Stock Purchase Agreement - NovaCare Inc. and HealthSouth Corp.
STOCK PURCHASE AGREEMENT
******
NOVACARE, INC.,
NC RESOURCES, INC.
AND
HEALTHSOUTH Corporation
Dated: February 3, 1995
<PAGE>
STOCK PURCHASE AGREEMENT
Table of Contents
ARTICLE 1
DEFINITIONS
........................................................................... 1
Section 1.1 Certain Defined Terms......................................... 1
Section 1.2 Index of Other Defined Terms.................................. 3
ARTICLE 2
BASIC TRANSACTIONS
........................................................................... 4
Section 2.1 Conveyance of RSC Shares...................................... 4
Section 2.2 Purchase Price; Post Closing Adjustment....................... 4
Section 2.3 Excluded Assets............................................... 5
Section 2.4 Employee Matters.............................................. 6
Section 2.5 Use of Names and Manuals...................................... 6
Section 2.6 Procedure for Consents or Default............................. 7
Section 2.7 Closing....................................................... 7
Section 2.8 Resolution of Cooperative Arrangements........................ 8
Section 2.9 Guaranty by NovaCare.......................................... 9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
........................................................................... 9
Section 3.1 Organization and Corporate Power.............................. 9
Section 3.2 RSC and Subsidiaries.......................................... 10
Section 3.3 Authority Relative to this Agreement.......................... 10
Section 3.4 Absence of Breach............................................. 10
Section 3.5 Private Party Consents........................................ 11
Section 3.6 Governmental Consents......................................... 11
Section 3.7 Brokers....................................................... 11
Section 3.8 Title to Personal Property.................................... 11
Section 3.9 Contracts and Leases.......................................... 12
Section 3.10 Licenses..................................................... 12
Section 3.11 Employee Relations........................................... 12
Section 3.12 Employee Plans............................................... 12
Section 3.13 Litigation................................................... 13
Section 3.14 Inventory.................................................... 13
Section 3.15 Hazardous Substances......................................... 13
Section 3.16 Financial Information and Related Matters.................... 13
Section 3.17 Changes Since Balance Sheet.................................. 15
Section 3.18 Compliance with Laws......................................... 15
Section 3.19 Lists of Other Data.......................................... 16
(i)
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
........................................................................... 16
Section 4.1 Organization and Corporate Power.............................. 16
Section 4.2 Authority Relative to this Agreement.......................... 16
Section 4.3 Absence of Breach............................................. 17
Section 4.4 Private Party Consents........................................ 17
Section 4.5 Governmental Consents......................................... 17
Section 4.6 Brokers....................................................... 17
Section 4.7 Qualified for Licenses........................................ 17
Section 4.8 Financial Ability to Perform.................................. 17
Section 4.9 No Assurance.................................................. 18
Section 4.10 Disposal of Assets........................................... 18
ARTICLE 5
COVENANTS OF EACH PARTY
........................................................................... 18
Section 5.1 Efforts to Consummate Transactions............................ 18
Section 5.2 Cooperation................................................... 18
Section 5.3 Further Assistance............................................ 19
Section 5.4 Cooperation Respecting Proceedings............................ 19
Section 5.5 Expenses...................................................... 19
Section 5.6 Announcements; Confidentiality................................ 20
Section 5.7 Cost Reports.................................................. 21
ARTICLE 6
ADDITIONAL COVENANTS OF SELLER
........................................................................... 22
Section 6.1 Conduct Pending Closing....................................... 22
Section 6.2 Access and Information; Environmental Survey; Remediation or
Adjustment.................................................... 23
Section 6.3 Updating...................................................... 24
Section 6.4 No Solicitation............................................... 24
Section 6.5 Filing of Cost Reports........................................ 24
ARTICLE 7
ADDITIONAL COVENANTS OF BUYER
........................................................................... 24
Section 7.1 Waiver of Bulk Sales Law Compliance........................... 24
Section 7.2 Cost Reports and Audit Contests............................... 24
Section 7.3 Letters of Credit............................................. 25
(ii)
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ARTICLE 8
BUYER'S CONDITIONS TO CLOSING
........................................................................... 25
Section 8.1 Performance of Agreement...................................... 25
Section 8.2 Accuracy of Representations and Warranties.................... 25
Section 8.3 Officer's Certificate......................................... 25
Section 8.4 Consents...................................................... 25
Section 8.5 Absence of Injunctions........................................ 25
Section 8.6 Opinion of Counsel............................................ 26
Section 8.7 Receipt of Other Documents.................................... 26
Section 8.8 Certificates of Need and Consents............................. 26
ARTICLE 9
SELLER'S CONDITIONS TO CLOSING
........................................................................... 27
Section 9.1 Performance of Agreement...................................... 27
Section 9.2 Accuracy of Representations and Warranties.................... 27
Section 9.3 Officer's Certificate......................................... 27
Section 9.4 Consents...................................................... 27
Section 9.5 Absence of Injunctions........................................ 28
Section 9.6 Opinion of Counsel............................................ 28
Section 9.7 Receipt of Other Documents.................................... 28
ARTICLE 10
TERMINATION
........................................................................... 29
Section 10.1 Termination................................................. 29
Section 10.2 Effect of Termination....................................... 29
ARTICLE 11
SURVIVAL AND REMEDIES; INDEMNIFICATION
........................................................................... 29
Section 11.1 Survival..................................................... 29
Section 11.2 Exclusive Remedy............................................. 29
Section 11.3 Indemnity by Seller.......................................... 30
Section 11.4 Indemnity by Buyer........................................... 30
Section 11.5 Further Qualifications Respecting Indemnification............ 31
Section 11.6 Procedures Respecting Third Party Claims..................... 32
(iii)
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ARTICLE 12
GENERAL PROVISIONS
........................................................................... 32
Section 12.1 Notices...................................................... 32
Section 12.2 Attorneys' Fees.............................................. 34
Section 12.3 Successors and Assigns....................................... 34
Section 12.4 Counterparts................................................. 34
Section 12.5 Captions and Paragraph Headings.............................. 34
Section 12.6 Entirety of Agreement; Amendments............................ 34
Section 12.7 Construction................................................. 34
Section 12.8 Waiver....................................................... 35
Section 12.9 Governing Law................................................ 35
Section 12.10 Severability................................................ 35
Section 12.11 Consents Not Unreasonably Withheld.......................... 35
Section 12.12 Time Is of the Essence...................................... 35
(iv)
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LIST OF SCHEDULES
A-1 Subsidiaries and Their
Respective States of Incorporation and
Qualification
A-2 Facilities
1.1-1 Leased Real Property
1.1-2 Other Contracts
1.1-3 Owned Real Property
1.1-5 Transferred Business Names
2.3 Excluded Assets
2.4 Employee Pension Benefit Plans
3.7 Brokers
3.13 Litigation
3.16(a) EBITDA Statements
3.16(b) Balance Sheet
3.19(a) Depreciation Schedule
3.19(b) Personal Property Leases
3.19(c) Insurance
3.19(d) Employee Benefit Arrangements
3.19(f) Material Licenses
7.3 Bonds, Letters of Credit, etc.
(v)
<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, made and entered into as of the 3d day of
February, 1995, by and among NOVACARE, INC., a Delaware corporation
("NovaCare"), NC RESOURCES, INC., a Delaware corporation ("Seller"), and
HEALTHSOUTH Corporation, a Delaware corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, Seller owns all of the issued and outstanding capital stock of
Rehab Systems Company, a Delaware corporation ("RSC");
WHEREAS, through subsidiary corporations identified on Schedule A-1
hereto (each, a "Subsidiary", and collectively, the "Subsidiaries"), RSC engages
in the business of delivering rehabilitative health care services to the public
through 11 rehabilitation hospitals, five community re-entry centers, five
sub-acute units and two satellite outpatient facilities, all of which are
identified on Schedule A-2 (the "Facilities");
WHEREAS, Buyer desires to purchase from Seller, and Seller desires to
sell to Buyer, all of the issued and outstanding shares of capital stock of RSC
(the "RSC Shares"), such transaction being referred to herein as the
"Transaction"; and
WHEREAS, NovaCare is the ultimate parent of Seller and is willing to
guarantee the obligations of Seller hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
promises and covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledge, the
parties hereto to hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Defined Terms. For purposes of this Agreement, the
following terms shall have the following meanings:
"Affiliate" of a specified person shall mean any corporation,
partnership, sole proprietorship or other person or entity which directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with the person specified. The term "control" means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a person or entity.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
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"Cost Report" shall mean the cost report required to be filed,
as of the end of a provider cost year or for any other required period, with
cost-based Payors with respect to cost reimbursement.
"Cost Report Settlements" shall mean all right, title and
interest of RSC or any Subsidiary in assets resulting from the finalization with
Payors of amounts due with respect to Cost Reports.
"Equipment" means fixed machinery and equipment, other
fixtures and fittings, movable plant, machinery, equipment and furniture,
trucks, tractors, trailers, and other vehicles, tools and other similar items of
tangible personal property (i) that are not consumed, disposed of or held for
sale or as Inventory in the ordinary course of business, and (ii) that are owned
or leased by or consigned to RSC or any Subsidiary as of the closing.
"Inventory" means all of RSC's or any Subsidiary right, title
and interest in and to inventories and supplies, drugs, food, janitorial and
office supplies, maintenance and shop supplies, and other similar items of
tangible personal property intended to be consumed, disposed of or sold, in the
ordinary course of business that are owned by or consigned to RSC or any
Subsidiary as of the Closing.
"Knowledge" of a party shall mean the collective knowledge of
the persons who serve as of the date of this Agreement as the duly elected
officers of such party.
"Laws" shall mean all statutes, rules, regulations,
ordinances, orders, codes, permits, licenses and agreements with or of federal,
state, local and foreign governmental and regulatory authorities and any order,
writ, injunction or decree issued by any court, arbitrator or governmental
agency or in connection with any judicial, administrative or other non-judicial
proceeding (including, without limitation, arbitration or reference).
"Leased Real Property" shall mean the land, Facilities and
real property improvements (whether owned or leased) which are held by RSC or
any Subsidiary pursuant to the Real Property Leases and which are identified in
Schedule 1.1-1, together with all construction work-in-progress in respect
thereof and rights, privileges and easements appurtenant thereto.
"Licenses" shall mean certificates of need, accreditations,
registrations, licenses, permits and other consents or approvals of governmental
agencies or accreditation organizations.
"Other Contracts" shall mean all contracts and agreements to
which RSC or any Subsidiary is a party as of the Closing, other than Real
Property Leases, including, but not limited to the contracts identified on
Schedule 1.1-2, which contains a list of the following categories of Other
Contracts: constructions contracts relating to construction work-in-progress at
a Facility; equipment leases (whether operating or capitalized leases),
installment purchase contracts where the annualized lease or installment
payments exceed $25,000; contracts or arrangements binding on a Subsidiary or a
Facility which contain any covenant not to compete or otherwise significantly
restrict the nature of the business activities in which such Subsidiary or
Facility may engage; employment contracts, if any, between RSC, any Subsidiary
or any Facility and any person providing services for such Facility; collective
bargaining agreements, if any; Medicare and Medicaid provider numbers and
provider agreements, and provider agreements with other Payors; and any other
contracts pursuant to which RSC or any Subsidiary paid or received over $25,000
during its last fiscal year; provided, however, that Schedule 1.1-2 need not
list an Other Contract if all material obligations of RSC and/or the Subsidiary
thereunder have been, or prior to the Closing will be, completed or RSC, or RSC
or the Subsidiary is entitled, or has or by the Closing will have exercised a
right, to terminate the contract without penalty on 90 days' notice or less.
<PAGE>
"Owned Real Property" shall mean the real property owned in
fee by RSC or any Subsidiary that is identified on Schedule 1.1-3, together with
the Facilities located thereon, construction work-in-progress, and all other
buildings and improvements thereon, and all rights, privileges, permits and
easements appurtenant thereto.
"Payor" shall mean Medicare, Medicaid, CHAMPUS and Medically
Indigent Assistance programs, Blue Cross, Blue Shield or any other third party
payor (including an insurance company), or any health care provider (such as a
health maintenance organization, preferred provider organization, peer review
organization, or any other managed care program).
"Prepayments" shall mean advance payments, prepayments,
prepaid expenses, deposits and the like made by RSC or any Subsidiary in the
ordinary course of business prior to the Closing, which exist as of the Closing
and with respect to which RSC or any Subsidiary will receive the benefit after
the Closing, and other items recorded as prepaid expenses by RSC and the
Subsidiaries.
"Real Property Leases" shall mean all leases pursuant to which
RSC or any Subsidiary holds a leasehold interest in land, Facilities and/or real
property improvements, all of which are identified on Schedule 1.1-4.
"Receivables" shall mean all of RSC's or any Subsidiary's
right, title and interest as of the Closing in and to accounts receivable
recorded by RSC or such Subsidiary as an account receivable from Payors,
patients and other third parties, including, but not limited to, Cost Report
Settlements.
"Taxes" shall mean (i) all federal, state, county and local
sales, use, property, payroll, recordation and transfer taxes, (ii) all state,
county and local taxes, levies, fees, assessments or surcharges (however
designated, including privilege taxes, room or bed taxes and user fees) which
are based on the gross receipts, net operating revenues or patient days of a
Facility for a period ending on, before or including the Closing Date (as
defined in Section 2.7) or a formula taking any one of the foregoing into
account, and (iii) any interest, penalties and additions to tax attributable to
any of the foregoing.
"Transferred Business Names" means all right, title and
interest of RSC or any Subsidiary in and to the business names set forth in
Schedule 1.1-5.
<PAGE>
Section 1.2 Index of Other Defined Terms. In addition to those terms
defined above, the following terms shall have the respective meanings given
thereto in the sections indicated below:
Defined Term Section
------------- ---------
Balance Sheet 3.16(b)
Buyer Preamble
Charter Documents 3.4
Claim Notice 11.6
Closing 2.7
Closing Balance Sheet 2.2(b)
Closing Date 2.7
Consultant 6.2(b)
Current Cost Reports 5.7(a)
EBITDA 3.16(a)
EBITDA Statements 3.16(a)
Employee Benefit Arrangements 3.18(d)
Environmental Regulations 3.15(a)
Environmental Survey 6.2(b)
ERISA 2.4
Excluded Assets 2.3
Facilities Recitals
Financial Schedule 3.16
Hazardous Materials 3.15
HSR Act 3.4
Indemnitee 11.5
Indemnitor 11.5(a)
Losses 11.3(a)
Manuals 2.5(b)
Material Adverse Effect 3.4
NovaCare Preamble
Panel 2.8
Pension Plans 2.14
Permitted Encumbrances 3.8
Post-Closing Adjustment Amount 2.2(b)
Prior Cost Reports 5.7(b)
Purchase Price 2.2(a)
Related Agreements 3.4
Seller Preamble
Subsidiaries Recitals
Termination Date 10.1(b)
Third Party Claims 11.5(a)
Transaction Recitals
Working Capital 2.2(b)
<PAGE>
ARTICLE 2
BASIC TRANSACTIONS
Section 2.1 Conveyance of RSC Shares. On the Closing Date, Seller will
convey, transfer and assign to Buyer all the Seller's right, title and interest
in and to the RSC Shares, free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever.
Section 2.2 Purchase Price; Post-Closing Adjustment. (a) The purchase
price (the "Purchase Price") in the aggregate for all of the RSC Shares shall be
$215,000,000, as adjusted pursuant to this Section 2.2, which price is based
upon the retention by RSC and the Subsidiaries of all assets which they own or
lease immediately prior to the Closing, including, but not limited to, working
capital and Receivables, subject only to Section 2.3 below.
(b) Within 30 days after the Closing, Seller shall deliver to
Buyer a balance sheet (the "Closing Balance Sheet") of RSC as of the Closing
Date, which shall be prepared in accordance with generally accepted accounting
principles, in a manner consistent with the methods and principles used by RSC
in preparing its financial statements on the date of this Agreement. Buyer shall
provide Seller with access to the books and records of RSC and the Subsidiaries
and the cooperation of their employees in connection with such preparation.
Seller shall also at that time prepare and deliver a statement computing a
"Post-Closing Adjustment Amount" equal to the difference between $26,573,000 and
the Working Capital of RSC as reflected on the Closing Balance Sheet. For
purposes of this Section 2.2, "Working Capital" shall mean the sum of the
following categories on the Closing Balance Sheet: (i) Cash, (ii) Net Patients
Accounts Receivable, (iii) Due (To) From Medicare, (iv) Other Accounts
Receivable, and (v) Other Current Assets, less (i) Accounts Payable, (ii)
Accrued Expenses and (iii) Other Current Liabilities. The following categories
shall not be included in the computation of Working Capital: (i) Current Portion
of Capital Leases and (ii) Current Portion of Long-Term Debt.
RSC and the Subsidiaries have received cash payments,
through the Subsidiary Cost Reports by interim or tentative cost report payments
and otherwise, based on Home Office Cost Statements of NovaCare for 1994 and
prior years. These amounts have historically been included as a liability in the
category Due (To) From Medicare. On the Closing Balance Sheet, these amounts
will be reclassified to a liability account entitled NovaCare, Inc. Home Office
Liability.
Cash held in trust accounts or other funds to pay
indebtedness pursuant to the Trust Indentures and Loan Agreements as amended (i)
by and between Mercer County, West Virginia and American Health Enterprises,
Ltd., and (ii) by and between Wood County, West Virginia and West Virginia
Rehabilitation Services, Inc. will be included in the category Cash on the
Closing Balance Sheet.
(c) Buyer shall have a period of 15 days from the date of
delivery to it of the Closing Balance Sheet and the Post-Closing Adjustment
Amount statement to object to the determination of the Post-Closing Adjustment
Amount, computed as aforesaid. In the event of an objection from Buyer, Price
Waterhouse, LLP and a public accounting firm chosen by Buyer shall have a period
of 15 days in which to review the Closing Balance Sheet and the statement
showing Seller's computation of the Post-Closing Adjustment Amount. If the
dispute is not resolved in the said 15-day period to the satisfaction of Buyer
and Seller, such accounting firms shall have an additional period of 15 days to
select a third accounting firm acceptable to both of them to review the Closing
Balance Sheet, and to make the final determination of the Post-Closing
Adjustment Amount, which determination, absent fraud, shall be conclusive and
binding. If Price Waterhouse and the second accounting firm are unable to agree
upon a third accounting firm to make the final determination, such an accounting
firm shall be appointed in accordance with the then-current rules of the
American Arbitration Association. The fees and expenses of the third accounting
firm shall be shared equally by Buyer and Seller.
<PAGE>
(d) Upon the determination of the Post-Closing Adjustment
Amount as provided for in the preceding two paragraphs, the Purchase Price to be
paid by Buyer hereunder shall be adjusted by the amount of the Post-Closing
Adjustment Amount. Such adjustment shall be paid by the appropriate party within
ten days after final determination of the Post-Closing Adjustment Amount.
Section 2.3 Excluded Assets. Notwithstanding any contrary provision of
this Agreement, the parties acknowledge and agree that the following described
assets of RSC and the Subsidiaries and the assets listed on Schedule 2.3
(collectively, "Excluded Assets") are not intended to be included in the
Transaction and that Seller, RSC and the Subsidiaries may take such actions as
are reasonably necessary to cause RSC and the Subsidiaries to sign all of their
respective right, title and interest in and to such Excluded Assets to Seller
(or a person or entity designated by Seller) immediately prior to the Closing:
all proprietary materials, documents, information, media, methods and processes
owned by Seller, and any and all rights to use the same, including, but not
limited to, all intangible assets of an intellectual property nature such as
trademarks, service marks and trade names (whether or not registered) other than
the Transferred Business Names, proprietary computer software, proprietary
procedures and manuals, promotional and marketing materials (including all
marketing and computer hardware and software); provided, however, that Buyer
shall have the rights set forth in Section 2.5.
Section 2.4 Employee Matters. Schedule 2.4 lists all "employee pension
benefit plans" ("Pension Plans") within the meaning of Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), in which
employees (as defined in Subsection (b) below) directly employed to work at the
Facilities participate. Neither Seller nor RSC nor any Subsidiary is a party to,
nor do any such employees participate in, any "multiemployer plans" within the
meaning of Section 3(37) of ERISA. Seller shall, or shall cause the Subsidiaries
to, (i) terminate as of the Closing Date the active participation of all such
employees in the Pension Plans, (ii) cause the Pension Plans to make timely
appropriate distributions, to the extent required, to such employees in
accordance with, and to the extent permitted by, the terms and conditions of
such Pension Plans, and (iii) in connection with the termination of the active
participation of all such employees in such Pension Plans, comply, and cause
each Pension Plan to comply, with all applicable Laws. Prior to the Closing,
Seller shall have delivered to Buyer, for information purposes only, forms of
any letters or other written communications which Seller or the Subsidiaries
shall distribute generally to such employees notifying them of their rights in
respect of their cessation of active participation in the Pension Plans.
<PAGE>
Section 2.5 Use of Names and Manuals.
(a) Although trade names of Seller, other than the Transferred
Business Names, are Excluded Assets, such names appear on certain fixtures and
Equipment, and on supplies, materials, stationery and similar consumable items
which will be on hand at the Facilities at the Closing. Notwithstanding that
such names are Excluded Assets, Buyer shall be entitled to use such consumable
items for a period of three months following the Closing and shall have up to
six months following the Closing to remove such names from fixed assets,
provided that Buyer shall not send correspondence or other materials to third
parties on any stationery that contains a trade name (other than a Transferred
Business Name) of Seller or any Affiliate of Seller.
(b) Seller hereby grants to Buyer, for the period from the
Closing Date through the expiration of the ninetieth day thereafter, the
non-exclusive right and license to use, solely in connection with the operation
of the Facilities, the clinical policy and procedures manuals of Seller (the
"Manuals") presently used at the Facilities. Such license shall be on the
following terms and conditions:
(i) Buyer shall accept the Manuals in their present
condition, "AS IS" and "WITH ALL FAULTS" and without any representation
or warranty of any kind whatsoever, either express or implied, by
Seller, including, but not limited to, any representation or warranty
that the Manuals are adequate for Buyer's operation of the Facilities
after the Closing or are in compliance with any Laws;
(ii) Buyer agrees that Seller shall have no
obligation whatsoever to update or otherwise revise the Manuals, even
if Seller or its Affiliates are revising similar manuals at other
healthcare facilities, and that Buyer shall have sole responsibility
for updating and revising such manuals;
(iii) Buyer acknowledges and agrees that the Manuals
are confidential and proprietary information of Seller and its
Affiliates and Buyer agrees that it will not, directly or indirectly,
reproduce, distribute or disclose the contents of the Manuals except as
may be required in the operation of the Facilities (including, but not
limited to, as may be required by any Laws) and shall exercise due care
to otherwise preserve and protect the proprietary nature thereof;
(iv) Upon the termination of Buyer's use of the
Manuals pursuant to this Section, Buyer shall return to Seller all
originals and copies of the Manuals; and
(v) Buyer shall diligently implement its own policy
and procedure manuals promptly following the Closing Date, and in any
event by the date on which the license hereby granted to Buyer
terminates.
<PAGE>
Section 2.6 Procedure for Consents or Default. The transfer of the RSC
Shares, in the absence of the consent or authorization of a third party, could
constitute a breach or default under a lease, agreement, encumbrance, obligation
or commitment or could adversely affect the rights, or increase the obligations,
of Buyer, Seller, RSC or any Subsidiary with respect thereto. If any such
consent or authorization is not obtained before Closing, and transfer of such
lease, agreement, encumbrance, obligation or commitment in the absence of such
consent or authorization would be ineffective or would adversely affect the
rights or increase the obligations of Seller, RSC, a Subsidiary or Buyer, with
respect to any such lease, agreement, encumbrance or commitment, so that Buyer
would not, in fact, receive all such rights, or assume the obligations of
Seller, RSC or such Subsidiary with respect thereto, as they exist prior to
Closing, then, in accordance with the procedures described in Section 2.8,
Seller and Buyer shall, and Seller shall cause RSC and each Subsidiary to, enter
into such reasonable cooperative arrangements as may be reasonably acceptable to
both Buyer and Seller (including, without limitation, sublease, agency,
management, indemnity or payment arrangements and/or other means to enforce, at
the cost and for the benefit of Buyer and any and all rights of RSC and the
Subsidiaries against an involved third party) to provide for Buyer the benefits
of such items or to relieve Seller from the obligations of such items. The
assignment of any contract, lease, agreement, encumbrance, obligation or
commitment, including, but not limited to, Medicare, Medicaid and similar
provider agreements, which may lawfully be made subject to customary conditions
subsequent (such as needs surveys, evaluations of Buyer or other determinations
by the counterparties to such agreements) shall be deemed not to constitute a
default under, or to in any way adversely affect the rights or increase the
obligations of Buyer with respect to, such lease, agreement, encumbrance or
commitment, whether or not the counterparty indicates prior to the Closing that
such condition or conditions subsequent are likely or not likely to be met.
Section 2.7 Closing. Subject to the terms and conditions hereof, the
consummation of the Transactions (the "Closing") shall occur at a mutually
agreeable time and place or places within five business days after the first
date on which all of the conditions set forth in Article 8 and Article 9 hereof
are capable of being satisfied, but in no event later than the Termination Date
set forth in Section 10.1(b). The date on which the Closing actually occurs is
referred to herein as the "Closing Date". The Closing shall be effective for all
purposes at 11:59 p.m. Eastern Time on the Closing Date. At the Closing, and
subject to the terms and conditions hereof, the following will occur:
(a) Deliveries by Seller. Seller shall deliver, or cause the
Subsidiaries to deliver, to Buyer:
(i) A certificate or certificates representing the
RSC Shares, together with stock powers duly executed in blank:
(ii) The documents and instruments required pursuant
to Section 8.7; and
(iii) Such other instruments of transfer executed by
Seller as may be necessary or advisable to transfer to and vest in
Buyer all of Seller's right, title and interest in and to the RSC
Shares.
<PAGE>
(b) Deliveries by Buyer. Buyer shall deliver to Seller:
(i) Immediately available funds, by way of wire
transfer to an account or accounts designated by Seller, in an amount
equal to the Purchase Price, as adjusted by the expenses due at Closing
pursuant to Section 5.5; and
(ii) The documents and instruments required to be
delivered pursuant to Section 9.7.
Section 2.8 Resolution of Cooperative Arrangements. In the event that
circumstances exist that require the parties to negotiate in good faith
cooperative arrangements under Section 2.6 or potential amendments to this
Agreement pursuant to Sections 8.5 then and in such event, such negotiations,
and the resolution of disagreements arising therefrom, shall be conducted in
accordance with the provisions of this Section 2.8. The parties shall negotiate
such cooperative arrangements in good faith prior to any scheduled Closing Date
(as may be extended by mutual agreement of the parties). If the parties are
unable to agree by the day prior to such scheduled Closing Date, then such
scheduled Closing Date (and the Termination Date, if necessary) shall be
extended for up to 15 business days to provide for the opportunity to resolve
such disagreement pursuant to the provisions of this Section 2.8. On the day the
Closing would have occurred but for the absence of agreement between the
parties, each party shall designate an individual (who may not be a present or
former officer, director, partner or employee of the party or of any present or
former investment banker, accounting firm, law firm or attorney of or for the
party) to mediate such disagreement, and advise the other party in writing of
the identity of such individual, which advice shall be accompanied by a list of
up to 10 suggested neutral individuals to serve as a third mediator. The
mediators originally designated by each party shall promptly confer about the
selection of a third mediator from such lists, and within five business days
following the originally scheduled Closing Date (or Termination Date, as the
case may be), the originally designated mediators shall agree upon and (subject
to availability) select the third mediator from the lists submitted by the
parties or otherwise, provided that if the originally designated mediators fail
to agree upon a third mediator by such date, the third mediator shall be
designated by the American Arbitration Association in accordance with its
then-current rules. The three mediators so selected are herein referred to as
the "Panel". Within two business days following the designation of the third
mediator, each party shall submit to the Panel in writing, its proposed
cooperative arrangements. Such proposals shall be materially in accordance with
the last proposals made by such party to the other party during the course of
the aforementioned good faith negotia- tions between the parties. The parties
shall additionally submit such memoranda, arguments, briefs and evidence in
support of their respective positions, and in accordance with such procedures,
as a majority of the Panel may determine. Within seven business days following
the designation of the third mediator, the Panel shall, by majority vote, select
the proposed cooperative arrangements proposed by one of the parties, it being
agreed that the Panel shall have no authority to alter any such proposal in any
way. Thereafter, the parties shall, subject to the terms and conditions of this
Agreement, consummate the Transactions on the basis of such selected cooperative
arrangements, amendments or adjustments at a mutually agreeable time and place
or places, in accordance with the provisions of Section 2.7, which shall be no
later than the fifteenth business day following the originally scheduled Closing
Date or such later date as the parties may agree upon. Subject to the foregoing,
the Panel may determine the issues in dispute following such procedures,
consistent with the language of this Agree- ment, as it deems appropriate to the
circumstances and with reference to the amounts in issue. No particular
procedures are intended to be imposed upon the Panel, it being the desire of the
parties that any such disagreement shall be resolved as expeditiously and
inexpensively as reasonably practicable. No member of the Panel shall have any
liability to the parties in connection with service on the Panel, and the
parties shall provide such indemnities to the members of the Panel as they shall
request.
<PAGE>
Section 2.9 Guaranty by NovaCare. To induce Buyer to execute and
deliver this Agreement, NovaCare hereby absolutely and unconditionally
guarantees the full, prompt and faithful performance by Seller of all covenants
and obligations to be performed by Seller under this Agreement and any Schedule,
certificate and agreement executed and delivered in connection herewith,
including, without limitation, the payment of all sums stipulated to be paid by
Seller pursuant to this Agreement. In the event that Seller fails to fully
perform all such covenants and obligations in accordance with their terms or pay
all or any part of such sums when due, NovaCare will perform all such covenants
and obligations in accordance with their terms or immediately pay to Buyer (or
such other payee as may be provided herein or in any such agreement) the amount
due and unpaid by Seller, it being understood that each such covenant or
obligation and each obligation to pay any such amount constitutes the direct and
primary obligation of NovaCare. NovaCare hereby waives presentment, demand of
payment, protest, dishonor, notice of protest or dishonor, and notice of
acceptance of the guaranty set forth in this Section 2.9 and all rights to
require Buyer to proceed against Seller, or to pursue any other remedy it may
have against Seller in the event of a breach by Seller of any representation,
warranty, obligation or covenant in this Agreement or in any Schedule,
certificate or agreement executed and delivered in connection therewith. In the
event that Seller is not liable to perform any such obligations or covenants
because the act creating such obligation or covenant is ultra vires or
unauthorized, and for such reasons such obligations or covenants cannot be
enforced against Seller, such fact shall not affect NovaCare's liability under
this Section 2.9. In the event of the merger, acquisition, termination,
liquidation or dissolution of Seller, this unconditional guaranty shall continue
in full force and effect.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer, as of the date hereof,
as follows, except as disclosed in Schedule 3:
Section 3.1 Organization and Corporate Power. Seller is a corporation
duly incorporated and validly existing under the laws of, and is authorized to
exercise its corporate powers, rights and privileges and is in good standing in,
the State of Delaware and has full corporate power to carry on its business as
presently conducted and to own or lease and operate its properties and assets
now owned or leased and operated by it.
<PAGE>
Section 3.2 RSC and Subsidiaries.
(a) Each of RSC and each Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation (which in each case is indicated on Schedule A-1) and is duly
qualified and in good standing as a foreign corporation in all jurisdictions in
which such qualification is required by reason of its business, properties or
activities in or relating to such jurisdictions (which is likewise indicated on
Schedule A-1), except where the failure to be so qualified will not have a
Material Adverse Effect (as defined in Section 3.4) on RSC or the applicable
Subsidiary.
(b) (i) All of the outstanding capital stock of RSC has been
duly authorized and is validly issued, fully paid and nonassessable and is owned
beneficially and of record by Seller. There are no rights, subscriptions,
warrants, options, conversion rights or agreements of any kind outstanding to
purchase or otherwise acquire any shares of capital stock of or securities or
obligations of any kind convertible into or exchangeable for any shares of
capital stock of RSC.
(ii) All of the outstanding capital stock of each
Subsidiary has been duly authorized and is validly issued, fully paid and
nonassessable and, except as indicated on Schedule A-1, is owned beneficially
and of record by RSC. Except as provided in Schedule A- 1, there are no rights,
subscriptions, warrants, options, conversion rights or agreements of any kind
outstanding to purchase or otherwise acquire any shares of capital stock of or
securities or obligations of any kind convertible into or exchangeable for any
shares of capital stock of any Subsidiary.
(c) Upon consummation of the Transaction, Buyer will acquire
valid title to the RSC Shares, free and clear of all liens, charges, pledges or
security interests (except for those created or allowed to be suffered by Buyer)
and free of any restrictions on voting and transfer.
(d) No corporate act or proceeding on the part of RSC or any
Subsidiary or their respective boards of directors or shareholders is necessary
to authorize the Transaction.
Section 3.3 Authority Relative to this Agreement. The execution,
delivery and performance of this Agreement and all other agreements contemplated
hereby and the consummation of the transactions contemplated hereby and thereby
have been duly and effectively authorized by the board of directors of Seller;
no other corporate act or proceeding on the part of Seller, its board of
directors or its stockholders is necessary to authorize this Agreement, any such
other agreement or the transactions contemplated hereby and thereby. This
Agreement has been, and each of the other agreements contemplated hereby will as
of the Closing have been, duly executed and delivered by Seller, and this
Agreement constitutes, and each such other agreement when executed and delivered
will constitute, a valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except as it may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar Laws now or hereafter in
effect relating to creditors' rights generally and that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding may be brought.
<PAGE>
Section 3.4 Absence of Breach. Subject to the provisions of Sections
3.5 and 3.6 below regarding private party and governmental consents, and except
for compliance with the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and any regulatory or
licensing Laws applicable to the businesses and assets represented by the
Transferred Assets, the execution, delivery and performance by Seller of this
Agreement and all other agreements contemplated hereby or executed in connection
herewith (the "Related Agreements"), do not (a) conflict with or result in a
breach of any of the provisions of the Articles or Certificates of Incorporation
or Bylaws or similar charter documents (the "Charter Documents") of Seller, of
RSC or of any of the Subsidiaries, (b) contravene any Law or cause the
suspension or revocation of any License presently in effect, which affects or
binds Seller or RSC or any of the Subsidiaries, or any of their material
properties, except where such contravention, suspension or revocation will not
have a Material Adverse Effect (as defined below) on RSC and the Subsidiaries
and will not affect the validity or enforceability of this Agreement and the
Related Agreements or the validity of the Transaction contemplated hereby and
thereby, or (c) conflict with or result in a breach of or default under any
indenture or loan or credit agreement or any other agreement or instrument to
which Seller or any of the Subsidiaries is a party or by which it or they or any
of their properties may be affected or bound, the effect of which conflict,
breach, or default, either individually or in the aggregate, would be a Material
Adverse Effect on RSC and the Subsidiaries. As used herein, a "Material Adverse
Effect": (a) when used with respect to a Facility, means a material adverse
effect on a Facility and on the businesses operated therefrom, including their
condition (financial or otherwise) and results of operations, taken as a whole;
and (b) when used with respect to an entity, such as Seller, RSC, a Subsidiary
or Buyer, means a material adverse effect on the business, condition (financial
or otherwise) and results of operations of such entity taken as a whole
(including any subsidiaries of such entity).
Section 3.5 Private Party Consents. Except as set forth on Schedule
3.5, the execution, delivery and performance by Seller of this Agreement and the
Related Agreements do not require the authorization, consent or approval of any
non-governmental third party of such a nature that the failure to obtain the
same would have a Material Adverse Effect on RSC and the Subsidiaries.
Section 3.6 Governmental Consents. The execution, delivery and
performance by Seller of this Agreement and the Related Agreements do not
require the authorization, con- sent, approval, certification, license or order
of, or any filing with, any court or governmental agency of such a nature that
the failure to obtain the same would have a Material Adverse Effect on the
Transferred Assets, except for compliance with the HSR Act and except for such
governmental authorizations, consents, approvals, certifications, licenses and
orders that customarily accompany the transfer of health care facilities such as
the Facilities.
Section 3.7 Brokers. No broker, finder, or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement or the Transaction contemplated hereby based upon any
agreements or arrangements or commitments, written or oral, made by or on behalf
of Seller or any of its Affiliates. Seller shall be solely responsible for the
payment of any such fee or commission to any person or entity listed on Schedule
3.7 as an exception to the foregoing.
<PAGE>
Section 3.8 Title to Personal Property. Each Subsidiary has good and
defensible title, or valid and effective leasehold rights in the case of leased
property, to all tangible personal property owned by such Subsidiary or used in
the operations of the applicable Facility, free and clear of all liens, charges,
claims, pledges, security interests, equities and encumbrances of any nature
whatsoever, except for those created or allowed to be suffered by Buyer and
except for the following (individually and collectively, the "Permitted
Encumbrances"): (a) the lien of current taxes not delinquent, (b) matters that
when viewed in the aggregate, do not have a Material Adverse Effect on RSC and
the Subsidiaries, (c) such consents, authorizations, approvals and Licenses as
are referred to in Sections 3.5 and 3.6, (e) liens, charges, claims, pledges,
security interests, equities and encumbrances which will be discharged or
released either prior to, or substantially simultaneously with, the Closing, and
(f) liens created under or pursuant to the Real Property Leases.
Section 3.9 Contracts and Leases. Except for matters that, when viewed
in the aggregate, do not have a Material Adverse Effect on RSC and the
Subsidiaries, (a) there is no liability to any person by reason of the default
by Seller, RSC or a Subsidiary under any Real Property Lease or Other Contract,
(b) neither Seller nor RSC nor any Subsidiary has received written or other
notice that any person intends to cancel or terminate any Real Property Lease or
Other Contract, (c) all of the Real Property Leases and Other Contracts are in
full force and effect, (d) subject to the provisions of Sections 3.5 and 3.6,
the consummation of the transactions contemplated by this Agreement will not
constitute and, to the best of Seller's current actual knowledge, no event has
occurred which, with or without the passage of time or the giving of notice,
would constitute a breach or default by Seller, RSC or a Subsidiary of such Real
Property Lease or Other Contract or would cause the acceleration of any
obligation of Seller, RSC or any Subsidiary or the creation of any lien (except
for Permitted Encumbrances) upon any asset of RSC or any Subsidiary, and (e)
neither Seller nor RSC nor any Subsidiary has waived any right under any Real
Property Lease or Other Contract.
Section 3.10 Licenses. To the best of Seller's current actual
knowledge, and except for such matters which, in the aggregate, do not have a
Material Adverse Affect on RSC and the Subsidiaries, (a) the Subsidiaries
possess all Licenses necessary for their operation of the Facilities at the
locations and in the manner presently operated, (b) if required, such Facilities
are accredited by applicable accrediting agencies as necessary for their
operations in the manner presently operated, (c) such Facilities are certified
for participation in the Medicare and applicable Medicaid programs and have
current and valid provider contracts with such programs, and (d) there is no
matter which would adversely affect the maintenance of any such Licenses,
program participations or accreditations.
Section 3.11 Employee Relations. With respect to the employees of RSC
and the Subsidiaries:
(a) Neither Seller nor RSC nor any Subsidiary nor any Facility
is a party to any agreement with any union, trade association or other similar
employee organization, no written demand has been made for recognition by a
labor organization, and to the best of Seller's current actual knowledge no
union organizing activities by or with respect to any such employees are taking
place; and
<PAGE>
(b) There are no controversies (including, without limitation,
any unfair labor practice complaints, labor strikes, arbitrations, disputes,
work slowdowns or work stoppages) affecting a material number of such employees
pending, or to the best of Seller's current actual knowledge, threatened.
Section 3.12 Employee Plans. Except for the Pension Plans, and except
as set forth on Schedule 3.19(d) hereto, neither RSC nor any Subsidiary has
established or maintains or is obligated to make contributions to or under or
otherwise participate in any Employee Benefit Arrangement. All such Employee
Benefit Arrangements have been operated and administered in all material
respects in accordance with, as applicable, ERISA, the Code, Title VII of the
Civil Rights Act of 1964, as amended, the Equal Pay Act of 1967, as amended, the
age discrimination in employment act of 1967, as amended, the Americans with
Disabilities Act, as amended, and the related rules and regulations adopted by
those federal agencies responsible for the administration of such Laws. All
accrued benefits under any such Employee Benefit Arrangement will be fully
funded at the Closing Date. No act or failure to act by Seller, RSC or any
Subsidiary has resulted in a "prohibited transaction" (as defined in ERISA).
With respect to any employee benefit plan, and no "reportable event" (as defined
in ERISA) has occurred with respect to any such employee benefit plan.
Section 3.13 Litigation. Except for ordinary routine claims and
litigation incidental to the businesses represented by the Facilities
(including, but not limited to, actions for negligence, professional
malpractice, workers' compensation claims, so-called "slip-and-fall" claims and
the like), and governmental inspections and reviews customarily made of
businesses such as those operated from the Facilities, there are no actions,
suits, claims or proceedings pending, or to the current actual knowledge of
Seller, threatened against or affecting RSC or the Subsidiaries or relating to
the operations of the Facilities, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, agency
or instrumentality. Schedule 3.13 sets forth identifying information and a brief
description with respect to any pending or, to the current actual knowledge of
Seller, RSC and the Subsidiaries, threatened claims or litigation affecting RSC,
the Subsidiaries or the Facilities (i) where the amount in controversy exceeds
$100,000, (ii) which involve any alleged violation of any Laws or (iii) which
could otherwise be reasonably expected to have a Material Adverse Effect on RSC
or the applicable Subsidiary.
Section 3.14 Inventory. All Inventory of the Facilities will, at the
Closing Date, consist of a quality and quantity usable and salable in the
ordinary course of business, except for items of obsolete materials and
materials of below-standard quality, all of which in the aggregate are
immaterial to the financial condition or results of operations of the businesses
operated from the Facilities taken as a whole, or have been, or prior to Closing
will be, written down to realizable market value.
Section 3.15 Hazardous Substances. To the best of Seller's current
actual knowledge, except as may be disclosed by the Environmental Survey (as
defined in Section 6.2(b)):
(a) There are no Hazardous Materials (as defined below) upon,
about, beneath or migrating or threatening to migrate to or from the Owned Real
Property or the Leased Real Property or the existence of any violation in any
material respect of any Laws relating to industrial hygiene, Hazardous Materials
and environmental protection ("Environmental Regulations"); and
<PAGE>
(b) There is no proceeding or action pending or threatened by
any person or governmental agency regarding the environmental condition or
occupational safety of the Facilities.
"Hazardous Materials" shall mean any substance (including, without limitation,
any asbestos, formaldehyde, radioactive substance, hydrocarbons, polychlorinated
biphenyls, industrial solvents, flammables, explosives and any other hazardous
substance or toxic material) which, in any material respect, is known to cause,
as of the date of this Agreement, a health, safety or environmental hazard and
require remediation at the behest of any governmental agency.
Section 3.16 Financial Information and Related Matters.
(a) To be attached hereto as Schedule 3.16(a) within seven
days after the execution and delivery of this Agreement is an unaudited
statement of certain combined earnings from the operations of the Facilities (as
they were comprised on the as of date of such schedule) before interest, income
taxes, depreciation and amortization ("EBITDA") for the fiscal year ended June
30, 1994 (the "EBITDA Statements") and for the six months ended December 31,
1994. The EBITDA Statements present fairly the combined EBITDA of such
operations, taken as a whole, as of the dates and for the periods shown, and
were derived from and are in accordance with the internal books and records of
RSC and the Subsidiaries and the regularly prepared unaudited internal financial
statements of the Facilities, which are prepared on a basis materially in
accordance with the generally accepted accounting principles utilized in the
preparation of the published financial statements of Seller.
(b) Attached hereto as Schedule 3.16(b) is a regularly
prepared internal unaudited combined balance sheet of the Facilities as of
December 31, 1994 (the "Balance Sheet"; collectively, the Balance Sheet and the
EBITDA Statement are the "Financial Schedule"). The Balance Sheet has been
prepared from, and is in accordance with, the internal books and records of RSC
and the Subsidiaries and presents fairly the financial condition of the
Facilities, taken as a whole, as of the date shown. The Balance Sheet was
prepared in accordance with Seller's practices for the preparation of internal
financial statements, consistently applied, and is materially in accordance with
the generally accepted accounting principles utilized in the preparation of the
published financial statements of Seller.
(c) Notwithstanding the foregoing, the Financial Schedule does
not (i) reflect allocations of indirect costs and overhead or the corresponding
cost reimbursement impact of claiming such costs in a Facility cost report, (ii)
reflect all intercompany eliminations, adjustments and accruals that are
reflected in financial statements of Seller, (iii) reflect any anticipation of
the divestiture of the Facilities and any adjustments to the carrying values of
the Facilities occasioned thereby, (iv) contain footnotes or other explanatory
material associated with financial statements prepared in accordance with
generally accepted accounting principles, or (v) contain normal year-end
adjustments with respect to interim peri- ods. In addition, the Financial
Schedule is to be read in conjunction with, and is subject to, all notes and
other explanatory material set forth therein.
<PAGE>
(d) The Balance Sheet reflects the amount of Receivables as of
the date thereof, net of allowances customarily recorded by the Subsidiaries for
uncollectible and doubtful accounts, and contractual allowances pursuant to
agreements with Payors, all in conformity with Seller's practices for the
preparation of internal financial statements and materially in accordance with
the generally accepted accounting principles utilized in the preparation of the
published financial statements of the Seller and the past practices employed by
each Subsidiary. To the current actual knowledge of Seller, all such Receivables
included in the Balance Sheet represent amounts validly owed to the applicable
Subsidiary by reason of the provision of goods, services and other consideration
by such Subsidiary, and, to the current actual knowledge of Seller, are not
valued in excess of the amounts expected to be collected with respect thereto.
Each Subsidiary maintains its accounting records in sufficient detail to
substantiate the Receivables reflected on the Balance Sheet. Since the date of
Seller's most recent audited financial statements, neither Seller nor RSC nor
any Subsidiary has changed any principle or practice with respect to the
recordation of accounts receivable or the calculation of reserves therefor, or
any material collection, discount or write-off policy or procedure.
(e) RSC and the Subsidiaries, as applicable, have timely filed
all Cost Reports required to be filed with respect to the Facilities prior to
the date of this Agreement. All such Cost Reports are, to the knowledge of
Seller, true and complete in all material respects and comply in all material
respects with all applicable Laws respecting Cost Reports. Neither Seller nor
RSC nor any Subsidiary has received any notice with respect to any challenge,
dispute or adjustment with respect to any open Cost Reports except challenges,
disputes or adjustments (i) which, if resolved adversely to Seller, RSC or the
Applicable Subsidiary, as the case may be, would not have a Material Adverse
Effect on such entity, or (ii) which are described on Schedule 3.16(e).
(f) Each of RSC and the Subsidiaries has filed all returns
required to be filed by it, and made all payments required to be made by it,
with respect to any Taxes as to which such filings or payments were due on or
before the date of this Agreement. To the best of Seller's knowledge, neither
RSC nor any Subsidiary has any liability with respect to any Taxes for which its
reserves are inadequate, except for sales, use, employment and similar Taxes for
periods as to which such Taxes have not yet become due and payable.
Section 3.17 Changes Since Balance Sheet. Since the date of the Balance
Sheet and up to and including the date of this Agreement, other than as
contemplated or permitted by this Agreement, RSC and the Subsidiaries have
conducted their respective businesses only in the ordinary and normal course,
except for matters in anticipation of the divestiture of the Facilities, and
there has not been:
(a) Any entry into or termination by Seller or RSC or a
Subsidiary of any material commitment, contract, agreement or transaction
(including, without limitation, any borrowing or lending transaction or capital
expenditure) related to RSC, the Subsidiaries or the Facilities, except for
transactions in the ordinary course of business and renegotiation of credit
agreements to which Seller and certain of its subsidiaries are parties;
<PAGE>
(b) Any casualty, physical damage, destruction or physical
loss respecting, or change in the physical condition of, the Facilities and the
Equipment that has had a Material Adverse Effect on RSC and the Subsidiaries;
(c) Any transfer of or rights granted under any contract which
would have been an Other Contract on the date of the Balance Sheet except for
transactions in the ordinary course of business;
(d) Other than in the ordinary course of business, any sale or
other disposition of any fixed asset included in the Balance Sheet having a net
book value in excess of $50,000 or any material mortgage, pledge or imposition
of any lien or other encumbrances on any such asset, or sales or dispositions
of, or the imposition of material encumbrances on, fixed assets included in such
Balance Sheet having a net book value that exceeds $250,000 in the aggregate, or
any sale or other disposition of Inventories included in the Balance Sheet;
(e) Any amendment (other than general amendments which the
carrier makes for a category of policy) or termination of any insurance policy
or failure to renew any insurance policy covering the Facilities, except for
amendments, terminations or failures to renew that do not have a Material
Adverse Effect on RSC and the Subsidiaries;
(f) Any default or breach by Seller, RSC or a Subsidiary under
any contract that would have been an Other Contract on the date of the Balance
Sheet which, when viewed individually or in the aggregate of all such breaches
or defaults, has had a Material Adverse Effect on RSC and the Facilities; or
(g) Any increase made in the compensation levels of any chief
executive officer or chief financial officer of any Facility, or any general
increase made in the compensation levels of the other employees of RSC or any
Subsidiary, except in the ordinary course of business.
Section 3.18 Compliance with Laws. Except as otherwise disclosed in
this Agreement (or in the Schedule thereto), RSC, each Subsidiary and each
Facility are, to the knowledge of NovaCare and Seller, in compliance in all
material respects with all Laws applicable to a Facility or the operations
thereof, and neither Seller, RSC nor any Facility has received any notices of
violations of any such Laws.
Section 3.19 Lists of Other Data. Except for contracts and agreements
already listed in Schedules 1.1-2 and 1.1-4, Schedules 3.19(a) through (f)
contain lists, complete and correct as of the dates shown thereon, of the
following:
(a) The most recent regularly generated depreciation schedules
0related to tangible personal property constituting Equipment, together with
copies of such schedules;
(b) Each lease constituting an Other Contract as of such date
(whether an operating or a capital lease) under which tangible personal property
was leased, where the annualized lease payments exceed $25,000;
<PAGE>
(c) A brief description of insurance in force covering fixed
assets that would constitute assets of the Facilities as of such date;
(d) All compensation, bonus, incentive, deferred payments,
retirement, pension, severance, profit-sharing, stock purchase and stock option
plans, group life, automobile, medical, dental, disability, welfare or other
employee benefit plans or insurance policies, and other similar arrangements
(collectively, "Employee Benefit Arrangements") generally applicable to the
employees of the Facilities or a substantial part thereof or generally
applicable to the chief executive or chief financial officers, or a substantial
part thereof, of the Facilities as of such date;
(e) The aggregate accrued paid time off (including vacation
time) and earned or available sick pay for all employees at each Facility, as of
the date shown; and
(f) Material Licenses of Seller and the Subsidiaries in force,
as of the date shown, with respect to the Facilities.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller, as of the date hereof,
as follows, except as disclosed in Schedule 4:
Section 4.1 Organization and Corporate Power. Buyer is a corporation
duly incorporated and validly existing under the laws of, and is authorized to
exercise its corporate powers, rights and privileges and is in good standing in,
the State of Delaware and has full corporate power to carry on its business as
presently conducted and to own or lease and operate its properties and assets
now owned or leased and operated by it.
Section 4.2 Authority Relative to this Agreement. The execution,
delivery and performance of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
and effectively authorized by the board of directors of Buyer; no other
corporate act or proceeding on the part of Buyer, its board of directors or its
stockholders is necessary to authorize this Agreement, any such Related
Agreement or the transactions contemplated hereby and thereby. This Agreement
has been, and each of the Related Agreements contemplated hereby will, as of the
Closing, have been, duly executed and delivered by Buyer and this Agreement
constitutes, and each such Related Agreement when executed and delivered will
constitute, a valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms, except as it may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar Laws now or hereafter in
effect relating to creditors' rights generally and that the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding may be brought.
Section 4.3 Absence of Breach. Subject to the provisions of Sections
4.4 and 4.5 below regarding private party and governmental consents, and except
for compliance with the requirements of the HSR Act and any regulatory or
licensing Laws applicable to the businesses and assets represented by the
Facilities, the execution, delivery and performance by Buyer of this Agreement
and the Related Agreements do not, (a) conflict with or result in a breach of
any of the provisions of Charter Documents of Buyer, (b) contravene any Law or
cause the suspension or revocation of any License presently in effect, which
affects or binds Buyer or any of its material properties, or (c) conflict with
or result in a breach of or default under any indenture or loan or credit
agreement or any other agreement or instrument to which Buyer is a party or by
which it or any of its properties may be affected or bound.
<PAGE>
Section 4.4 Private Party Consents. The execution, delivery and
performance by Buyer of this Agreement and the Related Agreements do not require
the authorization, consent or approval of any non-governmental third party.
Section 4.5 Governmental Consents. The execution, delivery and
performance by Buyer of this Agreement and the Related Agreements do not require
the authorization, consent, approval, certification, license or order of, or any
filing with, any court or governmen- tal agency, except for compliance with the
HSR Act and except for such governmental authorizations, consents, approvals,
certifications, licenses and orders that customarily accompany the transfer of
health care facilities such as the Facilities.
Section 4.6 Brokers. No broker, finder, or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement or the transactions contemplated hereby based upon any
agreements or arrangements or commitments, written or oral, made by or on behalf
of Buyer or any of its Affiliates. Buyer shall be solely responsible for the
payment of any such fee or commission to any person or entity listed on Schedule
4.6 as an exception to the foregoing.
Section 4.7 Qualified for Licenses. Buyer is qualified to obtain any
Licenses and program participations necessary for the operation by Buyer of the
Facilities in the same manner as the Facilities are presently operated by Seller
and the Subsidiaries. Each of Buyer and its Affiliates possesses all Licenses
and program participations necessary to permit them to operate the healthcare
facilities operated by them. If required, all such healthcare facilities are
accredited by applicable accrediting agencies as necessary for their operations
in the manner presently operated. Neither Buyer nor any of its Affiliates has
received any notice or has any knowledge of any matter which would materially
adversely affect the maintenance of any such Licenses, program participations or
accreditations.
Section 4.8 Financial Ability to Perform. Buyer has liquid capital or
committed sources therefor sufficient to permit it to perform timely its
obligations hereunder, including, but not limited to, the payment of the
Purchase Price to Seller at the Closing and the other payments to Seller
required hereunder. Promptly after its receipt of letters of commitment or other
documents related to the financing of its obligations hereunder, Buyer will
provide copies of the same to Seller.
Section 4.9 No Assurance. Buyer acknowledges and agrees that the rates
or bases used in calculating payments or reimbursements to it by any Payor
(including but not limited to Medicare) may differ from the rates and bases used
in calculating such payments or reim- bursements to Seller, RSC and the
Subsidiaries.
<PAGE>
Section 4.10 Disposal of Assets. Buyer does not intend to or currently
plan to dispose of, or cause RSC to dispose of, a significant part of the assets
of RSC or the Subsidiaries within two years after the Closing, other than
dispositions in the ordinary course of business or to eliminate duplicate
facilities or excess capacity.
ARTICLE 5
COVENANTS OF EACH PARTY
Section 5.1 Efforts to Consummate Transactions. Subject to the terms
and conditions herein provided, each of the parties hereto agrees to use its
reasonable commercial efforts to take, or to cause to be taken, all reasonable
actions and to do, or to cause to be done, all reasonable things necessary,
proper or advisable under applicable Laws to consummate and make effective, as
soon as reasonably practicable, the Transaction contemplated hereby, including
the satisfaction of all conditions thereto set forth herein. Such actions shall
include, without limitation, exerting their reasonable efforts to obtain the
consents, authoriza- tions and approvals of all private parties and governmental
authorities whose consent is reasonably necessary to effectuate the Transaction
contemplated hereby, and effecting all other necessary registrations and
filings, including but not limited to filings under Laws relating to the
transfer or obtaining of necessary Licenses, under the HSR Act and all other
necessary filings with governmental authorities. The foregoing notwithstanding,
it shall be the responsibility of Buyer to use its reasonable commercial efforts
and to act diligently and at its expense to obtain any authorizations, approvals
and consents in connection with acquiring Licenses and program participations
that will permit it to operate the Facilities after the Closing. Subject to
Sections 2.6 and 8.8, neither party shall have any liability to the other if,
after using its reasonable commercial efforts (and, in the case of Buyer's
efforts to obtain requisite Licenses, acting diligently), it is unable to obtain
any consents, authorizations or approvals necessary for such party to consummate
the Transactions, except as may result from cooperative arrangements determined
in accordance with Section 2.8. As used herein, the terms "reasonable commercial
efforts" or "reasonable efforts" do not include the provision of any
consideration to any third party or the suffering of any economic detriment to a
party's ongoing operations for the procurement of any such consent,
authorization or approval except for the costs of gathering and supplying data
or other information or making any filings, fees and expenses of counsel and
consultants and for customary fees and charges of governmental authorities and
accreditation organizations.
Section 5.2 Cooperation. Prior to and after the Closing, upon prior
reasonable written request, each party agrees to cooperate with the other in
every reasonable commercial way to consummate the Transaction. Notwithstanding
the foregoing, all analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals made or submitted by or on behalf of either
party hereto in connection with proceedings under or relating to the HSR Act or
any other federal or state antitrust or fair trade law, or made or submitted by
or on behalf of Buyer in connection with proceedings to obtain the Licenses and
program participations referred to in Section 5.1 hereof, shall be subject to
the joint approval or disapproval and the joint control of Buyer and Seller,
acting with the advice of their respective counsel, it being the intent of the
foregoing that the parties hereto will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any such
analysis, presentation, memorandum, brief, argument, appearance, opinion or
proposal; provided that nothing herein shall prevent either party hereto or any
of their Affiliates or their authorized representatives from (a) making or
submitting any such analysis, appearance, presentation, memorandum, brief,
argument, opinion or proposal in response to a subpoena or other legal process
or as otherwise required by Law, or (b) submitting factual information to the
United States Department of Justice, the Federal Trade Commission, any other
govern- mental agency or any court or administrative law judge in response to a
request therefor or as otherwise required by Law.
<PAGE>
Section 5.3 Further Assistance. From time to time, at the request of
either party, whether on or after the Closing, without further consideration,
either party, at its expense and within a reasonable amount of time after
request hereunder is made, shall execute and deliver such further instruments of
assignment, transfer and assumption and take such other action as may be
reasonably required to more effectively assign and transfer the RSC Shares to
Buyer, deliver or make the payment of the Purchase Price to Seller or any
amounts due from one party to the other pursuant to the terms of this Agreement
or confirm Seller's ownership of the Excluded Assets.
Section 5.4 Cooperation Respecting Proceedings. After the Closing, upon
prior reason- able written request, each party shall cooperate with the other,
at the requesting party's expense (but including only out-of-pocket expenses to
third parties and not the costs incurred by any party for the wages or other
benefits paid to its officers, directors or employees), in furnishing
information, testimony and other assistance in connection with any inquiries,
actions, tax or cost report audits, proceedings, arrangements or disputes
involving either of the parties hereto (other than in connection with disputes
between the parties hereto) and based upon contracts, arrangements or acts of
Seller, RSC or any of the Subsidiaries which were in effect or occurred on or
prior to the Closing and which relate to the Facilities, including, without
limitation, arranging discussions with (and the calling as witness of) officers,
directors, employees, agents, and representatives of Buyer.
Section 5.5 Expenses. Whether or not the Transactions contemplated
hereby are consummated, except as otherwise provided in this Agreement, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses. Notwithstanding the foregoing:
(a) All costs of the Environmental Survey referred to in
Section 6.2(b) shall be borne by Buyer;
(b) All charges of any neutral independent public accountant
or mediator, and related costs, shall be borne one-half by Buyer and one-half by
Seller (it being agreed that each party shall bear the costs of its own
independent public accountant or designated mediator);
(c) All fees and charges of governmental authorities and
accreditation agencies in connection with the transfer, issuance or
authorization of any License, accreditation or program participation shall be
borne by Buyer; and
<PAGE>
(d) All fees, charges or costs, including auditing fees and
expenses, incurred as a result of Buyer's compliance with the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder,
shall be borne by Buyer.
All such charges and expenses shall be promptly settled between the parties at
the Closing or upon termination or expiration of further proceedings under this
Agreement, or with respect to such charges and expenses not determined as of
such time, as soon thereafter as is reasonably practicable.
Section 5.6 Announcements; Confidentiality. Prior to the Closing Date,
no press or other public announcement, or public statement or comment in
response to any inquiry, relating to the transactions contemplated by this
Agreement shall be issued or made by Buyer or Seller or any Subsidiary without
the joint approval of Buyer and Seller; provided that a press release or other
public announcement, statement or comment made without such joint approval shall
not be in violation of this Section if it is made in order to comply with
applicable securities Laws or stock exchange policies and in the reasonable
judgment of the party making such release or announcement, based upon advice of
independent counsel, prior review and joint approval, despite reasonable efforts
to obtain the same, would prevent dissemination of such release or announcement
in a timely enough fashion to comply with such Laws or policies, provided that
in all instances prompt notice from one party to the other shall be given with
respect to any such release, announcement, statement or comment. Subject to the
foregoing, the parties hereto recognize and agree that all information,
instruments, documents and details concerning the businesses of Buyer, Seller,
RSC and the Subsidiaries are strictly confidential, and Seller and Buyer
expressly covenant and agree with each other that, prior to and after the
Closing, they will not, nor will they allow any of their respective officers,
directors, employees, representatives or agents (including professional
advisors) to disclose or publicly comment upon any matters relating to the
business of the other or relating to this Agreement, including, without
limitation, the terms, timing or progress of the transactions contemplated
hereby, or its negotiation, terms, provisions or conditions, including Purchase
Price, except for disclosure to their respective professional advisors (who
shall agree not to disclose the same) which is reasonably necessary to
effectuate the Transaction contemplated hereby and in a manner consistent with
the provisions of this Agreement. Each party shall keep all information obtained
from the other either before or after the date of this Agreement confidential,
and neither party shall reveal such information to, nor produce copies of any
written information for, any person outside its management group or its
professional advisors without the prior written consent of the other party,
unless such party is compelled to disclose such information by judicial or
administrative process or by any other requirements of Law. If the Transaction
contemplated by this Agreement should fail to close for any reason, each party
shall return to the other as soon as practicable all originals and copies of
written information provided to such party by or on behalf of the other party
and none of such information shall be used by either party, or their employees,
agents or representatives in the business operations of any person.
Notwithstanding the foregoing, each party's obligations under this Section shall
not apply to any information or document which is or becomes available to the
public other than as a result of a disclosure by the other party in violation of
this Agreement or other obligation of confidentiality under which such
information may be held or becomes available to the party on a non-confidential
basis from a source other than the other party or its officers, directors,
employees, representatives or agents. The parties' obligations under this
Section shall survive the termination of this Agreement. Nothing in this Section
shall, or is intended to, impair or modify any of the rights or obligations of
Buyer or its Affiliates under that certain letter agreement dated January 14,
1995, 1995, all of which remain in effect until termination of such letter
agreement in accordance with its terms.
<PAGE>
Section 5.7 Cost Reports.
(a) Buyer shall cause the Subsidiaries to prepare and file the
Cost Reports as required under their agreements and applicable laws, rules and
regulations pertaining to Medicare and Medicaid for their current cost report
years (the "Current Cost Reports"; similar Cost Reports for prior periods are
referred to as the "Prior Cost Reports") within the time periods required under
said agreements, laws, rules and regulations. Seller shall cooperate in the
preparation of the Cost Reports.
(b) No adjustments or positions shall be taken or agreed to by
Buyer or the Subsidiaries or their successors with respect to the Current Cost
Reports, or with respect to any Cost Reports for prior or subsequent periods,
which would create any claims on the part of Buyer pursuant to Article 11
without prior written consent of Seller. With respect to rights retained by
Seller relating to Prior Cost Reports, Seller shall not agree to any adjustment
or take any position which would adversely effect Buyer or the Subsidiaries or
their successors without prior written consent of Buyer. In the event that
Seller and Buyer fail to agree on any such adjustments or positions, either of
Seller or Buyer may cause the matter to be resolved by arbitration; provided,
however, that the arbitrator chosen by the parties shall have experience with
and understanding of the rules and regulations of the Payor with which the Cost
Report in question is to be filed and in the preparation of Cost Reports. The
matter shall be resolved within the time for filing such Cost Reports, or within
the time required for taking any action with respect thereto, including such
extensions as Buyer can cause the Subsidiaries to obtain using the best efforts
of said companies.
(c) NovaCare shall prepare and file its Home Office Cost
Statement for the fiscal year beginning on July 1, 1994 and ending on June 30,
1995 within the time period required pursuant to applicable laws and
regulations. Buyer agrees to include NovaCare's home office expenses in the
applicable Subsidiaries' Cost Reports and to cause RSC and the Subsidiaries to
deliver to NovaCare within ten days after their receipt thereof any payments
made by Medicare or other cost-based payors based on such Cost Reports or based
on the Home Office Cost Statement for prior periods, or any appeals of such
reports.
(d) The Closing Balance Sheet will contain Receivables
representing amounts Seller determines are payable by Medicare to the
Subsidiaries pursuant to the Current Cost Reports and the Prior Cost Reports. A
separate schedule identifying these amounts based on the financial data in the
Closing Balance Sheet and back-up materials will be prepared and delivered by
Seller along with the Closing Balance Sheet. In addition, RSC and the
Subsidiaries may receive payments from Medicare or other cost-based payors
pursuant to appeals of items contained in the Prior Cost Reports. Buyer agrees
to cause RSC and the Subsidiaries to deliver to NovaCare, Inc. within ten days
after their receipt thereof (i) any payments based on the Current Cost Reports
in excess of the amounts reflected on such schedule; and (ii) any payments based
on the Prior Cost Reports in excess of the amounts reflected on such schedule.
(e) Buyer, RSC or the Subsidiaries may be obligated to repay
Medicare or other cost-based payors for amounts which were reflected on Prior
Cost Reports or on the Current Cost Reports. Seller agrees to reimburse Buyer,
within ten days after such repayment is made, to the extent such repayments
exceed the amounts reflected on the schedule referred to in 5.7(d) as a
liability for such repayment. In such event, Buyer and Seller shall mutually
agree on whether to appeal the determination resulting in such repayment
obligation.
<PAGE>
ARTICLE 6
ADDITIONAL COVENANTS OF SELLER
Seller hereby additionally covenants, promises and agrees as follows:
Section 6.1 Conduct Pending Closing. Prior to consummation of the
Transaction contemplated hereby or the termination or expiration of this
Agreement pursuant to its terms, unless Buyer shall otherwise consent in
writing, which consent shall not be unreasonably withheld or delayed, and except
for actions taken pursuant to Real Property or Other Contracts, or which arise
from or are related to the anticipated transfer of the RSC Shares, or as
otherwise contemplated by this Agreement or disclosed in Schedule 6.1 or another
Schedule to this Agreement, Seller shall, and shall cause RSC and the
Subsidiaries to:
(a) Conduct the business represented by, and otherwise deal
with, the Facilities only in the usual and ordinary course, materially
consistent with practices followed prior to the execution of this Agreement;
(b) Use reasonable efforts to keep intact the Facilities and
the business they represent and to preserve relationships beneficial to such
business that physicians, patients, Payors, suppliers and others have with the
Facilities;
(c) Except as required by their terms, not amend, terminate,
renew, fail to renew or renegotiate any material contract, except in the
ordinary course of business and consistent with practices of the recent past, or
default (or take or omit to take any action that, with or without the giving of
notice or passage of time, would constitute a default) in any of its obligations
under any such contracts, that would be a Real Property Lease or Other Contract
as of the date hereof;
(d) Not sell, lease, mortgage, encumber, or otherwise dispose
of or grant any interest in, or permit or suffer to exist any lien or
encumbrance upon or the disposition of, any Facility, Inventory, or items of
Equipment having an undepreciated book value in excess of $25,000, including
without limitation any of its leasehold interests therein, whether by the taking
of action or the failure to take action, except for (i) sales of Inventory in
the ordinary course, (ii) liens constituting Permitted Encumbrances, or (iii)
sales or dispositions of Equip- ment in the ordinary course of business that are
consistent with practices of the recent past;
(e) Maintain in force and effect the insurance policies
identified in Section 3.19(c);
(f) Not enter into any contract that will constitute a Real
Property Lease or Other Contract as of the Closing except in the ordinary course
of business and consistent with practices of the recent past; or
<PAGE>
(g) Not grant any general or uniform increase in the rates of
pay or benefits to employees of the Facilities (or a class thereof) or any
increase in salary or benefits of any chief executive or financial officer of
any Facility, except for compensation previously agreed to prior to the date
hereof;
provided that nothing in this Section shall (i) obligate Seller or any
Subsidiary to make expenditures other than in the ordinary course of business
and consistent with practices of the recent past or to otherwise suffer any
economic detriment, or (ii) preclude Seller from paying, prepaying or otherwise
satisfying any liability of RSC or any Subsidiary.
Section 6.2 Access and Information; Environmental Survey; Remediation
or Adjustment.
(a) Subject to the restrictions set forth in Section 5.6
respecting confidentiality, Seller shall, and shall cause the Subsidiaries to,
afford Buyer, and the counsel, accountants and other representatives of Buyer,
reasonable access, throughout the period from the date hereof to the Closing, to
the Facilities and the employees, personnel and medical staff associated
therewith and all the properties, books, contracts, commitments, cost reports
and records respecting RSC, the Subsidiaries and the Facilities (regardless of
where such information may be located). Such access shall be afforded after no
less than 24 hours' prior written notice, during normal business hours whenever
reasonably possible and only in such manner so as not to disturb patient care or
to interfere with the normal operations of the Facilities. Seller's covenants
under this Section are made with the understanding that Buyer shall use all such
information in compliance with all Laws.
(b) At least ten business days prior to the Closing, Seller
shall, if so requested by Buyer, provide to Buyer copies of an environmental
survey conducted (at Buyer's expense) with respect to each of the Facilities
(the "Environmental Survey"). The Environmental Survey shall be conducted by an
environmental consulting firm or firms (the "Consultant") and in accordance with
such reasonable procedures as are jointly determined by Seller and Buyer. The
results of any such Environmental Survey shall be delivered to and owned by
Seller, and all proceedings in connection with the Environmental Survey and the
results thereof shall be subject to the confidentiality provisions of Section
5.6 and such other restrictions as Seller may impose in its reasonable
discretion. Buyer acknowledges and agrees that the Environmental Survey shall be
only an initial "Phase I" environmental site assess- ment. If subsequently
agreed by Seller and Buyer, after consultation with Consultant, to be necessary
or prudent and if Seller and Buyer jointly thereafter direct the Consultant to
undertake the same (at Buyer's sole cost and expense), the Environmental Survey
may include a further "Phase II" investigation respecting certain Facilities. In
any "Phase II" investigation, Seller shall give Buyer no less than 24 hours'
notice before the Consultant enters onto any Facility, and the "Phase II"
Environmental Survey shall be conducted so as not to interfere with the normal
operation of the Facilities. Buyer shall be permitted to have one of its
employees present during all inspections of, and sample gatherings (including
borings) from the soil or any floor tile, insulation or other internal component
of, a Facility.
(c) With respect to any matters disclosed by such
Environmental Survey that would constitute a breach of Seller's warranties in
Section 3.15, but for the qualifications to such warranties based on Seller's
knowledge or disclosures in the Environmental Survey, Seller will at its
election, either (i) clean up or otherwise remediate such matters in a
reasonable manner prior to the Closing Date, at its expense; or (ii) reimburse
Buyer for the costs of such reasonable clean-up or remediation incurred by Buyer
after the Closing Date, provided Seller shall have approved such costs in
advance and in writing (such approval not unreasonably to be withheld).
<PAGE>
(d) Promptly after execution and delivery of this Agreement,
Seller shall provide, or shall cause RSC or any applicable Subsidiary to
provide, Buyer with a copy of the most recent title binder, commitment or policy
in the possession of any of the foregoing entities with respect to the Owned
Real Property and the Leased Real Property, together with any documentation in
any of such entities' possession relating to any exceptions or encumbrances
reflected on such title binders, commitments or policies.
Section 6.3 Updating. Seller shall notify Buyer of any changes or
additions to any of Seller's Schedules to this Agreement by the delivery of
updates thereof, if any, not later than five business days prior to the Closing,
provided, however, that the Financial Schedule shall not be updated to cover any
period or periods subsequent to the respective dates thereof. No such updates
made pursuant to this Section shall be deemed to cure any breach of any
representation or warranty made in this Agreement, unless Buyer specifically
agrees thereto in writing, nor shall any such notification be considered to
constitute or give rise to a waiver by Buyer of any condition set forth in this
Agreement. Seller has delivered to Buyer all Other Contracts and leases that
Seller has knowledge of, if such contracts were located at the corporate offices
of Seller. Seller shall deliver all Other Contracts and leases which it is
obligated to deliver pursuant to this Agreement within seven business days after
the date hereof. Unless performance under such contracts or leases would have a
Material Adverse Effect (as defined in Section 3.4), Buyer shall have no claim
against Seller based on the delivery after the date hereof rather than before
execution of this Agreement.
Section 6.4 No Solicitation. Seller will not, and shall cause RSC and
the Subsidiaries not to, and will use its best efforts to cause its and their
officers, employees, agents and representatives (including any investment
banker) not to, directly or indirectly, solicit, encourage or initiate any
discussions with, or, subject to fiduciary duties to shareholders, negotiate or
otherwise deal with, or provide any information to, any corporation,
partnership, person or other entity or group, other than Buyer and its officers,
employees and agents, concerning any sale of or similar transactions involving
RSC, the Facilities or the stock of the Subsidiaries. None of the foregoing
shall prohibit providing information to others in a manner in keeping with the
ordinary conduct of Seller's or the Subsidiaries' businesses.
Section 6.5 Filing of Cost Reports. Seller shall cause to be prepared
and timely filed all Cost Reports which are required to be filed prior to the
Closing Date with Medicare and any other cost-based Payors with respect to the
operations of the Facilities for any and all periods ending prior to the Closing
Date.
<PAGE>
ARTICLE 7
ADDITIONAL COVENANTS OF BUYER
Section 7.1 Waiver of Bulk Sales Law Compliance. Subject to the
indemnification provisions of Section 11.3(a)(iii) hereof, Buyer hereby waives
compliance by Seller and the Subsidiaries with the requirements, if any, of
Article 6 of the Uniform Commercial Code as in force in any state in which the
Facilities are located and all other similar laws applicable to bulk sales and
transfers.
Section 7.2 Cost Reports and Audit Contests. After the Closing and for
the period of time necessary to conclude any pending or potential audit or
contest of any Cost Reports with respect to the Facilities that include periods
ending on or before the Closing Date, Buyer shall properly keep and preserve all
financial books and records delivered to Buyer by Seller and the Subsidiaries
(if any) and utilized in preparing such Reports, including, without limitation,
accounts payable invoices, Medicare logs and billing information in accordance
with Section 5.7. Upon reasonable written notice by Seller, Seller (or its
agents) shall be entitled, at Seller's expense, during regular business hours,
to have access to, inspect and make copies of all such books and records. Upon
the reasonable request of Seller, Buyer shall assist Seller and the Subsidiaries
in obtaining information deemed by Seller to be necessary or desirable in
connection with any audit or contest of such reports. To the extent required to
meet its obligations under this Section, Buyer shall provide the reasonable
support of its employees at no cost to Seller.
Section 7.3 Letters of Credit. Subject to the terms and conditions
hereof, at the Closing, Buyer shall cause guaranties, letters of credit and
indemnity or performance bonds to be provided to substitute for those letters of
credit and bonds listed in Schedule 7.3, so that at and as of the Closing Seller
and its Affiliates shall have no further obligation to provide such designated
letters of credit or bonds. Buyer shall use its reasonable commercial efforts to
cause the release of NovaCare promptly after Closing from any guaranties related
to the business of RSC or the Subsidiaries, provided that such guaranties have
been disclosed to Buyer in writing.
ARTICLE 8
BUYER'S CONDITIONS TO CLOSING
The obligations of Buyer to consummate the Transactions at the Closing
shall be subject to the fulfillment at or prior to the Closing of the following
conditions, unless Buyer waives such fulfillment:
Section 8.1 Performance of Agreement. Seller shall have performed in
all material respects its agreements and obligations contained in this Agreement
required to be performed on or prior to the Closing.
Section 8.2 Accuracy of Representations and Warranties. The
representations and warranties of Seller set forth in Article 3 of this
Agreement shall be true in all respects as of the date of this Agreement (unless
the inaccuracy or inaccuracies which would otherwise result in a failure of this
condition have been cured by the Closing) and as of the Closing (as updated by
the revising of Schedules contemplated by Section 6.3) as if made as of such
time, except where such inaccuracy or inaccuracies would not individually or in
the aggregate result in a Material Adverse Effect on RSC and the Subsidiaries.
<PAGE>
Section 8.3 Officer's Certificate. Buyer shall have received from
Seller an officer's certificate, executed on Seller's behalf by its chief
executive officer, president, chief financial officer or treasurer (in his or
her capacity as such) dated the Closing Date and stating that to the actual
knowledge of such individual, after inquiry of the other officers identified in
this Section 8.3, the conditions in Sections 8.1 and 8.2 above have been met.
Section 8.4 Consents. The waiting period under the HSR Act shall have
expired or been terminated.
Section 8.5 Absence of Injunctions. There shall not be in effect a
temporary restraining order or a preliminary or permanent injunction or other
order, decree or ruling by a court of competent jurisdiction or by a
governmental agency which restrains or prohibits Buyer's acquisition or
operation of the Facilities, provided that the parties will use their reasonable
efforts to litigate against the entry of, or to obtain the lifting of, any such
order or injunction, and the existence of any such temporary restraining order
or preliminary injunction shall operate, at the option of Seller, only to delay
the Closing (and extend the Termination Date) until the thirtieth day following
the lifting of any such order or injunction, except that such delay may not
extend the original Termination Date for more than nine months.
Section 8.6 Opinion of Counsel. Buyer shall have received, on and as of
the Closing Date, an opinion of Peter D. Bewley, Esq., counsel to Seller,
substantially as to the matters set forth in Sections 3.1, 3.2, 3.3, 3.4(a), and
3.4(c) (to the knowledge of such counsel), subject to customary conditions and
limitations.
Section 8.7 Receipt of Other Documents. Buyer shall have received the
following:
(a) Certified copies of the resolutions of Seller's board of
directors respecting this Agreement, the Related Agreements and the Transaction,
together with certified copies of any stockholder resolutions which are
necessary to approve the execution and delivery of this Agreement and any
Related Agreements and/or the performance of the obligations of Seller hereunder
and thereunder;
(b) Certified copies of Seller's, RSC's and each Subsidiary's
Charter Documents, together with a certificate of the corporate secretary of
each that none of such documents have been amended;
(c) One or more certificates as to the incumbency of each
officer of Seller or of RSC or of any Subsidiary who has signed the Agreement,
any Agreement or any certificate, document or instrument delivered pursuant to
the Agreement or any Agreement;
(d) Good standing certificates for Seller, RSC and each of the
Subsidiaries from the Secretaries of State of their respective states of
incorporation dated as of a date not earlier than 30 days prior to the Closing
Date; and
<PAGE>
(e) Copies of all third party and governmental consents,
permits and authorizations that Seller or any Subsidiary has received in
connection with the Agreement, the Agreements and the Transactions.
Section 8.8 Certificates of Need and Consents. The consent of the West
Virginia Health Care Cost Review Authority ("HCCRA") or other applicable
authority for facilities in other states and the issuance of a Certificate of
Need is legally required for Buyer to operate certain of the Subsidiaries after
Closing. In addition, other approvals, consents, authorizations and waivers from
governmental and accreditation agencies and from other third parties are
required to consummate the transactions. If such approvals, consents,
authorizations, waivers or issuance with respect to one or more of the
Subsidiaries has not been obtained within three days before the date Closing
would otherwise have occurred pursuant to this Agreement, the following
procedure shall be followed:
(i) The shares of the affected Subsidiary or
Subsidiaries which are owned by RSC shall be transferred from RSC to
Seller.
(ii) Seller shall then deposit such shares with an
escrow agent (the "Escrow Agent") chosen by the parties pursuant to the
mechanism in Section 2.8.
(iii) When the approval and issuance of a Certificate
of Need and delivery of consents, authorizations or waivers to Buyer
with respect to such Subsidiary occurs, the Escrow Agent shall deliver
the shares of such Subsidiary of Buyer.
(iv) If the approval and issuance with respect to any
Subsidiary is not approved within six months after Closing, or such
longer period as Buyer may determinie, Buyer shall use commercially
reasonable efforts to resell the shares of such Subsidiary to a buyer
who is able to obtain the required Certificate of Need. Buyer shall be
entitled to retain any proceeds from such sale and shall be subject to
any liabilities or obligations in connection with such sale. Upon
closing of such sale, the Escrow Agent shall deliver the escrowed
shares of such Subsidiary to Buyer.
(v) After Closing, and until release of the shares of
each Subsidiary from escrow, Buyer shall operate the Subsidiary
pursuant to a Management Agreement. Buyer shall be entitled to any
income with respect to each Subsidiary it manages and shall be liable
for any expenses or liabilities with respect to such Subsidiary;
provided, however, that all employees providing services to the
Subsidiary shall remain employees of the Subsidiary and Buyer and the
Subsidiary shall enter into appropriate arrangements to cause Buyer to
bear all compensation expense of such employees.
(vi) Within two weeks after execution of this
Agreement, Buyer and Seller shall agree on the form of Escrow
Agreement, designation of Escrow Agent, and form of Management
Agreement to effectuate the foregoing process. If they are unable to
reach agreement by such time, the dispute shall be settled pursuant to
the mechanism in Section 2.8.
<PAGE>
ARTICLE 9
SELLER'S CONDITIONS TO CLOSING
The obligations of Seller to consummate the Transaction at the Closing
shall be subject to the fulfillment at or prior to the Closing of the following
conditions, unless Seller waives such fulfillment:
Section 9.1 Performance of Agreement. Buyer shall have performed in all
material respects its agreements and obligations contained in this Agreement
required to be performed on or prior to the Closing.
Section 9.2 Accuracy of Representations and Warranties. The
representations and warranties of Buyer set forth in Article 4 of this Agreement
shall be true in all material respects as of the date of this Agreement (unless
the inaccuracy or inaccuracies which would otherwise result in a failure of this
condition have been cured by the Closing) and as of the Closing as if made as of
such time.
Section 9.3 Officer's Certificate. Seller shall have received from
Buyer an officers' certificate, executed on Buyer's behalf by its chief
executive officer, president, chief financial officer or treasurer (in his or
her capacity as such) dated the Closing Date and stating that to the actual
knowledge of such individual after inquiry of the other officers identified in
this Section 9.3, the conditions in Sections 9.1 and 9.2 above have been met.
Section 9.4 Consents. The waiting period under the HSR Act shall have
expired or been terminated, and, subject to the provisions of Sections 2.6, 2.7
and 2.8, all approvals, consents, authorizations and waivers from governmental
and accreditation agencies and from other third parties required for Seller to
consummate the Transaction shall have been obtained, except for such approvals,
consents, authorizations and waivers the failure to obtain which will not,
individually or in the aggregate, result in a Material Adverse Effect on Seller
following the Closing.
Section 9.5 Absence of Injunctions. There shall not be in effect a
temporary restraining order or a preliminary or permanent injunction or other
order, decree or ruling by a court of competent jurisdiction or by a
governmental agency which restrains or prohibits Seller's consummation of the
Transaction, or any threat by governmental authorities to exact any penalty or
impose any economic detriment upon Seller if it consummates the Transac- tions
that would have a Material Adverse Effect upon Seller following the Closing,
provided that the parties will use their reasonable efforts to litigate against
the entry of, or to obtain the lifting of, any such order, injunction or
potential penalty or imposition, and the existence of any such temporary
restraining order, preliminary injunction or potential penalty or imposition
shall operate, at the option of Seller, only to delay the Closing (and extend
the Termination Date) until the thirtieth day following the lifting of any such
order or injunction or threat, except that such delay may not extend the
original Termination Date for more than nine months.
Section 9.6 Opinion of Counsel. Seller shall have received, on and as
of the Closing Date, an opinion ofWilliam W. Horton, Esq., counsel to Buyer,
substantially as to the matters set forth in Sections 4.1, 4.2, 4.3(a), and
4.3(c) (to the knowledge of such counsel), subject to customary conditions and
limitations.
<PAGE>
Section 9.7 Receipt of Other Documents. Seller shall have received the
following:
(a) Certified copies of the resolutions of Buyer's board of
directors respecting this Agreement, the Related Agreements and the
Transactions;
(b) Certified copies of Buyer's Charter Documents, together
with a certificate of Buyer's corporate secretary that none of such documents
have been amended;
(c) One or more certificates as to the incumbency of each
officer of Buyer who has signed the Agreement, any Related Agreement, or any
certificate, document or instrument delivered pursuant to the Agreement or any
Related Agreement;
(d) Good standing certificates for Buyer and for each Buyer
Subsidiary from the Secretaries of State of the State of Delaware dated as of a
date not earlier than 30 days prior to the Closing Date;
(e) Copies of all third party and governmental consents,
permits and authorizations that Buyer has received in connection with the
Agreement, the Related Agreements and the Transactions; and
(f) A certificate of Buyer executed on its behalf by the Chief
Executive Officer, the Chief Financial Officer or the Treasurer of Buyer stating
that to the best of their knowledge and belief, specifying in reasonable detail
their basis for same, after giving effect to the Transaction, neither Buyer nor
any of its Subsidiaries is insolvent or will be rendered insolvent by
obligations incurred in connection therewith, or will be left with unreasonably
small capital with which to engage in their businesses, or will have incurred
obligations beyond their respective abilities to perform the same as and when
due.
ARTICLE 10
TERMINATION
Section 10.1 Termination. This Agreement and the transactions
contemplated hereby may be terminated at any time prior to the Closing:
(a) By mutual consent of Seller and Buyer; or
(b) By either Buyer or Seller upon written notice to the other
party, if (i) the Closing shall not have occurred by the later of April 30,
1995, the fifth business day following the expiration of the HSR waiting period,
or such later date as may be provided for in this Agreement or agreed upon by
the parties (the "Termination Date"); or (ii)(A) in the case of termination by
Seller, the conditions set forth in Article 9 cannot reasonably be met by the
Termination Date, and (B) in the case of termination by Buyer, the conditions
set forth in Article 8 cannot reasonably be met by the Termination Date, unless
in either of the cases described in clauses (A) or (B), the failure of the
condition is the result of the material breach of this Agreement by the party
seeking to terminate.
<PAGE>
Each party's right of termination hereunder is in addition to any other rights
it may have hereunder or otherwise.
Section 10.2 Effect of Termination. In the event this Agreement is
terminated pursuant to Section 10.1, all further obligations of the parties
hereunder shall terminate, except that the obligations set forth in Sections,
5.5 and 5.6 and in Articles 11 and 12 shall survive. In the event of termination
of this Agreement as provided above, there shall be no liability on the part of
a party to another under and by reason of this Agreement or the transactions
contemplated hereby except as set forth in Article 11 and except for fraudulent
acts by a party, the remedies for which shall not be limited by the provisions
of this Agree- ment. The foregoing provisions shall not, however, limit or
restrict the availability of specific performance or other injunctive or
equitable relief to the extent that specific performance or such other relief
would otherwise be available to a party hereunder.
ARTICLE 11
SURVIVAL AND REMEDIES; INDEMNIFICATION
Section 11.1 Survival. Except as may be otherwise expressly set forth
in this Agreement, the representations, warranties, covenants and agreements of
Buyer and Seller set forth in this Agreement, or in any writing required to be
delivered in connection with this Agreement, shall survive the Closing and the
consummation of the Transactions.
Section 11.2 Exclusive Remedy. Absent fraud, the sole exclusive remedy
for damages of a party hereto for any breach of the representations, warranties,
covenants and agreements of the other party contained in this Agreement and the
Agreements shall be the remedies contained in this Article 11.
Section 11.3 Indemnity by Seller.
(a) Seller shall indemnify Buyer and hold Buyer harmless from
and against any and all loss, liability, damage and expense, including
reasonable attorneys' fees and costs of investigation, litigation, settlement
and judgment (collectively "Losses"), which Buyer may sustain or suffer or to
which Buyer may become subject as a result of:
(i) The inaccuracy of any representation or the
breach of any warranty made by Seller herein or in a Agreement,
provided that any such inaccuracy or breach shall be determined without
regard to any qualification of such representation or warranty based
upon the absence of a Material Adverse Effect on the Transferred
Assets; and
(ii) The nonperformance or breach of any covenant or
agreement made or undertaken by Seller in this Agreement or in any
Related Agreement.
<PAGE>
(b) The indemnification obligations of Seller provided above
shall, in addition to the qualifications and conditions set forth in Sections
11.5 and 11.6, be subject to the following qualifications:
(i) Buyer shall not be entitled to indemnity under
Section 11.3(a)(i) above unless:
(A) Written notice to Seller of such claim
specifying the basis thereof is made, or an action at law or
in equity with respect to such claim is served, before the
second anniversary of the earlier to occur of the Closing Date
or the date on which this Agreement is terminated, as the case
may be;
(B) If the Closing occurs, the Losses
sustained or suffered by Buyer or to which it may be subject
as a result of circumstances described in such Section
11.3(a)(i) exceeds, in the aggregate, $3,000,000 (the
"Deductible Amount"), provided, however, that individual
claims of $10,000 or less shall not be aggregated for purposes
of calculating the Deductible Amount or the excess of Losses
over the Deductible Amount; and
(C) If the Closing occurs, in no event shall
Seller be liable to Buyer under Section 11.3 for (1) amounts
which, in the aggregate, exceed 100% of the Purchase Price or
(2) amounts below the Deductible Amount.
(ii) If the Closing occurs, Buyer shall not be
entitled to indemnity under Subsection (a)(ii) above except for
out-of-pocket Losses actually suffered or sustained by Buyer or to
which Buyer may become subject as a result of circumstances described
in such Subsections (a)(ii), and such indemnity shall not include
Losses in the nature of consequential damages, lost profits, diminution
in value, damage to reputation or the like.
Section 11.4 Indemnity by Buyer.
(a) Buyer shall indemnify Seller and hold Seller harmless from
and against any and all Losses which they may sustain or suffer or to which it
may become subject as a result of:
(i) The inaccuracy of any representation or the
breach of any warranty made by Buyer herein or in a Agreement;
(ii) The nonperformance or breach of any covenant or
agreement made or undertaken by Buyer in this Agreement or in any
Related Agreement;
(iii) If the Closing occurs, the ongoing operations
of Buyer, RSC, the Subsidiaries and the Facilities after the Closing
Date.
(b) The indemnification obligations of Buyer provided above
shall, in addition to the qualifications and conditions set forth in Sections
11.5 and 11.6, be subject to the following qualifications:
<PAGE>
(i) Seller shall not be entitled to indemnity under
Section 11.4(a)(i) above unless:
(A) Written notice to Buyer of such claim
specifying the basis thereof is made, or an action at law or
in equity with respect to such claim is served, before the
first anniversary of the earlier to occur of the Closing Date
or the date on which this Agreement is terminated, as the case
may be; and
(B) If the Closing occurs, the Losses
sustained or suffered by Seller or to which it may be subject
as a result of circumstances described in such Section
11.4(a)(i) exceeds, in the aggregate, the Deductible Amount,
provided, however, that individual claims of $10,000 or less
shall not be aggregated for purposes of calculating the
Deductible Amount or the excess of Losses over the Deductible
Amount; and
(C) If the Closing occurs, in no event shall
Buyer be liable to Seller under Section 11.4(a)(i) for amounts
below the Deductible Amount.
(ii) If the Closing occurs, Seller and the
Subsidiaries shall not be entitled to indemnity under Sections
11.4(a)(ii)-(iii) above except for out-of-pocket Losses actually
suffered or sustained by them or to which they may become subject as a
result of circumstances described in such Sections 11.4(a)(ii)-(iii),
and such indemnity shall not include Losses in the nature of
consequential damages, lost profits, diminution in value, damage to
reputation or the like.
Section 11.5 Further Qualifications Respecting Indemnification. The
right of a party (an "Indemnitee") to indemnity hereunder shall be subject to
the following additional qualifications:
(a) The Indemnitee shall promptly upon its discovery of facts
or circumstances giving rise to a claim for indemnification, including receipt
by it of notice of any demand, assertion, claim, action or proceeding, judicial,
governmental or otherwise, by any third party (such third party actions being
collectively referred to herein as "Third Party Claims"), give notice thereof to
the indemnifying party (the "Indemnitor"), such notice in any event to be given
within 60 days from the date the Indemnitee obtains actual knowledge of the
basis or alleged basis for the right of indemnity or such shorter period as may
be necessary to avoid material prejudice to the Indemnitor; and
(b) In computing Losses, such amounts shall be computed net of
any related recoveries to which the Indemnitee is entitled under insurance
policies or other related payments received or receivable from third parties and
net of any tax benefits actually received by the Indemnitee or for which it is
eligible, taking into account the income tax treatment of the receipt of
indemnification.
<PAGE>
Section 11.6 Procedures Respecting Third Party Claims. In providing
notice to the Indemnitor of any Third Party Claim (the "Claim Notice"), the
Indemnitee shall provide the Indemnitor with a copy of such Third Party Claim or
other documents received and shall otherwise make available to the Indemnitor
all relevant information material to the defense of such claim and within the
Indemnitee's possession. The Indemnitor shall have the right, by notice given to
the Indemnitee within 15 days after the date of the Claim Notice, to assume and
control the defense of the Third Party Claim that is the subject of such Claim
Notice, including the employment of counsel selected by the Indemnitor after
consultation with the Indemnitee, and the Indemnitor shall pay all expenses of,
and the Indemnitee shall cooperate fully with the Indemnitor in connection with,
the conduct of such defense. The Indemnitee shall have the right to employ
separate counsel in any such proceeding and to participate in (but not control)
the defense of such Third Party Claim, but the fees and expenses of such counsel
shall be borne by the Indemnitee unless the Indemnitor shall agree otherwise. If
the Indemnitor shall have failed to assume the defense of any Third Party Claim
in accordance with the provisions of this Section, then the Indemnitee shall
have the absolute right to control the defense of such Third Party Claim, and,
if and when it is finally determined that the Indemnitee is entitled to
indemnification from the Indemnitor hereunder, the fees and expenses of
Indemnitee's counsel shall be borne by the Indemnitor, provided that the
Indemnitor shall be entitled, at its expense, to participate in (but not
control) such defense. The Indemnitor shall have the right to settle or
compromise any such Third Party Claim for which it is providing indemnity so
long as such settlement does not impose any obligations on the Indemnitee
(except with respect to providing releases of the third party). The Indemnitor
shall not be liable for any settlement effected by the Indemnitee without the
Indemnitor's consent. The Indemnitor may assume and control, or bear the costs,
of any such defense subject to its reservation of a right to contest the
Indemnitee's right to indemnification hereunder, provided that it gives the
Indemnitee notice of such reservation within 15 days of the date of the Claim
Notice.
ARTICLE 12
GENERAL PROVISIONS
Section 12.1 Notices. All notices, requests, demands, waivers, consents
and other communications hereunder shall be in writing, shall be delivered
either in person, by telegraphic, facsimile or other electronic means, by
overnight air courier or by mail, and shall be deemed to have been duly given
and to have become effective (a) upon receipt if delivered in person or by
telegraphic, facsimile or other electronic means calculated to arrive on any
business day prior to 5:30 p.m. local time at the address of the addressee, or
on the next succeeding business day if delivered on a non-business day or after
5:30 p.m. local time, (b) one business day after having been delivered to an air
courier for overnight delivery or (c) five business days after having been
deposited in the mails as certified or registered mail, return receipt
requested, all fees prepaid, directed to the parties or their permitted
assignees at the following addresses (or at such other address as shall be given
in writing by a party hereto):
<PAGE>
If to NovaCare or Seller, addressed to:
NovaCare, Inc.
1016 West Ninth Avenue
King of Prussia, Pennsylvania 19406
Attention: Timothy E. Foster
President and Chief Operating Officer
Facsimile: (610) 992-3326
with a copy to counsel for Seller:
NovaCare, Inc.
1016 West Ninth Avenue
King of Prussia, Pennsylvania 19406
Attention: Peter D. Bewley, Esq.
Facsimile: (610) 902-3341
and
Tucci & Semes
Suite 206
Three Mill Road
Wilmington, Delaware 19806
If to Buyer, addressed to:
HEALTHSOUTH Corporation
Two Perimeter Park South
Birmingham, Alabama 35243
Attention: Richard M. Scrushy
Chairman of the Board, President and
Chief Executive Officer
Facsimile: (205) 969-4729
with a copy to counsel for Buyer:
HEALTHSOUTH Corporation
Two Perimeter Park South
Birmingham, Alabama 35243
Attention: William W. Horton, Esq.
Facsimile: (205) 969-4732
and
<PAGE>
J. Brooke Johnston, Jr., Esq.
Haskell Slaughter Young & Johnston,
Professional Association
1200 AmSouth/Harbert Plaza
1901 Sixth Avenue North
Birmingham, Alabama 35203
Facsimile: (205) 324-1133
Section 12.2 Attorneys' Fees. In any litigation or other proceeding
relating to this Agreement, including litigation with respect to any Agreement,
the prevailing party shall be entitled to recover its costs and reasonable
attorneys' fees. The term "prevailing party" shall mean the party in whose favor
final judgment after appeal (if any) is rendered with respect to the claims
asserted in such litigation or other proceeding. "Reasonable attorneys' fees"
are no greater than those attorneys' fees actually incurred in obtaining a
judgment or other determination in favor of the prevailing party.
Section 12.3 Successors and Assigns. The rights under this Agreement
shall not be assignable or transferable nor the duties delegable by either party
without the prior written consent of the other; and nothing contained in this
Agreement, express or implied, is intended to confer upon any person or entity,
other than the parties hereto and their permitted successors-in-interest and
permitted assignees, any rights or remedies under or by reason of this Agreement
unless so stated to the contrary.
Section 12.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 12.5 Captions and Paragraph Headings. Captions and paragraph
headings used herein are for convenience only and are not a part of this
Agreement and shall not be used in construing it.
Section 12.6 Entirety of Agreement; Amendments. This Agreement
(including the Schedules and Exhibits hereto) and the other documents and
instruments specifically provided for in this Agreement contain the entire
understanding between the parties concerning the subject matter of this
Agreement and such other documents and instruments and, except as expressly
provided for herein, supersede all prior understandings and agreements, whether
oral or written, between them with respect to the subject matter hereof and
thereof. There are no representations, warranties, agreements, arrangements or
under- standings, oral or written, between the parties hereto relating to the
subject matter of this Agreement and such other documents and instruments which
are not fully expressed herein or therein. This Agreement may be amended or
modified only by an agreement in writing signed by each of the parties hereto.
All Exhibits and Schedules attached to or delivered in connection with this
Agreement are integral parts of this Agreement as if fully set forth herein, and
all statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific provision in which they are explicitly
referenced.
<PAGE>
Section 12.7 Construction. This Agreement and any documents or
instruments delivered pursuant hereto shall be construed without regard to the
identity of the person who drafted the various provisions of the same. Each and
every provision of this Agreement and such other documents and instruments shall
be construed as though the parties participated equally in the drafting of the
same. Consequently, the parties acknowledge and agree that any rule of
construction that a document is to be construed against the drafting party shall
not be applicable either to this Agreement or such other documents and
instruments.
Section 12.8 Waiver. The failure of a party to insist, in any one or
more instances, on performance of any of the terms, covenants and conditions of
this Agreement shall not be construed as a waiver or relinquishment of any
rights granted hereunder or of the future performance of any such term, covenant
or condition, but the obligations of the parties with respect thereto shall
continue in full force and effect. No waiver of any provision or condition of
this Agreement by a party shall be valid unless in writing signed by such party
or operational by the terms of this Agreement. A waiver by one party of the
performance of any covenant, condition, representation or warranty of the other
party shall not invalidate this Agreement, nor shall such waiver be construed as
a waiver of any other covenant, condition, representation or warranty. A waiver
by any party of the time for performing any act shall not constitute a waiver of
the time for performing any other act or the time for performing an identical
act required to be performed at a later time.
Section 12.9 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
Commonwealth of Pennsylvania, without regard to the principles of conflicts of
law thereof.
Section 12.10 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be valid, binding and
enforceable under applicable law, but if any provision of this Agreement is held
to be invalid, void (or voidable) or unenforceable under applicable law, such
provision shall be ineffective only to the extent held to be invalid, void (or
voidable) or unenforceable, without affecting the remainder of such provision or
the remaining provisions of this Agreement.
Section 12.11 Consents Not Unreasonably Withheld. Wherever the consent
or approval of any party is required under this Agreement, such consent or
approval shall not be unreasonably withheld, unless such consent or approval is
to be given by such party at the sole or absolute discretion of such party or is
otherwise similarly qualified.
Section 12.12 Time Is of the Essence. Time is hereby expressly made of
the essence with respect to each and every term and provision of this Agreement.
The parties acknowledge that each will be relying upon the timely performance by
the other of its obligations hereunder as a material inducement to each party's
execution of this Agreement. Consequently, the parties agree that they are bound
strictly by the provisions concerning timely performance of their respective
obligations contained in this Agreement and that if any attempt is made by
either party to perform an obligation required to be performed or comply with a
provision of this Agreement required to be complied with in a manner other than
in strict compliance with the time period applicable thereto, even if such
purported attempt is but one day late, then such purported attempt at
performance or compliance shall be deemed a violation of this Section, shall be
deemed in contravention of the intention of the parties hereto, and shall be
null and void and of no force or effect.
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date first above written.
HEALTHSOUTH Corporation
By: /s/ MICHEAL D. MARTIN
_______________________________
Its: Senior Vice President and Treasurer
______________________________
NOVACARE, INC.
By: /s/ TIMOTHY G. FOSTER
_______________________________
Its: President and Chief Operating Officer
______________________________
NC RESOURCES, INC.
By: /s/ JOSEPH C. O'NEILL
_______________________________
Its: President
______________________________