ASSET PURCHASE AGREEMENT
By and Among
RENAL CARE GROUP, INC.,
RENAL CARE GROUP OF THE SOUTHEAST, INC.,
DIALYSIS SERVICES OF FLORIDA, INC. - FORT XXXXXX BEACH,
DIALYSIS CORPORATION OF AMERICA, INC.,
DCA MEDICAL SERVICES, INC.,
DIALYSIS MEDICAL, INC.
AND
XXXXX X. XXXXX, M.D.
Dated as of October 31, 1997
TABLE OF CONTENTS
(This Table of Contents is not a part of the Agreement and is only for
convenience of reference.)
1 Definitions 1
2 Basic Transaction 6
2.1 Purchase and Sale of Assets 6
2.2 Purchase Price 6
2.3 Adjustment to Purchase Price 7
2.4 Assumption of Liabilities 7
2.5 The Closing 7
2.6 Allocation 8
3 Representations and Warranties of Sellers, DCA and Xx. Xxxxx 8
3.1 Ownership of Sellers' Stock 8
3.2 Authority and Capacity 8
3.3 Absence of Conflicting Agreements or Required Consents 8
3.4 Interested Transactions 9
3.5 Securities Representations 9
3.6 Organization, Authority and Capacity 9
3.7 Authorization and Validity 9
3.8 Absence of Conflicting Agreements or Required Consents 10
3.9 Governing Documents of Sellers 10
3.10 Predecessors 10
3.11 Financial Statements 10
3.12 Absence of Changes 10
3.13 No Undisclosed Liabilities 12
3.14 Litigation, Etc. 12
3.15 No Violation of Law 12
3.16 Real and Personal Property 13
3.17 Contracts and Commitments 14
3.18 Employment and Labor Matters 15
3.19 Employee Benefit Matters 16
3.20 Insurance Policies 16
3.21 Environmental Matters 17
3.22 Accounts Receivable and Payable 18
3.23 Taxes 18
3.24 Licenses, Authorizations and Provider Programs 19
3.25 Inspections and Investigations 20
3.26 Certain Relationships 20
3.27 Debt Instruments 21
3.28 Fraud and Abuse 21
Page
3.29 Rates and Reimbursement Policies 22
3.30 Broker's Fees 22
3.31 Schedules 22
3.32 Statements True and Correct and Full Disclosure 22
4 Representations and Warranties of RCG and RCGSE 22
4.1 Organization, Authority and Capacity 22
4.2 Authorization and Validity 22
4.3 Absence of Conflicting Agreements or Required Consents 23
4.4 Litigation and Claims 23
4.5 RCG Shares 23
4.6 Statements True and Correct 23
4.7 Broker's Fees 23
5 Pre-Closing Covenants 23
5.1 General 23
5.2 Notices and Consents 24
5.3 Operation of Business 24
5.4 Full Access 27
5.5 Notice of Developments 27
5.6 Exclusivity 27
5.7 Employment Matters 27
5.8 Liabilities 28
6 Post-Closing Covenants 28
6.1 General 28
6.2 Litigation Support 28
6.3 Post-Closing Liabilities 29
6.4 Confidentiality, Non-Competition and Non-Solicitation 29
6.5 Registration of and Adjustment to RCG Shares 30
7 Conditions to Obligation to Close of RCG and RCGSE 30
7.1 Representations and Warranties 30
7.2 Performance; Covenants 30
7.3 No Material Adverse Change 30
7.4 No Injunction, Etc. 31
7.5 Document Delivery 31
7.6 Medical Director Agreement 32
7.7 Necessary Consents and Approvals 32
7.8 Satisfactory Due Diligence 32
7.9 Securities Matters 32
Page
8 Conditions to Obligation to Close of Sellers, DCA and Xx. Xxxxx 32
8.1 Representations and Warranties 32
8.2 Performance; Covenants 32
8.3 No Injunction, Etc. 33
8.4 Document Delivery 33
8.5 Medical Director Agreement 34
9 Closing and Termination 34
9.1 Actions at the Closing 34
9.2 Termination of Agreement 34
9.3 Effect of Termination 34
10 Remedies for Breaches of this Agreement 34
10.1 Survival of Representations and Warranties 35
10.2 Joint Indemnification By Sellers, DCA and Xx. Xxxxx 35
10.3 Individual Indemnification By DCA and Xx. Xxxxx 35
10.4 Indemnification By RCG and RCGSE 35
10.5 Matters Involving Third Parties 36
10.7 Insurance 37
10.8 Indemnification Limit 37
11 Miscellaneous 37
11.1 Press Releases and Public Announcements 37
11.2 No Third-Party Beneficiaries 37
11.3 Entire Agreement 37
11.4 Succession and Assignment 37
11.5 Counterparts 37
11.6 Headings 37
11.7 Notices 38
11.8 Governing Law 38
11.9 Amendments and Waivers 39
11.10 Severability 39
11.11 Expenses 39
11.12 Costs 39
11.13 Incorporation of Exhibits and Schedules 39
ASSET PURCHASE AGREEMENT
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THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into this
the 31st day of October, 1997, by and among Renal Care Group, Inc., a
Delaware corporation ("RCG"), Renal Care Group of the Southeast, Inc.,
a Florida corporation ("RCGSE"), Dialysis Corporation of America, Inc.,
a Florida corporation ("DCA"), Dialysis Services of Florida, Inc. - Fort
Xxxxxx Beach, a Florida corporation ("DSF"), DCA Medical Services, Inc.,
a Florida corporation ("DCAMS"), Dialysis Medical, Inc., a Florida corpora-
tion ("DMI"), and Xxxxx X. Xxxxx, M.D. ("Xx. Xxxxx"). RCG, RCGSE, DCA,
DSF, DCAMS, DMI and Xx. Xxxxx are referred to collectively herein as the
"Parties".
B A C K G R O U N D I N F O R M A T I O N:
A. DCA and Xx. Xxxxx own all of the issued and outstanding stock of
DSF and DMI and DCA owns all of the issued and outstanding stock
of DCAMS.
B. DSF owns and operates an outpatient dialysis facility located in
Fort Xxxxxx Beach, Florida (the "Facility"). DMI operates a Method
2 home patient supply company and DCAMS, among other operations,
provides acute-care management services to Columbia Fort Xxxxxx
Beach Medical Center under the In-patient Agreement defined below.
C. RCGSE is a wholly-owned subsidiary of RCG.
D. This Agreement contemplates a transaction in which RCGSE will
purchase substantially all of the assets of DSF and DMI and the
In-patient Agreement from DCAMS in exchange for cash, shares of
RCG common stock and the assumption of certain specified
liabilities.
E. The Parties desire to set forth in writing the terms and
conditions under which said transaction will be consummated.
In consideration of the mutual covenants and agreements set forth
herein, and other good and valuable consideration, the receipt and suffi-
ciency of which are hereby acknowledged by the Parties, it is agreed as
follows:
1 Definitions.
"Acquired Assets" shall mean all of the assets and properties,
tangible and intangible, of and pertaining to or used or useful at or in
connection with the Facility, the Method 2 Supply Business and the
In-patient Agreement and in which Sellers have any right, title or
interest wherever located, whether known or unknown, and whether or not
appearing on Sellers' books and records as the same exists on the Closing
Date including, without limitation, all of Sellers' right, title and
interest in and to the following (except for the Excluded Assets):
(a) real property, leaseholds and subleaseholds therein, improve-
ments, fixtures and fittings thereon, and easements, rights-of-
way, and other appurtenants thereto;
(b) equipment, fixtures, office furnishings, tools and other tangible
personal property owned or leased by Sellers, including, but not
limited to, the items listed and identified in Schedule 1.1
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hereto;
(c) current and useable inventory of supplies, janitorial and office
supplies and other disposables and consumables on hand at or
under order by Sellers on the Closing Date;
(d) Sellers' rights, benefits and interests under all the contracts
and agreements, written or oral, relating to the operation of
the Facility including, without limitation, the Sellers'
Agreements and the In-patient Agreement;
(e) accounts, notes and other receivables of Sellers as the same
exist on the Closing Date, which accounts shall include all
uncollected patient accounts of Sellers on the Closing Date;
(f) transferable franchises, approvals, permits, licenses, orders,
registrations, certificates, variances, and similar rights
obtained from governments and governmental agencies;
(g) books, records, documents, files and other writings used in
connection with the operations of the Facility, the In-patient
Agreement and the Method 2 Supply Business including patient
lists and medical records;
(h) data processing programs, software programs, computer printouts,
data bases and hardware and related items used in the conduct of
the business of the Facility, the In-patient Agreement and the
Method 2 Supply Business and located at the Facility, including
accounting, invoices, auditing, and data processing bases and
programs along with such copies of the business records of the
Facility as is requested by RCGSE;
(i) intangible assets including goodwill, going concern value,
and all intellectual property used in connection with the opera-
tion of the Facility, the In-patient Agreement and the Method 2
Supply Business;
(j) rights, claims, deposits, refunds, rights of recovery, rights
of set off, rights of recoupment and causes of action held by
Sellers which have accrued as a result of the operation of the
Facility, the In-patient Agreement and the Method 2 Supply
Business; and
(k) all other assets and properties, tangible and intangible, of
and pertaining to or used or useful at and in connection with the
Facility, the Method 2 Supply Business and the In-patient
Agreement.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judg-
ments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
reasonable amounts paid in settlement, liabilities, obligations, taxes,
liens, losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses.
"Assumed Liabilities" means and includes liabilities and obligations
arising from and after the Closing Date under any of the leases,
contracts, commitments and agreements included in the definition of
Acquired Assets, and liabilities specifically identified on Schedule
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1.2 hereto.
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"Closing" has the meaning set forth in Section 2.5.
"Closing Date" has the meaning set forth in Section 2.5 below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Data" has the meaning set forth in Section 6.4(b).
"DCA" has the meaning set forth in the preface above.
"DCAMS" has the meaning set forth in the preface above.
"DCAMS Purchase Price" has the meaning set forth in Section 2.2(b)
below.
"Disclosure Schedule" has the meaning set forth in Section 3.
"DMI" has the meaning set forth in the preface above.
"DMI Purchase Price" has the meaning set forth in Section 2.2(c) below.
"Xx. Xxxxx" has the meaning set forth in the preface above.
"DSF" has the meaning set forth in the preface above.
"DSF Purchase Price" has the meaning set forth in Section 2.2(a) below.
"Employee Benefit Plan" has the meaning set forth in Section 3.19.
"Environmental Condition" has the meaning set forth in Section 3.21.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Excluded Assets" means all of Sellers' right, title and interest in
their assets and properties, tangible and intangible, not pertaining to
or used or useful at or in connection with the Facility, the Method 2
Supply Business and the In-patient Agreement and the following: (i)
Sellers' corporate charters, taxpayer and other identification numbers,
seals, minute books, stock transfer books, blank stock certificates, and
other documents relating to the organization, maintenance, and existence
of Sellers as corporations, (ii) all provider and billing numbers; (iii)
all insurance policies of Sellers and claims arising thereunder and all
prepaid expenses on malpractice, property damage, flood and liability
insurance premiums; (iv) the inventories, cash and accounts receivable
disposed of, canceled, expended or collected by Sellers after the date
hereof and prior to the Closing in the Ordinary Course of Business;
(v) Sellers' Employee Benefit Plans and any liabilities related thereto;
(vi) Sellers' cash on hand as of the Closing Date and prepaid expenses;
(vii) Sellers' third-party provider agreements; (vii) claims for xxxx-
bursement from Florida Medicare; (viii) intercompany indebtedness;
(ix) claims for tax refunds; (x) vendor volume discounts earned but not
received by DCA and Sellers as of the Closing Date; and (xi) any of the
specific assets identified on Schedule 1.3 hereto.
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"Facility" means the outpatient renal dialysis facility and related
operating assets of Sellers located at 000 Xxxxxxx Xxxxx Xxxxxxx XX,
Number 00, Xxxx Xxxxxx Xxxxx, Xxxxxxx.
"Financial Statement" shall mean any of the financial statements
referred to in Section 3.11 below.
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"Government Programs" has the meaning set forth in Section 3.24(a).
"Indemnified Party" has the meaning set forth in Section 10.5(a).
"Indemnifying Party" has the meaning set forth in Section 10.5(a).
"In-patient Agreement" means the agreement between DCAMS and Columbia
Fort Xxxxxx Beach Medical Center for in-patient management services.
"Knowledge" of a particular fact or other matter for an individual
means that the individual is actually aware of such fact or other matter
or a prudent individual could be expected to discover or otherwise become
aware of such fact or other matter in the course of conducting a reason-
ably comprehensive investigation concerning the existence of such fact or
other matter. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has served within the past twelve (12) months, as a
director, officer or other person in a managerial role for such Person
has, or at any time had, Knowledge of such fact or other matter.
"Medical Director Agreement" means the Medical Director Agreement
between Practice and RCG of even date herewith, the form of which is
attached hereto as Exhibit A.
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"Method 2 Supply Business" means the Method 2 patients medical
supply business operated by DMI.
"RCGSE" has the meaning set forth in the preface above.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to
quantity and frequency).
"Party" has the meaning set forth in the preface above.
"Person" means an individual, a limited liability company, a partner-
ship, a corporation, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, or a governmental entity
(or any department, agency, or political subdivision thereof).
"Practice" means Nephrology Associates of Northwest Florida, P.A.,
a Florida professional corporation.
"Private Programs" has the meaning set forth in Section 3.24(a).
"Purchase Price Adjustment" has the meaning set forth in Section 2.3
below.
"RCG" has the meaning set forth in the preface above.
"RCG Shares" means the shares of RCG Stock to be issued as part of
the DSF Purchase Price.
"RCG Stock" means shares of the voting common stock of RCG.
"Real Property" means the real property leased or owned by DSF and
DMI as provided in Section 3.16(b).
"Remuneration" has the meaning set forth in Section 3.26(a).
"Restricted Business" shall mean (i) owning or operating an out-
patient renal dialysis center, unit or facility; (ii) providing dialysis
supplies or services to any other outpatient renal dialysis center, unit
or facility or any home dialysis patient, including the provision of
pharmaceuticals or laboratory services; and (iii) providing acute dialysis
care in-patient management services.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest.
"Sellers" means DSF, DCAMS and DMI.
"Sellers Agreements" has the meaning set forth in Section 3.17.
"Sellers' Business" shall mean (i) owning and operating the Facility;
(ii) owning and operating the Method 2 Supply Business; and (iii) providing
acute dialysis care in-patient management services through the In-patient
Agreement.
"Taxes" means any federal, state, county, local, foreign or other tax,
charge, imposition or other levy (including interest or penalties thereon)
including without limitation, income taxes, estimated taxes, excise taxes,
sales taxes, use taxes, gross receipts taxes, franchise taxes, taxes on
earnings and profits, employment and payroll related taxes, property
taxes, real property transfer taxes, Federal Insurance Contributions Act
taxes, taxes on value added and import duties, whether or not measured in
whole or in part by net income, imposed by the United States or any
political subdivision thereof or by any jurisdiction other than the
United States or any political subdivision thereof.
"Third Party Claim" has the meaning set forth in Section 10.5(a).
"Transaction Documents" means this Agreement and each other document
referenced herein to be executed and delivered at or prior to the Closing
by a Party.
"Transactions" means all of the transactions contemplated by the
Transaction Documents.
2 Basic Transaction.
2.1 Purchase and Sale of Assets. On and subject to the terms and
conditions of this Agreement, RCGSE agrees to purchase from Sellers and
Sellers agree to sell, transfer, convey, and deliver to RCGSE all of the
Acquired Assets at Closing for the consideration specified in Section 2.2
below.
2.2 Purchase Price.
(a) As the purchase price for DSF's interest in the Acquired Assets,
RCGSE agrees to pay to DSF Four Million Four Hundred Sixty-Five
Thousand Dollars ($4,465,000) (the "DSF Purchase Price") by
delivering to DSF at Closing: (i) Three Million Nine Hundred
Eighty-Five Thousand Dollars ($3,985,000) in cash by wire
transfer and (ii) Four Hundred Eighty Thousand Dollars ($480,000)
of RCG Stock (the "RCG Shares"). The number of RCG Shares shall
be determined by dividing Four Hundred Eighty Thousand Dollars
($480,000) by the ten day average closing price of RCG Stock
determined five business days prior to Closing. The RCG Shares
will initially not be
registered under either the Securities Act or any state securi-
ties laws and, accordingly, will be restricted stock within the
meaning of both federal and state securities laws and subject
to a restrictive legend. Notwithstanding the forgoing, RCG agrees
to transfer the RCG Shares to DCA or Xx. Xxxxx as directed by DSF.
RCG will register the RCG Shares within one year following the
Closing Date.
(b) As the purchase price DCAMS's interest in the Acquired Assets,
RCGSE agrees to pay to DCAMS One Hundred Thousand Dollars
($100,000) (the "DCAMS Purchase Price") in cash by wire transfer
at Closing.
(c) As the purchase price for DMI's interest in the Acquired Assets,
RCGSE agrees to pay to DMI Five Hundred Thousand Dollars
($500,000) (the "DMI Purchase Price") at Closing in cash
by wire transfer.
2.3 Adjustment to Purchase Price. In the event that the aggregate
sales proceeds (prior to commission and transaction costs) from the sale
of the RCG Shares is less than Four Hundred Eighty Thousand Dollars
($480,000) and such sale is made through a broker/dealer and either (i)
occurs within thirty (30) days of their registration as provided in
Section 6.5 below or (ii) if the RCG Shares are not registered by RCG
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and the sale occurs pursuant to an exemption from registration under
the Securities Act and applicable state securities laws and regulations,
then RCGSE will pay to DSF, DCA or Xx. Xxxxx, as applicable, as additional
DSF Purchase Price, the difference in cash or registered RCG Stock, as
determined by RCGSE (the "Purchase Price Adjustment"). If RCGSE deter-
mines to pay any part of the Purchase Price Adjustment in RCG Stock, then
the number of shares of RCG Stock delivered as the Purchase Price Adjust-
ment shall be determined by applying the per share price received by DSF,
DCA or Xx. Xxxxx, as applicable, in the sale of the RCG Shares. If the
RCG Shares are not sold within thirty (30) days of their registration,
then there shall be no adjustment to the DSF Purchase Price or the RCG
Shares upon their sale. Provided, however, if the proposed sales price
of the RCG Shares is less than Four Hundred Eighty Thousand Dollars
($480,000), then the holder of the RCG Shares shall notify RCG of its
or his intent to sell the RCG Shares and the price for such shares and
RCG shall have an option to elect to coordinate a private placement of
the RCG Shares or to purchase such RCG Shares for a price of Four Hundred
Eighty Thousand Dollars ($480,000) for two business days following the
delivery of such notice.
2.4 Assumption of Liabilities. On and subject to the terms and
conditions of this Agreement, RCGSE and RCG agree to assume and become
responsible for all of the Assumed Liabilities at the Closing. RCGSE and
RCG will not assume or have any responsibility, with respect to any other
obligation or liability of Sellers.
2.5 The Closing. If all the conditions to the Closing set forth in
Sections 7 and 8 shall have been fulfilled or waived in accordance here-
with and this Agreement shall not have been terminated as provided in
Section 9.2, the Parties shall close the Transactions (the "Closing").
The Closing shall take place at the offices of Baker, Donelson, Bearman
& Xxxxxxxx, P.C., in
Nashville, Tennessee, commencing at 9:00 a.m. local time on October 31,
1997, or such other date as the Parties may mutually determine (the
"Closing Date").
2.6 Allocation. Within thirty days following Closing, RCG will submit
to Sellers for their approval an allocation of the Purchase Price (and all
other capitalizable costs) among the Acquired Assets. The Parties will
report the allocation for all purposes (including financial accounting
and tax purposes) in accordance with the agreed upon allocation.
3 Representations and Warranties of Sellers, DCA and Xx. Xxxxx. Each
of Sellers, DCA, and Xx. Xxxxx represents, warrants and covenants to RCG
and RCGSE that the statements contained in this Section 3 as they relate
to each of them and not to any other Party are correct and complete as of
the date of this Agreement and will be correct and complete as of the
Closing Date except as set forth in the disclosure schedule accompanying
this Agreement and initialed by the Parties (the "Disclosure Schedule").
The Disclosure Schedule is arranged in paragraphs corresponding to the
lettered and numbered paragraphs contained in this Section 3. Disclosure
of a matter in regards to one paragraph shall not constitute disclosure
regarding any other paragraphs of this Section 3. To be effective,
separate disclosure of such matter must be made for each paragraph for
which disclosure of such matter is intended.
3.1 Ownership of Sellers' Stock. DCA and/or Xx. Xxxxx are the owners
of all right, title and interest (legal, record and beneficial) in and to
all of the issued and outstanding shares of stock of Sellers. DCA owns
80% of the stock of DSF and DMI and owns 100% of the stock of DCAMS. Xx.
Xxxxx owns 20% of the stock of DSF and DMI.
3.2 Authority and Capacity. DCA and Xx. Xxxxx have the full legal
right, authority and capacity necessary to execute, deliver and perform
their obligations under the Transaction Documents to be executed and
delivered by each of them.
3.3 Absence of Conflicting Agreements or Required Consents. The
execution, delivery and performance by DCA and Xx. Xxxxx of and under the
Transaction Documents to be executed and delivered by each of them do not
require the consent of or notice to any governmental or regulatory au-
thority or any other third party and will not conflict with or result in
a violation of any law, ordinance, regulation or ruling. The execution,
delivery and performance by DCA and Xx. Xxxxx of and under the Transaction
Documents to be executed and delivered by each of them: (i) will not
conflict with or result in a violation of any judgment, order or injunc-
tion of any court or governmental instrumentality to which either is
subject or by which either is bound; (ii) will not conflict with, con-
stitute grounds for termination of, result in a breach of, constitute a
default under, require any notice under, or accelerate or permit the
acceleration of any performance required by the terms of any agreement,
instrument, license or permit necessary to the Transaction; (iii) will
not create any Security Interest or restriction upon the Acquired Assets;
or (iv) will not conflict with any provision of DCA's charter, bylaws or
other organizational documents.
3.4 Interested Transactions. DCA is not an affiliate, employee,
consultant, partner, principal, director or owner of, and has no other
direct or indirect interest in or affiliation with, any Person that is
engaged in a business that competes with or is similar to Sellers'
Business and located within a fifty (50) mile radius of the Facility.
Xx. Xxxxx is not an affiliate, employee, consultant, partner, principal,
director or owner of, and has no other direct or indirect interest in or
affiliation with, any Person that is engaged in a business that competes
with or is similar to Sellers' Business.
3.5 Securities Representations.
(a) DSF is acquiring the RCG Shares for its own account and not with
a view to or for sale in connection with any public distribution
thereof within the meaning of the Securities Act until such time
as the RCG Shares are registered as provided in Section 6.5 or a
sale pursuant to an exemption from registration is available,
other than a liquidating distribution or sale of the RCG Shares
to DCA or Xx. Xxxxx. In such event, each of DCA and Xx. Xxxxx
represent and warrant that it or he will be acquiring the RCG
Shares for its or his own account and not with a view to or for
the sale in connection with any public distribution thereof within
the meaning of the Securities Act until such time as the RCG
Shares are registered as provided in Section 6.5 or an exemption
from registration is available.
(b) DSF, DCA and Xx. Xxxxx (i) acknowledge that the RCG Shares have
not been registered under any securities laws and cannot be resold
without registration thereunder or exemption therefrom, (ii) agree
not to transfer all or any of the RCG Shares received by them
unless such transfer has been registered or is exempt from regis-
tration under applicable securities laws and (iii) acknowledge
that the certificate(s) representing the RCG Shares shall bear
a prominent legend with respect to the restrictions on transfer
under applicable securities laws until such time as they are
registered; provided, however, that nothing herein will limit
the Purchase Price Adjustment or the registration requirement
under Section 6.5.
3.6 Organization, Authority and Capacity. Each of Sellers is a
corporation duly organized, validly existing, and in good standing under
the laws of the state where they were organized, and has the full corpo-
rate power and authority necessary to (i) execute, deliver and perform
its obligations under the Transaction Documents to be executed and
delivered by it and (ii) carry on its business as it has been and is now
being conducted and to own, operate and lease the properties and assets
which it now owns, operates or leases. Each of Sellers is duly qualified
to do business and is in good standing in Florida.
3.7 Authorization and Validity. The execution, delivery and per
formance of the Transaction Documents to be executed and delivered by
each of Sellers have been duly authorized by all necessary corporate
action on their part. The Transaction Documents to be executed and
delivered by each of Sellers have been or will be, as the case may be,
duly executed and delivered
by Sellers and constitute or will constitute the legal, valid and binding
obligations of each such corporation.
3.8 Absence of Conflicting Agreements or Required Consents. The
execution, delivery and performance by each of Sellers of the Transaction
Documents to be executed and delivered by Sellers: (i) do not require the
consent of or notice to any governmental or regulatory authority or any
other third party; (ii) will not conflict with any provision of the charter,
bylaws or other organizational documents of Sellers; (iii) will not
conflict with or result in a violation of any law, ordinance, regulation,
ruling, judgment, order or injunction of any court or governmental instru-
mentality to which any of Sellers is subject or by which any of Sellers or
any of their properties are bound; (iv) will not conflict with, constitute
grounds for termination of, result in a breach of, constitute a default
under, require any notice under, or accelerate or permit the acceleration
of any performance required by the terms of any agreement, instrument,
license or permit to which any of Sellers is a party or by which any of
Sellers or any of its properties are bound; and (v) will not create any
Security Interest or restriction upon any of the Acquired Assets.
3.9 Governing Documents of Sellers. True and correct copies of the
charter, bylaws and other organizational documents and all amendments
thereto of Sellers (certified by the Secretary of State of the state of
their incorporation) have been provided to RCG. RCG has previously been
provided with access to Sellers' minutes, and such minutes accurately
reflect all proceedings of the board of directors of Sellers (and all
committees thereof).
3.10 Predecessors. Set forth on Schedule 3.10 is a listing of all
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names of predecessors who within the last seven (7) years owned or
operated the Facility or the Method 2 Supply Business and any entities
from which Sellers obtained any of the Acquired Assets as a going-concern
other than vendors. Sellers have not previously sold or disposed of, by
way of asset sale, stock sale, spin-off or otherwise, any assets or
business of Sellers other than in the Ordinary Course of Business.
3.11 Financial Statements. Attached hereto as Schedule 3.11 are the
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unaudited financial statements of Sellers for the year ended December 31,
1996, and interim financial statements for Sellers' most recently ended
interim period, which accurately reflect the results of operations and
financial condition of the Facility for such periods and at such dates
(collectively, the "Financial Statements"). The Financial Statements
have been prepared in accordance with GAAP. The Financial Statements
present fairly in all material respects the financial position of the
Sellers as of the dates indicated and present fairly in all material
respects the results of Sellers' operation of the Facility, the Method 2
Supply Business and the management services provided under the In-patient
Agreement for the periods then ended, and are in accordance with the books
and records of Sellers, which have been properly maintained and are
complete and correct in all material respects.
3.12 Absence of Changes. Except as contemplated by this Agreement,
since the date of the most recent Financial Statements, Sellers in respect
to Sellers' Business have not:
(a) suffered any material adverse change in their working capital,
condition (financial or otherwise), assets, liabilities,
reserves, business or operations;
(b) paid, discharged, satisfied or incurred any material liability
other than in the Ordinary Course of Business;
(c) written off as uncollectible any account receivable other than
in the Ordinary Course of Business charged to applicable re-
serves, none of which individually or in the aggregate is
material to Sellers;
(d) compromised any debts, claims or rights or disposed of any of
their properties or assets other than in the Ordinary Course of
Business;
(e) entered into any commitments or transactions including capital
expenditures and commitments not in the Ordinary Course of
Business involving aggregate value in excess of $5,000;
(f) made any change in any method of accounting or accounting
practice;
(g) subjected any of their assets, tangible or intangible, to any
lien, encumbrance or restriction of any nature whatsoever,
except for liens for current property taxes not yet due and
payable;
(h) made any accrual or arrangement for or payment of bonuses or
special compensation of any kind to any director, officer or
employee;
(i) increased any salaries, wages or employee benefits for any
employee of Sellers other than in the Ordinary Course of
Business or entered into any employment agreements, consulting
agreement or the like;
(j) hired, committed to hire or terminated any employee other than
in the Ordinary Course of Business;
(k) terminated or materially amended any contract, license or other
instrument to which any of Sellers is a party or suffered any loss
or termination or threatened loss or termination of any existing
business arrangement or supplier, the termination or loss of
which, in the aggregate, could materially affect any of Sellers;
(l) conducted their business in a manner so as to materially
increase their accounts payable or to decrease their accounts
receivable other than in the Ordinary Course of Business;
(m) otherwise conducted their business or entered into any trans-
action, except in the usual and ordinary manner and in the
Ordinary Course of Business; or
(n) agreed, whether in writing or otherwise, to take any action
described in this Section 3.12.
3.13 No Undisclosed Liabilities. Sellers with respect to Sellers'
Business have no liabilities or obligations, whether accrued, absolute,
contingent or otherwise, except for liabilities and obligations reflected
in the Financial Statements or incurred in the Ordinary Course of Business
since the date of the Financial Statements which individually or in the
aggregate are material to Sellers' Business.
3.14 Litigation, etc. There are no claims, lawsuits, actions, arbi-
trations, administrative or other proceedings pending against Sellers
relating to Sellers' Business and to the best of their Knowledge, no such
matter is threatened and there is no basis for any such action. There are
no governmental or administrative investigations or inquiries pending that
involve Sellers' Business. There are no claims, lawsuits, proceedings or
judgments against or consent decrees binding on Sellers or the Acquired
Assets or any licensed professional associated with or employed by Sellers
relating to Sellers' Business.
3.15 No Violation of Law.
(a) There are no outstanding orders, writs, decrees, or injunctions of
any court, governmental agency or arbitration tribunal against or
affecting Sellers relating to Sellers' Business or the Acquired
Assets. Sellers in relation to Sellers' Business and the
Acquired Assets are in material compliance with all applicable
federal, state and local laws, regulations and administrative
orders, including, without limitation, matters relating to
antitrust and anti-competitive practices, discrimination, employ-
ment, Medicare/Medicaid reimbursement, insurance regulation,
self-referrals, conflicts of interest, fee-splitting, corporate
practice of medicine, and health and safety, and have received
no notices of alleged violation thereof. To the best of Sellers'
Knowledge, no governmental authority is presently conducting an
investigation or proceeding against Sellers or their related
healthcare professionals relating to Sellers' Business, and no
such investigation or proceeding has been threatened.
(b) Sellers are not currently subject to any fine, penalty, liability
or disability as the result of a failure to comply with any
requirement of federal, state or local law or regulation nor have
they received any notice of such noncompliance.
(c) Sellers, their officers and directors, and to the best of Sellers'
Knowledge, other persons and entities providing professional
services for the Facility have not engaged in any activity which
at the time thereof was prohibited under the federal False Claims
Act, 31 U.S.C. Section 3729, the Xxxxx Amendment, 42 U.S.C.
Section 1395nn, or any comparable state law or regulation.
3.16 Real and Personal Property.
(a) Schedule 3.16(a) sets forth a list of all Acquired Assets.
----------------
Sellers (i) have good and valid title to all of the Acquired
Assets, (ii) own such Acquired Assets free and clear of all
Security Interests or restrictions of any nature whatsoever;
and (iii) upon completion of the Transactions, RCGSE shall own
the Acquired Assets free and clear of all Security Interests and
restrictions of any nature whatsoever.
(b) Sellers do not have an ownership interest in any real property.
Schedule 3.16(b) lists all real property leased by Sellers from
----------------
others used in connection with Sellers' Business and the Acquired
Assets, and sets forth the owners of such properties (collec-
tively, the "Real Property").
(i) Sellers have valid and binding leases in each property
listed on Schedule 3.16(b), and (a) Sellers are current
----------------
with respect to all payments due under such leases;
(b) Sellers have complied in all respect with their obliga-
tions under such leases; and (c) there are no defaults
under any such lease that remain uncured and no condition
exists which, with the lapse of time or giving of notice,
or both, would give rise to a default under any such lease.
(ii) Sellers are entitled to use all of the Real Property
for the purposes for which it is now being used by Sellers
without violation of any building code, zoning or other
ordinance. Sellers have not received any notice (oral or
written) from any insurance carrier in relation to the Real
Property which could have an adverse effect on the
insurance coverage or premiums relating to the Real
Property or improvements thereon.
(iii) Sellers have not received any notice that any portion of
the Real Property, or any building, structure, fixture or
improvement thereon, is the subject of, or affected by, any
condemnation, taking, eminent domain or inverse condemnation
proceeding currently instituted or pending, and Sellers have
no knowledge that any of the foregoing are, or will be,
the subject of, or affected by, any such proceeding.
(iv) Sellers have not experienced any restriction in access to
and from public roads and to all utilities, including water,
sewer, gas, electric, telephone, drainage and other
utilities used by Sellers in the operation of the
business as presently conducted and to the best of
Sellers' Knowledge, there is no pending or threatened
governmental action which would prohibit or interfere with
such access, and DSF has no Knowledge of any fact or con-
dition exists which, with the mere running of time, the
giving of notice, or both, would result in the termination,
reduction or impairment of the furnishing of service to
the real property of water, sewer, gas, electric, tele-
phone, drainage and other such utility services.
(c) The Acquired Assets (including all buildings and improvements in
connection therewith) are in good operating condition and repair,
ordinary wear and tear excepted, and such assets include all
rights, properties, interests in properties, and assets necessary
to permit Sellers to carry on Sellers' Business as presently
conducted.
(d) Schedule 3.16(d) contains a complete and correct list of all
----------------
trademarks, trade names, service marks, service names, brand
names, copyrights, technology rights and licenses, software and
patents, registrations thereof and applications therefor, and
any other intellectual property used in Sellers' Business
together with a complete list of all licenses granted by or to
Sellers with respect to any of the foregoing. Sellers are not
currently in receipt of any notice of any violation of, and each
has no reason to believe that its operations are violating the
rights of others with respect to any such matter, and Sellers
have taken reasonable measures to protect their rights with
respect to any such matters as are proprietary to Sellers.
3.17 Contracts and Commitments.
(a) Schedule 3.17 contains a complete and accurate list of all
-------------
contracts, agreements, commitments, instrument and obligations
(whether written or oral, contingent or otherwise) of Sellers
relating to Sellers' Business concerning the following matters
(the "Sellers Agreements"):
(i) the lease (as lessee or lessor) or license (as licensee
or licensor) of any real or personal property (tangible
or intangible);
(ii) the employment or engagement of any officer, director,
employee, consultant or agent;
(iii) any arrangement for bonuses or incentive compensation, de-
ferred compensation, supplemental retirement payments or
the like;
(iv) any plan, contract or arrangement providing for insurance
for any officer or employee or member of his or her family
(other than conventional life, health, accident or similar
plans available to Sellers' employees generally);
(v) any arrangement limiting the freedom of Sellers to compete
in any manner in any line of business or requiring Sellers
to share revenues or profits;
(vi) any arrangement that could reasonably be anticipated to
have a material adverse effect on Sellers' operation of
Sellers' Business financial or otherwise;
(vii) any arrangement not in the Ordinary Course of Business and
any agreement for the purchase or sale of real estate; and
(viii) any other arrangement that requires performance for a
period of more than 90 days or that requires payments in
excess of $5,000.
(b) Sellers have delivered to RCGSE true and complete copies of all
Sellers Agreements. The Sellers Agreements are valid and effec-
tive in accordance with their terms, and there is not under any
of such Sellers Agreements (i) any existing or claimed default
by Sellers or event which with the notice or lapse of time, or
both, would constitute a breach by Sellers, or (ii) any existing
or claimed default by any other party or event which with notice
or lapse of time, or both, would constitute a default by any
such party. Except with respect to the consents and/or waivers to
be obtained by Sellers, the continuation, validity and effective-
ness of the Sellers Agreements will not be affected by their
assignment to RCGSE nor will the assignment constitute an event
of default under any Sellers Agreement. All Sellers Agreements
are assignable to RCGSE either without consent of any Person or
with consent and such consent will be obtained prior to Closing
and all Sellers Agreements will be binding on RCGSE according
to their terms after the Closing. Sellers have no Knowledge of
any actual or threatened termination, cancellation or limitation
of any Sellers Agreements that would have an adverse effect on
Sellers, financial or otherwise. Sellers have no Knowledge of
any pending or threatened bankruptcy, insolvency or similar
proceeding with respect to any other party to the Sellers
Agreements.
(c) DCAMS has delivered to RCGSE a true and complete copy of the
In-patient Agreement. The In-patient Agreement is valid and
effective in accordance with its terms, and there is not under
the In-patient Agreement (i) any existing or claimed default by
DCAMS or event which with the notice or lapse of time, or both,
would constitute a breach by DCAMS, or (ii) any existing or
claimed default by any other party or event which with notice
or lapse of time, or both, would constitute a default by any
such party. The continuation, validity and effectiveness of
the In-patient Agreement will not be affected by its assignment
to RCGSE nor will the assignment constitute an event of default
under the In-patient Agreement provided that RCGSE remains bound
by and adheres to the terms of the In-patient Agreement under the
Assignment and Assumption Agreement, the form of which is
attached hereto as Exhibit B. The In-patient Agreement is
---------
assignable to RCGSE without consent of any Person and will con-
tinue to be binding according to its terms after the Closing.
There is no actual or threatened termination, cancellation or
limitation of the In-patient Agreement.
3.18 Employment and Labor Matters. In connection with Sellers'
Business:
(a) Schedule 3.18 sets forth (i) the number of full-time and part-time
-------------
employees of and consultants to Sellers assigned to the Facility
(the "Facility Employees") and (ii) the name and compensation paid
to each such Facility Employee.
(b) To Sellers' Knowledge, Sellers are in compliance in all
respects with all applicable laws respecting employment and em-
ployment practices, terms and conditions of employment, wages
and hours, and occupational safety and health.
(c) Sellers have no notice of any charges, governmental audits, in-
vestigations, administrative proceedings or complaints concerning
Sellers' employment practices relating to the Facility pending
or threatened before any federal, state or local agency or court,
and no basis for any such matter exists.
(d) To Sellers' Knowledge, there are no inquiries, investigations or
monitoring of activities of any licensed, registered, or certified
professional personnel employed by, credentialed or privileged by,
or otherwise affiliated with Sellers, pending or threatened by
any state professional board or agency charged with regulating
the professional activities of health care practitioners.
(e) None of Sellers is a party to any union or collective bargaining
agreement and no union attempts to organize the Facility Em-
ployees have been made, nor are any such attempts now threatened.
(f) Sellers have not experienced any organized slowdown, work inter-
ruption, strike, or work stoppage by their employees.
(g) Sellers have paid or discharged all liabilities for compensation
and benefits to which all of its Facility Employees are currently
entitled, including but not limited to all salaries, wages,
bonuses, incentive compensation, payroll taxes, hospitalization
and medical expenses, deferred compensation and vacation and sick
pay, as well as any severance pay becoming due as a result of the
termination of the Facility Employees contemplated hereby except
for those items not yet payable in the Ordinary Course of
Business all of which will be paid as soon as practicable fol-
lowing Closing.
3.19 Employee Benefit Matters. Except as set forth on Schedule 3.19,
-------------
Sellers, for the Facility Employees do not maintain any bonus, deferred
compensation, pension, retirement, stock option, stock appreciation,
restricted stock, profit sharing, severance, medical or life insurance,
employee stock ownership or stock purchase plans or other employee pension
benefit plan, as defined in Section 3(2) of ERISA or other "employee
welfare benefit plan", as defined in Section 3(1) of ERISA (collectively
the "Employee Benefit Plans"). All of the Employee Benefit Plans described
in Schedule 3.19 have been operated in all respects in compliance with all
-------------
applicable laws, including without limitation, the applicable provisions
of ERISA and the Code, and regulations thereunder. Sellers, for the
Facility Employees, have performed all obligations required to be performed
by them under, and are not in default under or in violation of, the terms
of any of the Employee Benefit Plans in any respect. Sellers, for the
Facility Employees, have made all contributions and other payments
required by and due under the terms of each Employee Benefit Plan except
for amounts not yet payable in the Ordinary Course of Business including
medical and life insurance premiums and current withholdings.
3.20 Insurance Policies. In regard to Sellers' Business and the
Acquired Assets:
(a) All of Sellers' Business and the Acquired Assets are insured in
such amounts and against such loses, casualties or risks as are
customary for similar properties and businesses, and Sellers
have maintained such insurance continuously from the date of
their inception. Schedule 3.20(a) sets forth a complete and
----------------
accurate list and description of all of Sellers'insurance
policies in force relating to Sellers' Business naming any of
Sellers as an insured or beneficiary or as a loss payee or which
Sellers have paid or are obligated to pay all or part of the
premiums, including, without limitation, all liability, malprac-
xxxx, fire, health and life insurance policies. All such
policies are in full force and effect and the premiums due
thereon have been timely paid. Sellers have not received notice
of any pending or threatened termination or premium increase
(retroactive or otherwise) with respect thereto, and Sellers
are in compliance with all conditions contained therein. There
are no pending claims against such insurance by Sellers as to
which insurers are defending under reservation of rights or have
denied liability, and there exists no claim under such insurance
that has not been properly filed by Sellers. There are no out-
standing or unfulfilled requirements or recommendations of any
insurance company insuring Sellers regarding any repairs to or
work to be performed with respect to the Facility. Sellers have
complied with any such requirements and recommendations as to
which Sellers have received notice. Schedule 3.20(a) contains a
----------------
listing of all claims made and loss histories in respect of any
insurance maintained by Sellers or any predecessor during the
past three (3) years.
(b) Sellers have not, in the last seven (7) years, filed a written
application for any insurance coverage which has been denied by
an insurance agency or carrier. Sellers and to Sellers' Know-
ledge their professional employees during the shorter of their
employment by Sellers or the last seven (7) years, have been
continuously insured for professional malpractice claims during
the same period. Schedule 3.20(b) also sets forth a list of all
----------------
claims for any insured loss in excess of Five Thousand Dollars
($5,000.00) per occurrence filed by Sellers or their professional
employees during the three (3) year period immediately preceding
the date hereof, including, but not limited to, workers compen-
sation, general liability, environmental liability and pro-
fessional malpractice liability claims. None of Sellers are in
default with respect to any provision contained in any such
policy and none of them has failed to give any notice or present
any claim under any such policy in due and timely fashion.
3.21 Environmental Matters. There are no present or past Environmental
Conditions in any way relating to the Sellers' Business or the Acquired
Assets. For the purposes of this Agreement, "Environmental Condition"
means (a) the introduction into the environment of any pollution, including
without limitation any contaminant, irritant or pollutant or other toxic or
hazardous substance, in violation of any federal, state or local law,
ordinance or governmental rule or regulations, as a result of any spill,
discharge, leak, emission, escape, injection, dumping or release of any
kind whatsoever of any substance or exposure of any type in any work
places or to any medium, including without limitation air, land, surface
waters or ground waters, or from any generation, transportation, treatment,
discharge, storage or disposal of waste materials, raw materials, hazardous
materials, toxic materials or products of any kind or from the storage,
use or handling of any hazardous or toxic materials or other substances, as
a result of which any of Sellers has or may become liable to any person
pursuant to Sellers' Business or by any reason of which any of the Acquired
Assets may suffer or be subjected to any lien, encumbrance or
restriction of any nature, or (b) any noncompliance with any federal,
state or local environmental law, rule, regulation or order as a result
of or in connection with any of the foregoing.
3.22 Accounts Receivable and Payable. The amount of all accounts re-
ceivable, unbilled invoices and other debts due or recorded in the respec-
tive records and books of account of Sellers relating to the Facility and
Sellers' Business, as being due to Sellers, as at the Closing Date (less
the amount of any provision or reserve therefor made in the respective
records and books of account of Sellers), shall have arisen from bona
fide transactions and will be collectible in the Ordinary Course of
Business and in any event not later than one hundred eighty (180) days
after the Closing Date in an amount which will exceed the amount of the
Assumed Liabilities which, for purposes of this Section 3.22 only, is
determined to be One Hundred Eighteen Thousand Dollars ($118,000),
provided that RCGSE pursues such receivables with due diligence. None
of such accounts receivable, previously collected accounts or other debts
is or will at the Closing Date be subject to any counterclaim, claim for
refund or set-off except to the extent of any such provision or reserve.
There has been no material adverse change since the last balance sheet date
set forth in the Financial Statements in the amount of accounts receivable
or other debts due Sellers, the allowances with respect thereto, relating
to the Facility and Sellers' Business from that reflected in such balance
sheet.
3.23 Taxes.
(a) (i) All tax returns required to be filed with respect to Sellers
have been filed when due in accordance with all applicable laws,
and, as of the time of filing, such returns were accurate and
complete in all respects; (ii) none of Sellers' tax returns have
been audited and/or examined by any governmental agency within
the past five years; and (iii) there is no action, suit, pro-
ceeding, audit, investigation or claim pending or threatened
against or with respect to Sellers in respect of any tax return;
(b) (i) All Taxes shown as due and payable by Sellers on the returns
that have been filed have been duly paid; (ii) Sellers do not
have, and on the Closing Date will not have, any liability for
Taxes payable for or with respect to any periods prior to and in-
cluding the Closing Date in excess of the amounts actually paid
prior to the Closing Date or amounts accrued in accordance with
past practice in the Ordinary Course of Business but not yet
due and payable; (iii) there are no liens for taxes (other than
for current taxes not yet due and payable) upon the Acquired
Assets; and (iv) Sellers have neither given, nor been requested
to give, any waivers extending the statutory period of limitation
applicable to any tax return for Sellers for any period.
(c) Each of Sellers as to Sellers' Business and the Acquired Assets
(i) does not act as a lessor of property under any lease other
than a "true" operating lease; (ii) does not own any tax-exempt
use property within the meaning of Section 168(h) of the Code;
and (iii) is not a party to any agreement (including employment
agreements), contract, arrangement or plan that has resulted
(with respect to (A) below) or could result (with respect to (A)
and (B) below), separately or in the aggregate, upon termination
thereof or otherwise, in the payment of (A) any excess parachute
payments within the meaning of Section 280G of the Code or (B) any
applicable employee remuneration" within the meaning of Section
162(m) of the Code. The Transactions are not subject to the tax
withholding provisions of Section 3406 of the Code, or of sub-
chapter A of Chapter 3 of the Code or any other provision of law.
3.24 Licenses, Authorizations and Provider Programs.
(a) Each of Sellers is the holder of all valid license and other
rights and authorizations required by law, ordinance, regulation
or ruling of any governmental regulatory authority necessary to
operate the Facility and Sellers' Business as applicable. Each
of Sellers is certified for participation and reimbursement under
Titles XVIII and XIX of the Social Security Act (the referenced
Medicare and Medicaid programs and such other similar federal,
state or local reimbursement or governmental programs for which
Sellers are eligible are hereinafter referred to collectively as
the "Government Programs") and has current provider agreement
for such Government Programs and with such private non-govern-
mental programs, Including without limitation any private in-
surance program, under which Sellers directly or indirectly are
presently receiving payments relating to the Facility or Sellers'
Business (such non-governmental programs herein referred to as
"Private Programs"). Set forth on Schedule 3.24(a), as to each
----------------
separate facility operated by Sellers, is a correct and complete
list of such licenses, permits and other authorizations, and
provider agreements under all Government and Private Programs,
complete and correct copies of which have been provided to RCG.
True, complete and correct copies of all surveys of Sellers
relating to the facilities conducted in connection with any
Government Program, Private Program or licensing or accrediting
body during the past three (3) years have been provided to RCG.
(b) No violation, default or deficiency exists with respect to any
of the items listed on Schedule 3.24(a). Sellers have not re-
----------------
ceived any notice of any action pending or recommended by any
state or federal agencies having jurisdiction over the items
listed on Schedule 3.24(a), either to revoke, withdraw or
----------------
suspend any license, right or authorization, or to terminate
the participation of Sellers in any Government or Private Program.
(c) Sellers have timely filed all cost reports and other reports
relating to the Facility and Sellers' Business required to be
filed prior to the date hereof with respect to the Government
and Private Programs, all fiscal intermediaries and other
insurance carriers and all such reports are complete and
accurate in all material respects and have been prepared in
accordance with all applicable laws, regulations, and principles
governing reimbursement and payment claims. Sellers have paid
or caused to be paid or have properly reflected in the Financial
Statements all known and undisputed refunds, overpayments, dis-
counts or adjustments which have become due pursuant to such
reports and has no liability under any Government or Private
Program (known or unknown, contingent or otherwise) for any
refund, overpayment, discount or adjustment other than in the
ordinary course, and no interest or penalties accruing with
respect thereto. There are no pending appeals, adjustments,
challenges, audits, litigation, or notices of intent to reopen
any closed cost reports other than claims by Sellers seeking
reimbursement. There are no other reports required to be filed
by Sellers in order to be paid under any Government or Private
Program for services rendered, except for cost reports not yet
due.
3.25 Inspections and Investigations. Neither Sellers' right nor to
Sellers' Knowledge the right of any licensed professional or other individ-
ual affiliated with Sellers to receive reimbursements pursuant to any
Government or Private Program relating to Sellers' Business has been
terminated or otherwise adversely affected as a result of any investigation
or action whether by any federal or state governmental regulatory authority
or other third party. Neither Sellers nor to Sellers' Knowledge any
licensed professional or other individual affiliated with Sellers have,
during the past three (3) years, been the subject of any inspection,
investigation, survey, audit, monitoring or other form of review by any
governmental regulatory entity, trade association, professional review
organization, accrediting organization or certifying agency for the
purpose of any alleged improper activity on the part of such individual,
nor have Sellers received any notice of deficiency in connection with
Sellers' Business. There are not presently, and at Closing there will
not be, any outstanding deficiencies or work orders of any governmental
authority having jurisdiction over Sellers or other third party, requiring
conformity to any applicable agreement, statute, regulation, ordinance or
bylaw relating to Sellers' Business, including but not limited to, the
Government and Private Programs. There is not any notice of any claim,
requirement or demand of any licensing or certifying agency or other third
party supervising or having authority over Sellers or the Facility to
rework or redesign any part thereof or to provide additional furniture,
fixtures, equipment, appliances or inventory so as to conform to or comply
with any existing law, code, rule, regulation or standard. Attached as
part of Schedule 3.25 are copies of all reports, correspondence, notices
-------------
and other documents relating to any matter described or referenced therein.
3.26 Certain Relationships. Sellers have not:
(a) offered, paid, solicited or received anything of value, paid
directly or indirectly, overtly or covertly, in cash or in kind
("Remuneration") to or from any physician, family member of a
physician, or an entity in which a physician or physician family
member has an ownership or investment interest, including, but
not limited to:
(i) payments for personal or management services pursuant to
a medical director agreement, consulting agreement, manage-
ment contract, personal services agreement, or otherwise
except as listed on Schedule 3.26(a)(i);
-------------------
(ii) payments for the use of premises leased to or from a
physician, a family member of a physician or an entity in
which a physician or family member has an ownership or
investment interest.
(iii) payments for the acquisition or lease of equipment, goods
or supplies from a physician, a family member of a
physician or an entity in which a physician or family
member has an ownership or investment interest; or
(b) offered, paid, solicited or received any Remuneration (excluding
fair market value payments for equipment or supplies) to or from
any healthcare provider, pharmacy, drug or equipment supplier,
distributor or manufacturer, including, but not limited to:
(i) payments or exchanges of anything of value under a
warranty provided by a manufacturer or supplier of any
item to Sellers; or
(ii) discounts, rebates, or other reductions in price on a good
or service received by Sellers;
(c) offered, paid, solicited or received any Remuneration to or from
any Person in order to induce business, including, but not limited
to, payments intended not only to induce referrals of patients,
but also to induce the purchasing, leasing, ordering or arrange-
ment for any good, facility, service or item;
(d) entered into any joint venture, partnership, co-ownership or other
arrangement involving any ownership or investment interest by
any physician, or family member of a physician, or an entity in
which physician or physician family member has an ownership or
investment interest, directly or indirectly, through equity,
debt, or other means, including, but not limited to, an interest
in an entity providing goods or services to Sellers;
(e) entered into any joint venture, partnership, co-ownership or
other arrangement involving any ownership or investment interest
by any Person including, but not limited to, a hospital, pharmacy,
drug or equipment supplier, distributor or manufacturer, that is
or was in a position to make or influence referrals, furnish
items or services to, or otherwise generate business for Sellers;
or
(f) entered into any agreement providing for the referral of any
patient for the providing of goods or services by Sellers, or
payments by Sellers as a result of any referrals of patients to
Sellers.
3.27 Debt Instruments. There are no mortgages, indentures, notes,
guarantees or other agreements for or relating to borrowed money (in-
cluding, without limitation, conditional sales agreements and capital
leases) to which Sellers are a party or which have been assumed by
Sellers or to which any Acquired Assets are subject. Sellers have
performed all the obligations required to be performed by them to date,
and Sellers are not in default in any respect under any of the foregoing.
3.28 Fraud and Abuse. Sellers and to Sellers' Knowledge all persons
and entities providing professional services for Sellers have not engaged
in any activities which are prohibited under 42 U.S.C. Section 1320a-7b,
or the regulations promulgated thereunder pursuant to such statutes, or
related state or local statutes or regulations, or which are prohibited
by rules of professional conduct, including but not limited to the fol-
lowing: (a) knowingly and willfully making or causing to be made a false
statement or representation of a fact in any application for any benefit or
payment; (b) knowingly and willfully making or causing to be made any false
statement or representation of a fact for use in determining rights to any
benefit or payment; (c) failing to disclose knowledge by a claimant of the
occurrence of any event affecting the initial or continued right to any
benefit or payment on its own behalf or on behalf of another, with
intent to
fraudulently secure such benefit or payment; and (d) knowingly and
willfully soliciting or receiving any remuneration (including any kick-
back, bribe, or rebate), directly or indirectly, overtly or covertly, in
cash or in kind or offering to pay or receive such remuneration (i) in
return for referring an individual to a person for the furnishing or
arranging for the furnishing of any item or service for which payment
may be made in whole or in part by Medicare or Medicaid, or (ii) in return
for purchasing, leasing, or ordering or arranging for or recommending
purchasing, leasing, or ordering any good, facility, service or item for
which payment may be made in whole or in part by Medicare or Medicaid.
3.29 Rates and Reimbursement Policies. Sellers do not have any rate
appeal currently pending before any governmental authority or any admin-
istrator of any Private Programs.
3.30 Broker's Fees. Sellers have no liability or obligation to pay
fees or commissions to any broker, finder or agent with respect to the
Transactions.
3.31 Schedules. All the facts recited in the Disclosure Schedules
annexed hereto (as updated as of the Closing Date) shall be deemed to be
representations of fact by Sellers as though recited in this Section 3.
3.32 Statements True and Correct and Full Disclosure. No representa-
tion or warranty made herein by Sellers nor any statement, certificate or
instrument furnished or to be furnished to RCG or RCGSE by Sellers pursuant
to any Transaction Document, contains or will contain any untrue statement
of a fact or omits or will omit to state a fact necessary to make the
statements contained herein or therein not misleading.
4 Representations and Warranties of RCG and RCGSE. Each of RCG and
RCGSE represents, warrants and covenants to Sellers, DCA, and Xx. Xxxxx
that the statements contained in this Section 4 are correct and complete
as of the date of this Agreement and will be correct and complete as of
the Closing Date.
4.1 Organization, Authority and Capacity. Each of RCG and RCGSE is a
corporation duly organized, validly existing, and in good standing under
the laws of the state of its organization and has the full power and
authority necessary to (i) execute, deliver and perform its obligations
under the Transaction Documents to be executed and delivered by it, and
(ii) carry on its business as it has been and is now being conducted and
to own, operate and lease the properties and assets which it now owns,
operates or leases. Each of RCG and RCGSE is duly qualified to do business
and is in good standing in each jurisdiction in which a failure to be so
qualified or in good standing would have a material adverse effect on (i)
its ability to perform its obligations under the Transaction Documents to
be executed and delivered by it or, (ii) the assets, results of operations
or prospects of RCG or RCGSE.
4.2 Authorization and Validity. The execution, delivery and per-
formance of the Transaction Documents to be executed and delivered by
RCG and RCGSE have been duly
authorized by all necessary action by RCG and RCGSE. The Transaction
Documents to be executed and delivered by RCG and RCGSE have been or will
be, as the case may be, duly executed and delivered by RCG and RCGSE and
constitute or will constitute the legal, valid and binding obligations
of RCG and RCGSE, enforceable in accordance with their respective term.
4.3 Absence of Conflicting Agreements or Required Consents. The execu-
tion, delivery and performance by RCG and RCGSE of the Transaction Documents
to be executed and delivered by them: (i) do not require the consent of or
notice to any governmental or regulatory authority or any other third
party; (ii) will not conflict with any provision of their certificates of
incorporation or bylaws or other organizational documents; (iii) will not
conflict with or result in a violation of any law, ordinance, regulation,
ruling, Judgment, order or injunction of any court or governmental instru-
mentality to which RCG or RCGSE is a party or by which RCG, RCGSE or any of
their properties are bound; and (iv) will not conflict with, constitute
grounds for termination of, result in a breach of, constitute a default
under, require any notice under, or accelerate or permit the acceleration
of any performance required by the terms of any agreement, instrument,
license or permit to which RCG or RCGSE is a party or by which any of
their properties are bound.
4.4 Litigation and Claims. There are no claims, lawsuits, actions,
arbitrations, administrative or other proceedings, governmental investiga-
tions or inquiries pending or threatened against RCG or RCGSE affecting
the performance by RCG or RCGSE under the Transaction Documents and there
is no basis for any such action or any state of facts or occurrence of any
event which might give rise to the foregoing.
4.5 RCG Shares. The RCG Shares will be duly and validly issued, fully
paid and nonassessable and free and clear of all Security Interests when
issued.
4.6 Statements True and Correct. No representation or warranty made
herein by RCG or RCGSE nor in any statement, certificate or instrument to
be furnished to DSF, DCA or Xx. Xxxxx by RCG or RCGSE pursuant to any
Transaction Document, contains or will contain any untrue statement of
material fact or omits or will omit to state a material fact necessary
to make these statements contained and therein not misleading.
4.7 Broker's Fees. Neither RCG nor RCGSE has any liability or obliga-
tion to pay any fees or commissions to any broker, finder or agent with
respect to the Transactions.
5 Pre-Closing Covenants. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing.
5.1 General. Each of the Parties will use its reasonable best efforts
to take all action and to do all things necessary, proper, or advisable in
order to consummate and make effective the Transactions (including satisfac-
tion, but not waiver, of the closing conditions set forth in Section 7
below). In addition thereto, and without limiting the foregoing, Sellers,
DCA and Xx. Xxxxx will use their best efforts to supplement and amend the
Disclosure Schedules hereto,
to the full extent necessary to render such Disclosure Schedules accurate
and complete, as promptly as practicable following the date hereof.
5.2 Notices and Consents. Each of the Parties will give any notices
to third parties, and will use its best efforts to obtain any third party
consents, that may be required in connection with the matters contemplated
by this Agreement. Each of the Parties will give any notices to, make any
filings with, and use its reasonable best efforts to obtain any authori-
zations, consents, and approvals of governments and governmental agencies
in connection with the Transactions.
5.3 Operation of Business. During the period from the date of this
Agreement until the earlier of the Closing Date or the termination of this
Agreement, Sellers will not engage in any practice, take any action, or
enter into any transaction relating to the Facility and Sellers' Business
outside the Ordinary Course of Business. Without limiting the generality
of the foregoing, Sellers covenant and agree to use their best efforts to
keep available the services of the Facility Employees and preserve the
relationships with patients, suppliers, and others having business and
professional relations with Sellers to the end that Sellers' Business
will remain unimpaired at the Closing.
(a) From the date hereof until the earlier of the Closing or the ter-
mination of this Agreement, Sellers covenant and agree that,
unless the prior written consent of RCG shall have been obtained,
and except as otherwise expressly contemplated herein, Sellers
shall with respect to Sellers' Business:
(i) operate only in the Ordinary Course of Business;
(ii) preserve intact their business organization, licenses,
permits, government programs, private programs and patients;
(iii) retain the services of its employees, agents and con-
sultants on terms and conditions not less favorable than
those existing prior to the date hereof and to ensure that
there are no adverse changes to employee relations;
(iv) keep and maintain the Acquired Assets in their present
condition, repair and working order, except for normal wear
and tear, maintain their rights and licenses and keep the
Acquired Assets free and clear of all additional liens and
encumbrances;
(v) pay all accounts payable of Sellers in accordance with
past practice and collect all accounts receivable in
accordance with past practice, but not less than in
accordance with prudent business practices;
(vi) consult with RCG prior to undertaking any new business
opportunity outside the Ordinary Course of Business and not
undertake such new business opportunity without the prior
written consent of RCG;
(vii) confer on a regular and frequent basis with one or more
designated represntatives of RCG to report operational
matters and to report the general status of ongoing
business operations;
(viii) make available to RCG true and correct copies of all
internal management and control reports (including aging
of accounts receivable, listing of accounts payable, and
inventory control reports) and financial statements
furnished to management of Sellers;
(ix) cause all tax returns required to be filed prior to Closing
to be prepared and filed on or before the date such tax
return is required to be filed (taking into account any
extensions of the filing deadlines granted);
(x) as soon as reasonably practicable after they become
available, but in no event more than thirty (30) days
following the end of each calendar month, deliver to RCG
true and complete copies of its monthly financial state-
ments for each calendar month ending subsequent to the
date hereof on the format historically utilized by Sellers;
(xi) perform in all respects all obligations under the Sellers
Agreements, the In-patient Agreement and those relating to
or affecting the Acquired Assets or its properties or
rights;
(xii) keep in full force and effect present insurance policies
or other comparable insurance coverage;
(xiii) notice RCG of (i) any event or circumstance which is
reasonably likely to have an adverse effect on Sellers'
Business or would cause or constitute a material breach
of any of Sellers representations, warranties or covenants
contained herein; or (ii) any unexpected change in the
Ordinary Course of Business or in the operation of the
Acquired Assets, and of any governmental complaints,
investigations or hearings (or communications indicating
that the same may be contemplated), adjudicatory pro-
ceedings, budget meetings or submissions involving any
property. Sellers agree to keep RCG fully informed of
such events and to permit RCG's representatives prompt
access to all materials prepared in connection therewith;
(xiv) Make all contributions to Employee Benefit Plans which
(i) they are required to make under the terms of such
Employee Benefit Plan or applicable law or (ii) have
been authorized or announced, but not funded, at any
time prior to the Closing
Date with the exception of current payroll withholdings
not yet due in the Ordinary Course of Business; and
(xv) Make all payments of withholding taxes, including Sellers
matching portion, that they are required to make, to the
extent due in the Ordinary Course of Business prior to
the Closing Date.
(b) From the date hereof until the earlier of the Closing Date or the
termination of this Agreement, Sellers covenant and agree that
they will not do any of the following with respect to Sellers'
Business and the Acquired Assets without the prior written
consent of RCG:
(i) take any action which would adversely affect the ability
of any party to the Transaction Documents to obtain any
consents required for the Transactions, or adversely
affect the ability of any party hereto to perform its
covenants and agreements under the Transaction Documents.
(ii) incur any additional debt obligation or other obliga-
tion for borrowed money in excess of an aggregate of $5,000
except in the Ordinary Course of Business consistent with
past practices, or impose, or suffer the imposition, on any
Acquired Asset of any Security Interest or permit any such
Security Interest to exist except for those Security
Interests set forth on the Disclosure Schedule;
(iii) purchase or acquire any assets or properties, whether
real or personal, tangible or intangible, or sell or
dispose of any assets or properties, whether real or
personal, tangible or intangible, except in the Ordinary
Course of Business;
(iv) sell, lease, mortgage or otherwise dispose of or other-
wise encumber any Acquired Asset other than in the
Ordinary Course of Business for reasonable and adequate
consideration;
(v) grant any increase in compensation or benefits to the
employees or officers of Sellers except in accordance
with past practice;
(vi) enter into or amend any employment contract between
Sellers and any Person that Sellers do not have the un-
conditional right to terminate without liability (other
than liability for services already rendered), on the
Closing Date;
(vii) make any significant change in any tax or accounting
methods or systems of internal accounting controls,
except as may be appropriate to conform to changes in tax
laws or regulatory accounting requirements or GAAP;
(viii) modify, amend or terminate any contract or waive, release,
compromise or assign any rights or claims;
(ix) except in the Ordinary Course of Business and, even if in
the Ordinary Course of Business, then not in an amount to
exceed $10,000 in the aggregate, make or commit to make
any capital expenditure, or enter into any lease of
capital equipment as lessee or lessor; and
(x) take any action, or omit to take any action, which cause
any of the representations and warranties contained in
Section 3 to materially be untrue or incorrect.
5.4 Full Access. Sellers will permit representatives of RCG to have
full access at all reasonable times, and in a manner so as not to interfere
with the normal business operations of Sellers, to all premises, proper-
ties, personnel, books, records (including tax records), contracts, and
documents of or pertaining to Sellers. No such investigation shall
diminish or otherwise affect any of the representations, warranties,
covenants or agreements of Sellers under this Agreement.
5.5 Notice of Developments. Each Party will give prompt written
notice to the other Parties of any adverse development causing a breach
of any of its own representations and warranties above. No disclosure by
any Party pursuant to this Section 5.5, however, shall be deemed to amend
or supplement the Disclosure Schedules hereto or to prevent or cure any
misrepresentation or breach of warranty.
5.6 Exclusivity. Unless and until this Agreement is terminated pur-
suant to Section 9, Sellers shall not directly or indirectly, through any
officer, director, employee, agent, intermediary or otherwise: (i) solicit,
Initiate or encourage submission of proposals or offers from any person or
other entity relating to any purchase of Sellers or the Facility or any
merger, sale of substantial assets or any similar transaction whether or
not resulting in a change of control of DSF; (ii) participate in any dis-
cussions or negotiations regarding, or furnish to any other person or other
entity, any information with respect to, or otherwise cooperate with or
encourage, any effort or attempt by any other person or other entity to
purchase Sellers, or engage in a merger, purchase of substantial assets or
any similar transaction whether or not such transaction contemplates a
change of control Sellers; or (iii) approve or undertake any such trans-
action. Sellers shall promptly communicate to RCG the terms of any such
oral or written proposal or offer upon knowledge or receipt of such
proposal or offer.
5.7 Employment Matters.
(a) Except as hereinafter specifically provided, RCG shall not assume
any employment obligation, wage or salary payment obligation
or Employee Benefit Plan obligation of Sellers. Effective the
Closing Date, Sellers shall terminate the employment of each
Facility Employee. On the Closing Date, or as soon as practica-
ble thereafter, Sellers shall pay each such persons all accrued
wages, salary, commission, bonus and other employee compensation
payments and make all federal, state and local withholding taxes
for all periods prior to the Closing Date. Sellers shall cause
its insurance carrier to satisfy, all valid claims for covered
medical, health and hospital benefits, including, but not
limited to, workers' compensation, life insurance, and medical
and disability programs, under the Employee Benefit Plans
brought by such employees relating to claims arising prior to
the Closing Date. In addition, Sellers shall pay or provide for
all employee benefits accrued for all periods prior to the
Closing Date, all in accordance with applicable law. Upon ter-
mination of employment as provided herein, Sellers shall give
each of their terminated employees all required notices and
information with respect to the continuation of certain health
insurance coverage by Sellers and shall make available all such
coverage required by Section 4980B of the Code to any of their
employees who do not become employees of RCGSE.
(b) Effective the Closing Date, RCGSE shall offer employment to all
Facility Employees who desire to become employees of RCGSE, in
the same positions and at reasonably comparable salaries and
wages as immediately before the Closing Date. RCGSE will
provide such employees all of the fringe benefits made gen-
erally available to its employees.
(c) Nothing contained in paragraphs (a) or (b) of this Section 5.7
shall be deemed to create or give rise to any employment or
other contractual rights in favor of any such employees, all of
whom shall, from and after the Closing Date, be employees-at-will
of RCGSE and none of whom shall be deemed for any purpose a third
party beneficiary of this Agreement.
5.8 Liabilities. Prior to Closing, Sellers shall discharge all of the
liabilities, indebtedness and obligations of Sellers relating to the
Acquired Assets and Sellers' Business except for the Assumed Liabilities.
6 Post-Closing Covenants. The Parties agree as follows with respect
to the period following the Closing.
6.1 General. For a period of one year following the Closing any
further action is necessary or desirable to carry out the purposes of
this Agreement, each of the Parties will take such further action (in-
cluding the execution and delivery of such further instruments and
documents) as the other Party reasonably may request, all at the sole
cost and expense of the requesting Party (unless the requesting Party is
entitled to indemnification therefor under Section 10 below). After the
one year period, the Parties will not unreasonably withhold their consent
to provide any requested assistance.
6.2 Litigation Support. For a period of one year following Closing,
in the event and for so long as any Party actively is contesting or de-
fending against any action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction on or prior to the Closing Date
involving DSF, the other Party will cooperate with the contesting or de-
fending Party and its counsel in the contest or defense, make available its
personnel, and
provide such testimony and access to its books and records as shall be
necessary in connection with the contest or defense, all at the sole cost
and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under Section 10
below). After the one year period, the Parties will not unreasonably
withhold their consent to provide any requested litigation assistance.
6.3 Post-Closing Liabilities. Sellers shall be responsible for paying
all of their obligations existing on or after the Closing Date other than
the Assumed Liabilities.
6.4 Confidentiality, Non-Competition and Non-Solicitation.
(a) Sellers, DCA and Xx. Xxxxx agree that, for a period of seven (7)
years after the Closing Date, each of them will not in any manner,
directly or indirectly, by itself or in conjunction with any other
Person, conduct activities that are competitive with Sellers'
Business and/or the Restricted Business or acquire, establish or
own any financial, beneficial or other interest in (other than an
interest consisting of less than one percent (1%) of a class of
publicly traded security or an interest in RCG), make any loan to
or for the benefit of, or render any managerial, marketing or
other business advice, to any entity that is then conducting
activities that are competitive with Sellers' Business and/or
the Restricted Business in either case within a geographic
territory defined as a fifty (50) mile radius of the Facility.
(b) Sellers, DCA and Xx. Xxxxx further agree that, for a period of
seven (7) years after the Closing Date, each will keep confiden-
tial and not directly or indirectly divulge to anyone or use
or otherwise appropriate for its own benefit or for the benefit of
others, any knowledge or information of a confidential nature with
respect to Sellers' Business and/or the Restricted Business, RCG
or any of its affiliates, including all trade secrets, pricing
information, marketing information or technical information
(hereinafter referred to as the "Confidential Data"), except for
(i) a disclosure that is required by law; (ii) information that
has been made generally available to the public by the act of one
who has the right to disclose such information; or (iii) was
acquired by the recipient from a third party who, at the time was
not under the obligation of secrecy. Sellers, DCA and Xx. Xxxxx
hereby acknowledge and agree that the prohibitions against dis-
closure of Confidential Data recited herein are in addition to,
and not in lieu of, any rights or remedies which RCG or RCGSE
may have available pursuant to the laws of any jurisdiction or
at common law to prevent the disclosure of confidential infor-
mation, and the enforcement by RCG or RCGSE of their rights and
remedies pursuant hereto shall not be construed as a waiver of any
other rights or available remedies which RCG or RCGSE may possess
in law or equity.
(c) Sellers, DCA and Xx. Xxxxx also agree that, for a period of seven
(7) years after the Closing Date, each will not, for its own
benefit or the benefit of others, solicit any patient of RCGSE,
or any of its affiliates, located within fifty (50) miles of the
Facility, for the purpose of being an outpatient dialysis patient
or prospective patient.
(d) Sellers, DCA and Xx. Xxxxx further agree that, for a period of
seven (7) years after the Closing Date, each will not induce, nor
attempt to induce, any employee of
RCGSE, or any of its affiliates, whose principal place of employ-
ment is located within fifty (50) miles of the Facility, to
terminate his or her association with any such party.
(e) The covenants contained in this Section 6.4 are considered by the
Parties to be fair, reasonable and necessary for the protection of
RCG and RCGSE. The Parties mutually agree that if a violation of
any covenant contained in this Section 6.4 occurs, such violation
or threatened violation will cause irreparable injury to RCG and
RCGSE and the remedy at law for any such violation or threatened
violation will be inadequate. Sellers therefore agree that RCG
and RCGSE shall be entitled to appropriate equitable relief,
including but not limited to a temporary restraining order or a
preliminary injunction, in addition to any other remedy that
might be available at law or in equity.
(f) Nothing in this Section 6.4 shall be deemed to prohibit any
physician from exercising his or her medical judgment concerning
the treatment of his or her patient in any manner whatsoever in
any location whatsoever, and shall not be deemed to require the
referral of any such patient to any facility of RCG or RCGSE or
any of their affiliates or preclude any physician from referring
patients to facilities of DCA.
6.5 Registration of and Adjustment to RCG Shares. RCG will cause
the RCG Shares to be registered under the Securities Act within one year
following the Closing Date. RCG will bear all expenses in connection with
such registration.
7 Conditions to Obligation to Close of RCG and RCGSE. The obligation
of RCG and RCGSE to consummate the Transactions to be performed by them in
connection with the Closing is subject to satisfaction or waiver of the
following conditions by RCG at or prior to Closing:
7.1 Representations and Warranties. The representations and warran-
ties of Sellers, DCA and Xx. Xxxxx set forth in this Agreement, the Dis-
closure Schedules hereto and any document or instrument delivered to RCG
or RCGSE hereunder, shall be true and correct in all material respects as
of the Closing with the same force and effect as if such representations
and warranties had been made at and as of the Closing.
7.2 Performance; Covenants. All of the terms, covenants and condi-
tions of the Transaction Documents to be complied with or performed by
Sellers, DCA and Xx. Xxxxx at or prior to Closing shall have been
complied with and performed in all material respects.
7.3 No Material Adverse Change. Prior to the Closing Date, there
shall be no material adverse change in the Acquired Assets or Assumed
Liabilities and the business or condition, financial, medical or other-
wise of Sellers' Business; or the results of operations or prospects of
Sellers' Business as a result of any event or occurrence, including but
not limited to any legislative or regulatory change, revocation of any
license or rights to do business, fire, casualty, flood, condemnation,
or act of God, public force or otherwise.
7.4 No Injunction, Etc. No action, proceeding, investigation or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency, or legislative body to enjoin, restrain,
prohibit or obtain substantial damages in respect of, or which is related
to or arises out of, this Agreement or the consummation of the Transac-
tions, or which is related to or arises out of Sellers' Business.
7.5 Document Delivery. Sellers shall have delivered to RCG and RCGSE
the following:
(a) a Xxxx of Sale conveying each of Sellers' interest in the
Acquired Assets substantially in the form attached hereto as
Exhibit C duly executed by Sellers, as applicable;
---------
(b) Assignment of Contracts transferring each of Sellers' interest
in the Sellers Agreements substantially in the form attached
hereto as Exhibit D duly executed by Sellers, as applicable;
---------
(c) an Assignment of Contracts transferring the In-patient Agreement,
substantially in the form attached hereto as Exhibit B duly
---------
executed by DCAMS;
(d) an Assignment of Lease transferring the real property lease for
the property identified on Schedule 3.16(b) duly executed by DSF
----------------
and the owner(s) of such leased real property, substantially in
the form attached hereto as Exhibit E;
---------
(e) each of Sellers' shall have delivered to RCG an officer's cer-
tificate dated as of the Closing Date to the effect that each
of the conditions specified above in Sections 7.1 through 7.4
are satisfied in all respects;
(f) good standing certificates regarding each of Sellers certified
by the Secretary of State of Florida dated within fifteen (15)
business days of the Closing;
(g) all authorizations, consents, and approvals of governmental
agencies and other Persons required to consummate the Transac-
tions;
(h) resolutions of each of Sellers in form and substance satisfactory
to RCG approving the execution, delivery and performance of this
Agreement and the consummation of the Transactions, certified by
an appropriate officer of each such entity;
(i) an incumbency certificate certifying the identity of the officers
of each of Sellers;
(j) the opinion of counsel to DSF in form and substance as set forth
in Exhibit F attached hereto, addressed to RCG and RCGSE and
---------
dated as of the Closing Date; and,
(k) such other instruments as may be reasonably requested by RCG in
order to give effect to or carry out the intent of this Agreement.
7.6 Medical Director Agreement. Practice and RCGSE shall have entered
into the Medical Director Agreement.
7.7 Necessary Consents and Approvals. The Parties shall have obtained
all licenses, consents and permits and provided all notices necessary in
order for to consummate the Transactions and for the operation of Sellers'
Business by RCGSE after the Closing consistent with its operation prior to
the Closing, including all consents and approvals listed on the Disclosure
Schedules hereto.
7.8 Satisfactory Due Diligence.
(a) RCG shall in all respects be reasonably satisfied with the re-
sults of its due diligence investigation of Sellers, including
its continuing review of matters contained or not contained in
the Disclosure Schedules.
(b) RCG shall have received Uniform Commercial Code, court and
docket searches (conducted through a date reasonably approximate
in time to the Closing) in all jurisdictions where Sellers have
any personal property or fixtures, which shall be in form, scope
and substance satisfactory to RCG, and which shall not disclose
any liens, security interests or encumbrances in the Acquired
Assets that are not listed on the Disclosure Schedules hereto.
7.9 Securities Matters. RCG shall have determined that the issuance
of the RCG Shares shall be exempt from registration under all applicable
state and federal securities laws and regulations.
8 Conditions to Obligation to Close of Sellers, DCA and Xx. Xxxxx.
The obligation of Sellers, DCA and Xx. Xxxxx to consummate the Transactions
to be performed by them in connection with the Closing is subject to satis-
faction or waiver by Sellers, DCA and/or Xx. Xxxxx at or prior to Closing
of the following conditions:
8.1 Representations and Warranties. The representations and war-
ranties of RCG and RCGSE set forth in the Transaction Documents shall be
true and correct in all material respects as of the Closing with the same
force and effect as if such representations and warranties had been made
at and as of the Closing.
8.2 Performance; Covenants. All of the terms, covenants and condi-
tions of the Transaction Documents to be complied with or performed by RCG
and RCGSE at or prior to Closing shall have been complied with and per-
formed in all material respects.
8.3 No Injunction, Etc. No action, proceeding, investigation or
legislation shall have been instituted, threatened or proposed before any
court, governmental agency, or legislative body to enjoin, restrain,
prohibit or obtain substantial damages in respect of, or which is related to
or arises out of, this Agreement or the consummation of the Transactions
or which is related to or arises out of Sellers' Business or operations of
the Acquired Assets, if such action, proceeding, investigation or legisla-
tion, in the reasonable judgment of Sellers would make it inadvisable to
consummate such Transactions.
8.4 Document Delivery. RCG or RCGSE shall have delivered the
following:
(a) an officer's certificate dated as of the Closing Date to the
effect that each of the conditions specified above in Sections
8.1 through 8.3 are satisfied in all respects.
(b) a good standing certificate regarding RCG and RCGSE certified
by the Secretary of State of the states of their organization
dated within fifteen (15) business days of the Closing;
(c) resolutions of RCG and RCGSE in form and substance satisfactory
to Sellers approving the execution, delivery and performance of
this Agreement and the consummation of the Transactions certified
by an appropriate officer of RCG and RCGSE;
(d) an incumbency certificate certifying the identity of the officers
of RCG and RCGSE;
(e) the DSF Purchase Price, the DCAMS Purchase Price and the DMI
Purchase Price as provided in Section 2.2 above;
(f) an Assignment of Lease transferring the real property lease for
the property identified on Schedule 3.16(b) duly executed by
----------------
RCGSE and the owner(s) of such leased real property;
(g) an Assignment of Contracts transferring the In-patient Agreement,
substantially in the form attached hereto as Exhibit B duly
---------
executed by RCGSE;
(h) the opinion of counsel to RCG in form and substance as set
forth in Exhibit G attached hereto, addressed to DSF and dated
---------
as of the Closing Date;
(i) All authorizations, consents, and approvals of governmental
agencies and other Persons required to consummate the Transac-
tions; and
(j) such other instruments as may be reasonably requested by Sellers
in order to give effect to or carry out the intent of this Agree-
ment.
8.5 Medical Director Agreement. Practice and RCG shall have entered
into the Medical Director Agreement.
9 Closing and Termination.
9.1 Actions at the Closing. If all the conditions set forth in
Sections 7 and 8 shall have been fulfilled or waived in accordance herewith
and this Agreement shall not have been terminated as provided in Section
9.2, the Parties shall close the Transactions. At the Closing, (i) Sellers
will deliver to RCG and RCGSE the various certificates, instruments, and
documents referred to in Section 7.5 and (ii) RCG and RCGSE will deliver
to Sellers the various certificates, instruments, and documents referred
to in Section 8.4.
9.2 Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(a) RCG and Sellers may terminate this Agreement by mutual written
consent at any time prior to the Closing;
(b) RCG may terminate this Agreement by giving written notice to
Sellers at any time prior to the Closing (i) in the event Sellers
have breached any representation, warranty, or covenant contained
in this Agreement in any material respect, RCG has notified
Sellers of the breach, and the breach has continued without cure
for a period of 10 days after the notice of breach or (ii) if
the Closing shall not have occurred on or before November 30,
1997, by reason of the failure of any condition precedent under
Section 7 hereof (unless the failure results primarily from RCG
or RCGSE breach of any representation, warranty, or covenant
contained in this Agreement); and
(c) Sellers may terminate this Agreement by giving written notice to
RCG at any time prior to the Closing (i) in the event RCG has
breached any representation, warranty, or covenant contained in
this Agreement in any material respect, Sellers have notified
RCG of the breach, and the breach has continued without cure for
a period of ten (10) days after the notice of breach or (ii) if
the Closing shall not have occurred on or before November 30,
1997, by reason of the failure of any condition precedent under
Section 8 hereof (unless the failure results primarily from
Sellers breach of any representation, warranty, or covenant
contained in this Agreement).
9.3 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 9.2 above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to the other
Party (except for any liability of any Party then in breach); provided,
however, that the confidentiality provisions contained in Section 6 above
shall survive termination.
10 Remedies for Breaches of this Agreement.
10.1 Survival of Representations and Warranties. All of the repre-
sentations and warranties of the Parties contained in this Agreement shall
survive the Closing and shall not be limited, extinguished or otherwise
affected by the execution and delivery of any instrument at the Closing
or by any investigation by RCG. The representations and warranties of the
Parties shall survive until one year following the Closing Date. Provided,
however, that the right to indemnification with respect to any claim for
which written notice was given to Sellers prior to the termination of such
one year period shall extend beyond such period and shall expire on the
expiration of the statutes of limitations applicable to any claims or
causes of action with respect to matters covered thereby.
10.2 Joint Indemnification By Sellers, DCA and Xx. Xxxxx. Sellers,
DCA, and Xx. Xxxxx, jointly and severally, agree to and shall defend,
indemnify and hold harmless RCG, RCGSE and their successors and assigns,
officers and directors against any and all Adverse Consequences resulting
from or arising out of the breach, untruth or inaccuracy of any represen-
tation, warranty or covenant of Sellers set forth in this Agreement or
arising as a result of the matters identified on Schedule 10.2 hereto.
-------------
Sellers, DCA and Xx. Xxxxx, jointly and severally, further agree to and
shall defend, indemnify and hold harmless RCG and RCGSE against any and
all Adverse Consequences resulting from any such breach, untruth or
inaccuracy, or which may be incurred to compromise or defend such
liabilities, causes of action, or claims of any nature, absolute or
contingent, known or unknown of the representations, warranties and
covenants of Sellers. Sellers and DCA, jointly and severally, and
Xx. Xxxxx, individually, specifically agree to indemnify RCG and RCGSE
against any Adverse Consequences incurred by RCG or RCGSE attributable to
the Acquired Assets or the operation of Sellers' Business prior to the
Closing Date and not expressly assumed hereunder. Each of Sellers, DCA
and Xx. Xxxxx shall be liable for the full amount of the Adverse Conse-
quences under this Section 10.2 subject only to the limitation of
Section 10.8 below.
10.3 Individual Indemnification By DCA and Xx. Xxxxx. DCA and
Xx. Xxxxx individually agree to and shall defend, indemnify and hold
harmless RCG, RCGSE and their successors and assigns, officers and
directors against any and all Adverse Consequences resulting from or
arising out of the breach, untruth or inaccuracy of any representation,
warranty or covenant made individually by each of them in this Agreement.
Each of DCA and Xx. Xxxxx further agree to and shall defend, indemnify
and hold harmless RCG and RCGSE against any and all Adverse Consequences
resulting from any such breach, untruth or inaccuracy, or which may be
incurred to compromise or defend such liabilities, causes of action, or
claims of any nature, absolute or contingent, known or unknown.
10.4 Indemnification By RCG and RCGSE. RCG and RCGSE, jointly and
severally, agree to and shall defend, indemnify and hold harmless Sellers,
DCA, and Xx. Xxxxx, and their successors and assigns, officers and
directors, against any and all damages resulting from or arising out of
the breach, untruth or inaccuracy of any representation, warranty or
covenant of RCG or RCGSE set forth in this Agreement. RCG and RCGSE
further agree to and shall defend, indemnify and hold harmless Sellers,
DCA, and Xx. Xxxxx against any and all Adverse Consequences resulting
from or arising out of any such breach, untruth or inaccuracy, or which
may be incurred to compromise or defend such liabilities, causes of
action or claims of any nature absolute or contingent, known or unknown.
10.5 Matters Involving Third Parties.
(a) If any third party shall notify any Party (the "Indemnified
Party") with respect to any matter (a "Third Party Claim")
which may give rise to a claim for indemnification against the
other Party (the "Indemnifying Party") under this Section 10,
then the Indemnified Party shall promptly (and in any event with-
in five business days after receiving notice of the Third Party
Claim) notify the Indemnifying Party thereof in writing.
(b) The Indemnifying Party will have the right at any time to assume
and thereafter conduct the defense of the Third Party Claim with
counsel of its choice reasonably satisfactory to the Indemnified
Party; provided, however, that the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement
with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably)
unless the judgment or proposed settlement involves only the
payment of money damages and does not impose an injunction or
other equitable relief upon the Indemnified Party.
(c) Unless and until the Indemnifying Party assumes the defense of
the Third Party Claim as provided in Section 10.5 above, however,
the Indemnified Party may defend against the Third Party Claim
in any manner it reasonably may deem appropriate.
(d) In no event will the Indemnified Party consent to the entry of
any judgment or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the In-
demnifying Party (not to be withheld unreasonably).
(e) The Indemnified Party shall be entitled to retain separate
counsel of its own choosing to review the progress and defense of
any Third Party Claim, at the Indemnified Party's sole cost and
expense; provided, however, that in the event counsel to the
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Indemnifying Party or the Indemnified Party reasonably advises
that the Indemnified Party has available defenses or counter-
claims that may not properly be asserted by the Indemnifying
Party, or that there exists a conflict of interest which
ethically precludes counsel for the Indemnifying Party from
concurrently representing the interests of the Indemnified Party,
the Indemnifying Party shall be responsible for the reasonable
fees and expenses of counsel to the Indemnified Party, and such
counsel may enter an appearance on behalf of the Indemnified
Party and actively participate in the defense (including assertion
and prosecution of any counter-claims or cross-claims) of the
Indemnified Party.
10.6 Indemnification Deductible. No party hereto shall be required to
indemnify any other party hereto unless the amount of the loss or claim for
which indemnification is sought, when aggregated with all other losses and
claims for which indemnification is sought by such party, exceeds Fifty
Thousand Dollars ($50,000.00), at which time rights to indemnification for
losses and claims may be asserted for all amounts; provided, however, that
the indemnification deductible set forth in this Section 10.6 shall not
apply to claims made relating the non-fulfillment of any covenant or
agreement contained in Sections 6.3 and 6.4.
10.7 Insurance. Any indemnified loss shall be reduced by the amount
of any insurance proceeds actually received from insurance maintained by
the Indemnified Party.
10.8 Indemnification Limit. Notwithstanding anything herein to the
contrary, all claims for indemnification under Sections 10.2 and 10.3 are
enforceable only up to an aggregate of Five Million Sixty-Five Thousand
Dollars ($5,065,000).
11 Miscellaneous.
11.1 Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject
matter of this Agreement prior to the Closing without the prior written
approval of the other Party; provided, however, that any Party may make
any public disclosure it believes in good faith is required by applicable
law or any listing or trading agreement concerning its publicly-traded
securities (in which case the disclosing Party will use its reasonable
efforts to advise the other Party prior to making the disclosure).
11.2 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties, their re-
spective successors and permitted assigns.
11.3 Entire Agreement. This Agreement (including the documents re-
ferred to herein) constitutes the entire agreement between the Parties
and supersedes any prior understandings, agreements, or representations
by or between the Parties, written or oral, to the extent they related
in any way to the subject matter hereof.
11.4 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agree-
ment or any of its rights, interests, or obligations hereunder without the
prior written approval of the other Party provided, however, RCG and RCGSE
may assign their rights hereunder to an Affiliate.
11.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
11.7 Notices. All notices, requests, demands, claims, and other com-
munications hereunder will be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if
(and then two business days after) it is sent by registered or certified
mail, return receipt requested, postage prepaid, and addressed to the
intended recipient as set forth below:
If to RCG: Renal Care Group, Inc.
0000 Xxxx Xxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx, Executive Vice President
with a copy to: Baker, Donelson, Bearman & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
If to Sellers: Dialysis Corporation of America, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attention: Xxx Xxxxx
with a copy to: Xxxxxxxx X. Xxxxx, Esq.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx Xxxxxxx, Xxx Xxxxxx 00000
J. Xxxxxx Xxxxxx, Esq.
Xxxxxx & Brownless
000 Xxxxxxxx Xxxxx, Xxxxx 0
Xxxxxxx, Xxxxxxx 00000
Any Party may send any notice, request, demand, claim, or other communica-
tion hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail, or electronic mail),
but no such notice, request, demand, claim, or other communication shall
be deemed to have been duly given unless and until it actually is
received by the intended recipient. Any Party may change the address
to which notices, requests, demands, claims, and other communications
hereunder are to be delivered by giving the other Party notice in the
manner herein set forth.
11.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Florida without
giving effect to any choice or conflict of law provision or rule that
would cause the application of the laws of any other jurisdiction.
11.9 Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed
by the Parties. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not,
shall be deemed to extend to any prior or subsequent default, misrepre-
sentation, or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
11.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision
in any other situation or in any other jurisdiction.
11.11 Expenses. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with
this Agreement and the Transactions. DSF shall pay all of its costs and
expenses prior to the Closing Date.
11.12 Costs. Should any legal proceeding arising out of this Agree-
ment be instituted by any Party against another Party, the Party
prevailing in such suit shall be entitled, in addition to such other
damages and relief as the court shall award, to reimbursement of
reasonable attorneys' fees, costs and expenses incurred in the prose-
cution or defense of such suit.
11.13 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
[SIGNATURES ON NEXT PAGE]
IN WITNESS WHEREOF, the Parties have executed this Agreement on the
day and year hereinabove first set forth.
RENAL CARE GROUP, INC.
By: /s/ Xxxxxx Xxxxx
---------------------------
Title: CFO
RENAL CARE GROUP OF THE
SOUTHEAST, INC.
By: /s/ Xxxxxx Xxxxx
---------------------------
Title: Secretary/Treasurer
DIALYSIS SERVICES OF FLORIDA, INC.
- FORT XXXXXX BEACH
By: /s/ Xxxx Xxxxxxxxx
---------------------------
Title: President
DIALYSIS CORPORATION OF AMERICA, INC.
By: /s/ Xxxx Xxxxxxxxx
---------------------------
Title: President
DCA MEDICAL SERVICES, INC.
By: /s/ Xxxx Xxxxxxxxx
---------------------------
Title: President
DIALYSIS MEDICAL, INC.
By: /s/ Xxxx Xxxxxxxxx
---------------------------
Title: President
/s/ Xxxxx X. Xxxxx, M.D.
______________________________
XXXXX X. XXXXX, M.D.
LIST OF EXHIBITS
Exhibit A Medical Director Agreement
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Exhibit B Assignment of In-patient Agreement
---------
Exhibit C Xxxx of Sale
---------
Exhibit D Assignment of Contracts
---------
Exhibit E Assignment of Lease
---------
Exhibit F Opinion of Counsel to Sellers
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Exhibit G Opinion of Counsel to RCG
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