pursuant hereto, and any certificate or other instrument
delivered by or on behalf of either party pursuant to the terms of this
Agreement, shall constitute representations and warranties. All representations
and warranties of the parties shall survive the date of this Agreement for a
period of two years. All covenants of the parties shall survive the date of this
Agreement and continue forever. The parties shall be entitled to rely upon such
representations, warranties and covenants irrespective of any investigations
made by such parties.
7.2. Indemnification for Breach. Each of the parties hereto indemnifies
the other against any loss, liability, damage, cost or expense, including
reasonable attorneys' fees, on account of a breach of any warranty,
representation, covenant or agreement made in this Agreement or in any Exhibit
attached hereto or any document executed in connection herewith. Any such
indemnification made hereto shall be limited to the total amount of
consideration paid pursuant to the Agreement to Purchase Assets and for the
Non-Competition Agreement.
7.3. Methods of Asserting Claims. As used herein, the "Indemnified
Party" shall refer to the party entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Indemnified Party. In the event that any Indemnified Party is made a defendant
in or party to any action or proceeding, judicial or administrative, instituted
by any third party, the liability or the costs or expenses of which are Losses
(any such third party action or proceeding being referred to as a "Claim"), the
Indemnified Party shall give the Indemnifying Party prompt notice thereof. The
Indemnifying Party shall be entitled to contest and defend such Claim, and
notice of the intention so to contest and defend shall be given by the
Indemnifying Party to the Indemnified party within 20 business days after the
Indemnified Party's notice of such Claim (but, in all events, at least five
business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
employed by the Indemnifying Party. The Indemnified Party shall be entitled at
any time, at its own cost and expense (which expense shall not constitute a
loss), to participate in such contest and defense and to be represented by
attorneys of its or their own choosing. If the Indemnified Party elects to
participate in such defense, the Indemnified party will cooperate with the
Indemnifying Party in the conduct of such defense. Neither the Indemnified Party
nor the Indemnifying Party may concede, settle or compromise any Claim without
the consent of the other party, which consent will not be unreasonably withheld.
Section 8. Miscellaneous.
8.1 Collection of Accounts Receivable. HEALTHSOUTH agrees that, if any
payment is made to HEALTHSOUTH after the Effective Date on account of accounts
receivable of Sellers arising from products sold or services performed prior to
the close of business on the Effective Date ("Pre-Closing ARs"), HEALTHSOUTH
shall promptly endorse and deliver any checks, drafts or money designated as
such payment to the following "lock-box" account: NW7247, P.O. Box 1450,
Minneapolis, Minnesota 55485 or, if such payment is received in connection with
a Medicare or Medicaid Pre-Closing AR, to the following "lock-box" account:
NW7248, P.O. Box 1450, Minneapolis, Minnesota 55485. If payment is received
without designation of which invoice such payment relates to, such payment shall
be initially applied to the oldest invoice of the Sellers' Business to such
third party up to and until any Pre-Closing AR amount for that particular
invoice is satisfied. HEALTHSOUTH agrees to cooperate and give reasonable
assistance to Sellers in Sellers' efforts to collect any Pre-Closing ARs.
HEALTHSOUTH shall not assert any right of set-off or counterclaim against the
Pre-Closing AR's or the checks, drafts, or money designated as payment therefor
or any other proceeds thereof.
8.2 Parent Company. Health Fitness Corporation is the Parent Company of
all of the Sellers, and the Sellers are all wholly-owned first or second-tier
subsidiaries of Health Fitness Corporation. As such, Health Fitness Corporation,
in order to induce the Buyer to enter into this Agreement, hereby guarantees all
of the other Sellers' obligations, representations, warranties, and covenants
due to the Buyer under this Agreement. Health Fitness Corporation's obligations
as guarantor shall be absolute, unconditional and primary (not secondary) and
shall not depend in any manner upon the pursuit by the Buyer of any remedy or
remedies against the other Sellers. Health Fitness Corporation as guarantor
hereby waives any and all legal requirements that the Buyer shall give any
notice, institute any action or proceeding at law or in equity against other
Sellers or exhaust its remedies against the other Sellers or anyone else as a
condition precedent to bringing an action against Health Fitness Corporation as
guarantor hereunder. Health Fitness Corporation as guarantor hereby waives any
demand for payment, notice of demand, and all other notices and demands of any
kind or description which may now or hereafter be provided for by any statute or
any other doctrine or rule of law.
8.3 Notices. Any notice required or permitted hereunder or any
agreement or document executed and delivered in connection with this Agreement
shall be deemed to have been served properly if hand delivered or delivered by
overnight courier, charges prepaid and properly addressed, to the respective
party to whom such notice relates at the following addresses:
If to HEALTHSOUTH:
HEALTHSOUTH Corporation
One HEALTHSOUTH Parkway
Birmingham, Alabama 35243
Attention: P. Daryl Brown
With copies to:
David A. Hughes, Esq.
HEALTHSOUTH Corporation
One HEALTHSOUTH Parkway
Birmingham, Alabama 35243
If to the Sellers:
Health Fitness Corporation
3500 West 80th Street, Suite 130
Bloomington, Minnesota 55431
Attention: Chief Executive Officer
With copies to:
John F. Wurm, Esq.
Fredrikson & Byron, P.A.
900 Second Avenue South
1100 International Centre
Minneapolis, Minnesota 55402
or such other address as shall be noticed in writing by any party to the other
parties. All such notices shall be deemed received when hand delivered or one
day after delivered to the overnight courier.
8.4 Additional Acts. Each party hereto agrees to perform any further
acts and to execute and deliver any other documents which may be reasonably
necessary to carry out the provisions of this Agreement.
8.5 Governing Law. This Agreement shall be interpreted, construed and
enforced in accordance with the laws of the State of Minnesota.
8.6 Headings. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
8.7 Severability. The provisions of this Agreement shall be severable
and if any provisions shall be invalid or void or unenforceable in whole or in
part for any reason, the remaining provisions shall remain in full force and
effect.
8.8 Terminology. The word "including", when following any general
statement, term or matter, shall not be construed to limit such statement, term
or matter to the specific terms or matters as provided immediately following the
word "including" or to similar items or matters, whether or not non-limiting
language (such as "without limitation", "but not limited to", or words of
similar import) is used with reference to the word "including" or the similar
items or matters, but rather shall be deemed to refer to all other items or
matters that could reasonably fall within the broadest possible scope of the
general statement, term or matter. "To the knowledge", "to the best knowledge,
information and belief', or any similar phrase shall be deemed to include the
assurance that such knowledge is based upon a reasonable investigation, unless
otherwise expressly provided. Unless otherwise expressly provided herein,
knowledge of the Sellers shall be deemed to include facts known to any officer,
director or managerial employee of the Sellers.
8.9 Entire Agreement. This Agreement and the other agreements executed
and delivered contemporaneously herewith contain the entire agreement of the
parties and supersede any and all prior agreements between the parties, written
or oral, with respect to the purchase and sale contemplated hereby. This
Agreement may not be changed or terminated orally, but may only be changed by an
agreement in writing signed by the party or parties against whom enforcement of
any waiver, change, modification extension, discharge or termination is sought.
8.10 Counterparts. This Agreement may be executed in several
counterparts, each of which, when so executed, shall be deemed to be an
original, and such counterparts shall, together, constitute and be one and the
same instrument. The parties may execute this Agreement, individually or in a
representative capacity, and forward an executed counterpart signature to one or
more other parties by telecopy, overnight express or other means, and the party
or parties receiving such executed counterpart signature shall be authorized to
attach it hereto as the legal and valid signature of such executing party. The
party or parties receiving such executed counterpart signature, together with
their attorneys and counsel, shall be able to rely on the validity of such
executed counterpart signature as fully as if the original of such signature was
affixed hereon.
8.11 Binding Effect. This Agreement shall be binding and shall inure to
the benefit of the parties hereto, and their respective heirs, legatees,
executors, administrators, successors and assigns.
8.12 No Rule of Construction. The parties acknowledge that this
Agreement was initially prepared by HEALTHSOUTH solely as a convenience and that
all parties hereto, and their counsel, have read and fully negotiated all the
language used in this Agreement. The parties acknowledge that, because all
parties and their counsel participated in negotiating and drafting this
Agreement, no rule of construction shall apply to this Agreement which construes
ambiguous or unclear language in favor or against any party because such party
drafted this Agreement.
8.13 Reliance on Statements. All Exhibits and documents referred to in
or attached to this Agreement are integral parts of this Agreement as if fully
set forth herein, and all statements appearing therein shall be deemed disclosed
and relied upon for all purposes and not just in connection with the specific
representation to which they are explicitly referenced.
IN WITNESS WHEREOF, the undersigned parties have executed this document
as of the day and year first written above.
HEALTHFITNESS CORPORATION
By: /s/ Loren S. Brink
Its: Chief Executive Officer
HEALTHFITNESS REHAB OF IOWA, INC.
By: /s/ Loren S. Brink
Its: President
DUFFY & ASSOCIATES PHYSICAL THERAPY CORP
By: /s/ Loren S. Brink
Its: President
SPORTS & ORTHOPEDIC PHYSICAL THERAPY, INC.
By: /s/ Loren S. Brink
Its: President
MIDLANDS PHYSICAL THERAPY, INC.
By: /s/ Loren S. Brink
Its: President
HEALTHSOUTH Corporation
By: /s/ P. Daryl Brown
President
HEALTHSOUTH Outpatient Centers
EXHIBIT INDEX
TO
AGREEMENT TO PURCHASE ASSETS
Exhibit
A Listing of Purchased Assets of Sellers
B Listing of All Leases, Contracts and Agreements
C Sellers' Patient Information and Sellers' Financial Information
D Disclosure Schedule
E List of Sellers' Employees to be retained by HEALTHSOUTH
F Risk Management Information
G Legal Opinion
NOTE: This Exhibit Index has been included in this Agreement solely for
the convenience and general reference of the parties and shall not
be construed to describe, define or limit the scope or intent of
the provisions of this Agreement