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AGREEMENT
BY AND AMONG
MHM SERVICES, INC.
and
MHM EXTENDED CARE SERVICES, INC.,
and
LIBERTY MANAGEMENT GROUP, INC.,
and
LIBERTY BAY COLONY HEALTH SERVICES, INC.,
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TABLE OF CONTENTS
Paragraph Title Page
--------- ----- ----
No.
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1. Purchase and Sale of Assets 2
2. Purchase Price 5
3. Representations and Warranties of Sellers 16
4. Representations and Warranties of Buyer 23
5. Covenants of Sellers 27
6. Covenants of Buyer 30
7. Conditions to Obligations of Buyer and Buyer Parent 32
8. Conditions to Obligations of Sellers 34
9. Provisions for Indemnification 35
10. Closing 41
11. Opinion of Counsel for Sellers 42
12. Opinion of Counsel for Buyer 43
13. Restrictive Covenant 44
14. Survival of Representations and Xxxxxxxxxx 00
00. Further Assurances 46
16. Termination 47
17. Notices 47
18. Broker 49
19. Expenses 49
20. No Solicitation 50
21. Entire Agreement 50
22. Employees 51
23. Binding Effect 52
(i)
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Paragraph Title Page
--------- ----- ----
No.
--
24. Assignment 52
25. Headings 53
26. Law Governing 53
27. Counterparts 54
28. Consented Assignment 54
29. Guaranty of Buyer Parent 54
30. Guaranty of Seller Parent 55
31. Consent to Use of Name 55
(ii)
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LIST OF EXHIBITS
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Exhibit Number Description
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1(a)(i) List of Facility Contracts
2(a)(ii) Promissory Note
2(c)(v) Cash Basis Bad Debt Reserve Percentage
2(e)(ii) Estimate of a Regional Allocation for the Period
Ended November 30, 1997
2(e)(iii) List of 15 Facility Contracts
3(c) Material Changes
3(d) Exceptions to Title to Assets
3(e) Breaches of Sun Contract
3(f) List of Claims
3(g) Exceptions to Required Sellers' Authorizations
3(h)
Notices
3(i)(i) Exceptions to Compliance with Laws
3(j) Union Activity - Business
4(d) Buyer Parent Financial Statements
4(f) Insurance for Buyer
4(g) Union Activity - Buyer Geripsych Business
10(a)(i) Xxxx of Sale and Assignment
22 List of Employees
(iii)
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AGREEMENT
THIS AGREEMENT (the "Agreement"), made this 22nd day of November, 1996
by and among MHM Services, Inc., a corporation organized and existing under the
laws of the State of Delaware (hereafter referred to as "Buyer Parent") and its
wholly owned subsidiary MHM Extended Care Services, Inc., a corporation
organized and existing under the laws of the State of Delaware (hereinafter
referred to as "Buyer") and Liberty Management Group, Inc., a corporation
organized and existing under the laws of the Commonwealth of Massachusetts
(hereinafter referred to as "Seller Parent"), and its wholly owned subsidiary
Liberty Bay Colony Health Services, Inc., a corporation organized and existing
under the laws of the Commonwealth of Massachusetts (hereinafter referred to as
"Seller Sub" and, collectively with Seller Parent, as "Sellers"). The term
"Sellers" as used herein shall mean the Sellers or each or either of them, as
the context requires.
W I T N E S S E T H :
WHEREAS, the business of Seller Sub consists of managing the provision
of mobile professional geripsych services for skilled nursing facilities, adult
day care centers, and assisted living facilities in Massachusetts (currently
numbering approximately sixty facilities), and providing such services to
residents of such facilities as well as counseling services to such residents'
families in such facilities (which counseling services are currently billed
under Medicare Procedure Codes 90846 and 90847)
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(hereinafter referred to as the "Business").
WHEREAS, Buyer wishes to purchase from Sellers certain of the assets
and contractual rights of the Business owned by Sellers; and
WHEREAS, Sellers wish to sell the said assets and contractual rights
to Buyer upon, under and subject to certain terms and conditions agreed upon by
and among the parties as hereinafter set forth; and
NOW THEREFORE, intending to be legally bound hereby, and in
consideration of the mutual covenants herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. PURCHASE AND SALE OF ASSETS
(a) Buyer hereby agrees to purchase from Sellers and
Sellers agree to sell to Buyer the following assets and contractual rights
related to the Business (collectively, the "Assets"), owned by Sellers, for the
purchase price set forth in paragraph 2 hereinafter:
(i) All of Sellers' rights under or in
connection with certain agreements related to the Business in force on the
Closing Date (as hereinafter defined), as follows: agreements relating to
managing the provision of mobile professional geripsych services for skilled
nursing facilities, adult day care centers and assisted living facilities and
providing such services to residents of such facilities as well as counseling
services to families of such residents in such facilities (which services are
currently billed under Medicare Procedure Codes 90846
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and 90847), including, without limitation, the Sun Contract, as hereinafter
defined (each, a "Facility Contract" and collectively, "Facility Contracts") (a
list of those Facility Contracts in force on the date of this Agreement is
attached as EXHIBIT 1(a)(i) hereto). Buyer and Sellers agree that all of
Sellers' rights under, or in connection with, agreements to be transferred to
Buyer pursuant to this subparagraph 1(a)(i) at the Closing (as hereinafter
defined) shall be as set forth above and in EXHIBIT 1(a)(i), with such
additions and deletions between the time of the execution of this Agreement and
the Closing that are entered into in the ordinary course of business;
(ii) All customer lists, records and
files, plans, systems, methods, designs, protocols, policies and procedures,
and books and records relating to the operations, personnel, vendors, suppliers
and customers of the Business; and
(iii) All personnel and payroll records of
employees of Sellers who become employees of Buyer after the Closing.
(b) The Assets shall be transferred by Sellers to Buyer
free of all security interests, liens, encumbrances, and indebtedness of any
kind, provided, however, that all contracts are subject to the rights of the
other parties to such contracts.
(c) Buyer shall not assume, nor be obligated to perform,
fulfill or pay, any obligations or indebtedness of Sellers or the Business
whatsoever, except that Buyer shall assume all obligations and indebtedness
related to the Business with respect to acts,
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occurrences and obligations occurring or accruing on and after the Closing Date
under or in connection with the Assets.
(d) The Assets to be transferred to Buyer hereunder shall
not include, and Sellers shall retain for their own account, any other assets
of the Business, including, without limitation, any and all licenses, leases,
computers, and furniture; any part of the trade name (except as expressly set
forth in paragraph 31 hereof); accounts receivable and related contract rights
and claims for the period prior to the Closing Date and records relating
thereto to the extent such records do not also relate to services to be
provided on or after the Closing Date; and similar related items.
(e) Under the letter of intent dated September 17, 1996
between Sellers and Buyer, it was contemplated that Sellers would sell to Buyer
not only the Business but also a similar business in Connecticut operated by a
subsidiary of Seller Sub (the "Sellers' Connecticut Business"). After
consideration, Buyer has decided that it wants to purchase only the Business,
even though the Business and Sellers' Connecticut Business service some of the
same customers or affiliates thereof (collectively, the "Dual State
Customers"). Sellers have concluded that Buyer's purchase of the Business
makes the continuation of Sellers' Connecticut Business uneconomical and,
therefore, Sellers plan to close down or otherwise terminate Sellers'
Connecticut Business. Notwithstanding anything contained to the contrary in
this Agreement, Sellers shall not have any liability under this Agreement
whatsoever (except for
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any potential liability pursuant to the first sentence of Section 3(e)) if the
closure, termination or wind down of the Sellers' Connecticut Business results
in or contributes to the termination of any of the Facility Contracts by any
Dual State Customers.
2. PURCHASE PRICE
(a) As consideration for the purchase of the Assets and
the restrictive covenants of Sellers, Buyer shall deliver to Sellers as the
Purchase Price hereunder:
(i) One Hundred and Fifty Thousand Dollars
($150,000.00) payable to Sellers jointly at the Document Closing (as
hereinafter defined), by wire transfer of immediately available funds;
(ii) One Hundred and Fifty Thousand Dollars
($150,000.00) payable to Sellers jointly at the Document Closing by delivery of
an absolute, unconditional and fully negotiable promissory note dated as of the
Closing Date payable to the order of Sellers jointly, without offset or defense
of any kind or nature except for an offset of Seventy Five Thousand Dollars
($75,000.00) if the Sun Contract (as hereinafter defined) was invalid in its
entirety due to an act or omission of Sellers prior to the Closing (other than
the entry into of this Agreement or consummation of the transactions
contemplated hereby), guaranteed by Buyer Parent, which note shall provide for
quarterly payments of interest at the annual rate of nine percent (9%) and a
balloon payment of the principal amount (together with payment of interest for
the prior quarter) on the maturity date three years after the Closing Date,
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and shall be in the form attached as EXHIBIT 2(a)(ii) (the "Promissory Note");
and
(iii) Such Annual Earnout described in
subparagraph 2(b) thereof as may be payable on the dates and in accordance with
the terms specified in subparagraph 2(c) hereof.
(b) With respect to the period of five (5) years
commencing on December 1, 1996 (the "Earnout Commencement Date"), Buyer shall
pay to Sellers and Sellers will be entitled to receive from Buyer, subject to
the payment provisions of paragraph 2(c), twenty percent (20%) of the annual
Cash Flow of each Contract (as defined in paragraph 2(e) hereof) (the "Annual
Earnout").
(c) The Annual Earnout and Annual Net Revenue Target (as
defined in paragraph 2(e) hereof) shall be calculated on an accrual basis for
each annual period (each an "Annual Earnout Period") within ninety (90) days
after the end of each year after the Earnout Commencement Date for five (5)
years (each an "Annual Calculation Date") subject to the Final Cash Basis
Adjustment, if any, as described in paragraph 2(c)(v) hereof; provided,
however, that the Annual Earnout shall only be payable to Sellers as follows:
(i) On each Annual Calculation Date Buyer will
provide Seller Parent with detailed reports and calculations of the Annual Net
Revenue Target, Cash Flow of each Contract and Annual Earnout for the preceding
Annual Earnout Period, determined through the end of such Annual Earnout
Period, together with a certification by the Chief Financial Officer of Buyer
Parent of the
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completeness and accuracy of such calculations in accordance with the terms of
this Agreement. Seller Parent shall have the right to audit the records that
support all such detailed reports and calculations by Buyer, in accordance with
the provisions of subparagraph 2(g) hereof.
(ii) Within fifteen (15) days after the end of each
Annual Calculation Date and each quarterly period after the first Annual
Earnout Period (the "Quarterly Reporting Date") until the seventy-eighth month
after the Earnout Commencement Date, Buyer shall provide Seller Parent with:
(a) a detailed report of all collections received by Buyer during the preceding
Annual Earnout Period (in the case of reports to be provided on an Annual
Calculation Date) or the quarterly period ended on the last day of the month
preceding such Quarterly Reporting Date (in the case of reports to be provided
on a Quarterly Reporting Date) with respect to all Contract Net Revenues for
each preceding Annual Earnout Period, designating the Annual Earnout Period to
which such collections apply; and (b) a detailed report and calculation of the
Current Revenue Collection Percentage (as defined in subparagraph 2(e) hereof)
for each preceding Annual Earnout Period. Seller Parent shall have the right
to audit the records that support the detailed report and calculation of each
Current Revenue Collection Percentage, in accordance with the provisions of
subparagraph 2(g) hereof.
(iii) On each Annual Calculation Date and Quarterly
Reporting Date, Buyer shall pay to Sellers the sum of the products
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for all Annual Earnout Periods of: (a) the Annual Earnout for each such Annual
Earnout Period; multiplied by (b) the Current Revenue Collection Percentage for
each such Annual Earnout Period; provided, however, that such payments shall be
reduced by the amounts of the Annual Earnout previously paid with respect to
each Annual Earnout Period.
(iv) On each Annual Calculation Date and
Quarterly Reporting Date, as of which the Current Revenue Collection Percentage
for any Annual Earnout Period exceeds 100%, Buyer shall also pay to Seller (in
addition to the amounts referred to above), 20% of the amounts by which the
Contract Net Revenues actually collected exceed the Annual Net Revenue Target
for such Annual Earnout Period.
(v) On each Quarterly Reporting Date which
coincides with the fifteen month anniversary of the Annual Calculation Date for
each Annual Earnout Period, if the Current Revenue Collection Percentage for
such Annual Earnout Period is then less than 100%, Buyer shall recalculate the
Cash Flow of Each Contract and Annual Earnout for such Annual Earnout Period by
substituting in the formulas thereof, for the applicable Base Bad Debt Reserve
Percentage, the actual Cash Basis Bad Debt Reserve Percentage determined in a
manner consistent with the methodology discussed on EXHIBIT 2(c)(v) (the "Final
Cash Basis Adjustment"). Within 30 days after Seller receives detailed
calculations of the Final Cash Basis Adjustment, for any Annual Earnout Period
(subject to Sellers' rights to audit such information as described below)
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Sellers shall refund to Buyer the aggregate amounts by which: (x) the
cumulative cash payments received by the Seller applicable to the Annual
Earnout for such Annual Earnout Period calculated on an accrual basis pursuant
to paragraph 2(b) and 2(e)(iii) hereof; exceeds (y) the Annual Earnout
calculated in the Final Cash Basis Adjustment.
(d) The Cash Flow of each Contract during each Annual
Earnout Period will be determined separately and not cumulatively with other
Facility Contracts or other Annual Earnout Periods for purposes of calculating
any Annual Earnout. If there is Cash Flow for any Facility Contract in any
such Annual Earnout Period, calculation of the Annual Earnout for such Annual
Earnout Period shall be due for such Facility Contract for such period and
shall not be affected by any net loss on any other Facility Contract, whether
in the same or any other Annual Earnout Period. Sellers shall not be obligated
to return any payment on account of an Annual Earnout in the event of any net
loss incurred under any Facility Contract with respect to any Annual Earnout
Period after such payment is made.
(e) As used herein, the following terms have the
following meanings:
(i) "Annual Net Revenue Target" shall mean
(for such Annual Earnout Period) the amount of the Contract Net Revenues (as
defined in paragraph 2(e)(vii) hereof) from all Facility Contracts during such
Annual Earnout Period; minus a reasonably projected bad debt reserve for such
Contract Net Revenues, not to
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exceed 10% thereof for the first two Annual Earnout Periods (the "Base Bad Debt
Reserve Percentage"). Collections in excess of the Annual Net Revenue Target
for each respective Annual Earnout Period will result in additional payments by
Buyer to Seller as provided in paragraph 2(c)(iv) hereof, and the Base Bad Debt
Reserve Percentage for the final three Annual Earnout Periods may be adjusted
as of the third Annual Calculation Date, by applying the methodology described
on Exhibit 2(c)(v) hereto, to the actual collection experience for the first
Annual Earnout Period. In the event the Base Bad Debt Reserve Percentage for
any Annual Earnout Period is increased pursuant to the Final Cash Basis
Adjustment outlined in paragraph 2(c)(v), then paragraph 2(c)(iv) will apply to
all collections received thereafter for the Net Contract Revenues of such
Annual Earnout Period.
(ii) "Aggregate Regional Overhead Costs"
shall mean reasonable and ordinary costs directly incurred by the Buyer in
connection with the operations of Buyer in Massachusetts (which are
substantially similar in nature, scope and category to the costs reflected in
Buyer's general ledger which were used to make the estimate of a Regional
Allocation for the period ended November 30, 1997, as set forth in EXHIBIT
2(e)(ii));
(iii) "Cash Flow of each Contract" shall
mean the Contract Net Revenues for each Facility Contract minus (a) the direct
costs of providing such services, which shall be estimated by multiplying the
Contract Net Revenues for such Facility Contract by the Contract Cost
Percentage; (b) a reserve for bad debts which
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will not exceed the applicable Base Bad Debt Reserve Percentage; (c) amounts
reasonably charged against revenues as refunds made with respect to payments
previously received by Buyer for services rendered pursuant to such Facility
Contract (the "Refunds"); and (d) an allocation of regional overhead to such
Facility Contract (the "Regional Allocation"), initially in the amount of
$7,000 for each separate nursing facility, adult day care center or assisted
living facility (i.e., related facilities on the same "campus" shall be
considered a single "facility" for such purpose) covered by a Facility Contract
(a "Business Facility") for the first Annual Earnout Period.
(w) For the first Annual Earnout Period only, the Regional Allocation
for each Business Facility may be increased above $7,000 by an amount
determined by taking 50% of the aggregate sum of the negative Cash Flow of each
Contract derived from the 15 Facility Contracts listed on EXHIBIT 2(e)(iii) for
the first Annual Earnout Period but not to exceed $100,000 in any event (the
"Unabsorbed Regional Overhead") and then dividing the resulting amount by the
total number of Business Facilities under contract to Buyer for the provision
of mobile geripsych management services that yielded a positive Cash Flow of
each Contract for the first Annual Earnout period.
(x) For each Annual Earnout Period after the first Annual Earnout
Period, such Regional Allocation for each Business Facility shall be made by
multiplying the Aggregate Regional Overhead Costs for such Annual Earnout
Period by the ratio of the Total Net
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Revenues to the total revenues of Buyer arising from its operations in
Massachusetts and dividing the resulting product by the total number of skilled
nursing facilities, adult day care centers and assisted living facilities in
Massachusetts under contract to Buyer for the provision of mobile geripsych
management services (each, a "Facility") (with any such Facility under contract
for less than the entire year to be counted in such total number based on the
fraction of the year for which such Facility was under contract); provided,
however, that for each Annual Earnout Period after the first Annual Earnout
Period, any proposed Regional Allocation for a Business Facility exceeding
$7,700 shall require the consent of Seller Parent, which consent shall not be
unreasonably withheld; and provided, further, that the Regional Allocation
shall in no event exceed $10,000 for each Business Facility for any Annual
Earnout Period.
(y) In reporting any proposed change in the Regional Allocation, Buyer
shall provide Seller Parent with a detailed report which compares each category
of expense and the allocation thereof by Facility for the preceding Annual
Earnout Period, to the same category of expense and the allocation thereof for
the Annual Earnout Period for which such change is proposed. Seller Parent
shall have the right to audit the records that support the detailed report and
calculation of any proposed change in the Regional Allocation. In the event
that Seller Parent withholds its consent to any proposed increase of the
Regional Allocation allocable to a Facility above $7,700 for more than thirty
(30) days after receipt
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of such detailed report and calculation, Seller Parent shall be deemed to have
given written notice to Buyer pursuant to subparagraph 2(g) hereof of its
election to exercise its right to audit the records supporting such detailed
report and calculation, and the dispute as to the proposed increase shall be
resolved in accordance with the procedures established in paragraph 2(g)
hereof.
(z) In calculating the "Cash Flow of each Contract," no deductions
from net revenues shall be made for interest, bad debts, depreciation,
amortization, corporate overhead or regional overhead (except for the Regional
Allocation and bad debt reserves expressly referred to hereinabove).
(iv) "Contract Cost Percentage" as used
herein shall mean (a) all direct costs incurred for professional mental
healthcare services directly related to the Business, including, without
limitation, salaries, fringe benefits, FICA, reasonable and ordinary payments
for services rendered pursuant to independent contract arrangements with a
professional, any insurance (including professional liability insurance)
covering professionals providing services under all of the Facility Contracts,
and reasonable ordinary and necessary business expenses, including, without
limitation, travel expenses (if reimbursed or paid by Buyer) incurred by any
professionals for such services divided by (b) the total Contract Net Revenues
for all Facility Contracts.
(v) "Current Revenue Collection Percentage"
shall mean, for each Annual Earnout Period preceding any Annual
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Calculation Date or Quarterly Reporting Date referred to above, the percentage
(which may exceed 100%) of the Annual Net Revenue Target for such Annual
Earnout Period which has actually been collected as of the end of the Annual
Earnout Period or quarterly period, as the case may be, immediately preceding
such Annual Calculation Date or Quarterly Reporting Date, as the case may be,
with respect to the Contract Net Revenues generated during such Annual Earnout
Period.
(vi) "Sun Contract" shall mean the Geripsych
Consulting Agreement dated as of October 1, 1995 between Seller Parent and
Seller Sub, on the one hand, and Sun Healthcare Group, Inc. and Sunrise
Healthcare Corporation (collectively, the "Sun Parties"), on the other hand.
(vii) "Contract Net Revenues" as used
herein shall mean gross revenues billed for services pursuant to each Facility
Contract, minus adjustments to reduce these revenues by provisions for discount
arrangements with commercial payers and other contractual or administrative
allowances with government payors. The differences between established billing
rates and amounts estimated to be received under such discount, contractual and
administrative arrangements are accounted for as "contractual adjustments".
(f) The Purchase Price shall be allocated as follows:
(i) Five Thousand Dollars ($5,000.00) to the
restrictive covenant set forth in paragraph 13; and
(ii) the balance of the Purchase Price to the
purchase of the Assets that are intangible.
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(g) Seller Parent may exercise its right to audit
detailed reports and calculations pursuant to paragraphs 2(c)(i), (ii) and (v),
and 2(e)(iii) hereof only in accordance with the procedures set out in this
paragraph. Seller Parent shall give written notice to Buyer within thirty (30)
days after receipt of a detailed report and calculation of its election to
exercise its right to audit the supporting records. If Seller Parent so
elects, it shall retain an accounting firm at its expense to conduct such audit
(or it may conduct such audit with representatives of the Seller Parent) and
shall provide a copy of the determination of such accounting firm or such
representatives (the "Seller Determination") to Buyer within thirty (30) days
after delivery of its written notice of election to Buyer. Buyer and Buyer
Parent shall provide such accounting firm or representatives with reasonable
access and cooperation with regard to the files and materials relevant to such
audit in order to facilitate and expedite such audit, including making
available in Massachusetts, at the expense of Sellers, copies of documents
maintained outside of Massachusetts, provided that such accounting firm or
representatives identify such documents with reasonable specificity. Seller
Parent shall take such measures to maintain the confidentiality of any
information obtained in any audit as it takes to maintain the confidentiality
of its own confidential information, and all such information will be destroyed
or returned to Buyer promptly after the conclusion of the audit, or in the
event of an arbitration, the issuance of an arbitration award. In
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the event there is a discrepancy between Buyer's detailed report and
calculation and the Seller Determination, and the parties hereto do not reach
an agreement on any adjustments to Buyer's detailed report and calculation
within twenty (20) days following Buyer's receipt of a copy of the Seller
Determination, then the matter shall be submitted to binding arbitration in
Boston, Massachusetts, before a single arbitrator who is a Certified Public
Accountant, in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA"). If the parties fail to agree on the selection
of an arbitrator within ten (10) days after the expiration of the
above-described twenty (20) day period, then the AAA shall promptly make the
selection, which decision shall be binding upon the parties. The disputed
issues shall be submitted to the arbitrator within five (5) days after
selection of the arbitrator and each issue shall be decided by the arbitrator
within thirty (30) days. The fees and expenses of the AAA and the arbitrator
shall be paid by the parties hereto in proportion to the dollar amount of the
disputed issues decided against each party. Judgment may be entered on any
decision rendered by the arbitrator, including the fees and expenses of the AAA
and the arbitrator.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers jointly and severally represent and warrant, upon
which representations and warranties Buyer relies, and which representations
and warranties shall survive Closing for the period set forth in paragraph 14
hereinafter, as follows:
(a) Each Seller is a corporation duly organized, validly
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existing, and in good standing under the laws of its state of incorporation,
and has all requisite power and authority to own the Assets and carry on the
Business as it is now being conducted and to enter into this Agreement and to
consummate the transactions contemplated hereunder. The Articles of
Incorporation and all amendments thereto to date of Sellers and their Bylaws as
amended to date, all of which have been delivered to Buyer for review prior to
execution of this Agreement, are full, complete and correct to the date of this
Agreement. Sellers are not in violation of any of the provisions of their
Articles of Incorporation, as amended, nor of their Bylaws as amended.
(b) Sellers have delivered to Buyer unaudited compiled
financial information for the Business for the period(s) ending August 31, 1996
(the "Financial Information"). The Financial Information has been derived from
the books and records of Sellers, and in management's opinion fairly represents
the results of the operation of the Business for the periods presented in all
material respects, except as otherwise noted in the Financial Information. The
preparation of the Financial Information required management to make estimates
and assumptions that affect the reported amounts of revenues and expenses
during the reported periods. Actual results could differ from those estimates.
(c) Since August 31, 1996 except as described on EXHIBIT
3(c) attached hereto and made a part hereof, there has not been (i) any
material change, or any material development, or the incurring of any material
liability which has affected in a
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materially adverse manner the Assets or the Business other than in the ordinary
course of business; or (ii) any modification affecting the term or economics or
termination of any Facility Contract, or failure to renew or extend any
Facility Contract (except in the ordinary course of business).
(d) Sellers own and have good and marketable title to all
the Assets, except, in the case of contractual rights, subject to the consent
of the other contracting party or parties before a transfer of such rights may
occur. Except as described on EXHIBIT 3(d) attached hereto and made a part
hereof, the Assets are not subject to any security interest, mortgage, deed of
trust, pledge, lien, encumbrance, option, or restriction or limitation on their
transferability (collectively, "Encumbrances"), and none of the Assets is
subject to any commitment or other arrangement for their sale or use by any
affiliate of Sellers or by any third party.
(e) Copies of all Facility Contracts have been delivered
to Buyer (or copies of the form of agreement have been delivered to Buyer and
access to the original, individual contracts has been granted to Buyer) and are
true and complete in all respects material to the term and economics thereof
(except for the copy of the Sun Contract, which is true and complete in all
respects). Sellers have substantially complied in all respects with all of the
provisions of all Facility Contracts, and are not in breach, violation or
default under any of them. No event has occurred with respect to the Sun
Contract that constitutes, or with the lapse of
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time or the giving of notice, or both, would constitute a breach, violation or
default under the Sun Contract that would permit the Sun Parties to terminate
the Sun Contract, or to recover damages or otherwise avail themselves of a
legal or equitable remedy thereunder, except as described on EXHIBIT 3(e).
(f) Except for those matters disclosed on EXHIBIT 3(f)
attached hereto and made part hereof, there is no action, suit, litigation,
claim, administrative, state, federal or local, or governmental or
quasi-governmental investigation or proceeding pending or, to the best of
Sellers' knowledge, threatened against Seller relating to the Business or the
Assets. Sellers are not party to, or the subject of, any action, suit,
litigation, claim, administrative proceeding or governmental or
quasi-governmental investigation relating to the Business or the Assets; nor to
the best of the knowledge of Sellers is any such action, suit, litigation,
proceeding or investigation threatened. Sellers are not subject to any order,
judgment, decree or obligation which would limit their ability to operate the
Business in the ordinary course or enter into this Agreement and consummate the
transactions contemplated hereby.
(g) This Agreement does not violate any existing statute,
law, regulation, rule, court or administrative judgment, order or decree which
is applicable to Sellers or the Assets or the Business, or to which Sellers are
subject or by which Sellers are bound, or Sellers' Articles of Incorporation or
Bylaws. Except as set forth in EXHIBIT 3(g) attached hereto and made a part
hereof,
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all actions of Sellers necessary to authorize Sellers to execute, deliver and
consummate this Agreement have been duly and validly authorized and taken; no
further actions or authorizations are required; and this Agreement constitutes
the valid, legally binding obligation of Sellers and is enforceable in
accordance with its terms, except as the enforceability may be limited by
bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights generally, and further except to the extent that the
enforceability of such obligations is subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). This Agreement and the transactions contemplated herein
will not constitute a violation or breach of, or be in conflict with, or
constitute a default under the terms of, or require the consent not heretofore
obtained of any person under, any contract (other than the Facility Contracts),
agreement, equipment lease or other instrument to which Sellers or are subject,
or are parties, or are bound.
(h) No Seller has received any notice of any pending or
threatened claim, investigation, or inquiry by any governmental or
quasi-governmental authority asserting that any Seller has at any time engaged
in any unlawful activity in the operation of the Business, except as noted on
EXHIBIT 3(h) hereto.
(i) (i)To the best of Sellers' knowledge, except as set
forth in EXHIBIT 3(i)(i) Sellers have complied in all material respects with,
and are currently in compliance with, all existing statutes, laws, ordinances,
rules, regulations, judgments, decrees
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and orders, of any court or governmental or quasi-governmental authority, to
which the Business (or Sellers with respect to the Business) is subject or by
which either is bound and non-compliance with which could adversely affect the
Business in any material respect.
(ii) No Seller has executed any contracts or
agreements with any governmental authority or person expressly providing that
the Business shall provide a certain amount of free care.
(j) Except as described on EXHIBIT 3(j) attached hereto
and made part hereof:
(i) To the actual knowledge of Sellers, no
employees of the Business are represented by any labor organization with
respect to their employment in the Business and, as of the date hereof, no
labor organization or group of such employees of the Business has made a demand
to any Seller for recognition or has filed a petition with any Seller seeking a
representation proceeding or given Sellers notice of any intention to hold an
election of a collective bargaining representative. To the actual knowledge of
Sellers, there is no strike, work stoppage, or labor disturbance pending or
threatened which involves any such employee of the Business; and
(ii) To the actual knowledge of Sellers,
there are no unfair employment or labor practice charges or employment-related
litigation or administrative proceedings which are presently pending against
any Seller in relation to employees
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of the Business.
(k) No Seller, or any officer, director or employee, or
any agent with actual authority, of any Seller has at any time made gifts,
gratuities, or payments in any other form, whether in cash, goods or services,
to any persons or entities whatsoever, in payment for, or intended to induce or
encourage, or which resulted in or may have resulted in or had the effect of
inducing, obtaining, encouraging or continuing the referral of persons or
entities as customers for the Business, or inducing, obtaining, encouraging or
extending any contractual relationship, written or oral with respect to the
Business, in violation of any law; nor has any Seller or any officer, director,
employee, member or agent thereof (i) entered into any arrangement, written or
oral, under or pursuant to which bribes, kickbacks, rebates, payoffs or other
forms of illegal payments or remuneration have been or will be made, provided
for, or offered, either directly or indirectly with respect to the Business
through agents with actual authority, brokers, distributors, dealers or other
intermediaries, or (ii) made any illegal contribution of monies, services or
property to any political party, candidate or elected official for any purpose.
(l) There is no material fact about the Assets or the
Business or Sellers as of the Closing Date known to Sellers which Sellers have
not disclosed in this Agreement or in any Exhibit hereto which materially and
adversely affects or may reasonably be expected to affect, materially and
adversely, the Assets or the
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Business as of the Closing Date. Sellers make no warranties, representations
or covenants whatsoever regarding the prospects, projections, operations or
earnings, assets, liabilities or condition (financial or otherwise) of the
Assets or the Business after the Closing Date.
Buyer and Buyer Parent acknowledge that all of the Facility Contracts,
other than the Sun Contract, can be terminated without cause on relatively
short periods of time, generally 30 to 60 days. In addition, Buyer and Buyer
Parent acknowledge that Sellers do not have certain licenses which Buyer has in
Massachusetts which will allow the Buyer to run the Business in a more
efficient manner. Sellers acknowledge that the Business has not been
profitable prior to the date hereof. Buyer and Buyer Parent acknowledge that
the success or failure of the Business on a going forward basis will depend
largely on the Buyer's handling of the Facility Contracts in the future.
Notwithstanding anything to the contrary contained herein Sellers make no
representations, warranties or covenants as to the survival of any Facility
Contract after the Closing or as to the assignability of any of the Facility
Contracts.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers, upon which
representations and warranties Sellers rely, and which representations and
warranties shall survive Closing for the period set forth in paragraph 14
hereinafter, as follows:
(a) Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of
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Delaware, and has all requisite power and authority (corporate and other) to
enter into this Agreement and to consummate the transactions contemplated
hereby.
(b) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereunder by Buyer have been duly
and validly authorized and no further actions or authorizations are required;
and this Agreement has been duly executed and delivered by Buyer and
constitutes the valid, legally binding obligation of Buyer in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
or other similar laws affecting the enforcement of creditors' rights generally,
and further except to the extent that the enforceability of such obligations is
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
(c) The execution and delivery of this Agreement and the
consummation of the transactions contemplated by this Agreement will not:
(i) Result in any breach of, or constitute a
default under, the Certificate of Incorporation or Bylaws of Buyer, or any
contract, agreement, instrument or obligation to which either Buyer or Buyer
parent is a party or to which either of them is subject or by which either of
them is bound, or;
(ii) Violate any existing statute, law,
regulation, rule, court or administrative judgment, order, or decree applicable
to Buyer or to which it is subject or by which it
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is bound.
(d) Buyer has or will have by the Closing Date all
licenses and approvals necessary to conduct the Business after the Closing
Date. Buyer represents that it has adequate financial resources available to
it from Buyer Parent to finance the working capital needs of the Business after
the Closing Date as evidenced by copies of the most recent financial statements
for Buyer Parent filed with the Securities and Exchange Commission, copies of
which are attached hereto as EXHIBIT 4(d). Buyer is not subject to any order,
judgment, decree or obligation which would limit its ability to operate the
Business in the ordinary course after the Closing or enter into this Agreement
and consummate the transactions contemplated hereby. Buyer has not received
any notice of any pending or threatened claim, investigation, or inquiry by any
governmental authority or quasi-governmental authority asserting that Buyer has
at any time engaged in any unlawful activity in the operation of its business
of providing mobile professional geripsych services to residents of skilled
nursing facilities, adult day care centers and assisted living facilities and
counseling services to such residents' families as currently billed under
Medicare Procedure Codes 90846 and 90847 (the "Buyer Geripsych Business"). To
the best of Buyer's knowledge, Buyer has complied with, and is currently in
compliance with, all statutes, laws, ordinances, rules, regulations, judgments,
decrees and orders of any court or governmental or quasi-governmental
authority, to which Buyer is subject or by which it is bound, non-compliance
with
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which could adversely affect the Business in any material respect after the
Closing.
(e) Buyer has not executed any contracts or agreement
with any governmental authority or person expressly providing that Buyer shall
provide a certain amount of free care in Massachusetts in the Buyer Geripsych
Business.
(f) EXHIBIT 4(f) attached hereto and made part hereof
contains a complete and correct list of all policies of insurance of every kind
and nature maintained by or on behalf of Buyer relating to the Buyer Geripsych
Business, including policies of life, fire, liability, title, professional
liability, theft, employee fidelity, workers' compensation and all other forms
of casualty and liability insurance, indicating the insurer, the policy or
binder number, the type of coverage, the amount of coverage, and the expiration
date, with a brief description of the coverage afforded by each policy.
(g) Except as described on EXHIBIT 4(g) attached hereto
and made part hereof:
(i) To the actual knowledge of Buyer, no
employees of the Buyer Geripsych Business are represented by any labor
organization with respect to their employment in the Buyer Geripsych Business
and, as of the date hereof, no labor organization or group of such employees of
the Buyer Geripsych Business has made a demand to any Buyer for recognition or
has filed a petition with any Buyer seeking a representation proceeding or
given Buyer notice of any intention to hold an election of a
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collective bargaining representative. To the actual knowledge of Buyer, there
is no strike, work stoppage, or labor disturbance pending or threatened which
involves any such employee of the Buyer Geripsych Business; and
(ii) To the actual knowledge of Buyer, there
are no unfair employment or labor practice charges or employment-related
litigation or administrative proceedings which are presently pending against
any Buyer in relation to employees of the Buyer Geripsych Business.
(h) Neither Buyer nor Buyer Parent nor any officer,
director or employee, nor agent with actual authority, of Buyer or Buyer Parent
has at any time made gifts, gratuities, or payments in any other form, whether
in cash, goods or services, to any persons or entities whatsoever, in payment
for, or intended to induce or encourage, or which resulted in or may have
resulted in or had the effect of inducing, obtaining, encouraging or continuing
the referral of persons or entities as customers for the Buyer Geripsych
Business, or inducing, obtaining, encouraging or extending any contractual
relationship, written or oral with respect to the Buyer Geripsych Business, in
violation of any law; nor has the Buyer or Buyer Parent or any officer,
director or employee, member or agent with actual authority thereof (i) entered
into any arrangement, written or oral, under or pursuant to which bribes,
kickbacks, rebates, payoffs or other forms of illegal payments or remuneration
have been or will be made, provided for, or offered, either directly or
indirectly with respect to the Buyer
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Geripsych Business through agents, brokers, distributors, dealers or other
intermediaries, or (ii) made any illegal contribution of monies, services or
property to any political party, candidate or elected official for any purpose.
5. COVENANTS OF SELLERS
From the Document Closing to the Closing, Sellers jointly and
severally agree to use commercially reasonable efforts:
(a) To conduct the Business in the ordinary course of
business and substantially in accordance with past practice, except for such
changes as are required by applicable laws and regulations, and in material
compliance with applicable law; and not to make any material change of the
Business's operational, marketing, pricing or purchasing policies.
(b) Except in the ordinary course of business, not to
sell, mortgage, pledge, encumber, assign, or dispose of any material portion of
the Assets except as permitted under the provisions of this Agreement.
(c) To maintain the books and records of the Business
generally consistent in all material respects with prior practice.
(d) Except in the ordinary course of business, not to
take any other action which would cause any of the representations and
warranties made in this Agreement by Sellers to be materially untrue or
incorrect in any adverse respect on and as of the Closing Date with the same
force and effect as if such representations and warranties had been made on and
as of the Closing Date.
(e) During the period from the date of this Agreement to
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the Closing Date, to give Buyer, its counsel, accountants, agents, employees
and other representatives ("Buyer's Representatives"), reasonable access upon
prior notice to the offices, records, files and books of account of Sellers for
the purpose of becoming familiar with all matters relating to the Business and
the Assets; provided, however, that such process shall be conducted in a manner
that does not unreasonably interfere with the normal operations, and customer
and employee relationships, of Sellers. At the request of Buyer, Sellers shall
furnish to Buyer further information reasonably relating to the matters set
forth in paragraph 3 hereof and the exhibits thereto and copies of all
documents referred to therein, as well as any and all other matters reasonably
relating to Sellers' operation of the Business. Sellers shall use their
reasonable best efforts to cause their personnel to assist Buyer in such
process. During such process, Buyer shall have the right to make copies (at
Buyer's cost) of such records, files and other materials as it may deem
advisable for its own use and the use of Buyer's Representatives, and shall
maintain the confidentiality thereof prior to and, with respect to copies not
related to the Business, subsequent to Closing. If this Agreement is not
consummated, Buyer and its representatives shall, upon request of Sellers,
return to Sellers all copies made by Buyer and its representatives of material
belonging to Sellers and shall destroy all such confidential information
contained in any document of Buyer.
(f) To maintain Sellers as corporations in good standing
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under the laws of their respective states of organization, and under the laws
of each other state in which they are qualified to do business.
(g) To use reasonable best efforts in good faith to take
or cause to be taken all action reasonably necessary or desirable under this
Agreement on Sellers' part as promptly as reasonably practicable, so as to
permit the consummation of the transactions contemplated hereby, and to
cooperate fully with the other parties hereto to that end.
(h) Unless approved in advance by Buyer, not to issue any
press release or written statement for general or public circulation relating
to the transactions contemplated hereby, except as required by law in the
reasonable opinion of Sellers' counsel. Sellers shall use good faith efforts
to obtain Buyer's approval of the text of any public report, statement or
release to be made on behalf of Sellers.
(i) In cooperation with Buyer as required, to commence
all reasonable action, provide all reasonable information, and execute all
documents reasonably required to obtain all applicable consents, approvals and
agreements of, and to give all notices to and make all filings with, any third
parties as may be necessary to consummate the transactions contemplated hereby
(provided that no consents for the transfer of the Facility Contracts shall be
required), by a date early enough to allow the transactions to be consummated
by the Document Closing and effective as of the Closing Date except as
otherwise agreed in writing by the parties hereto.
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(j) Except in the ordinary course of business, not to
terminate or waive any material rights under any Facility Contract.
6. COVENANTS OF BUYER
From the Document Closing to Closing, Buyer agrees to use
commercially reasonable efforts:
(a) Not to take any other action which would cause any of
the representations and warranties made in this Agreement by Buyer to be
materially untrue or incorrect in any respect on and as of the Closing Date
with the same force and effect as if such representations and warranties had
been made on and as of the Closing Date.
(b) To maintain Buyer as a corporation in good standing
under the laws of its state of organization, and under the laws of each other
state in which it is qualified to do business.
(c) To use reasonable best efforts in good faith to take
or cause to be taken all action reasonably necessary or desirable under this
Agreement on its part as promptly as reasonably practicable, so as to permit
the consummation of the transactions contemplated hereby, and to cooperate
fully with the other party hereto to that end.
(d) Unless approved in advance by Seller Parent, not to
issue any press release or written statement for general or public circulation
relating to the transactions contemplated hereby, except as required by law in
the reasonable opinion of Buyer's counsel. Buyer agrees to use good faith
efforts to obtain Sellers' approval of the text of any public report, statement
or release to
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be made on behalf of Buyer or Buyer Parent.
(e) In cooperation with Sellers as required, to commence
all reasonable action, provide all reasonable information, and execute all
documents reasonably required to obtain all applicable consents, approvals and
agreements of, and to give all notices and make all filings with, any third
parties as may be necessary to consummate the transactions contemplated hereby,
by a date early enough to allow the transactions to be consummated by the
Document Closing and effective as of the Closing Date except as otherwise
agreed in writing by the parties hereto.
(f) Not to take any other action which would cause any of
the representations and warranties made in this Agreement by Sellers to be
materially untrue or incorrect in any adverse respect on and as of the Closing
Date with the same force and effect as if such representations and warranties
had been made on and as of the Closing Date.
7. CONDITIONS TO OBLIGATIONS OF BUYER AND BUYER PARENT
The obligations of Buyer and Buyer Parent hereunder with
respect to the Document Closing are subject to the fulfillment, at or prior to
the Document Closing, of each of the following conditions, performance of any
or all of which may be waived in writing by Buyer Parent; together with the
delivery by Sellers of the documents required to be delivered by them pursuant
to the provisions of paragraph 10 hereinafter:
(a) The Sellers' Representations and Warranties contained
in this Agreement shall be true and correct in all
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material respects at the Document Closing as though the Sellers'
Representations and Warranties were made at such time. Sellers shall have
performed and complied with all agreements, covenants and conditions required
by this Agreement to be performed and complied with by them prior to or at the
Document Closing. Buyer's counsel shall have obtained, with respect to each
Seller, a Good Standing Certificate if such a document is issued by the
appropriate department of the applicable state of incorporation, dated as of a
day proximately before the Document Closing. Each Seller shall have delivered
a Certificate signed by its authorized officer certifying to the truth of such
Seller's representations and warranties and such Seller's performance and
compliance.
(b) There shall not have been any material adverse change
in the Business.
(c) No suit, action or other legal or administrative
proceeding shall have been instituted or threatened, or claim or demand made
against Buyer or Sellers before any court or other governmental body, seeking
to restrain or prohibit, or to obtain substantial damages with respect to, the
consummation of the transactions contemplated hereby, or which questions their
validity or legality, or which might materially and adversely affect the
Business.
(d) All proceedings to be taken and all documents to be
executed and delivered by Sellers in connection with the consummation of the
transactions contemplated hereby shall be reasonably satisfactory as to form
and substance to Buyer and its
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counsel.
(e) The Board of Directors and, if required by law or
contract, the shareholders of each Seller shall have ratified and approved the
execution and performance of this Agreement, and each Seller shall have
delivered to Buyer a true and correct copy of such resolutions, certified by
such Seller's Secretary or Assistant Secretary.
(f) All consents, approvals and waivers from governmental
authorities, if any, and other parties necessary to permit Sellers to transfer
the Assets to Buyer as contemplated hereby and to permit Buyer to operate the
Business after the Closing shall have been obtained, provided that nothing
herein shall be construed so as to require or make the Document Closing or
Closing conditional upon the Buyer having obtained the consent of the parties
to the Facility Contracts to the transactions contemplated hereby.
(g) The Boards of Directors of Buyer and Buyer Parent
shall have ratified and approved the execution and performance of this
Agreement, the Promissory Note, and the Xxxx of Sale and Assignment.
8. CONDITIONS TO OBLIGATIONS OF SELLERS
The obligations of Sellers hereunder with respect to the
Document Closing are subject to the fulfillment, on or prior to the Document
Closing, of each of the following conditions, performance of any or all of
which may be waived in writing by Sellers; together with the delivery by Buyer
and Buyer Parent of the
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documents required to be delivered by them pursuant to the provisions of
paragraph 10 hereinafter:
(a) The representations, warranties and covenants of
Buyer contained in this Agreement shall be true and correct in all material
respects at the Document Closing as though such representations, warranties and
covenants were made at such time. Buyer shall have performed and complied with
all agreements, covenants and conditions required by this Agreement to be
performed and complied with by Buyer prior to or at the Document Closing.
Buyer shall have delivered a Good Standing Certificate issued by the
appropriate department of its state of incorporation, dated as of a day
proximately before the Document Closing, as well as a certificate signed by its
President or Vice President certifying to the truth of such representations and
warranties and such performance and compliance.
(b) No suit, action or other legal or administrative
proceeding shall have been instituted or threatened, or claim or demand made
against Buyer or Sellers before any court or other governmental body, seeking
to restrain or prohibit, or to obtain substantial damages with respect to, the
consummation of the transactions contemplated hereby, or which questions their
validity or legality.
(c) All proceedings to be taken and all documents to be
executed and delivered by Buyer in connection with the consummation of the
transactions contemplated hereby shall be reasonably satisfactory as to form
and substance to Sellers and their counsel.
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(d) The Board of Directors and shareholder of Buyer and
the Board of Directors of Buyer Parent shall have ratified and approved the
execution and performance of this Agreement, and Buyer and shall have delivered
to Sellers a true and correct copy of each such resolution, certified by the
Secretary or Assistant Secretary of the applicable party.
(e) All consents, approvals and waivers from governmental
authorities, if any, and other parties necessary to permit Sellers to transfer
the Assets to Buyer as contemplated hereby shall have been obtained, provided
that nothing herein shall be construed so as to require or make the Document
Closing or Closing conditional upon the Buyer having obtained the consent of
the parties to the Facility Contracts to the transactions contemplated hereby.
(f) The Board of Directors and Shareholder of the Seller and
the Board of Directors of Seller Parent shall have ratified and approved the
execution and performance of this Agreement.
9. PROVISIONS FOR INDEMNIFICATION
(a) Sellers hereby jointly and severally agree to
indemnify Buyer and Buyer Parent and save and hold them harmless from, against,
for and in respect of any and all damages, losses, obligations, liabilities,
costs and expenses incident to any suit, action, investigation, claim or
proceeding, including, without limitation, interest, penalties, reasonable
attorneys' fees and reasonable amounts paid in defense and/or settlement of any
of the foregoing (collectively, "Buyers' Damages"), suffered, sustained,
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incurred or required to be paid by Buyer or Buyer Parent by reason of, or in
connection with, or arising out of:
(i) Any breach of any warranty or
representation made by Sellers in this Agreement or any Exhibit hereto or in
any certificate or document delivered pursuant to this Agreement;
(ii) Any loss or damage resulting to Buyer or
Buyer Parent by reason of any claim, debt, liability or obligation of Sellers,
except for liabilities or obligations of Sellers expressly assumed by Buyer
pursuant to the provisions of subparagraph 1(c) of this Agreement; and
(iii) All liabilities and obligations,
fixed or contingent, known or unknown, actual or alleged, asserted against,
imposed upon or incurred by Buyer or Buyer Parent as a proximate result of or
in connection with any act, failure to act, misconduct, unlawful act,
dereliction of duty or negligence on the part of any Seller relating to such
Seller's ownership and/or operation of the Business and/or Assets on or prior
to the Closing Date.
Without restricting the generality of the foregoing, Sellers
hereby agree to indemnify Buyer and Buyer Parent and save and hold them
harmless from, against, for and in respect of any and all Buyers' Damages
arising if any disallowance or demand for refund by a third party payor or
patient with respect to a billing for services rendered prior to the Closing
results in a setoff by such payor or patient against a billing for services
rendered by Buyer after the Closing.
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(b) Buyer hereby agrees to indemnify Sellers and save and
hold them harmless from, against, for and in respect of any and all damages,
losses, obligations, liabilities, costs and expenses incident to any suit,
action, investigation, claim or proceeding, including, without limitation,
interest, penalties, reasonable attorneys' fees and reasonable amounts paid in
defense and/or settlement of any of the foregoing (collectively, "Sellers'
Damages") suffered, sustained, incurred or required to be paid by Sellers by
reason of, or in connection with, or arising out of:
(i) Any breach of any warranty or
representation made by Buyer in this Agreement or any Exhibit hereto or in any
certificate or document delivered pursuant to this Agreement;
(ii) Any loss or damages resulting to Sellers
by reason of any claim, debt, liability or obligation of Buyer or Buyer Parent
for the liabilities and obligations of Sellers expressly assumed by Buyer
pursuant to the provisions of subparagraph 1(c) of this Agreement;
(iii) All liabilities and obligations,
fixed or contingent, known or unknown, actual or alleged, asserted against,
imposed upon or incurred by Sellers as a proximate result of or in connection
with any act, failure to act, misconduct, unlawful act, dereliction of duty or
negligence on the part of Buyer or Buyer Parent relating to the Buyer's
ownership and/or operation of the Business and the Assets on and after the
Closing Date; and
(iv) All liabilities and obligations
resulting to Sellers as a result of Buyer's use of the name "MHM Bay Colony".
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(c) Any party, whether Buyer or Seller, claiming a right
to indemnification under the provisions of this paragraph 9 (hereinafter, the
"Indemnitee") shall give written notice as promptly as practicable (and in any
event, within ten (10) days after receipt of notice or service of any citation,
Summons, Complaint or lawsuit) to the other parties of each claim for
indemnification hereunder, specifying the amount and nature of the claim, and
of any matter which, in the opinion of the claiming party, is likely to give
rise to an indemnification claim. Notwithstanding the foregoing, the failure
to give timely notice shall not affect rights to indemnification hereunder,
except to the extent that the party or parties against whom such indemnity is
sought to be recovered (hereinafter, the "Indemnitor") shall demonstrate damage
caused by such failure. Indemnitor shall have the right to undertake the
defense of any such matter at Indemnitor's sole cost and expense, and through
legal counsel reasonably acceptable to Indemnitee, provided that Indemnitor
proceeds in good faith, expeditiously and diligently. No final determination
shall be made pursuant to subparagraph 9(d) below while such defense is still
being made until the earlier of (x) the resolution of such claim by Indemnitor
with the claimant, or (y) the termination of the defense by Indemnitor against
such claim or the failure of Indemnitor to prosecute such defense in good faith
and in an expeditious and diligent manner. Indemnitee, at its option and at its
sole cost and expense, shall have the right to participate in any defense
undertaken by Indemnitor, with legal
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counsel of its own selection. No settlement or compromise may be made by
Indemnitor without the prior written consent of Indemnitee unless (x) prior to
such settlement or compromise Indemnitor acknowledges in writing Indemnitor's
obligation to pay in full the amount of the settlement or compromise and all
associated expenses; (y) Indemnitee is furnished with security reasonably
satisfactory to Indemnitee that Indemnitor will in fact pay such amount and
expenses; and (z) if any part of the settlement or compromise establishes an
obligation other than payment and the making of customary releases and filings,
the Indemnitee is not required to fulfill any such obligation.
(d) Indemnitor shall pay to Indemnitee the amount of
established claims for indemnification within twenty (20) days after the
establishment thereof by final judgment thereon after all appeals have been
taken or applicable appeal periods have expired (the "Due Date") in cash or by
certified check. Any amounts not paid by Indemnitor on or before the Due Date
shall bear interest from the Due Date thereof (if and when Indemnitee pays
same) until the date paid at a rate equal to the prime rate of interest as
published in the Wall Street Journal under "Money Rates" from time to time or,
if such a rate is no longer published by the Wall Street Journal, the rate most
comparable to the prime rate.
(e) The indemnifications provided in this paragraph 9
shall survive Closing, provided that any claim for indemnification hereunder
shall be made no later than two (2) years after Closing.
(f) Notwithstanding anything to the contrary contained
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herein, no indemnity shall be payable by Buyer or Sellers hereunder with
respect to claims until the amount of all claims of the Indemnitee pursuant to
this paragraph 9 shall exceed $25,000.00 in the aggregate and any indemnity
payable hereunder with respect to such claims shall be limited to the excess of
the amount of all claims over $25,000, provided that such indemnity shall be
payable only in respect of claims of $5,000 or more. Notwithstanding anything
to the contrary contained herein, the aggregate maximum indemnity obligation
payable by Sellers shall in no event exceed the aggregate amounts paid to
Sellers by the Buyer and Buyer Parent under this Agreement; provided, however,
that in the event that Buyer does not use "Bay Colony" in its name, and only in
such event, the foregoing maximum shall be increased by $300,000 only with
respect to any indemnity obligation payable by Sellers due to a breach of
paragraphs 3(f) (but only with respect to a claim based on an action, suit,
litigation, claim, or investigation by a governmental entity or an order,
judgment, decree, or obligation obtained by a governmental entity), 3(h), and
3(k) asserted prior to the first anniversary of the Closing Date.
10. CLOSING
The Document Closing shall take place on November 22, 1996
(the "Document Closing") and at such time and according to such modalities as
shall be agreed upon in writing by Counsel for Seller and Buyer, said time
being of the essence. All proceedings to be taken and all documents to be
executed and delivered by all parties at the Document Closing shall be deemed
to have been taken
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and executed simultaneously, and no proceedings shall be deemed taken nor any
documents executed or delivered, until all have been taken, executed and
delivered. At the Document Closing:
(a) Sellers shall deliver or cause to be delivered to
Buyer:
(i) A Xxxx of Sale and Assignment,
substantially in the form attached hereto as EXHIBIT 10(a)(i), transferring to
Buyer good and marketable title to the Assets, to be effective as of December
1, 1996 (the "Closing Date" or "Closing");
(ii) the certificates of each Seller
described in subparagraph 7(a);
(iii) the Secretaries' certifications of
corporate resolutions described in subparagraph 7(e); and
(iv) the Opinion of Counsel described in
paragraph 11.
(b) Buyer shall deliver to Sellers;
(i) One Hundred and Fifty Thousand Dollars
($150,000.00), by wire transfer of immediately available funds;
(ii) the Promissory Note to be issued to
Sellers pursuant to paragraph 2(a)(ii) hereof;
(iii) the certificate of Good Standing of
Buyer described in subparagraph 8(a);
(iv) the certificate of Buyer described in
subparagraph 8(a);
(v) the Secretarys' certifications of
corporate resolutions described in subparagraph 8(d); and
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(vi) the Opinion of Counsel described in
paragraph 12.
11. OPINION OF COUNSEL FOR SELLERS
Sellers shall deliver to Buyer and Buyer Parent at the
Document Closing an opinion of Seller Parent's General Counsel, in form and
substance reasonably acceptable to Buyer's counsel, dated as of the date of the
Document Closing, addressed to Buyer and Buyer Parent, to the effect that:
(a) Each Seller is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation,
with full corporate power to carry on its business as it is being conducted.
(b) The execution, delivery and performance of this
Agreement and all documents and agreements required to be executed by Sellers
by this Agreement have been duly authorized and approved by all necessary
corporate and other required action, and neither the execution, delivery or
performance of, or consummation of the transactions contemplated by, this
Agreement by Sellers require any further actions or authorizations. This
Agreement and all such documents and agreements delivered pursuant to this
Agreement have been duly executed and delivered by Sellers, require no further
actions or authorizations, and constitute their respective legal, valid and
binding obligations, enforceable in accordance with their respective terms,
except as the enforceability of all such documents and agreements may be
limited by bankruptcy, insolvency, or other similar laws affecting the
enforcement of creditors'
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rights generally, and further except to the extent that the enforceability of
such obligations is subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
12. OPINION OF COUNSEL FOR BUYER
Buyer shall deliver to Sellers at the Document Closing an
opinion of Simon, Xxxxxxxx & Xxxxxx, Chartered, counsel for Buyer and Buyer
Parent, in form and substance reasonably acceptable to Seller's counsel, dated
as of the date of the Document Closing, addressed to Sellers, to the effect
that:
(a) Each of Buyer and Buyer Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power to carry on its business as it is being
conducted.
(b) The execution, delivery and performance of this
Agreement and all documents and agreements required to be executed by Buyer and
Buyer Parent by this Agreement have been duly authorized and approved by all
necessary corporate and other required action, and neither the execution,
delivery or performance of, or consummation of the transactions contemplated
by, this Agreement by Buyer and Buyer Parent require any further actions or
authorizations. This Agreement and all such documents and agreements delivered
pursuant to this Agreement have been duly executed and delivered by Buyer and
Buyer Parent, require no further actions or authorizations, and constitute
their respective legal, valid and binding obligations, enforceable in
accordance
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with their respective terms, except as the enforceability of all such documents
and agreements may be limited by bankruptcy, insolvency, or other similar laws
affecting the enforcement of creditors' rights generally, and further except to
the extent that the enforceability of such obligations is subject to general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
13. RESTRICTIVE COVENANT
(a) The parties understand and agree that it is the
intention of Buyer to expand markets and marketing activities, utilizing the
Assets, beyond those engaged in by Sellers; and further that such operations
are intended in the future to be throughout the Commonwealth of Massachusetts.
Therefore, Sellers agree that for a period of three (3) years from and after
Closing hereunder, no Sellers will, directly or indirectly, within the
Commonwealth of Massachusetts, carry on or engage in, whether by owning an
interest in, leasing, managing, operating, providing services to, or otherwise,
any business which shall provide mobile professional geripsych services to
residents of or geripsych management services to, skilled nursing facilities,
adult day care centers, and assisted living facilities or counseling services
to, or management of counseling services for, residents' families in any of the
foregoing facilities (which counseling services are currently billed under
Medicare Procedure Codes 90846 and 90847), or any similar business with respect
to residents of such facilities.
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(b) Sellers acknowledge that the restrictions contained
in subparagraph 13(a), in view of the nature of the business activities in
which Buyer intends to utilize the Assets, are reasonable and necessary in
order to protect the legitimate interests of Buyer, and that any violation
thereof would result in irreparable injuries to Buyer. Sellers therefore
acknowledges that in the event of a breach or threatened breach of the
provisions of subparagraph 13(a) by Seller, Buyer shall be entitled to obtain
from any court of competent jurisdiction, preliminary and permanent injunctive
relief restraining Sellers from any violation of the foregoing, provided that
Buyer shall not be entitled to an injunction contrary to the public health,
safety or welfare. If the period of time or geographic area specified should
be deemed unreasonable in any proceeding, then the period of time or geographic
area will be reduced by the elimination or reduction of a portion thereof so
that such restrictions may be enforced for such time and area as is adjudged to
be reasonable.
(c) Nothing herein shall be construed as prohibiting
Buyer from pursuing any other remedies available to it for such breach or
threatened breach, including recovery of damages and an equitable accounting of
all earnings, profits and other benefits arising from such violation, from
Seller.
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The parties hereto agree that the representations and
warranties contained in this Agreement and the Exhibits hereto, and in each
certificate, document or instrument delivered in connection
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herewith, shall survive the execution and delivery of this Agreement and the
Closing hereunder, regardless of any investigation made by any of the parties
hereto; and shall continue to exist as to each such representation and warranty
for a period of two (2) years from and after Closing.
15. FURTHER ASSURANCES
Subsequent to the Document Closing and Closing, Seller and
Buyer shall each, at the reasonable request of the other, furnish, execute and
deliver such documents, instruments, certificates, notices and other and
further assurances as counsel for the requesting party shall reasonably require
as necessary or desirable to effect complete consummation of this Agreement and
to carry out the transactions contemplated hereunder, or in connection with the
preparation and filing of reports (including tax returns and reviews thereof)
required or requested by governmental agencies, stock exchanges or other
regulatory bodies. Without restricting the generality of the foregoing, Buyer
shall cooperate with and assist Sellers in the collection of accounts
receivable of the Business and the Facility Contracts with respect to periods
prior to the Closing by having its employees respond to questions and requests
regarding such accounts receivable (for no consideration) to the extent such
cooperation and assistance becomes necessary as a result of the transactions
contemplated hereby and Sellers make available to Buyer such patient records as
Buyer may reasonably request in connection with post-closing provision of
services to patients. If Buyer or either Seller
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receives funds to which the other party is entitled, such party shall promptly
transfer such funds to such other party.
16. TERMINATION
This Agreement may be terminated by written notice from either
Buyer or Sellers to the other party if the Document Closing has not occurred on
or before November 22, 1996, without further liability of either party to the
other, except with respect to the confidentiality of materials delivered by
each party to the other.
17. NOTICES
(a) Each notice, demand, request, consent, report,
approval or communication ("Notice") which is or may be required to be given by
any party to any other party in connection with this Agreement and the
transactions contemplated hereby, shall be in writing, and given by telecopy,
personal delivery, recognized overnight courier service, receipted delivery
service, or by certified mail, return receipt requested, prepaid and properly
addressed to the party to be served as shown in subparagraph 17(b) below.
(b) Notices shall be effective on the date sent via
telecopy, the date delivered personally or by receipted delivery service or by
recognized overnight courier service, or three (3) days after the date mailed:
If to Sellers: c/o Xx. Xxxxxxx X. Xxxxxxxx
President
Liberty Management Group, Inc.
21 Xxxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Fax No. (000) 000-0000
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In each case,
with copies to: Liberty Management Group, Inc.
21 Xxxxxx Xxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Fax No. (000) 000-0000
Attn: General Counsel
If to Buyer
or Buyer Parent: Xx. Xxxxxxx X. Xxxxxxx
President
MHM Services, Inc.
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Fax No. (000) 000-0000
In each case,
with copies to: Xxxxxx X. Xxxxxxxx, Esq.
Simon, Xxxxxxxx & Xxxxxx,
Chartered
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000 Xxxx
Xxxxxxxxxx, X.X. 00000-0000
Fax No. (000) 000-0000
(c) Each party may designate by Notice to the others in
writing, given in the foregoing manner, a new address to which any Notice may
thereafter be so given, served or sent.
18. BROKER
No broker's or finder's fee, expense, commission or other form
of compensation (collectively, "Fee") is due or payable from or by Buyer or
Sellers; nor has any such Fee been earned by any third party on behalf of any
of the foregoing in connection with the negotiation and execution of this
Agreement, or in any other manner affecting or involving the Business, or the
consummation of any transaction contemplated hereby, or in connection with any
proposed sale of the Business or any of the Assets, or any restructuring or
merger or similar transaction involving Sellers.
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Sellers agree to indemnify and save Buyer harmless from and against any and all
claims or demands for Fee by or from any person or persons whatsoever, based on
any arrangement made by Sellers. Buyer agrees to indemnify and save Sellers
harmless from and against any and all claims or demands for Fee by or from any
person or persons whatsoever, based on any arrangement made by Buyer.
19. EXPENSES
Whether or not the transactions contemplated hereby are
consummated, Sellers shall be solely responsible for the payment of, and shall
pay, the fees, expenses, commissions or other forms of compensation
(collectively, "Expenses") due or payable to, or earned by, attorneys,
accountants, bankers investment bankers, consultants, analysts and advisors
(collectively, "Advisors") selected or retained by Sellers, and Buyer shall be
solely responsible for the payment of, and shall pay, the Expenses of Advisors
selected or retained by Buyer, in connection with the negotiation,
authorization, preparation, execution and performance of this Agreement, and
the consummation of the transactions contemplated hereby.
20. NO SOLICITATION
Unless and until this Agreement shall have been terminated
pursuant to the provisions of paragraph 16 hereof, Sellers shall not, and shall
use their best efforts to cause each of Seller's officers, directors and
affiliates not to:
(a) Solicit or initiate, directly or indirectly,
discussions or negotiations with any corporation, partnership,
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person or other entity or group concerning any sale of Assets or similar
transaction involving the Business (a "Takeover Proposal"); or
(b) Except as required by law, knowingly disclose,
directly or indirectly, any information not customarily disclosed to any person
(other than Buyer and its Advisors) concerning the business and properties of
Seller, knowingly afford to any other Person access to the properties, books or
records of Seller regarding the Business with respect to a possible Takeover
Proposal or otherwise knowingly assist or encourage any person (other than
Buyer, and its Advisors) in connection with a Takeover Proposal.
21. ENTIRE AGREEMENT
This Agreement, together with the Exhibits hereto, constitutes
and sets forth the entire agreement and understanding of the parties pertaining
to the subject matter hereof, and there are no other prior or contemporaneous
written or oral agreements, understandings, undertakings, negotiations,
promises, discussions, warranties or covenants not specifically referred to or
contained herein or attached hereto. No supplement, modification, termination
in whole or in part, or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision hereof (whether or not similar), nor shall any such waiver
constitute a continuing waiver unless otherwise expressly provided.
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22. EMPLOYEES
Buyer agrees that, upon Closing, Buyer or, at the option of
Buyer, its employee leasing service, Administaff Companies, Inc.
("Administaff") will employ those employees of the Business listed on EXHIBIT
22 on an at-will basis or upon such other basis as specifically negotiated upon
by the employee and Buyer. Sellers agree that on or prior to the Closing Date,
Xxxxx Xxxxxxxxxxx, Ph.D. may enter into an employment contract with Buyer or,
at the option of Buyer, Administaff, the terms of which shall be mutually
satisfactory to Buyer and Xx. Xxxxxxxxxxx, with annual compensation at least
equal to his current compensation and otherwise consistent with his employment
obligations with Seller Sub. All compensation payable by Buyer to Xx.
Xxxxxxxxxxx shall be considered a part of the expense in Aggregate Regional
Overhead Costs. Buyer agrees that, for a period of 90 days after the Closing
Date, Doctor Xxxxxxxxxxx shall be available to consult with the Sellers on the
closing, wind down or termination and transition of the Sellers' Connecticut
Business. Such services shall be provided to Sellers at no cost to Sellers
except for any out-of-pocket costs reasonably incurred by Buyer or Doctor
Xxxxxxxxxxx in connection with the rendering of such services by Doctor
Xxxxxxxxxxx (which will be promptly paid by Sellers to Buyer upon presentation
by Buyer of reasonable documentation of the incurrence of such costs) and
Doctor Xxxxxxxxxxx shall not be obligated to spend more than two days a week
rendering such services during such period.
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23. BINDING EFFECT
Subject to the provisions of paragraph 24 hereinafter, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto, their and each of their respective heirs, executors, administrators,
successors and permitted assigns, and no other person shall have or derive any
right, benefit or obligation hereunder.
24. ASSIGNMENT
Neither this Agreement nor any of the rights or obligations
hereunder may be assigned by either party without the prior written consent of
the other party; except that Buyer may, without such consent, assign any or all
such rights and such obligations to a wholly-owned subsidiary of Buyer, which
shall assume all obligations and liabilities hereunder so assigned, but without
releasing Buyer or Buyer Parent with respect to any such obligations or
liabilities except with the prior written consent of Sellers in their sole
discretion. Notwithstanding the foregoing, Seller Sub may on or after the
Document Closing Date assign any or all of its rights hereunder to Seller
Parent and any of the Sellers may negotiate the Promissory Note without the
consent of the Buyer.
25. HEADINGS
The headings or titles of the various paragraphs of this
Agreement are inserted merely for the purpose of convenience and do not
expressly or by implication or intention, limit, define, extend or affect the
meaning or interpretation of this Agreement or the specific terms or text of
the paragraph so designated.
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26. LAW GOVERNING
This Agreement shall be governed in all respects, whether as
to validity, construction, interpretation, capacity, performance or otherwise,
by the laws of the Commonwealth of Massachusetts. If any provision of this
Agreement shall be held invalid by a court with jurisdiction over the parties
to this Agreement, then and in that event, such provision shall be deleted from
the Agreement, which shall then be construed to give effect to the remaining
provisions thereof. Except as aforesaid, if any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, then and in that event, to the maximum extent permitted by law, such
invalidity, illegality or unenforceability shall not affect any other
provisions of this Agreement or any other such instrument. Nothing herein
shall be construed so as to modify or diminish Buyer's offset rights as
specifically refered to in paragraph 2(a)(ii).
27. COUNTERPARTS
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
28. CONSENTED ASSIGNMENT
Anything contained herein or therein to the contrary
notwithstanding, as between the Buyer and third parties, this Agreement and the
assignments to be granted by Sellers hereunder shall not constitute an
assignment or an agreement to assign any
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claim, right or contract if an attempted assignment thereof without the consent
of another party thereto would constitute a breach thereof or in any material
way affect the rights of Sellers thereunder, unless such consent is obtained.
If such consent is not obtained, or if an attempted assignment would be
ineffective or would materially affect Sellers' rights thereunder so that Buyer
would not in fact receive all such rights, Sellers shall cooperate in any
reasonable arrangement designed to provide the Buyer the benefits under any
such claim, right or contract, including, without limitation, enforcement of
any and all rights of Sellers against the other party or parties thereto
arising out of the breach or cancellation by such other parties or otherwise.
29. GUARANTY OF BUYER PARENT
For value received and hereby acknowledged, Buyer Parent
hereby unconditionally and absolutely guaranties the full and prompt payment
and performance, as and when due, of all indebtedness, obligations, agreements
and liabilities of every kind, nature and description of Buyer under this
Agreement and the Promissory Note (collectively, the "Obligations"). This
guaranty is a continuing guaranty of the full and punctual payment and
performance of the Obligations and not merely of their collectibility. Buyer
Parent hereby waives notice of acceptance hereof and reliance hereon, notice of
any action taken or omitted by Seller Sub or Seller Parent in reliance hereon,
suretyship defenses, presentment, demand, protest, notice of nonpayment, notice
of dishonor and notice of any default by the Buyer except as
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specifically set forth herein.
30. GUARANTY OF SELLER PARENT
For value received and hereby acknowledged, Seller Parent
hereby unconditionally and absolutely guaranties the full and prompt payment
and performance, as and when due, of all indebtedness, obligations, agreements
and liabilities of every kind, nature and description of Seller Sub under this
Agreement (collectively, the "Obligations"). This guaranty is a continuing
guaranty of the full and punctual payment and performance of the Obligations
and not merely of their collectibility. Seller Parent hereby waives notice of
acceptance hereof and reliance hereon, notice of any action taken or omitted by
Buyer or Buyer Parent in reliance hereon, suretyship defenses, presentment,
demand, protest, notice of nonpayment, notice of dishonor and notice of any
default by the Buyer except as specifically set forth herein.
31. CONSENT TO USE OF NAME. Without making any representation or
warranty with respect to the rights of any third party to object thereto or
that such name is exclusive or protected Sellers consent to Buyer doing
business in Massachusetts under the name "MHM Bay Colony" for no more than one
year after the Closing.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers and have affixed their
respective corporate seals, all on the day and year first above written.
Buyer:
-----
MHM Extended Care Services, Inc.
By: /s/ XXXXXXX X. XXXXXXX
-------------------------------
Xxxxxxx X. Xxxxxxx
President and Chief Executive
Officer
Buyer Parent:
------------
MHM Services, Inc.
By: /s/ XXXXXXX X. XXXXXXX
-------------------------------
Xxxxxxx X. Xxxxxxx
President and Chief Executive
Officer
Sellers:
-------
Liberty Management Group, Inc.
By: /s/ XXXXXX X. XXXX
--------------------------------
V.P.
Liberty Bay Colony Health Services, Inc.
By: /s/ XXXXXX X. XXXX
--------------------------------
V.P.
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PROMISSORY NOTE
$150,000.00 December 1, 1996
FOR VALUE RECEIVED, the undersigned MHM Extended Care Services, Inc.,
a Delaware corporation (the "Company"), promises to pay to the order of Liberty
Management Group, Inc., a Massachusetts corporation, and Liberty Bay Colony
Health Services, Inc., a Massachusetts corporation, jointly, (collectively, the
"Payees"), the principal sum of ONE HUNDRED FIFTY THOUSAND DOLLARS ($150,000.00)
in one (1) installment on December 1, 1999, together with interest on the unpaid
balance of this Note from time to time outstanding, at the rate hereinafter set
forth, from the date hereof until payment in full of all principal and interest
hereunder. This Note may be prepaid in whole or in part at any time and from
time to time, without premium or penalty.
1. Interest. Interest on the unpaid balance hereof shall be payable
quarterly in arrears on the 1st day of each March, June, September, and
December, commencing March 1, 1997 and shall be at the rate of nine percent (9%)
per annum (computed on the basis of a year of three hundred sixty (360) days for
the actual number of days elapsed). Any payment not made when due and the
entire unpaid balance after default or maturity shall accrue interest at the
rate of eighteen percent (18%) per annum, or, if less, the highest rate
allowable by applicable law.
2. Event of Default. Upon the occurrence of any of the following
events (each hereinafter called an "Event of Default"):
(a) The Company shall fail to pay any installment of principal
or interest hereunder when due and shall have failed to cure such nonpayment
within five business days after receiving notice from Payees of such failure to
pay; provided, however, that after Payees send such a notice as a result of the
failure of the Company to pay any installment when due, any failure by the
Company to pay when due any other installment due during the twelve months after
the date of the first such notice shall constitute an Event of Default.
(b) The Company shall fail to cure any breach of this Note
(other than a failure to pay any installment of principal or interest) within
thirty (30) days after receiving notice from Payees of such breach.
(c) The Company shall fail to pay promptly when due any
indemnity obligation under that certain Asset Purchase Agreement of even date by
and among the Company, MHM Services, Inc. ("MHM"), and Payees.
63
(d) The dissolution, termination of existence, insolvency,
business failure, cessation, suspension or termination of the active conduct of
the normal business activities of the Company or MHM; the service upon either
Payee of a writ or other court document in which such Payee is named as trustee
of the Company or MHM, which attachment remains undischarged for a period of 45
days; the calling of a meeting of creditors, appointment of a committee of
creditors or liquidating agents, or offering of a composition or extension to
creditors by, for or of the Company or MHM; the Company or MHM shall make any
assignment for the benefit of creditors, or enter into any composition, trust
mortgage or similar arrangement with its respective creditors; the Company or
MHM shall cease, be unable or admit in writing its inability to pay its
respective debts as they mature; or the commencement by or against the Company
or MHM of a case under the federal bankruptcy laws, as now or hereafter
constituted, or under any other applicable federal or state bankruptcy,
insolvency or other laws relating to relief for debtors, or the readjustment,
reorganization, composition or extension of debt; or
(e) The entry of a decree or order against, or consent by the
Company or MHM to the appointment of a receiver, liquidator, assignee,
custodian, trustee or sequestrator (or similar official) of the Company or MHM
or for any part of the property of the Company or MHM or the winding up or
liquidation of the affairs of either;
then, and in any such event, and at any time thereafter if any Event of Default
shall then be continuing, the principal of and accrued interest on this Note
shall, at Payees' option, forthwith become, due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby waived by the
Company; provided that, if an Event of Default specified in Section 2(d) shall
occur, the principal of, and accrued interest on, this Note shall automatically
and immediately become due and payable, without presentment, demand, protest or
notice of any kind, all of which are hereby waived by the Company.
3. Waivers. The Company hereby (a) waives all presentment, demand
for performance, notice of nonperformance (except to the extent expressly
required by the provisions hereof), protest, notice of protest and notice of
dishonor, and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note, (b) assents to any
extension or postponement of the time of payment or any other indulgence and/or
to the addition or release or any party or person primarily or secondarily
liable, (c) waives any requirement of diligence or promptness on the part of the
Payees in the enforcement of their rights under this Note, (d) waives all
notices of every kind which may be required to be given by any statute or rule
of law, (e) waived any valuation, stay, appraisement or redemption laws and (f)
waives any defense of any kind (other than payment) including
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all suretyship defenses which it may now or hereafter have with respect to its
liability under this Note.
4. Course of Dealing. No course of dealing between the parties
shall operate as a waiver of any of the parties' respective rights under this
Note. No delay or omission on the part of Payees in exercising any right under
this Note shall operate as a waiver of such right or any other right hereunder.
No amendment or waiver hereof shall be binding unless it is in writing and
signed by the parties.
5. Payments; Notices. All payments to the holder hereof shall be
made at the address set forth below or at such other address as the holder
hereof shall specify in writing to the company. Any notice or demand in
connection with this Note shall be deemed to be delivered if in writing
addressed as provided below (or at such other address as the addressee shall
have specified by notice actually received by the addressor) and if either (a)
actually delivered at such address; (b) telecopied to the party's telecopy
number set forth below or (c) in the case of a letter, (i) three business days
shall have elapsed after the same shall have been deposited in the United States
mail, postage prepaid and registered or certified or (ii) one day has elapsed
after the same shall have been delivered to Federal Express or other recognized
overnight courier for overnight delivery.
If to Payees, to them at the following address:
Liberty Management Group, Inc.
00 Xxxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: President
Telecopier Number: (000) 000-0000
If to the Company, to it at the following address:
MHM Extended Care Services, Inc.
0000 Xxxxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: President
Telecopier Number: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxxxxx, Esq.
Simon, Xxxxxxxx & Xxxxxx, Chartered
0000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000 Xxxx
Xxxxxxxxxx, X.X. 00000-0000
Telecopier Number: (000) 000-0000
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65
6. Costs. The Company hereby agrees to pay all reasonable expenses
of the holder hereof (including reasonable attorney fees and expenses) in
connection with the enforcement and collection of this Note.
7. Assignability; Governing Law. This Note shall bind and inure to
the benefit of the Company and Payees and their respective successors and
assigns, including as such successors and assigns of Payees any holder of this
Note, provided that the obligations of the Company hereunder may not be assigned
except with the prior written consent of the holder hereof. This Note shall be
governed by and construed in accordance with the laws (other than the conflict
of laws rules) of the Commonwealth of Massachusetts. The word "holder" as used
in this Note shall refer to Payees and all assignees, endorsees or transferees
of payees.
8. Limited Offset and Defenses. This Note is an absolute,
unconditional and fully negotiable promissory note without offset or defense of
any kind or nature except for an offset of $75,000 if the Sun Contract (as
defined below) was invalid in its entirety due to an act or omission of any of
the Payees prior to the date hereof other than the assignment of the Sun
Contract to, or purchase of the Sun Contract by, the Company. As used herein,
the "Sun Contract" shall mean the Geripsych Consulting Agreement dated as of
October 1, 1995 between the Payees, and Sun Healthcare Group, Inc. and Sunrise
Healthcare Corporation.
IN WITNESS WHEREOF, the undersigned Company has caused this Note
to be executed as an agreement under seal by its duly authorized officer as of
the date first above written.
WITNESS: MHM EXTENDED CARE SERVICES, INC.
By:
------------------------------------ ------------------------------------
Name:
Title:
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GUARANTY BY MHM SERVICES. INC.
For value received and hereby acknowledged, MHM Services, Inc. hereby
unconditionally and absolutely guaranties the full and prompt payment and
performance, as and when due, of all indebtedness, obligations, agreements and
liabilities of every kind, nature and description of the Company under this Note
(the "Obligations"). This guaranty is a continuing guaranty of the full and
punctual payment and performance of the Obligations and not merely of their
collectibility.
MHM Services, Inc. hereby waives notice of acceptance hereof and
reliance hereon, notice of any action taken or omitted by the Payees in reliance
hereon, suretyship defenses, presentment, demand, protest, notice of nonpayment,
notice of dishonor, protest of any dishonor, notice of protest, and giving
notice of any default by the Company except as specifically set forth herein.
MHM SERVICES, INC.
By:
--------------------------------------
Its:
5
