<PAGE>
EXHIBIT 2.1
Execution Copy
=================================================================
STOCK PURCHASE AGREEMENT
By and Among
SELECT MEDICAL CORPORATION
As Buyer
AND
BEVERLY ENTERPRISES, INC.
As Seller
AND
AMERICAN TRANSITIONAL HOSPITALS, INC.
Dated as of May 29, 1998
=================================================================
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TABLE OF CONTENTS
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ARTICLE I THE TRANSACTION........................................................... 2
1.1. Sale and Purchase of Stock and Notes................................ 2
1.2. Purchase Price; Payment; Adjustment................................. 2
1.3. Closing............................................................. 3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER AND ATH......................... 4
2.1. Organization........................................................ 4
2.2. Capitalization and Ownership; Power and Authority................... 4
2.3. Subsidiaries........................................................ 5
2.4. Qualification; Location of Business and Assets...................... 5
2.5. Authorization and Enforceability.................................... 5
2.6. No Violation of Laws or Agreements.................................. 6
2.7. Financial Statements................................................ 6
2.8. No Undisclosed Liabilities.......................................... 7
2.9. No Changes.......................................................... 7
2.10. Taxes............................................................... 9
2.11. Leasehold Improvements, Inventory and Equipment..................... 11
2.12. Accounts Receivable................................................. 11
2.13. No Pending Litigation or Proceedings................................ 11
2.14. Contracts; Compliance............................................... 12
2.15. Compliance With Laws................................................ 13
2.16. Consents............................................................ 15
2.17. Title............................................................... 15
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2.18. Real Estate......................................................... 15
2.19. Transactions with Related Parties................................... 16
2.20. Condition of Assets................................................. 16
2.21. Compensation Arrangements; Bank Accounts; Officers and Directors.... 17
2.22. Labor Relations..................................................... 17
2.23. Insurance........................................................... 17
2.24. Patents and Intellectual Property Rights............................ 18
2.25. Employee Retirement Income Security Act of 1974, as amended......... 19
2.26. Brokerage........................................................... 21
2.27. Indebtedness........................................................ 21
2.28. Third-Party Payment Contracts....................................... 21
2.29. Billing; Gratuitous Payments........................................ 21
2.30. Reimbursement Matters............................................... 21
2.31. Federal Health Care Programs........................................ 22
2.32. No Criminal Proceedings............................................. 23
2.33. PRO Denials......................................................... 23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER................................. 23
3.1. Organization........................................................ 23
3.2. Power and Authority................................................. 23
3.3. Authorization and Enforceability.................................... 23
3.4. Brokerage........................................................... 24
3.5. No Violation of Laws or Agreements.................................. 24
3.6. No Pending Litigation or Proceedings................................ 24
ARTICLE IV CERTAIN OBLIGATIONS...................................................... 24
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4.1. Conduct of Business Pending Closing................................. 24
4.2. Insurance........................................................... 26
4.3. Fulfillment of Agreements........................................... 27
4.4. Access, Information and Documents................................... 27
4.5. Resignations........................................................ 27
4.6. No Transfers or Pledges of Stock.................................... 27
4.7. Lender and Lessor Consents.......................................... 28
4.8. Delivery of May Financial Statements................................ 28
4.9. Information Systems Support......................................... 28
4.10. Negotiations........................................................ 28
4.11. Assumed Debt........................................................ 29
4.12. Buyer's Knowledge................................................... 29
4.13. Delivery of Schedules............................................... 29
4.14. Delivery of Exhibits................................................ 29
4.15. Receivable Reserve.................................................. 30
4.16. Pharmerica Agreements............................................... 30
4.17. Medicare Cost Reports............................................... 30
ARTICLE V CONDITIONS TO CLOSING; TERMINATION........................................ 31
5.1. Conditions Precedent to Obligations of Buyer........................ 31
5.2. Conditions Precedent to the Obligations of the Seller............... 33
5.3. Termination......................................................... 34
ARTICLE VI CERTAIN ADDITIONAL COVENANTS............................................. 35
6.1. Costs, Expenses and Taxes........................................... 35
6.2. Indemnification By the Seller....................................... 35
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6.3. Indemnification by Buyer............................................ 36
6.4. Limitations and Conditions of Indemnification....................... 36
6.5. Indemnification Procedures.......................................... 37
6.6. Payment of Indemnification.......................................... 39
6.7. No Right of Contribution or Subrogation............................. 39
6.8. Hart-Scott-Rodino Antitrust Improvements Act of 1976................ 39
6.9. Confidentiality..................................................... 39
6.10. Cooperation......................................................... 40
6.11. Books and Records................................................... 40
6.12. Employee Matters.................................................... 41
6.13. Intellectual Property............................................... 42
ARTICLE VII TAX MATTERS............................................................. 42
7.1. Termination of Tax Sharing.......................................... 42
7.2. Seller's Taxes...................................................... 42
7.3. Buyer's Taxes....................................................... 43
7.4. Tax Cooperation..................................................... 43
7.5. Indemnification..................................................... 44
7.6. Notification of Proceedings; Control................................ 44
7.7. Tax Effect of Payments.............................................. 45
ARTICLE VIII CERTAIN DEFINITIONS.................................................... 45
8.1. Certain Definitions................................................. 45
ARTICLE IX MISCELLANEOUS............................................................ 46
9.1. Nature and Survival of Representations.............................. 46
9.2. Notices............................................................. 46
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9.3. Successors and Assigns.............................................. 48
9.4. Governing Law....................................................... 48
9.5. Headings............................................................ 48
9.6. Counterparts........................................................ 49
9.7. Further Assurances.................................................. 49
9.8. Amendment and Waiver................................................ 49
9.9. Entire Agreement.................................................... 49
9.10. Risk of Loss........................................................ 49
9.11. Post-Closing Mergers................................................ 49
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LIST OF SCHEDULES
-----------------
Schedule 2.2 Capitalization and Ownership
Schedule 2.4 States of Qualification; Location of Business and Assets
Schedule 2.6 Violations of Laws or Agreements
Schedule 2.7 Financial Statements
Schedule 2.8 No Undisclosed Liabilities
Schedule 2.9 Changes Since Balance Sheet Date
Schedule 2.9(e) Bonus, Severance and Similar Payments
Schedule 2.9(f) New Hospitals
Schedule 2.10 Taxes
Schedule 2.12 List and Aging of Accounts Receivable
Schedule 2.13 Pending Litigation or Proceedings
Schedule 2.14 Contracts; Unfilled Firm Purchase Orders
Schedule 2.15(b) Approvals
Schedule 2.15(c) Certain Exceptions; Medicare and/or Medicaid Provider Number
Schedule 2.15(d) Violation of Law, Permits and Licenses
Schedule 2.15(g) Accredited Hospitals
Schedule 2.16 Consents
Schedule 2.17 Permitted Liens And Encumbrances
Schedule 2.18 Real Estate
Schedule 2.19 Transactions With Related Parties
Schedule 2.20 Computer Software
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Schedule 2.21 Compensation Arrangements, Bank Accounts and Officers and
Directors
Schedule 2.22 Labor Relations
Schedule 2.23 Insurance
Schedule 2.24 Patents, Trademarks, Etc.
Schedule 2.25 Employee Benefit Plans
Schedule 2.28 Third-party Payment Contracts
Schedule 2.29 Billing; Gratuitous Payments
Schedule 2.30 Reimbursement Matters
Schedule 2.31 Federal Health Care Programs
Schedule 2.33 Pro Denials
Schedule 3.2 Capitalization and Ownership
Schedule 3.6 Pending Litigation or Proceedings
Schedule 4.6 Transfers and Pledges of Stock
Schedule 4.7 Required Lender and Lessor Consents
Schedule 8.1(a) Accounting Principles
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LIST OF EXHIBITS
----------------
Exhibit A Hospitals
Exhibit B Subsidiaries
Exhibit C-1 Opinion of Seller's General Counsel
Exhibit C-2 Opinion of Latham & Watkins
Exhibit D Opinion of Dechert Price & Rhoads
Exhibit E Description of Transition Services
Exhibit F Joint Venture Agreement
Exhibit G Noncompete Agreement
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<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
This is a Stock Purchase Agreement (the "Agreement") dated as of May
29, 1998, by and among SELECT MEDICAL CORPORATION, a Delaware corporation
("Buyer"), BEVERLY ENTERPRISES, INC., a Delaware corporation ("Seller") and
AMERICAN TRANSITIONAL HOSPITALS, INC., a Delaware corporation ("ATH").
Background
----------
ATH is, among other things, a leading nationwide long-term care
"hospital within a hospital" company providing quality long-term acute care to
chronically ill patients. ATH operates the hospitals listed on Exhibit A hereto
(the "Hospitals").
Seller owns all of the issued and outstanding capital stock (the
"Stock") of ATH.
Seller has made certain loans and advances to ATH and the Subsidiaries
(defined below) in an aggregate amount, net of loans and advances made by ATH
and the Subsidiaries to Seller. At Closing, ATH and each Subsidiary, as
applicable, will execute promissory notes (the "Notes") in an aggregate amount
equal to such inter-company debt, as adjusted to reflect any increase or
decrease through the Closing Date ("Intercompany Debt").
ATH, ATH Heights, Inc. or Synergos, Inc. owns all of the issued and
outstanding capital stock (the "Subsidiary Stock") of the corporations
identified on Exhibit B (the "Subsidiaries") as noted therein.
Buyer desires to purchase, and Seller desires to sell, the Stock and
the Notes, on the terms and subject to the conditions set forth in this
Agreement.
Following the acquisition of the Stock and Notes, Buyer intends to
consummate one or more mergers pursuant to which ATH and/or the Subsidiaries
which own the Hospitals will be merged with and into Buyer and/or its
subsidiaries, and the corporate existence of ATH and/or the Subsidiaries shall
thereupon cease and Buyer and/or its subsidiaries shall be the successors or
surviving corporations. The purpose of such post-closing mergers is to fulfill
Buyer's intention to acquire the assets of ATH and the Subsidiaries.
Terms
-----
In consideration of the mutual covenants contained herein and
intending to be legally bound hereby, the parties hereto agree as follows:
<PAGE>
ARTICLE I
---------
THE TRANSACTION
---------------
1.1. Sale and Purchase of Stock and Notes.
------------------------------------
At the Closing referred to in Section 1.3 below, the Seller will sell
and assign to Buyer, and Buyer will purchase from the Seller, the Stock and the
Notes.
1.2. Purchase Price; Payment; Adjustment.
-----------------------------------
(a) The aggregate purchase price for (i) the Notes shall be equal
to the Intercompany Debt (the "Note Purchase Price"), and (ii) the Stock shall
be equal to Sixty-Two Million Eight Hundred Thousand Dollars ($62,800,000) minus
-----
the Intercompany Debt (the "Stock Purchase Price," together with the Note
Purchase Price, the "Purchase Price"), subject to adjustment as set forth in
subsection (b) below. The Stock Purchase Price shall be paid by permitting the
Assumed Debt to remain outstanding and, with respect to the balance, in
immediately available funds. At Closing, Buyer shall pay to Seller an amount
equal to the Purchase Price, as adjusted pursuant hereto, minus the Assumed Debt
-----
by wire transfer to an account designated in writing by the Seller at least
three business days prior to the Closing.
(b) It is the intention and agreement of the parties that the
Consolidated Net Working Capital (as hereinafter defined) of ATH and its
Subsidiaries be not less than the Consolidated Net Working Capital as of
December 31, 1997 based on the December 31, 1997 balance sheet included in the
Financial Statements (as hereinafter defined) (the "Threshold Amount"). On the
Closing Date, an estimate of the Consolidated Net Working Capital based on
financial statements as of, and for the period ending on, the last day of the
full month immediately preceding the month in which the Closing occurs (the
"Estimated Closing Consolidated Net Working Capital") shall be mutually agreed
to by Buyer and Seller. If the Estimated Closing Consolidated Net Working
Capital is less than the Threshold Amount by greater than $50,000 (the
"Designated Amount"), the Purchase Price otherwise due pursuant to Section
1.2(a) shall be reduced by the difference between the Estimated Closing
Consolidated Net Working Capital and the Threshold Amount. If the Estimated
Closing Consolidated Net Working Capital is greater than the Threshold Amount by
at least the Designated Amount, the Purchase Price otherwise due pursuant to
Section 1.2(a) shall be increased by the difference between the Estimated
Closing Consolidated Net Working Capital and the Threshold Amount. The Estimated
Closing Consolidated Net Working Capital shall be subject to final adjustment as
provided in this Section 1.2(b). Buyer shall prepare (in cooperation with
Seller) and deliver to Seller within thirty (30) days after the Closing an
unaudited consolidated balance sheet of ATH and its Subsidiaries as of Closing
(the "Closing Balance Sheet") prepared in accordance with the Accounting
Principles and applying the methodology contemplated in Section 4.15 hereof.
Buyer shall determine the Consolidated Net Working Capital using the information
reflected on the Closing Balance Sheet. The Closing Balance Sheet and Buyer's
determination of Consolidated Net Working Capital shall be subject to
verification by Seller within thirty (30) days of the date of delivery of such
information to Seller, during which period Seller shall have access to the
workpapers and such other documents and information relating to the preparation
of
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the Closing Balance Sheet and the determination of the Consolidated Net Working
Capital as it shall request. Within that thirty (30) day period, Seller shall
notify Buyer of any dispute with respect to the Closing Balance Sheet or the
determination of the Consolidated Net Working Capital. Any such dispute which
cannot be resolved after good faith negotiations within thirty (30) days from
the date Buyer is so notified shall be referred to a nationally recognized firm
of certified public accountants who has not previously rendered services to
Buyer or Seller or an affiliate thereof chosen by the certified public
accountants of Seller and Buyer, whose determination on such matters shall be
final and binding on the parties and whose fees and expenses shall be shared
equally by the parties. For purposes of this Agreement, the final Consolidated
Net Working Capital (and the calculation of the final Purchase Price) shall be
reflected on (and made from) the Closing Balance Sheet as modified by resolution
of the Seller and Buyer or by the aforesaid independent accounting firm, or if
the Seller fails to notify Buyer in writing of any disputed items within the
prescribed thirty (30) day period, the Closing Balance Sheet as previously
delivered by Buyer. If the Consolidated Net Working Capital is so determined to
be less than the Estimated Closing Consolidated Net Working Capital by greater
than the Designated Amount, the amount of the shortfall from the Estimated
Closing Consolidated Net Working Capital shall be paid by the Seller to Buyer.
If the Consolidated Net Working Capital is so determined to be greater than the
Estimated Closing Consolidated Net Working Capital by greater than the
Designated Amount, the amount of the overage from the Estimated Closing
Consolidated Net Working Capital shall be paid by Buyer to Seller. Any amount
due pursuant to this Section 1.2(b) shall be paid by Seller to Buyer or Buyer to
Seller, as the case may be, within ten (10) days after (i) as to any undisputed
portion, the determination of such undisputed portion of such amount, and (ii)
as to any disputed portion, the final determination of the Consolidated Net
Working Capital (taking into account any amounts previously paid pursuant
hereto). Buyer (in cooperation with Seller) shall prepare and deliver to Seller
within fifteen (15) days of Closing the profit and loss statement for such month
through the Closing Date; provided, however, that in the event Closing occurs on
the first or last business day of a month, such profit and loss statement shall
be prepared and delivered within twelve (12) days of Closing.
(c) As used herein, the "Consolidated Net Working Capital" of ATH
and its Subsidiaries shall mean the excess of the "current assets" of ATH and
its Subsidiaries over the "current liabilities" (excluding the current portion
of long-term debt) of ATH and its Subsidiaries, on a consolidated basis, in each
case as such assets and liabilities are properly accrued and reflected on the
books and records of ATH and its Subsidiaries in accordance with the Accounting
Principles.
1.3. Closing.
-------
(a) Time and Place. The closing under this Agreement (the
--------------
"Closing") will take place at 10:00 a.m., local time, on the later of June 30,
1998 or the third business day after the satisfaction or waiver of the
conditions set forth in Sections 5.1 and 5.2 of the Agreement and two weeks
after delivery of the Schedules and Exhibits, at the offices of Dechert Price &
Rhoads, 4000 Bell Atlantic Tower, 1717 Arch Street, Philadelphia, Pennsylvania,
or at
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such other time, date or place as the parties shall mutually agree; provided,
however, such date shall not be later than July 31, 1998. The date on which
Closing occurs is sometimes referred to herein as the "Closing Date."
(b) Deliveries and Proceedings at the Closing. At the Closing:
-----------------------------------------
i. Deliveries by Seller. Seller will deliver to Buyer the
--------------------
Notes and certificates evidencing the Stock accompanied by stock powers duly
executed in blank or duly executed instruments of transfer, any other documents
that are reasonably necessary to transfer to the Buyer good title to the Stock,
free and clear of all liens, claims, security interests, pledges, charges,
equities, options, restrictions and encumbrances of whatever nature and the most
recent JCAHO (as hereinafter defined) report and state surveys to the extent
such report or surveys exist.
ii. Deliveries By Buyer. Buyer will deliver the Purchase
-------------------
Price minus the Assumed Debt to the Seller by wire transfer in accordance with
-----
Section 1.2.
iii. Other Deliveries. The closing certificates, opinions
----------------
of counsel and other documents required to be delivered pursuant to this
Agreement will be exchanged.
ARTICLE II
----------
REPRESENTATIONS AND WARRANTIES OF SELLER AND ATH
------------------------------------------------
The Seller and ATH hereby, jointly and severally, represent and
warrant to Buyer as follows:
2.1. Organization.
------------
Each of Seller, ATH and the Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state of
its incorporation. Each of Seller, ATH and the Subsidiaries has all requisite
power and authority to own or lease its properties and assets as now owned or
leased and to carry on its business as and where now being conducted. Copies of
the articles of incorporation and bylaws of ATH and each of the Subsidiaries, as
amended to date, have been delivered to Buyer, and are correct, complete and in
full force and effect.
2.2. Capitalization and Ownership; Power and Authority.
-------------------------------------------------
Schedule 2.2 sets forth the authorized capital stock of ATH and each
of the Subsidiaries including the number of shares of common stock, par value
per share, and the number of shares which are presently issued and outstanding
or held in its treasury. All of such outstanding shares have been duly
authorized, validly issued and are fully paid and nonassessable, were not issued
in violation of the terms of any agreement or other understanding binding upon
ATH or the Subsidiaries, and were issued in compliance with all applicable
federal
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and state securities or "blue-sky" laws and regulations. Except as set forth on
Schedule 2.2, there are no outstanding options, warrants, rights, agreements,
calls, commitments or demands of any character relating to the capital stock of
ATH or the Subsidiaries and no securities convertible into or exchangeable for
any of such capital stock. Seller (a) is the sole record and beneficial owner of
the shares of Stock, free and clear of any lien, security interest, restriction,
encumbrance or claim except as set forth in Schedule 2.2, and (b) has full legal
right, power and authority to enter into this Agreement, transfer such Stock to
Buyer in accordance with this Agreement and to perform its other obligations
hereunder, without the need for the consent of any other person or entity, other
than those set forth on Schedule 2.16 and as required under the HSR Act. ATH,
ATH Heights, Inc. or Synergos, Inc. is the sole record and beneficial owner of
the shares of Subsidiary Stock, free and clear of any lien, security interest,
restriction, encumbrance or claim except as set forth in Schedule 2.2. ATH has
full legal right, power and authority to enter into this Agreement and to
perform its other obligations hereunder, without the need for the consent of any
other person or entity, other than those set forth on Schedule 2.16 and as
required under the HSR Act.
2.3. Subsidiaries.
------------
Except for the Subsidiary Stock, ATH does not, directly or indirectly,
own any stock of, or any other interest in, any other corporation, partnership,
joint venture or business entity.
2.4. Qualification; Location of Business and Assets.
----------------------------------------------
Each of ATH and the Subsidiaries is duly qualified and in good
standing as a foreign corporation, duly authorized to do business in the
jurisdictions set forth on Schedule 2.4, which jurisdictions are the only
jurisdictions wherein the character of the properties owned or leased or the
nature of activities conducted by it makes such qualification necessary. Set
forth on Schedule 2.4 is each location (specifying state, county and city) where
ATH and each of the Subsidiaries (a) has a place of business, and (b) owns or
leases real property.
2.5. Authorization and Enforceability.
--------------------------------
The execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Seller and ATH. This Agreement has been
duly executed and delivered by the Seller and ATH and constitutes the legal,
valid and binding obligation of the Seller and ATH, enforceable against each of
them in accordance with its terms. Upon delivery to Buyer at the Closing of
certificates representing the Stock in accordance herewith, Buyer will acquire
good and valid title to such Stock, free and clear of all liens, claims,
security interests, pledges, charges, equities, options, restrictions and
encumbrances of whatever nature.
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2.6. No Violation of Laws or Agreements.
----------------------------------
Except as set forth on Schedule 2.6, the execution and delivery of
this Agreement do not, and the consummation of the transactions contemplated by
this Agreement and the compliance with the terms, conditions and provisions of
this Agreement by the Seller and ATH, will not (a) contravene any provision of
the Seller's, ATH's or any Subsidiary's articles of incorporation or bylaws; (b)
conflict with or result in a breach of or constitute a default (or an event
which might, with the passage of time or the giving of notice or both,
constitute a default) under any of the terms, conditions or provisions of any
indenture, mortgage, loan or credit agreement or any other agreement or
instrument to which the Seller, ATH or any Subsidiary is a party or by which any
of them or any of their assets may be bound or affected, or any judgment or
order of any court or governmental department, commission, board, agency or
instrumentality, domestic or foreign, or any applicable law, rule or regulation;
(c) result in the creation or imposition of any lien, charge or encumbrance of
any nature whatsoever upon any of ATH's or any Subsidiary's assets or upon the
Stock or give to others any interests or rights therein; (d) result in the
maturation or acceleration of any liability or obligation of ATH or any
Subsidiary (or give others the right to cause such a maturation or
acceleration); or (e) result in the termination of or loss of any right (or give
others the right to cause such a termination or loss) under any agreement or
contract to which ATH or any Subsidiary is a party or by which any of them may
be bound; except with respect to those matters set forth in clauses (b), (d) and
(e) above which would not have a Material Adverse Effect.
2.7. Financial Statements.
--------------------
The books of account and related records of ATH and each Subsidiary
fairly present its assets, liabilities and transactions in accordance with
Accounting Principles. Attached as Schedule 2.7 hereto are the following
unaudited financial statements which have previously been delivered by Seller
and ATH to Buyer (the "Financial Statements"):
(a) consolidated and consolidating statements of the results of
operations of ATH and the Subsidiaries for the fiscal years
ended December 31, 1995 through December 31, 1997,
inclusive, and consolidated and consolidating balance sheets
of ATH and the Subsidiaries as at each of such dates,
certified by a financial officer of Seller and ATH.
(b) consolidated and consolidating statement of the results of
operations of ATH and the Subsidiaries for the fiscal
quarter ended March 31, 1998 and a consolidated and
consolidating balance sheet of ATH and the Subsidiaries as
at such date, certified by a financial officer of Seller and
ATH.
The Financial Statements (i) are correct and complete and in accordance with the
books and records of ATH, (ii) fairly present the consolidated financial
condition, assets and liabilities of ATH and the Subsidiaries and the results of
their operations for the periods covered thereby, and
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(iii) have been prepared in accordance with Accounting Principles. All
references in this Agreement to the "Balance Sheet" shall mean the balance sheet
of ATH, as at March 31, 1998 included in the Financial Statements and all
references to the "Balance Sheet Date" shall mean March 31, 1998.
2.8. No Undisclosed Liabilities.
--------------------------
Neither ATH, to its knowledge, nor any Subsidiary, to its knowledge,
has any liability or obligation of any nature, whether due or to become due
required to be disclosed by Accounting Principles, except (a) liabilities
disclosed on the consolidated and consolidating Balance Sheet, and (b)
liabilities disclosed on Schedule 2.8.
2.9. No Changes.
----------
Except as disclosed on Schedule 2.9, since March 31, 1998, ATH and
each of its Subsidiaries has conducted its business only in the ordinary course.
Without limiting the generality of the foregoing sentence, except as disclosed
on Schedule 2.9, since March 31, 1998, there has not been:
(a) any change in the financial condition, assets, liabilities,
net worth or business of ATH or any Subsidiary, except changes in the ordinary
course of business, none of which, individually or in the aggregate, has or is
reasonably likely to have a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance, which has or is reasonably likely to have a Material Adverse Effect;
(c) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind of any of ATH's or any Subsidiary's assets, tangible or
intangible, other than Permitted Encumbrances (as hereinafter defined);
(d) except for the payment of cash dividends, any declaration,
setting aside or payment of a dividend or other distribution in respect of any
of the capital stock of ATH or any Subsidiary, or any direct or indirect
redemption, purchase or other acquisition of any capital stock of ATH or any
Subsidiary or any rights to purchase such capital stock or securities
convertible into or exchangeable for such capital stock;
(e) except for stay, retention, successful completion or other
bonuses, or severance, parachute or similar payments which are set forth on
Schedule 2.9(e) and have been or will be paid in connection with the
transactions contemplated hereby and for which ATH has established a full
current reserve or accrual on the Closing Balance Sheet or the payment of which
is otherwise Seller's responsibility, any increase in the salaries or other
compensation payable or to become payable to, or any advance (excluding advances
for ordinary business expenses) or loan to, any officer, director, employee or
shareholder of ATH or any Subsidiary (except normal annual merit increases made
in the ordinary course of business and consistent
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with past practice for employees), or any increase in, or any addition to, other
benefits (including without limitation any bonus, profit-sharing, pension or
other plan) to which any of ATH's or any Subsidiary's officers, directors,
employees or shareholders may be entitled, or any payments to any pension,
retirement, profit-sharing, bonus or similar plan except payments in the
ordinary course of business and consistent with past practice made pursuant to
the employee benefit plans described on Schedule 2.25, or any other payment of
any kind to or on behalf of any such officer, director, employee or shareholder
other than payment of base compensation and reimbursement for reasonable
business expenses in the ordinary course of business;
(f) any making or authorization of any capital expenditures in
excess of $50,000 individually or $200,000 in the aggregate except for capital
expenditures incurred in connection with the opening of new hospitals currently
under contract and which are set forth on Schedule 2.9(f);
(g) any cancellation or waiver of any right material to the
operation of ATH's or any Subsidiary's business, including, without limitation,
any leases, licenses or certifications relating to the operation of the
Hospitals, or any cancellation or waiver of any debts or claims of substantial
value or any cancellation or waiver of any debts or claims against any Related
Party;
(h) any sale, transfer or other disposition of the Stock or any
assets of ATH or any Subsidiary other than sales, transfers or other
dispositions of assets in the ordinary course of business;
(i) any payment, discharge or satisfaction of any liability or
obligation (whether accrued, absolute, contingent or otherwise) by ATH or any
Subsidiary, other than the payment, discharge or satisfaction, in the ordinary
course of business, of liabilities or obligations shown or reflected on the
Balance Sheet or incurred in the ordinary course of business since the Balance
Sheet Date including intercompany debt (but excluding the Assumed Debt);
(j) any adverse change or, to Seller's and ATH's knowledge, any
threat of any adverse change in ATH's or any Subsidiary's relations with, or any
loss or, to Seller's and ATH's knowledge, threat of loss of, any of ATH's or any
Subsidiary's third-party payors (including, but not limited to, Title XVIII
("Medicare") of the Social Security Act and Title XIV ("Medicaid") of the Social
Security Act), suppliers, clients or customers, the loss of which would have a
Material Adverse Effect;
(k) any write-offs as uncollectible of any notes or accounts
receivable of ATH or any Subsidiary or write-downs of the value of any assets or
inventory by ATH or any Subsidiary other than those for which reserves or
accruals have been established on the Balance Sheet or those in immaterial
amounts;
(l) any change by ATH or any Subsidiary in any method of
accounting or keeping its books of account or accounting practices;
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(m) any creation, incurrence, assumption or guarantee by ATH or
any Subsidiary of any obligations or liabilities (whether absolute, accrued,
contingent or otherwise and whether due or to become due), except in the
ordinary course of business including intercompany debt, or any creation,
incurrence, assumption or guarantee by ATH or any Subsidiary of any indebtedness
for money borrowed other than intercompany debt;
(n) any payment, loan or advance of any amount to or in respect
of, or the sale, transfer or lease of any properties or assets (whether real,
personal or mixed, tangible or intangible) to, or entering into of any
agreement, arrangement or transaction with, any Related Party, except for
compensation to the officers and employees of ATH or any Subsidiary at rates not
exceeding the rates of compensation disclosed on Schedule 2.21 hereto; or
(o) any transaction or agreement outside the ordinary course of
ATH's or any Subsidiary's business or inconsistent with past practice which has
or is reasonably likely to have a Material Adverse Effect.
2.10. Taxes.
-----
(a) ATH and each Subsidiary has (i) timely filed or will timely
file all returns required to be filed by it for all taxable periods up to and
including the Closing Date with respect to all federal, state and local income,
payroll, withholding, excise, sales, use, real and personal property, use and
occupancy, business and occupation, mercantile, real estate, capital stock and
franchise or other tax (all the foregoing taxes, including interest and
penalties thereon and including estimated taxes, being hereinafter individually
called a "Tax" and collectively called "Taxes"), (ii) paid all Taxes shown to
have become due pursuant to such returns, and (iii) paid all other Taxes for
which a notice of or assessment or demand for payment has been received. All Tax
returns have been prepared in accordance with all applicable laws and
requirements and accurately reflect the taxable income (or other measure of tax)
of ATH and each Subsidiary.
(b) The accruals for Taxes contained in the Balance Sheet are
adequate to cover all liabilities for Taxes of ATH and each Subsidiary for all
periods ending on or before the Balance Sheet Date and include adequate
provision for all deferred Taxes, and nothing has occurred subsequent to that
date to make any of such accruals inadequate. All Taxes for periods beginning
after the Balance Sheet Date have been paid or are the subject of an adequate
current reserve on the books of ATH and each Subsidiary. ATH and each Subsidiary
has timely filed all information returns or reports, including forms 1099, which
are required to be filed and has accurately reported all information required to
be included on such returns or reports. True copies of federal and state income
tax returns of ATH and each Subsidiary for each of the fiscal years ended
December 31, 1992 through December 31, 1996 have been delivered to Buyer. There
are no proposed assessments of Taxes against ATH or any Subsidiary or proposed
adjustments to any Tax return filed, pending against ATH or any Subsidiary or
any proposed adjustments to the manner in which any Taxes of ATH or any
Subsidiary are determined. Except as disclosed on Schedule 2.10, each Tax return
of ATH and the Subsidiaries has been audited by the relevant authorities (and
all deficiencies or proposed deficiencies resulting from
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such audits have been paid or are adequately provided for in the Financial
Statements), or the statute of limitations with respect to each Tax return has
expired, and no Tax return is under examination by any taxing authority.
(c) Except as disclosed on Schedule 2.10, neither ATH nor any
Subsidiary has with respect to any open Tax period (i) filed any consent
agreement under section 341(f) of the Internal Revenue Code of 1986, as amended
(the "Code"), (ii) executed a waiver or consent extending any statute of
limitation for any Tax liability which remains outstanding, (iii) joined in or
been required to join in filing a consolidated or combined federal income Tax
return, (iv) applied for a Tax ruling, (v) entered into a closing agreement with
any taxing authority, or (vi) filed an election under section 338(g) or section
338(h)(10) of the Code or caused a deemed election under section 338(e) thereof.
(d) None of ATH, Seller or the Subsidiaries are "foreign persons"
within the meaning of the Code and regulations promulgated thereunder.
(e) Schedule 2.10 reflects the separate net operating loss carryovers
of ATH and the Subsidiaries and the portion of the Group's consolidated net
operating loss carryovers allocable to ATH and its Subsidiaries allocated in
accordance with Treasury Regulation (S)1.1502-21T(b) as reported for federal
income tax purposes as of the close of the taxable year ended December 31, 1997;
the year of origination of such net operating loss carryforwards; the portion of
any such net operating loss carryforward arising in a separate return limitation
year with respect to the Group; the portion of any such net operating losses
subject to limitation under Section 382 of the Code, the date of any applicable
change of ownership under Section 382 of the Code and the annual limitation of
such net operating losses under Section 382 of the Code. Except as set forth on
Schedule 2.10, none of such net operating losses are subject to limitation (i)
under Section 382 of the Code by virtue of a direct or indirect "ownership
change" of ATH or a Subsidiary within the meaning of Section 382 of the Code on
or before the Closing Date or (ii) by reason of a consolidated return change of
ownership under Treasury regulations (S)1.1502-21A on or before January 1, 1998.
None of such net operating losses has been the subject of an election under
Treasury regulations (S)1.1502-20(g) to have such losses reattributed to another
corporation. The portion of the consolidated net operating losses of the Group
allocable to ATH and the Subsidiaries in accordance with Treas. Reg. (S)1.1502-
21T(b) as of the Closing Date will not be less than $5,000,000. For purposes of
this Section 2.10, "Group" means the consolidated group of corporations filing
consolidated federal income tax returns of which Seller is the common parent
("Seller Parent").
(f) ATH and its Subsidiaries currently utilize the accrual method of
accounting for income tax purposes and such method has not changed within the
past five years. ATH and its Subsidiaries have not been required to make any
adjustments under Section 481(a) of the Code as a result of a change in a tax
accounting method.
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2.11. Leasehold Improvements, Inventory and Equipment.
-----------------------------------------------
All of the inventory of ATH and each Subsidiary, including that
reflected in the Balance Sheet, is valued at the lower of cost or market, the
cost thereof being determined on a first-in, first-out basis, except as
disclosed in the Financial Statements. All of the equipment and leasehold
improvements of ATH and each Subsidiary reflected in the Balance Sheet is valued
at its acquisition cost less accumulated depreciation. All of the inventory and
equipment of ATH and each Subsidiary reflected in the Balance Sheet and all
inventory and equipment acquired since the Balance Sheet Date is maintained in
quality and quantity consistent with past practice. There has been no material
reduction in the level of inventory or equipment from the level set forth in the
December 31, 1997 balance sheet included in the Financial Statements.
2.12. Accounts Receivable.
-------------------
All of the accounts and notes receivable (including any amounts due
from affiliates or any Related Party) of ATH and each Subsidiary represent
amounts receivable for merchandise actually delivered or services actually
provided (or, in the case of non-trade accounts or notes, represent amounts
receivable in respect of other bona-fide business transactions), have arisen in
the ordinary course of business, have been billed and are generally due within
30 days after such billing and, to Seller's and ATH's knowledge, are not subject
to any counterclaims or offsets. On March 31, 1998, ATH and the Subsidiaries
each had accounts receivable, net of reserves for contractual allowances and
doubtful accounts (as calculated in a manner consistent with Section 4.15
hereof) equal to or greater than the dollar amount set forth on Schedule 2.12
opposite its name. Schedule 2.12 sets forth for ATH and each Subsidiary (a) the
total amount of accounts receivable outstanding as of the last day of the month
immediately preceding the present month and (b) the agings of such receivables
based on a schedule containing the ranges of number of days outstanding from the
bill date thereof used historically by ATH and each Subsidiary.
2.13. No Pending Litigation or Proceedings.
-------------------------------------
Except as set forth on Schedule 2.13, there are no actions, suits,
investigations, or proceedings pending or, to the best of Seller's and ATH's
knowledge, threatened against or affecting ATH, any Subsidiary or any of their
assets or affecting the Stock or the Seller's rights thereto, at law or in
equity, by or before any court or governmental department, agency or
instrumentality, and, to Seller's and ATH's knowledge, there is no basis for any
such action, suit, investigation or proceeding which is reasonably likely to
cause a Material Adverse Effect. There are presently no outstanding judgments,
decrees or orders of any court or any governmental or administrative agency
against or affecting ATH, any Subsidiary or any of their assets or businesses or
affecting the Stock or the Seller's rights thereto.
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2.14. Contracts; Compliance.
---------------------
(a) Except as listed on Schedule 2.14, neither ATH nor any
Subsidiary is a party to or bound by any material lease, contract or commitment,
oral or written, formal or informal, including, without limitation, the
following leases, contracts or commitments:
i. mortgages, indentures, security agreements or other
agreements and instruments relating to the borrowing of money, the extension of
credit or the granting of liens or encumbrances;
ii. employment and consulting agreements;
iii. union or other collective bargaining agreements;
iv. powers of attorney;
v. sales agency, manufacturers representative and
distributorship agreements or other distribution or commission arrangements;
vi. material licenses of patent, trademark and other
intellectual property rights;
vii. agreements, orders or commitments for the purchase of
equipment, services, raw materials, supplies or finished products from any one
supplier for an amount in excess of $35,000;
viii. agreements, orders or commitments for the rental,
lease or sale of equipment, products or services for more than $50,000 to any
single purchaser or lessee;
ix. contracts or options relating to the rental, sale or
lease by ATH of any material asset, other than in the ordinary course of
business;
x. bonus, profit-sharing, compensation, stock option,
pension, retirement, deferred compensation, accrued vacation pay, group
insurance, welfare agreements or other plans, agreements, trusts or arrangements
for the benefit of employees;
xi. agreements or commitments for capital expenditures in
excess of $50,000 for any single project;
xii. partnership or joint venture agreements;
xiii. agreements, arrangements or understandings with any
Related Party;
xiv. material rental or lease agreements under which it is
either lessor or lessee;
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xv. material agreements, contracts or commitments for any
charitable or political contribution; or
xvi. other agreements, contracts and commitments which are
material to the business of ATH or any Subsidiary which involve payments or
receipts of more than $50,000 in any single year, or which were entered into
other than in the ordinary course of business.
(b) Except as listed in Schedule 2.14, all such agreements,
leases, contracts and other commitments are in full force and effect; Seller and
ATH and, to Seller's and ATH's knowledge, all other parties to such agreements,
leases, contracts and other commitments have complied with the provisions
thereof; no such party is in default under any of the terms thereof; no event
has occurred that with the passage of time or the giving of notice or both would
constitute a default by ATH or any Subsidiary, or to Seller's and ATH's
knowledge, any other party thereto under any provision thereof; and neither
Seller, ATH nor any Subsidiary has received, or has any knowledge of the
existence of, any written notice of termination or other election by a lessor
under any such agreement.
2.15. Compliance With Laws.
--------------------
(a) Each of ATH, any Subsidiary and any of their current or
former shareholders, directors, officers, agents, employees and other persons
acting on behalf of them, has complied, in all material respects, with all
applicable federal, state and municipal statutes, rules, regulations and orders
and other requirements of all courts and other governmental or regulatory
authorities having jurisdiction over ATH, including without limitation those
relating to third party reimbursement (including, but not limited to, Medicare,
Medicaid, CHAMPUS and other Federal Health Care Programs), fraudulent or abusive
practices (including but not limited to the State Health Care Programs Anti-
Fraud and Abuse Amendments of the Social Security Act, as amended, commonly
known as the "Anti-Kickback Statute," and the amendments to Section 1877 of the
Social Security Act (42 U.S.C.(S)1395nn), enacted as part of the Omnibus Budget
Reconciliation Act of 1993, commonly known as "Stark II"), health care industry
regulation, environmental protection, occupational safety and health, equal
employment practices and fair trade practices.
(b) ATH and all professional employees or agents of ATH hold and
are in compliance with all permits, certificates (including, without limitation,
certificates of need), licenses, orders, registrations, franchises,
authorizations and other approvals from all federal, state, local and foreign
governmental and regulatory bodies (collectively, "Approvals") which are
required pursuant to all laws, rules and regulations to enable ATH to own,
operate and manage its business and the failure of which to possess or be in
compliance with has not had and is not reasonably likely to have a Material
Adverse Effect. All such Approvals are in full force and effect. Schedule
2.15(b) sets forth a true and correct list of those Approvals held by ATH which
are required to operate the Hospital facilities.
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<PAGE>
(c) All services provided by Seller, ATH, the Subsidiaries or any
professional employee or agent acting on behalf of any of them or for which
Seller, ATH and/or the Subsidiaries directly or indirectly receive payment under
Medicare, Medicaid or other Federal Health Care Programs are, to the extent
required by law, certified for participation or enrollment in all such Federal
Health Care Programs, have a current and valid provider contract with such
Federal Health Care Programs, are in compliance with the conditions of
participation or enrollment of such Federal Health Care Programs, and, to the
extent required by law, have received all approvals or qualifications necessary
for capital reimbursement, except for such certifications, contracts,
compliances, approvals and qualifications which are set forth on Schedule
2.15(c) or which, individually or in the aggregate, would not have a Material
Adverse Effect. Seller and ATH have delivered to the Buyer true and complete
copies of all Medicare and Medicaid cost reports for any period after December
31, 1994 for each location of ATH or any Subsidiary for which there is a
Medicare or Medicaid provider number. Schedule 2.15(c) sets forth the applicable
Medicare and/or Medicaid provider number utilized by ATH and each Subsidiary and
a true and correct list of the applicable TEFRA limitation with respect to each
such provider.
(d) Except as set forth on Schedule 2.15(d), none of Seller, ATH or
the Subsidiaries has received, or has knowledge of the existence, of any notice,
citation, summons, order, complaint or penalty, and, to the Seller's or ATH's
knowledge, no investigation or review is pending or threatened by any
governmental or other entity (i) with respect to any alleged violation by ATH or
any Subsidiary of any law, ordinance, rule, regulation or order of any
governmental entity, or (ii) with respect to any alleged failure by ATH or any
Subsidiary to have any permit, certificate, license, approval, registration or
authorization required in connection with its business, or (iii) with respect to
any generation, treatment, storage, recycling, transportation or disposal of any
hazardous or toxic or polluting substances generated by ATH or any Subsidiary.
(e) Neither ATH nor any Subsidiary has treated, stored, recycled,
disposed of or released any hazardous, toxic or polluting substances on any
property now or previously owned or leased by ATH or any Subsidiary, nor, to
Seller's and ATH's knowledge, has anyone else treated, stored, recycled,
disposed of or released any hazardous, toxic or polluting substances on any
property now or previously owned or leased by ATH or at any other property which
has resulted in any condition for which ATH is or could be responsible,
including under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA"). Neither ATH nor any Subsidiary has transported
any hazardous, toxic or polluting substances or arranged for the transportation
of such substances to any location which is the subject of federal, state or
local enforcement actions or other investigations which may lead to claims
against ATH, any Subsidiary or the Buyer for clean-up costs, remedial work,
damages to natural resources or for personal injury claims, including, but not
limited to, claims under CERCLA. ATH's and each Subsidiary's Standard Industry
Code ("SIC") number is listed on Schedule 2.15(e).
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<PAGE>
(f) ATH has correctly maintained in all material respects all
records (whether financial, medical or otherwise) required by state and federal
agencies and pursuant to the requirements of Medicare, Medicaid and other
Federal Health Care Programs.
(g) Each Hospital set forth on Schedule 2.15(g) has been
surveyed for and has received accreditation by the Joint Commission for
Accreditation of Health Care Organizations ("JCAHO") and such accreditation by
JCAHO remains in full force and effect and has not been modified, revoked or
suspended as of the Closing Date.
2.16. Consents.
--------
Except for such consents as are set forth on Schedule 2.16 or those
which arise under categories of contracts not described on such Schedule and
except as required under the HSR Act, no consent, approval or authorization of,
or registration or filing with, any person, including any governmental authority
or other regulatory agency, is required in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except where the failure to obtain any of the foregoing would not have a
Material Adverse Effect.
2.17. Title.
-----
Each of ATH and the Subsidiaries has good and, in the case of real
property, marketable title (fee or leasehold) to all of its properties and
assets (including equipment), including the properties and assets reflected in
the Balance Sheet (except those disposed of in the ordinary course of business
since the Balance Sheet Date), free and clear of any mortgage, pledge, lien,
restriction, encumbrance, tenancy, license, encroachment, covenant, condition,
right of way, easement, claim, security interest, charge or any other matter
affecting title, except (a) minor imperfections of title, none of which,
individually or in the aggregate, materially detracts from the value of or
impairs the use of the affected properties and assets or impairs the operations
of ATH or the Subsidiaries, (b) liens for current taxes not yet due and payable,
and (c) as disclosed on Schedule 2.17 (collectively "Permitted Encumbrances").
2.18. Real Estate.
-----------
Schedule 2.18 contains a correct list and summary description of all
real properties owned (beneficially or of record) or leased by ATH or any
Subsidiary and identifies all title insurance policies covering any of, and all
leases relating to, such properties; and the construction, use and operation of
all real properties owned or leased by ATH or any Subsidiary conform to all
applicable building, zoning, safety, environmental, subdivision, and other laws,
ordinances, regulations, codes, permits, licenses and certificates and all
restrictions and conditions affecting title, except for any nonconformance that
does not have a Material Adverse Effect. Neither ATH nor any Subsidiary has
received any written, or has knowledge of the existence of any written or oral,
notice for assessments for public improvements against any of such real
properties which remains unpaid and no such assessment has been proposed.
Neither ATH nor any Subsidiary has received any written, or has knowledge of the
existence of any
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<PAGE>
written or oral, notice or order by any governmental or other public authority,
any insurance company which has issued a policy with respect to any of such
properties or any board of fire underwriters or other body exercising similar
functions which (a) relates to violations of building, safety, fire or other
ordinances or regulations, (b) claims any defect or deficiency with respect to
any of such properties, or (c) requests the performance of any repairs,
alterations or other work to or in any of such properties or in the streets
bounding the same. Neither Seller, ATH nor any Subsidiary has received notice or
has any knowledge of the existence of any pending condemnation, expropriation,
eminent domain or similar proceeding affecting all or any portion of any of such
properties and, to the best knowledge of the Seller and ATH, no such proceeding
is contemplated.
2.19. Transactions with Related Parties.
---------------------------------
Except such transactions as are disclosed on Schedule 2.19, no Related
Party:
(a) has borrowed money or loaned money to ATH or any Subsidiary
which has not been repaid, other than Seller;
(b) has any contractual or other claim, express or implied, of
any kind whatsoever against ATH or any Subsidiary, other than claims of
employees, those incurred in the ordinary course of business and disclosed in
the Schedules hereto;
(c) had, since the Balance Sheet Date, any interest in any
property or assets used by ATH or any Subsidiary in its business; or
(d) has been engaged, since the Balance Sheet Date, in any other
transaction with ATH or any Subsidiary (other than employment relationships at
the salaries disclosed in Schedule 2.21).
2.20. Condition of Assets.
-------------------
(a) The buildings, machinery, inventory, equipment, furniture,
improvements and other assets, properties and rights of ATH and the
Subsidiaries, including those reflected in the Balance Sheet, are sufficient to
operate the business of ATH and the Subsidiaries as currently operated.
(b) ATH and the Subsidiaries own or license all computer
hardware, software and data processing systems or other electronic data
transmission, storage or computation programs used in connection with the
operation of the Hospitals (collectively, the "Computer Software") which are
listed on Schedule 2.20. Certain services described in Schedule 2.20 are
provided by Seller to ATH and its Subsidiaries using computer hardware, software
and other electronic data processing and transmission services which are not
listed on Schedule 2.20, are not owned by ATH or the Subsidiaries and ATH and
the Subsidiaries have no rights to their use except to the extent contemplated
by Exhibit E. Except as provided for in Exhibit E, other than the Computer
Software, no other computer hardware, software and data
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processing systems or other electronic data transmission is currently used by
ATH or any Subsidiary to operate its business as presently conducted. To the
best knowledge of the Seller and ATH, there are no material malfunctions or
design failures with respect to the Computer Software and related items of
systems hardware.
2.21. Compensation Arrangements; Bank Accounts; Officers and
------------------------------------------------------
Directors.
---------
Schedule 2.21 sets forth the following information:
(a) the names and current annual salary, including any bonus,
if applicable, of all present officers and employees of ATH and each Subsidiary
whose current annual salary, including any promised, expected or customary
bonus, equals or exceeds $75,000, together with a statement of the full amount
of all remuneration paid by ATH and each Subsidiary to each such person, during
the twelve-month period preceding the date hereof;
(b) the name of each bank in which ATH and each Subsidiary has
an account or safe deposit box, the identifying numbers or symbols thereof and
the names of all persons authorized to draw thereon or have access thereto; or
(c) the names and titles of all directors and officers of ATH
and each Subsidiary.
2.22. Labor Relations.
---------------
Except as disclosed on Schedule 2.22, (a) no employee of ATH or any
Subsidiary is represented by any union or other labor organization; (b) neither
Seller, ATH nor any Subsidiary has received notice, or has knowledge of the
existence, of any unfair labor practice complaint against ATH or any Subsidiary
pending or threatened before the National Labor Relations Board; (c) there is no
labor strike, dispute, slow down or stoppage actually pending or, to the best
knowledge of the Seller and ATH, threatened against or involving ATH or any
Subsidiary; (d) no grievance which might have a Material Adverse Effect is
pending; (e) no private agreement restricts ATH or any Subsidiary from
relocating, closing or terminating any of its operations or facilities; and (f)
neither ATH nor any Subsidiary has in the past three years experienced any work
stoppage.
2.23. Insurance.
---------
(a) Attached hereto as Schedule 2.23 is a complete and correct
list of all policies of insurance of which ATH and each Subsidiary is the owner,
insured or beneficiary, or covering any of its property, indicating for each
policy the carrier, risks insured, the amounts of coverage, deductible, premium
rate, cash value if any, expiration date and any pending claims thereunder. All
such policies are outstanding and in full force and effect. There is no default
with respect to any provision contained in any such policy, nor has there been
any failure to give any notice or present any claim under any such policy in a
timely fashion or in the manner or detail required by the policy. Except as set
forth on Schedule 2.23, there are no outstanding
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unpaid premiums or claims under such policies. No notice of cancellation or non-
renewal with respect to, or disallowance of any claim under, any such policy has
been received by ATH or any Subsidiary.
(b) Neither ATH nor any Subsidiary has been refused any
insurance, nor has any of their coverage been limited by any insurance carrier
to which any of them has applied for insurance or with which any of them has
carried insurance during the last five years. Since June 1, 1987, all products
liability and general liability policies maintained by or for the benefit of ATH
or any Subsidiary have been "occurrence" policies and not "claims made"
policies.
2.24. Patents and Intellectual Property Rights.
----------------------------------------
(a) Schedule 2.24 contains a complete and accurate list of all
patents and patent applications, industrial design registrations, copyright
registrations, trademarks, service marks, trade names, and registrations and
applications for registration of trademarks, service marks, trade names, trade
dress and domain names used in the conduct of ATH's and each Subsidiary's
business specifying as to each such item, as applicable: (i) the owner of the
item, (ii) the jurisdictions in which the item is issued or registered or in
which any application for issuance or registration has been filed, (iii) the
respective issuance, registration, or application number of the item, and (iv)
the date of application and issuance or registration of the item.
(b) Schedule 2.24 contains a complete and accurate list of all
material licenses, sublicenses, consents and other agreements (whether written
or otherwise) (i) pertaining to any patents, industrial design rights,
trademarks, service marks, trade names, trade dress, copyrights, trade secrets,
computer software programs (other than standard, commercially available
programs), or other intellectual property used in the conduct of ATH's or each
Subsidiary's business, and (ii) by which ATH and each Subsidiary licenses or
otherwise authorizes a third party to use such intellectual property. None of
ATH, the Subsidiaries or any other party is in material breach of or default
under any such license or other agreement and each such license or other
agreement is now and immediately following the Closing will be valid and in full
force and effect.
(c) Except as explicitly indicated in Schedule 2.24, ATH and
each Subsidiary owns or is licensed or otherwise has the right to use all
patents, industrial design rights, trademarks, service marks, trade names, trade
dress, copyrights, inventions, technology, know-how, designs, formulae, trade
secrets, confidential and proprietary information, computer software programs
(other than standard, commercially available programs), domain names, and other
intellectual property used in the operation of ATH's and each Subsidiary's
business as it is currently conducted.
(d) The operation of ATH's and each Subsidiary's business does
not, to the best knowledge of the Seller and ATH, infringe on the patents,
industrial design rights, trademarks, service marks, trade names, trade dress,
copyrights, trade secrets or other intellectual property rights of any third
party, and no claim has been made, notice given, or dispute arisen to
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that effect. Neither ATH nor any Subsidiary has any pending claims that a third
party has violated or infringed any of ATH's and any Subsidiary's patents,
industrial design rights, trademarks, service marks, trade names, trade dress,
copyrights, trade secrets or other proprietary rights.
(e) Except as explicitly indicated in Schedule 2.24, all of
the patents, industrial design registrations, trademark and service mark
registrations, copyright registrations and domain name registrations indicated
in Schedule 2.24 are valid and in full force, are held of record in ATH's or a
Subsidiary's name, free and clear of all liens, encumbrances and other claims,
and are not the subject of any cancellation or reexamination proceeding or any
other proceeding challenging their extent or validity. Except as explicitly
indicated in Schedule 2.24, ATH or a Subsidiary is the applicant of record in
all patent applications, and applications for trademark, service mark, trade
dress, industrial design, and copyright registration indicated in Schedule 2.24,
and no opposition, extension of time to oppose, interference, rejection, or
refusal to register has been received in connection with any such application.
(f) Prior to or at Closing, all patents, patent applications
or other intellectual property rights used exclusively in the business of ATH
and the Subsidiaries and held by any Related Party shall be transferred to ATH
and the Subsidiaries.
2.25. Employee Retirement Income Security Act of 1974, as amended.
-----------------------------------------------------------
(a) The only employee pension benefit plans (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), welfare benefit plans (as defined in Section 3(1) of ERISA), bonus,
stock purchase, stock ownership, stock option, deferred compensation, incentive
or other compensation plan or arrangement, and other material employee fringe
benefit plans presently maintained by, or contributed to by ATH or any other
employer (an "ERISA Affiliate") that is, or at any relevant time was, together
with ATH, treated as a "single employer" under section 414(b), 414(c) or 414(m)
of the Code, other than a multiemployer plan as defined in Section 3(37) of
ERISA, are those listed in Schedule 2.25 (the "Benefit Plans"), a true and
complete copy of each of which and, where applicable, a copy of the most recent
IRS Determination Letter received, and the three most recent IRS Forms 5500
filed, with respect to each such Benefit Plan, has been made available to Buyer.
(b) Except as specifically designated on Schedule 2.25(b), all
of the Benefit Plans are sponsored or maintained by the Seller or another ERISA
Affiliate other than ATH or the Subsidiaries. No Benefit Plan designated on
Schedule 2.25(b) is an employee pension benefit plan as defined in Section
2.25(a).
(c) Except as indicated on Schedule 2.25, all of the Benefit
Plans which are pension benefit plans have received determination letters from
the Internal Revenue Service ("IRS") to the effect that such plans are qualified
and exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, as amended; and no determination letter with respect
to any Benefit Plan has been revoked nor, to the best of Seller's and ATH's
knowledge, has revocation been threatened, nor has any Benefit Plan been amended
since the
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date of its most recent determination letter or application therefor in any
respect which would adversely affect its qualification.
(d) ATH and each ERISA Affiliate have complied with the notice
and continuation coverage requirements of section 4980B of the Code and the
regulations thereunder with respect to each Benefit Plan that is, or was during
any taxable year of ATH or any ERISA Affiliate for which the statute of
limitations on the assessment of federal income taxes remains open, by consent
or otherwise, a group health plan within the meaning of section 5000(b)(1) of
the Code.
(e) Set forth on Schedule 2.25 are the unfunded liabilities and
projected costs, as of the date of this Agreement, of (1) the amount of any
unfunded deferred compensation for which ATH or any Subsidiary is or is
reasonably likely to be liable, (2) the actuarially determined present value of
any obligation to provide retiree medical or life insurance benefits under any
Benefit Plan and (3) any payment that will be required to be made to any Benefit
Plan participant or beneficiary by ATH or any ERISA Affiliate as a direct result
of the transactions contemplated by this Agreement.
(f) At no time since September 2, 1974 has Seller, ATH or any
ERISA Affiliate incurred any liability which could subject Buyer to liability
under Section 4062, 4063 or 4064 of ERISA.
(g) At no time since September 26, 1990, has Seller, ATH, or any
ERISA Affiliate, (i) been required to contribute to, or incurred any withdrawal
liability, within the meaning of Section 4201 of ERISA to any multiemployer
pension plan, within the meaning of Section 3(37) of ERISA, which liability has
not been fully paid as of the date hereof, or (ii) announced an intention to
withdraw, but not yet completed such withdrawal, from any multiemployer plan.
Neither Seller, ATH nor any ERISA Affiliate has incurred any potential
withdrawal liability arising from a transaction described in Section 4204 of
ERISA.
(h) Neither ATH nor any Subsidiary has incurred or is reasonably
likely to incur any liability with respect to any plan or arrangement that would
be included within the definition of "Benefit Plan" hereunder but for the fact
that such plan or arrangement was terminated before the date of this Agreement.
(i) Except as listed on Schedule 2.25, no payment which is or
may be made by from or with respect to any Benefit Plan, to any employee, former
employee, director or agent of ATH or any ERISA Affiliate, either alone or in
conjunction with any other payment, will or could properly be characterized as
an excess parachute payment under section 280G of the Code.
(j) There are no material pension, welfare, bonus, stock
purchase, stock ownership, stock option, deferred compensation, incentive,
severance, termination or other compensation plan or arrangement, or other
material employee fringe benefit plan presently maintained by, or contributed to
by ATH or any ERISA Affiliate for the benefit of any employee
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of ATH or any ERISA Affiliate, including any such plan required to be maintained
or contributed to by the law of the relevant jurisdiction, which would be
described in (a) above, but for the fact that such plans are maintained outside
the jurisdiction of the United States.
2.26. Brokerage.
---------
None of the Seller, ATH or any Subsidiary has made any agreement or
taken any other action which might cause anyone to become entitled to a broker's
fee or commission as a result of the transactions contemplated hereunder.
2.27. Indebtedness.
------------
Other than the Intercompany Debt and the senior secured promissory
note issued by ATH Heights, Inc. to West Houston Healthcare Group, Ltd. dated
September 21, 1994 in the original principal amount of $2,941,000 (the "Assumed
Debt"), neither ATH nor any Subsidiary has any indebtedness or other obligations
with respect to borrowed money.
2.28. Third-Party Payment Contracts.
-----------------------------
ATH and each Subsidiary is approved as a participating provider of
services in and under the third-party payment programs listed on Schedule 2.28.
To the knowledge of the Seller and ATH, no action is pending to suspend, limit,
terminate, or revoke the status of ATH or any Subsidiary as a provider in any
such program, and neither ATH nor any Subsidiary has been provided notice by any
such third-party payor of its intention to suspend, limit, terminate, revoke, or
fail to renew any contractual arrangement with ATH or any Subsidiary as a
participating provider of services in whole or in part.
2.29. Billing; Gratuitous Payments.
----------------------------
Except as set forth in Schedule 2.29, all billing by, or on behalf of,
the Seller, ATH or any Subsidiary to third-party payors, including, but not
limited to, Medicare, Medicaid and private insurance companies has been true and
correct in all material respects. None of Seller, ATH or any Subsidiary has
received any notice from any third-party payor, including but not limited to,
Medicare or Medicaid, that indicates that Buyer could not continue to bill in
substantially the same manner and structure as ATH or any Subsidiary is billing
on the date hereof.
2.30. Reimbursement Matters.
---------------------
Except as disclosed on Schedule 2.30, for the previous three years,
(a) Seller, ATH and the Subsidiaries have not received any written notice of
denial of payment or overpayment of a material nature from a Federal Health Care
Program or any other third party reimbursement source (inclusive of managed care
organizations) with respect to items or services provided by Seller, ATH and/or
any Subsidiary, other than those which have been finally resolved in any
settlement for an amount less than $1,000,000, (b) to the Seller's and ATH's
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knowledge, there is no basis for the assertion after the Closing of any such
denial or overpayment claim, and (c) none of Seller, ATH or any Subsidiary has
received written notice from a Federal Health Care Program or any other third
party reimbursement source (inclusive of managed care organizations) of any
pending or threatened claims, proceedings, investigations or surveys
specifically with respect to, or arising out of, items or services provided by
the Seller, ATH or any Subsidiary, and to the Seller's and ATH's knowledge, no
such investigation or survey is pending, threatened or imminent.
2.31. Federal Health Care Programs.
----------------------------
(a) Neither Seller, ATH, any affiliate nor any person who has
a direct or indirect ownership interest (as those terms are defined in 42 C.F.R.
(S)1001.1001(a)(2)) in ATH of 5% or more, or who has an ownership or control
interest (as defined in Section 1124(a)(3) of the Social Security Act or any
regulations promulgated thereunder) in ATH, or who is an officer, director,
agent or managing employee (as defined in 42 C.F.R. (S)1001.1001(a)(i): (a) has
had a civil monetary penalty assessed against it under Section 1128A of the
Social Security Act or any regulations promulgated thereunder; (b) has been
excluded from participation under any Federal Health Care Program; or (c) has
been convicted (as that term is defined in 42 C.F.R. (S)1001.2) of any of the
categories of offenses as described in the Social Security Act Section 1128(a)
and (b)(1), (2), (3) or any regulations promulgated thereunder.
(b) All cost reports to be filed under Medicare and Medicaid
or any other applicable governmental or private provider regulations for the
Hospitals were filed by the required filing dates. Such cost reports were
prepared and filed in good faith in accordance with applicable, laws, rule and
regulations and ATH and each Subsidiary has made provision to pay any net
liability on all Notices of Program Reimbursement (or similar documents)
received from Medicare, Medicaid or other governmental or private payors for the
periods ended prior to December 31, 1994. Schedule 2.31 lists the Medicare and
Medicaid cost reports duly filed by ATH and each Subsidiary covering the periods
noted and which of such cost reports has been audited but not fully settled, has
been settled or has not been audited or settled. Neither ATH nor any Subsidiary
has received notice, or has knowledge of the existence, of any pending dispute
between ATH and/or any Subsidiary and governmental authorities or the Medicare
fiscal intermediary regarding such cost reports for the remaining unaudited cost
reports, other than with respect to adjustments thereto made in the ordinary
course of business which do not involve amounts in excess of $20,000 in the
aggregate. All home office cost reports filed by Seller and ATH are true and
correct and the costs contained in such reports are appropriately included
therein and have been properly allocated among Seller and its subsidiaries and
businesses in accordance with Medicare and Medicaid rules and regulations. The
home office cost report of Seller covering the period January 1, 1998 through
and including Closing will include costs incurred by Seller in an amount at
least equal to the Seller's home office costs reflected on the consolidated
balance sheet of ATH and the Subsidiaries for the corresponding period.
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<PAGE>
2.32. No Criminal Proceedings.
-----------------------
There are no pending actions, charges, indictments, or investigations
of ATH, any Subsidiary or, with respect to their employment with ATH or any
Subsidiary, their agents, officers or employees which involve allegations of
criminal violations by ATH, any Subsidiary or their agents, officers or
employees acting on behalf of ATH or any Subsidiary of any federal, state, or
local statute, law, or ordinance, including without limitation, Medicare or
Medicaid.
2.33. PRO Denials.
-----------
Set forth on Schedule 2.33 is a list of all Peer Review Organization
denials which Seller, ATH or the Subsidiaries have received with respect to the
operation of the Hospitals during the last five years, including a description
of the basis therefor and of the action, if any, taken by Seller, ATH or the
Subsidiaries to appeal the same and the status and/or outcome of any such
appeals.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to the Seller as follows:
3.1. Organization.
------------
Buyer is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. Buyer has all requisite power and
authority to own or lease its properties and assets as now owned or leased and
to carry on its business as and where now being conducted.
3.2. Power and Authority.
-------------------
Buyer has full legal right, power and authority to enter into this
Agreement and to perform its other obligations hereunder, without the need for
the consent of any other person or entity, other than as required under the HSR
Act.
3.3. Authorization and Enforceability.
--------------------------------
The execution, delivery and performance of this Agreement and the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed
and delivered by Buyer and constitutes the legal, valid and binding obligation
of Buyer, enforceable against it in accordance with its terms.
3.4. Brokerage.
---------
Buyer has not made any agreement or taken any other action which might
cause anyone to become entitled to a broker's fee or commission as a result of
the transactions contemplated hereunder.
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<PAGE>
3.5. No Violation of Laws or Agreements.
----------------------------------
The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated by this Agreement and the
compliance with the terms, conditions and provisions of this Agreement by Buyer,
will not (a) contravene any provision of Buyer's articles of incorporation or
bylaws; (b) conflict with or result in a breach of or constitute a default (or
an event which might, with the passage of time or the giving of notice or both,
constitute a default) under any of the terms, conditions or provisions of any
indenture, mortgage, loan or credit agreement or any other agreement or
instrument to which Buyer is a party or by which it or any of its assets may be
bound or affected, or any judgment or order of any court or governmental
department, commission, board, agency or instrumentality, domestic or foreign,
or any applicable law, rule or regulation, except with respect to those matters
set forth in this clause (b) which would not have a material adverse effect on
Buyer; (c) result in the creation or imposition of any lien, charge or
encumbrance of any nature whatsoever upon Buyer's assets or give to others any
interests or rights therein except for any financing entered into by Buyer in
connection with the transactions contemplated hereby.
3.6. No Pending Litigation or Proceedings.
-------------------------------------
Except as set forth on Schedule 3.6, there are no actions, suits,
investigations, or proceedings pending or, to the best of Buyer's knowledge,
threatened against or affecting Buyer or any of its assets which would adversely
affect Buyer's ability to consummate this Agreement and the transactions
contemplated herein, at law or in equity, by or before any court or governmental
department, agency or instrumentality, and, to Buyer's knowledge, there is no
basis for any such action, suit, investigation or proceeding. There are
presently no outstanding judgments, decrees or orders of any court or any
governmental or administrative agency against Buyer which would adversely affect
Buyer's ability to consummate this Agreement and the transactions contemplated
herein.
ARTICLE IV
----------
CERTAIN OBLIGATIONS
-------------------
4.1. Conduct of Business Pending Closing.
-----------------------------------
From and after the date hereof and pending Closing, and unless Buyer
shall otherwise consent or agree in writing, the Seller and ATH covenant and
agree that:
(a) Ordinary Course. The business of ATH and the Subsidiaries
---------------
will be conducted only in the ordinary course and consistent with past practice,
including billing, collection practices and payment of accounts payable.
(b) Preservation of Business. Each of the Seller and ATH will
------------------------
use all reasonable efforts to preserve the business organization of ATH and the
Subsidiaries intact, to keep available to Buyer the services of the present
officers and employees of ATH, each
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<PAGE>
Subsidiary and to preserve for Buyer the good will of the suppliers, customers
and others having business relations with ATH and each Subsidiary.
(c) Material Transactions. Neither ATH nor any Subsidiary will
---------------------
and neither the Seller nor ATH will permit ATH and any Subsidiary, respectively,
to:
i. amend its Articles of Incorporation or Bylaws;
ii. change its authorized or issued capital stock or
issue any rights or options to acquire shares of its capital stock;
iii. enter into any rental, lease, contract or commitment
the performance of which may extend beyond the Closing, except those made in the
ordinary course of business the terms of which are consistent with past practice
and reasonable in light of current conditions;
iv. enter into any employment or consulting contract or
arrangement with any person which is not terminable at will, without penalty or
continuing obligation;
v. sell, transfer, rent, lease or otherwise dispose of
any of their assets other than in the ordinary course of business and consistent
with past practice;
vi. incur, create, assume or suffer to exist any
mortgage, pledge, lien, restriction, encumbrance, tenancy, encroachment,
covenant, condition, right-of-way, easement, claim, security interest, charge or
other matter affecting title on any of its assets or other property, except
Permitted Encumbrances;
vii. make, change or revoke any tax election or make any
agreement or settlement with any taxing authority;
viii. declare or pay any dividend or other distribution in
respect of any class of its capital stock, or make any payment to redeem,
purchase or otherwise acquire, or call for redemption, any of such stock or any
securities convertible into or exchangeable for such stock except for the
payment of cash dividends which would not cause the Consolidated Net Working
Capital to be less than the Threshold Amount; provided, it shall not be deemed a
violation of this covenant if Seller and ATH continue normal working capital
practices consistent with past practice;
ix. increase or otherwise change the compensation payable
or to become payable to any officer, employee or agent except for stay,
retention, successful completion or other bonuses, or severance, parachute or
similar payments which are set forth on Schedule 2.9(e) and have been or will be
paid in connection with the transactions contemplated hereby and for which ATH
has established a full current reserve or accrual on the Closing Balance Sheet
or the payment of which is otherwise Seller's responsibility;
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<PAGE>
x. make or authorize the making of any capital
expenditure in excess of $50,000 individually or $200,000 in the aggregate
except for capital expenditures incurred in connection with the opening of new
hospitals currently under contract and which are set forth on Schedule 2.9(f);
xi. incur any debt or other obligation for money borrowed
or any lease obligations required to be capitalized and reflected on the balance
sheet of ATH or any Subsidiary under Accounting Principles other than
intercompany debt;
xii. incur any other obligation or liability, absolute or
contingent except in the ordinary course of business and consistent with past
practice;
xiii. guarantee or become a co-maker or accommodation maker
or otherwise become or remain contingently liable in connection with any
liability or obligation of any person other than ATH or the applicable
Subsidiary;
xiv. loan, advance funds or make an investment in or
capital contribution to any person other than ATH or the applicable Subsidiary;
xv. take any action or permit to occur any event set
forth in subparagraphs (c) through (i) and (k) through (n) of Section 2.9;
xvi. take any action or omit to take any action which will
result in a violation of any applicable law or cause a breach of any agreements,
contracts or commitments that would result in a Material Adverse Effect; or
xvii. enter into any agreement to do any of the foregoing.
4.2. Insurance.
---------
ATH and each Subsidiary shall maintain in full force and effect the
policies of insurance listed on Schedule 2.23, subject only to variations
required by the ordinary operations of its business, or else will obtain, prior
to the lapse of any such policy, substantially similar coverage with insurers of
recognized standing and approved in writing by the Buyer. Each of the Seller
and ATH shall promptly advise the Buyer in writing of any change of insurer or
type of coverage in respect of the policies listed on Schedule 2.23.
4.3. Fulfillment of Agreements.
-------------------------
(a) Each of the Seller and ATH shall use its respective
commercially reasonable efforts to cause all of the conditions to the
obligations of the Buyer under Section 5.1 of this Agreement to be satisfied on
or prior to the Closing. Each of the Seller and ATH shall use its commercially
reasonable efforts, and Seller and ATH shall cause ATH and each Subsidiary,
respectively, to use its commercially reasonable efforts, to conduct its
business in such a manner that at the Closing the representations and warranties
of the Seller and ATH
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<PAGE>
contained in this Agreement shall be true and correct as though such
representations and warranties were made on, as of, and with reference to such
date. The Seller and ATH will promptly notify Buyer in writing of any event or
fact which represents a breach of any of its representations, warranties,
covenants or agreements. Each of the Seller and ATH shall promptly advise Buyer
in writing of the occurrence of any condition or development (exclusive of
general economic factors affecting business in general) of a nature that will
result in a Material Adverse Effect.
(b) Buyer shall use its commercially reasonable efforts to cause
all of the conditions to the obligations of the Seller under Section 5.2 of this
Agreement to be satisfied on or prior to the Closing. Buyer shall use its
commercially reasonable efforts to conduct its business in such a manner that at
the Closing the representations and warranties of Buyer contained in this
Agreement shall be true and correct as though such representations and
warranties were made on, as of, and with reference to such date. Buyer will
promptly notify Seller in writing of any event or fact which represents a breach
of any of its representations, warranties, covenants or agreements.
4.4. Access, Information and Documents.
---------------------------------
ATH will give, and the Seller and ATH will cause ATH and each
Subsidiary, respectively, to give, to Buyer and to Buyer's counsel, accountants
and other representatives access during normal business hours to all of ATH's
and the Subsidiaries' properties, books, tax returns, contracts, commitments,
records, officers, personnel and accountants and will furnish to Buyer all such
documents and copies of documents (certified to be true copies if requested) and
all information with respect to the affairs of ATH or any Subsidiary as Buyer
may request.
4.5. Resignations.
------------
At the Closing, the Seller will deliver written resignations of ATH's
and each Subsidiary's directors and officers and of the trustees, plan
administrators and fiduciaries of the Benefit Plans.
4.6. No Transfers or Pledges of Stock.
--------------------------------
Except as set forth on Schedule 4.6, the Seller shall not sell,
transfer, assign, mortgage, pledge, encumber or otherwise dispose of the Stock
and shall not incur, create, assume or suffer to exist any mortgage, pledge,
loan, encumbrance, claim or security or other interest in, or affecting title
to, the Stock.
4.7. Lender and Lessor Consents.
--------------------------
Promptly after the execution of this Agreement and prior to the
Closing, the Seller and ATH shall use their commercially reasonable efforts, and
shall cause the Subsidiaries to use their commercially reasonable efforts, to
obtain from each lender, lessor or other party to the agreements set forth on
Schedule 4.7, in a form reasonably satisfactory to Buyer, the consent,
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<PAGE>
estoppel certificate or other appropriate agreement of such lender, lessor or
other party to the transactions contemplated by this Agreement. Seller's and
ATH's agreement to use commercially reasonable efforts pursuant to this Section
4.7 shall not be deemed to require Seller or ATH to (i) incur any material out-
of-pocket expenses, (ii) amend any loan agreement to change any material terms
thereof, including, without limitation, any payment term, amortization schedule,
or termination date, or (ii) amend any material provision in any other contract.
4.8. Delivery of May Financial Statements.
------------------------------------
The Seller and ATH shall promptly deliver to Buyer a consolidated and
consolidating statement of income for ATH and the Subsidiaries for the five
months ending May 31, 1998 and a consolidated and consolidating balance sheet of
ATH and the Subsidiaries as at such date (the "May Financial Statements").
Delivery of the May Financial Statements to the Buyer shall constitute the
Seller's and ATH's representation and warranty to Buyer that the May Financial
Statements (a) are correct and complete and in accordance with the books and
records of ATH, (b) fairly present the financial condition, assets and
liabilities of ATH and the Subsidiaries as at May 31, 1998 and the results of
their operations for the five-month period then ended, and (c) have been
prepared in accordance with Accounting Principles.
4.9. Information Systems Support.
---------------------------
The parties hereto acknowledge that the information systems used to
operate the businesses of ATH and the Subsidiaries are, in many instances,
linked to the information systems used generally by Seller. To facilitate the
orderly transition of the operations of ATH and the Subsidiaries, Seller shall
provide transitional data processing and related support services as described
on Exhibit E attached hereto to Buyer for the specified period after Closing and
the cost to Buyer, if any, set forth on such Exhibit.
4.10. Negotiations.
------------
Between the date of this Agreement and the earlier of the date this
Agreement is terminated or the Closing Date, none of Seller, ATH, or any of
their affiliates, officers, directors, employees, stockholders, agents or
advisors, shall solicit, initiate, furnish information relating to or
participate in any discussions or negotiations with any person or entity
concerning the sale or other disposition of any or all of ATH or any Subsidiary,
or a merger, consolidation, or sale of all or substantially all of the assets,
or any material assets, of ATH or any Subsidiary. The Seller and ATH shall
promptly notify Buyer if any such discussion or negotiations are sought to be
initiated with, any such information is requested from, or any proposal is
received by, the Seller or ATH.
4.11. Assumed Debt.
------------
At Closing, the Assumed Debt shall remain an outstanding obligation of
ATH Heights, Inc., and immediately following the Closing (and as part of a
closing escrow) either (i) Buyer will cause ATH Heights, Inc. to fully refinance
the Assumed Debt such that the existing
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debt is fully paid and released, or (ii) Buyer shall obtain and deliver to
Seller an unconditional release of Seller's guarantee of the Assumed Debt.
4.12. Buyer's Knowledge.
-----------------
Seller acknowledges that the results of Buyer's investigation and due
diligence of ATH's and the Subsidiaries' businesses will not affect the
representations and warranties provided by the Seller and ATH herein except as
expressly set forth below. Notwithstanding the foregoing, in the event that the
Buyer obtains actual knowledge prior to Closing of a material inaccuracy in, or
breach of, any of such representations and warranties of the Seller or ATH, the
Buyer agrees promptly to notify Seller and ATH, whereupon the Seller and ATH
shall promptly use their best efforts to cure such material inaccuracy or
breach. If such material inaccuracy or breach is not cured, as aforesaid, the
Buyer shall have the option to: (y) terminate this Agreement, in accordance with
Section 5.3 hereof and to receive reimbursement from Seller of the out-of-pocket
costs and expenses incurred by the Buyer from and after the date of execution of
this Agreement in connection with the transaction contemplated by this
Agreement, including without limitation, reasonable attorneys' and accounting
fees, or (z) to waive such inaccuracy or breach and proceed to Closing in
accordance with the terms hereof without a reduction in the Purchase Price;
provided, however, Seller shall not have the cure or termination right provided
in this sentence (and, accordingly, will remain fully liable to the Buyer in
respect of such inaccuracy or breach) if (i) Seller had intentionally or
knowingly attempted to conceal from the Buyer such inaccuracy or breach, or (ii)
after execution of this Agreement, Seller volitionally creates or permits to
occur such inaccuracy or breach. No termination of this Agreement under clause
(y) shall be effective until all fees and expenses contemplated by that clause
have been paid in full.
4.13. Delivery of Schedules.
---------------------
As soon as practicable following execution of this Agreement, Seller
shall deliver to Buyer the Schedules required hereunder.
4.14. Delivery of Exhibits.
--------------------
As soon as practicable following execution of this Agreement, Buyer
and/or Seller, as applicable, shall deliver to each other the Exhibits required
hereunder.
4.15. Receivable Reserve.
------------------
For the purposes of this Agreement, no party shall contest the amount
of the accounts receivable reserve for contractual allowances and doubtful
accounts as of December 31, 1997 or the Balance Sheet Date, or the methodology
underlying such reserve, which methodology shall be applied in the preparation
of the Closing Balance Sheet (including without limitation consistent aging
percentages) and shall be deemed adequate for the purposes of this Agreement to
the extent used in the preparation of any Financial Statement as of and
following December 31, 1997.
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<PAGE>
4.16. Pharmerica Agreements.
---------------------
Buyer acknowledges that Seller is contractually obligated to execute
and deliver pharmaceutical provider agreements with Pharmerica to replace
existing agreements with Pharmacy Corporation of America. With respect to the
facilities set forth on Schedule 4.16 hereto, Buyer agrees to cause ATH or its
successor to execute pharmaceutical provider agreements with Pharmerica in
substantially the form attached in Schedule 4.16.
4.17. Medicare Cost Reports.
---------------------
(a) New Cost Reports. Following Closing Buyer shall prepare and
----------------
file with the applicable authority any unfiled ATH Medicare/Medicaid cost
reports (the "Unfiled Reports"). Seller shall be afforded the opportunity to
review and comment on the Unfiled Reports prior to their filing by Buyer, which
review and comment will not unreasonably delay their filing. Buyer shall be
responsible for, and entitled to the benefit of all benefits and liabilities in
respect of the Unfiled Reports except any liability that is attributable to any
home office allocation of Seller ("Home Office Charge") included in such Unfiled
Reports. Seller shall be responsible for (and shall indemnify Buyer) for any
liability or claim in respect of a Home Office Charge in excess of any current
reserve for such Home Office Charge on the Closing Balance Sheet.
(b) Filed Cost Reports. Every two years commencing on the
------------------
second anniversary of the Closing Date and continuing thereafter until finally
resolved, Seller and Buyer shall exchange information sufficient to permit Buyer
and Seller to review and ascertain, (x) all payments received by Buyer (or ATH
following Closing), and (y) all liabilities and claims paid, each in respect of
Medicare/Medicaid cost reports filed by ATH prior to Closing ("Filed Reports").
To the extent such amounts when netted at such time in the aggregate exceed the
value thereof reflected on the Closing Balance Sheet, Seller shall be entitled
to the benefit of such excess and Buyer promptly shall cause Seller to be paid
such amount. To the extent such amounts when netted at such time in the
aggregate are less than the value thereof reflected on the Closing Balance
Sheet. Seller promptly shall reimburse Buyer for the shortfall and otherwise
indemnify and hold Buyer harmless from any and all claims and losses arising
therefrom.
(c) Notices. Buyer shall provide Seller promptly with copies
-------
of any NPRs or similar correspondence Buyer periodically receives that relate to
any Filed Report or any matter for which Seller could have liability under this
Section.
ARTICLE V
---------
CONDITIONS TO CLOSING; TERMINATION
----------------------------------
5.1. Conditions Precedent to Obligations of Buyer.
--------------------------------------------
The obligations of Buyer to proceed with the Closing under this
Agreement are subject to the fulfillment prior to or at Closing of the following
conditions (any one or more of
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which may be waived in whole or in part by Buyer at Buyer's option and, upon
Closing, shall be deemed satisfied or waived):
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Seller and ATH contained in this Agreement shall be true and
correct on and as of the time of Closing, with the same force and effect as
though such representations and warranties had been made on, as of and with
reference to such time, and Buyer shall have received two certificates to such
effect, one signed by the Seller and one signed by the president of ATH.
(b) Performance and Compliance. The Seller and ATH shall have
--------------------------
performed, or shall have caused the performance of, in all material respects all
of the covenants and complied, or caused the compliance, with in all material
respects all of the provisions required by this Agreement to be performed or
complied with by them on or before the Closing and Buyer shall have received two
certificates to such effect, one signed by the Seller and one signed by ATH.
(c) Opinion of Counsel. Buyer shall have received from each of
------------------
the General Counsel or Associate General Counsel of Seller and Latham & Watkins,
counsel for the Seller, an opinion dated the date of the Closing in form and
substance satisfactory to Buyer, to the effects set forth in Exhibit C-1 and
Exhibit C-2, respectively, and with respect to such other matters as Buyer may
reasonably request.
(d) Satisfactory Instruments. All instruments and documents
------------------------
required on the Seller's and ATH's part to effectuate and consummate the
transactions contemplated hereby shall be delivered to Buyer and shall be in
form and substance satisfactory to Buyer and its counsel.
(e) Required Consents; Waiver. All consents and approvals of any
-------------------------
governmental departments or agencies or other regulatory bodies or other third
parties to the transactions contemplated hereby shall have been obtained
(including, without limitation, the consents and agreements of the lenders,
lessors and other parties set forth on Schedule 2.16 to the consummation of the
transactions contemplated by this Agreement) and all waiting periods specified
by law the passing of which is necessary for the consummation of such
transactions (including, without limitation, the waiting period under the HSR
Act) shall have passed or been terminated. Fort Sanders Regional Medical Center
in Knoxville, Tennessee shall have delivered a waiver of its right to terminate
the lease by reason of the sale and purchase of the Stock.
(f) Litigation. No order of any court or administrative agency
----------
shall be in effect which restrains or prohibits the transactions contemplated
hereby or which would limit or adversely affect Buyer's ownership or control, or
the business, of ATH or any Subsidiary, and there shall not have been
threatened, nor shall there be pending, any action or proceeding by or before
any court or governmental agency or other regulatory or administrative agency or
commission, (i) challenging any of the transactions contemplated by this
Agreement or seeking monetary relief by reason of the consummation of such
transactions, or (ii) by any present or
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former owner of any capital stock or equity interest in ATH or any Subsidiary
(whether through a derivative action or otherwise) against ATH, any Subsidiary
or any officer, director or shareholder of ATH or any Subsidiary or in his
capacity as such, or (iii) which is reasonably likely to have a Material Adverse
Effect.
(g) Delivery of May Financial Statements. Buyer shall have
------------------------------------
received the May Financial Statements of ATH and the Subsidiaries and such May
Financial Statements shall not reflect any matter that constitutes or is
reasonably likely to constitute a Material Adverse Effect.
(h) Joint Venture Agreement. Seller shall have executed an
-----------------------
agreement in the form of Exhibit F attached hereto regarding the parties' joint
venture in the Fort Smith metropolitan market which contains customary terms and
conditions and provides for the ownership of such joint venture by Seller and
Buyer in percentages of 19% and 81%, respectively, the allocation of costs,
distributions, capital needs, profit and loss in accordance with such ownership
percentages, the payment of a management fee to Buyer of 7% of the joint
venture's net revenue (but only to the extent such joint venture makes a profit;
provided that the management fee shall be accrued and shall be paid (including
any accrued amounts) at such time as the joint venture has sufficient cashflow
to do so) and a board of directors (or analogous governing body) consisting of
three persons, two of whom shall be designated by Buyer and the other of whom
shall be designated by Seller (the "Joint Venture Agreement").
(i) Noncompete Agreement. Seller and ATH shall execute a
--------------------
covenant not to compete agreement in the form of Exhibit G attached hereto (the
"Noncompete Agreement").
(j) Schedules and Exhibits. All Schedules and Exhibits
----------------------
contemplated hereby shall have been accepted by the parties without the exercise
of any termination right pursuant to Section 5.3(a)(v) or Section 5.3(a)(vi).
5.2. Conditions Precedent to the Obligations of the Seller.
-----------------------------------------------------
The obligations of the Seller to proceed with the Closing hereunder
are subject to the fulfillment prior to or at Closing of the following
conditions (any one or more of which may be waived in whole or in part by the
Seller at the Seller's option and, upon Closing, shall be deemed satisfied or
waived):
(a) Representations and Warranties. The representations and
------------------------------
warranties of Buyer contained in this Agreement shall be true and correct on and
as of the time of Closing, with the same force and effect as though such
representations and warranties had been made on, as of and with reference to
such time and Buyer shall have delivered to the Seller a certificate, signed by
its President or a Vice President, to such effect.
(b) Performance and Compliance. Buyer shall have performed in
--------------------------
all material respects all of the covenants and complied in all material respects
with all the provisions
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required by this Agreement to be performed or complied with by it on or before
the Closing and Buyer shall have delivered to the Seller a certificate, signed
by its President or a Vice President, to such effect.
(c) Opinion of Counsel for Buyer. The Seller shall have received
----------------------------
from Dechert Price & Rhoads, counsel for the Buyer, an opinion dated the date of
the Closing in form and substance satisfactory to the Seller, to the effects set
forth in Exhibit D, and with respect to such other matters as the Seller may
reasonably request.
(d) Satisfactory Instruments. All instruments and documents
------------------------
required on Buyer's part to effectuate and consummate the transactions
contemplated hereby shall be delivered to Seller and shall be in form and
substance satisfactory to Seller and its counsel.
(e) Litigation. No order of any court or administrative agency
----------
shall be in effect which restrains or prohibits the transactions contemplated
hereby, and there shall not have been threatened, nor shall there be pending,
any action or proceeding by or before any court or governmental agency or other
regulatory or administrative agency or commission, (i) challenging any of the
transactions contemplated by this Agreement or seeking monetary relief by reason
of the consummation of such transactions, or (ii) which might have a material
adverse effect on Buyer's ability to consummate this Agreement and the
transactions contemplated herein.
(f) Required Consents. All consents and approvals of all
-----------------
governmental departments, agencies, authorities and commissions required for the
transactions contemplated hereby shall have been obtained, and all waiting
periods specified by law the passing of which is necessary for the consummation
of such transactions (including, without limitation, the waiting period under
the HSR Act) shall have passed or been terminated.
(g) Joint Venture Agreement. Buyer shall have executed the Joint
-----------------------
Venture Agreement.
(h) Schedules and Exhibits. All Schedules and Exhibits
----------------------
contemplated hereby shall have been accepted by the parties without the exercise
of any termination right pursuant to Section 5.3(a)(v) or Section 5.3(a)(vi).
5.3. Termination.
-----------
(a) When Agreement May Be Terminated. This Agreement may be
--------------------------------
terminated at any time prior to Closing:
i. By mutual consent of Buyer and the Seller;
ii. By Buyer if there has been a breach by the Seller or
ATH of any of their representations, warranties, covenants or agreements;
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iii. By the Seller if there has been a breach by Buyer of
any of its representations, warranties, covenants or agreements;
iv. By Buyer or the Seller if Closing shall not have
occurred prior to July 31, 1998; provided, that Buyer or the Seller may
terminate this Agreement pursuant to this subparagraph (iv) only if such party
is not in material breach hereof;
v. By Buyer or Seller in the event that one or more of the
following is not acceptable to such party in its sole discretion: (x) an
exhibit not attached hereto at the time of signing, or (y) a schedule not
attached hereto at the time of signing and not prepared by the terminating
party. Prior to any such termination pursuant to this subsection, the
terminating party must give written notice of its intention to the other party
stating in detail its objections to the exhibit(s) or schedule(s) objected to,
and in the event the other party agrees in writing within fifteen (15) days to
remedy such objections, the right to terminate based on such objections shall
expire.
vi. By Buyer in the event that the schedules and exhibits
are not delivered within three weeks from the date of this Agreement.
(b) Effect of Termination. In the event of termination of this
---------------------
Agreement by either the Seller or Buyer, as provided above, this Agreement shall
forthwith terminate and there shall be no liability on the part of either the
Seller or Buyer or Buyer's officers or directors, except for liabilities arising
from a breach of this Agreement prior to such termination; provided, however,
that the obligations of the parties set forth in Section 6.2 and 6.3 hereof
shall survive such termination. Notwithstanding anything to the contrary
herein, each of Buyer and Seller shall be entitled to any and all remedies
available at law or in equity for any breach by Seller or ATH, in the case of
Buyer, or any breach by Buyer, in the case of Seller, of the provisions of this
Agreement, including, without limitation, specific performance of the terms and
provisions hereof.
ARTICLE VI
----------
CERTAIN ADDITIONAL COVENANTS
----------------------------
6.1. Costs, Expenses and Taxes.
-------------------------
Except as set forth in Sections 6.3, 6.8 and 7.7, Seller will pay
all costs and expenses, including legal fees, in connection with its and ATH's
performance of and compliance with this Agreement, and all transfer, documentary
and similar taxes in connection with the delivery of the shares of Stock to be
made hereunder. Except as set forth in Sections 6.2, 6.8 and 7.7, Buyer will pay
all costs and expenses, including legal fees, of Buyer's performance of and
compliance with this Agreement.
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6.2. Indemnification By the Seller.
-----------------------------
In accordance with the procedures in Section 6.5, if applicable, the
Seller and ATH hereby agree to jointly and severally indemnify and hold harmless
Buyer from and against:
(a) any loss, liability, claim, obligation, damage or deficiency
of or to Buyer, ATH or any Subsidiary arising out of or resulting from (i) any
inaccuracy in, or breach of, any representation, warranty, covenant or
nonfulfillment of any agreement on the part of the Seller or ATH contained in
this Agreement or in any statement or certificate furnished or to be furnished
to Buyer pursuant hereto or in connection with the transactions contemplated
hereby, or (ii) any and all liabilities of Seller, ATH or any Subsidiary related
to ATH's or any Subsidiary's business first arising before the Closing Date,
including, without limitation, (A) the payment of retrospective or retroactive
premium adjustments provided for in the insurance policies set forth on Schedule
2.23, (B) any liability, obligation or costs arising from matters set forth on
Schedules 2.15(d) hereto, (C) any claim or loss as provided in Section 4.17, and
(D) any liability, obligation or costs arising from the Vencor litigation
including, without limitation, severance expense, lease payments and relocation
expenses incurred by ATH or any Subsidiary in connection with the elimination or
modification of services at the applicable Hospitals; provided, that Seller
shall control any matters set forth on (B) above, and the defense of the Vencor
litigation process (including any settlements or appeals) as set forth in
Section 6.5 and, in addition to attorneys' fees, court costs, severance expense,
lease payments and relocation expenses as noted above, shall be solely
responsible for any resulting judgment or award (including any lost profits or
consequential damages, if any, awarded therein to a third party) (Seller shall
have no liability to Buyer or ATH for matters in (B), (C) and (D) above except
to the extent of judgments owed to third parties), and
(b) any actions, judgments, costs and expenses (including
reasonable attorneys' fees and all other expenses incurred in investigating,
preparing or defending any litigation or proceeding, commenced or threatened)
incident to any of the foregoing or the enforcement of this Section.
For purposes for this Agreement, the aggregate amount of such losses,
liabilities, claims, obligations, damages, deficiencies, costs, expenses and
fees, net of all insurance proceeds, shall be hereinafter referred to as
"Damage" or "Damages."
6.3. Indemnification by Buyer.
------------------------
In accordance with the procedures in Section 6.5, if applicable, Buyer
hereby agrees to indemnify and hold harmless the Seller from and against:
(a) any Damages arising out of or resulting from (i) any
inaccuracy in, or breach, of any representation or warranty or covenant or
nonfulfillment of any agreement on the part of Buyer contained in this Agreement
or in any statement or certificate furnished or to be furnished to the Seller in
connection with the transactions contemplated hereby, or (ii) any and all
liabilities related to ATH's business first arising after the Closing Date, and
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(b) any actions, judgments, costs and expenses (including
reasonable attorneys' fees and all other expenses incurred in investigating,
preparing or defending any litigation or proceeding, commenced or threatened)
incident to any of the foregoing or the enforcement of this Section.
6.4. Limitations and Conditions of Indemnification.
---------------------------------------------
Notwithstanding any provision of this Agreement to the contrary:
(a) Neither Seller, ATH nor Buyer shall be responsible for lost
profits or consequential damages; provided, however, with respect to Seller's
and ATH's indemnity obligations, Seller and ATH shall be responsible for lost
profits or consequential damages awards to third parties as provided in Section
6.2(a)(ii)(B), (C) and (D).
(b) If and to the extent any Damages for which indemnification is
sought relate to events or circumstances occurring both prior to and after the
Closing Date or are from both a cause that is indemnified and one that is not so
indemnified, (i) Seller's and ATH's obligations hereunder shall extend only to
the Damages attributable to events or circumstances prior to the Closing Date or
the indemnified event, circumstances or cause, and (ii) Buyer's obligations
hereunder shall extend only to the Damages attributable to events or
circumstances subsequent to the Closing Date or the indemnified event,
circumstances or cause.
(c) No action or claim for Damages resulting from any
misrepresentation or breach of warranty shall be brought or made after the
survival period set forth in Section 9.1 hereof.
(d) The aggregate Damages indemnified hereunder (i) resulting
from a claim under Section 6.2(a)(i)(other than for misrepresentation or breach
of warranty) or 6.2(a)(ii) shall not exceed, in the aggregate, the Purchase
Price, and (ii) resulting from any misrepresentation or breach of warranty shall
not exceed, in the aggregate, $20,000,000. Any adjustment made pursuant to
Section 1.2 hereof shall not apply toward the foregoing limitation.
(e) No party shall be entitled to receive an indemnification
payment with respect to any Damages in respect of any misrepresentation or
breach of warranty unless the aggregate payments claimed by such party hereunder
with respect to all Damages equal or exceed Two Hundred Fifty Thousand Dollars
($250,000). Any adjustment made pursuant to Section 1.2 shall not apply toward
the foregoing limitation.
(f) After the Closing Date, to the extent permitted by law, the
provisions of Sections 6.2 through 6.5, as applicable, shall be the sole and
exclusive remedy of (i) Buyer for any breach by Seller or ATH of the
representations, warranties and covenants contained in this Agreement (or any
other document delivered by Seller or ATH at the Closing) and Buyer waives all
other remedies, and (ii) Seller for any breach by Buyer of the representations,
warranties and covenants contained in this Agreement (or any other document
delivered by Buyer at the Closing) and Seller waives all other remedies.
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<PAGE>
(g) Notwithstanding anything to the contrary herein, no
limitation or condition of liability provided in this Section 6.4 shall apply to
any misrepresentation or breach of warranty contained herein if such
misrepresentation or breach of warranty resulted from fraud, any securities
violation or was made willfully or with intent to deceive.
(h) For purposes of calculating the amount of any Damages
incurred in connection with any such misrepresentation, breach of warranty, or
nonfulfillment of any covenant or agreement, any and all references to material
or Material Adverse Effect (or other correlative terms) or dollar qualifiers
herein shall be disregarded.
(i) Notwithstanding anything to the contrary herein, no
limitation or condition of liability (other than subsection (d) above) shall
apply with respect to any liability under any Benefit Plan retained by Seller or
any Benefit Plan pursuant to Section 6.12.
6.5. Indemnification Procedures.
--------------------------
(a) A party seeking indemnification pursuant to this Agreement
(an "Indemnified Party") shall give prompt notice to the party from whom such
indemnification is sought (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any action, suit or proceeding by a third party
which is not an affiliate of any party hereto in respect of which indemnity may
be sought hereunder (a "Third Party Claim"), and will give the Indemnifying
Party such information with respect thereto as the Indemnifying Party may
reasonably request, but failure to give such notice shall not relieve the
Indemnifying Party of any liability hereunder except to the extent that the
Indemnifying Party is actually prejudiced thereby.
(b) The Indemnifying Party shall have the right, exercisable by
written notice to the Indemnified Party within 30 days of receipt of notice from
the Indemnified Party of the commencement or assertion of any Third Party Claim
in respect of which indemnity may be sought hereunder, to assume and conduct the
defense of such Third Party Claim with counsel selected by the Indemnifying
Party and reasonably acceptable to the Indemnified Party; provided that (i) the
defense of such Third Party Claim by the Indemnifying Party will not, in the
judgment of the Indemnified Party, have a material adverse effect on the
Indemnified Party; and (ii) the Indemnifying Party has sufficient financial
resources, in the judgment of the Indemnified Party, to satisfy the amount of
any adverse monetary judgment that is reasonably likely to result; and (iii) the
Third Party Claim solely seeks (and continues to seek) monetary damages; and
(iv) the Indemnifying Party expressly agrees in writing that as between the
Indemnifying Party and the Indemnified Party, the Indemnifying Party shall be
solely obligated to satisfy and discharge the Third Party Claim (the conditions
set forth in clauses (i) through (iv) are collectively referred to as the
"Litigation Conditions"). If the Indemnifying Party does not assume the defense
of such Third Party Claim in accordance with this Section 6.5, the Indemnified
Party may continue to defend the Third Party Claim. If the Indemnifying Party
has assumed the defense of a Third Party Claim as provided in this Section 6.5,
the Indemnifying Party will not be liable for any legal expenses subsequently
incurred by the Indemnified Party in connection with the defense thereof;
provided, however, that if (i) the Litigation Conditions cease to be met, or
(ii) the Indemnifying Party fails to take reasonable steps necessary to defend
diligently such Third Party
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<PAGE>
Claim, the Indemnified Party may assume its own defense, and the Indemnifying
Party will be liable for all reasonable costs or expenses paid or incurred in
connection therewith.
(c) The Indemnifying Party or the Indemnified Party, as the case
may be, shall have the right to participate in (but not control), at its own
expense, the defense of any Third Party Claim which the other is defending as
provided in this Agreement.
(d) The Indemnifying Party, if it shall have assumed the defense
of any Third Party Claim as provided in this Agreement, shall not, without the
prior written consent of the Indemnified Party, consent to a settlement of, or
the entry of any judgment arising from, any such Third Party Claim (i) which
does not include as an unconditional term thereof the giving by the claimant or
the plaintiff to the Indemnified Party a complete release from all liability in
respect of such Third Party Claim, or (ii) which grants any injunctive or
equitable relief, or (iii) which may reasonably be expected to have a material
adverse effect on the affected business of the Indemnified Party. The
Indemnified Party shall have the right to settle any Third Party Claim, the
defense of which has not been assumed by the Indemnifying Party, with the
written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed.
(e) Amounts payable in respect of indemnification obligations of
the parties shall be treated as an adjustment to the Purchase Price unless
otherwise required by law. Whether or not the Indemnifying Party chooses to
defend or prosecute any Third Party Claim, all the parties hereto shall
cooperate in the defense or prosecution thereof and shall furnish such records,
information and testimony, and attend such conferences, discovery proceedings,
hearings, trials and appeals, as may be reasonably requested in connection
therewith.
6.6. Payment of Indemnification.
--------------------------
The obligations of the parties pursuant to Section 6.2 and 6.3 to pay
Damages shall be satisfied by the indemnifying party within five business days
after demand for payment by the party entitled to such indemnification.
Interest will accrue on unpaid Damages at the prime rate plus two percent (2%)
per annum.
6.7. No Right of Contribution or Subrogation.
---------------------------------------
Following the Closing, the Seller waives and releases (i) any and all
claims for contribution or other payment from ATH or any Subsidiary which Seller
may have with respect to the payment by the Seller of any amounts pursuant to
Sections 6.2 or 6.5 of the Agreement or for any breach by ATH of its
representations, warranties, covenants or agreements contained herein, or (ii)
any right of subrogation against ATH or any Subsidiary. The Seller acknowledges
that its liability under Sections 6.2 and 6.5 is joint and several with ATH and
that Buyer may seek indemnification, in its sole discretion, from any and all
such parties, including the Seller exclusively.
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6.8. Hart-Scott-Rodino Antitrust Improvements Act of 1976.
----------------------------------------------------
Promptly after the date hereof, Buyer and the Seller will file the
required notifications with the Federal Trade Commission ("FTC") and the
Antitrust Division of the Department of Justice ("Department") pursuant to and
in compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"). The parties hereto shall not intentionally or negligently delay
submission of information requested by FTC and Department under the HSR Act and
shall use their respective best efforts promptly to supply, or cause to be
supplied, such information and shall use their best efforts to obtain early
termination of the applicable waiting period. Buyer and the Seller shall share
equally the cost of the filing fee required by the HSR Act.
6.9. Confidentiality.
---------------
(a) Each of Seller and Buyer shall, and shall cause their
respective employees and representatives, and their affiliates (and the
employees and representatives of such affiliates) to, keep confidential and not
disclose to any other person or entity or use for its own benefit or the benefit
of any other person or entity any trade secrets or other confidential
proprietary information in its or their possession or control regarding the
other party or their businesses and operations and, specifically with respect to
Seller or its affiliates, any trade secrets or confidential information
regarding ATH or its Subsidiaries or their businesses or operations. In the
event that this Agreement is terminated or the transactions contemplated hereby
otherwise fail to close, Buyer and its affiliates and their respective
representatives shall promptly return to Seller all written materials provided
to Buyer or its affiliates or their representatives by Seller, ATH or their
affiliates or representatives.
(b) The obligations of the parties under this Section 6.9 shall
not apply to information which (i) is or becomes generally available to the
public without breach of the commitment provided for in this Section; or (ii) is
required to be disclosed by law, order or regulation of a court or tribunal or
governmental authority; provided, however, in any such case, that the disclosing
party subject to such requirement shall notify the affected party as early as
practicable prior to disclosure to allow the affected party to take appropriate
measures to preserve the confidentiality of such information.
6.10. Cooperation.
-----------
Each party shall cooperate with the other in connection with (i) the
filing of any Medicare and/or Medicaid cost reports required to be filed after
the Closing Date; (ii) the determination of any liability or right relating to
such reports, and (iii) the conduct or defense of any investigation, audit or
other proceeding related to such reports. Buyer, ATH, the Subsidiaries and
Seller, and their respective affiliates, shall preserve all information,
returns, books, records and documents relating to any Medicare and/or Medicaid
cost reports and supporting materials with respect to an applicable period, and
shall provide access to employees and former employees, until the later of the
expiration of all applicable statutes of limitation and
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extensions thereof, or the conclusion of all litigation with respect to the
applicable reports for such period.
6.11. Books and Records.
-----------------
For a period of five (5) years from and after the Closing Date:
(a) Neither party shall dispose of or destroy any of its books
and records relating to the business of ATH and any Subsidiary for periods prior
to the Closing (whether on paper, electronic or other form or media) ("Books and
Records") without first offering to turn over possession thereof to the other
party by written notice given to the other party at least thirty (30) days prior
to the proposed date of such disposition or destruction.
(b) Each party shall allow the other party and its agents access
to all Books and Records (to the extent that they relate to periods prior to the
Closing) during normal working hours at its principal place of business or, at
such party's option, at any location where any such Books and Records are
stored, and the requesting party shall have the right to make copies of any
Books and Records (to the extent that they relate to periods prior to the
Closing) at its own expense; provided, however, that any such access or copying
shall be had or done in such a manner so as not to interfere unreasonably with
the normal conduct of the business of the party to whom the request was made.
(c) Each party shall make available to the other party upon
reasonable written request: (i) copies of any Books and Records (to the extent
that they relate to periods prior to the Closing), or (ii) such personnel as are
reasonably required to assist in locating and obtaining any such Books and
Records.
6.12. Employee Matters.
----------------
(a) Cessation of Participation. Effective as of the Closing
--------------------------
Date, ATH shall cease to be a participating employer in any of the Benefit Plans
not listed on Schedule 2.25(b), and Seller shall take, or cause to be taken, all
such action as is necessary to effect that cessation of participation. The
Seller and the Benefit Plans shall retain all liabilities for benefits accrued
under any of the Benefit Plans by employees, former employees and their
beneficiaries of ATH and the Subsidiaries (the "ATH Participants") through the
Closing Date, except as otherwise specifically noted herein.
(b) Pension Benefit Plans. Effective as of the Closing Date,
---------------------
benefit accruals, under any Benefit Plan that is an employee pension benefit
plan, for ATH Participants shall cease, except for the payment of any
contributions attributable to periods of service before the Closing Date but
remaining unpaid on that date. All benefits accrued for ATH Participants shall
become fully vested as of the Closing Date.
(c) Welfare Benefit Plans. Effective as of the Closing Date, the
---------------------
ATH Participants shall cease to participate in those Benefit Plans that are
employee welfare benefit
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plans as defined in Section 2.25(a). Seller and the Benefit Plans shall retain
responsibility under those Benefit Plans for all costs and coverages and all
amounts payable by reason of claims incurred by or on behalf of the ATH
Participants through the Closing Date, including claims submitted after the
Closing Date. A claim shall be deemed to have occurred on the date of (i) death
or dismemberment in the case of claims under life insurance or accidental death
and dismemberment insurance, (ii) the date of initial disability in the case of
disability claims, or (iii) in the case of all other claims including medical
claims, the date on which the charge or expense giving rise to such claim is
incurred in the case of all other claims. Seller and the Benefit Plans shall be
responsible for all legally mandated continuation coverage for ATH Participants
who had or have a loss of coverage due to a "qualifying event" within the
meaning of Section 603 of ERISA that occurred before the Closing Date.
(d) Post-Closing Benefits. Effective as of the Closing Date,
---------------------
Buyer agrees that all of the employees of ATH, the Subsidiaries and any
affiliates thereof who continue employment with ATH and/or the Subsidiaries
thereafter (the "Retained Employees") shall be permitted to immediately commence
participation in all of Buyer's employee benefit plans, without any waiting
period or exclusions for pre-existing conditions. Buyer will make available to
each Retained Employee life insurance, including spousal insurance, and
disability coverage, at the same levels as would be made available to similarly
situated employees of Buyer, without regard to any preexisting condition. Buyer
further agrees that each Retained Employee shall receive credit for those sums
paid in the current year under Seller's health plans as deductibles, coinsurance
and copayments towards any deductible and/or out-of-pocket maximum which may
apply under Buyer's plans. Buyer further agrees that, subsequent to the Closing,
Buyer shall comply with the requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") as contained in part 6 of Title
I of ERISA and Section 4980B of the Internal Revenue Code with respect to such
Retained Employees, and will indemnify, defend and hold harmless Seller and
Seller's plan from any COBRA liability with respect to such Retained Employees.
Buyer further agrees that each Retained Employee will be given credit for all
service with ATH, the Subsidiaries and any affiliates thereof in determining
such Retained Employee's eligibility to participate and vesting in any employee
benefits, as well as the amount of vacation and severance, if service is
applicable under Buyer's plans, offered by Buyer or any affiliate of Buyer to
the same extent as if that service had been performed for Buyer. In addition,
Buyer will grant credit under its vacation, sick leave and paid time off
programs for all accrued vacation, sick leave and paid time off to which the
Retained Employees are entitled under comparable Benefit Plans maintained by
Seller on the Closing Date. Buyer shall furthermore pay any Retained Employee
whose employment is terminated within one (1) year after the Closing Date a
severance payment equal to that to which the Retained Employee would be entitled
under the Seller's severance plan attached hereto as Schedule 6.12(d) based on a
termination under the same conditions as are applicable to the Retained
Employee's termination.
6.13. Intellectual Property.
---------------------
As soon as reasonably practicable but in no event later than one year
following Closing, ATH shall, and shall cause its Subsidiaries to, remove all of
Seller's logos that are
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displayed in the Hospitals or on other real and personal property or otherwise
used in the business of ATH and its Subsidiaries. It is understood by the
parties that, except as provided in Section 2.24 hereof, no logo, trademark,
tradename, or other item of intellectual property owned by Seller or any of its
subsidiaries or affiliates, other than ATH and the Subsidiaries, and no right to
use such, shall be transferred in connection with the transactions contemplated
hereby.
ARTICLE VII
-----------
TAX MATTERS
-----------
7.1. Termination of Tax Sharing.
--------------------------
Except as otherwise provided in this Article VII, all tax sharing
agreements, arrangements, policies and guidelines, formal or informal, express
or implied, that may exist between ATH and/or the Subsidiaries and Seller or any
of its affiliates and all obligations thereunder shall terminate as of the
Closing Date and neither ATH nor any Subsidiary shall have any liability
thereunder for any amounts due in respect of periods ending prior to or on the
Closing Date.
7.2. Seller's Taxes.
--------------
ATH and the Subsidiaries shall continue to be included for all taxable
periods ending on or before the Closing Date in the consolidated federal income
Tax Return of which Seller is the common parent and any required state or local
consolidated, combined or unitary income or franchise Tax Returns that include
ATH and the Subsidiaries for any period ending prior to or on the Closing Date
(all such Tax Returns including taxable periods of ATH and the Subsidiaries
ending prior to or on the Closing Date being hereinafter referred to as "Pre-
Closing Consolidated Returns"). Seller shall timely prepare and file or cause
to be prepared and filed all Pre-Closing Consolidated Returns, all other income
Tax Returns of ATH and the Subsidiaries for taxable periods ending on or prior
to the Closing Date and all other Tax Returns of ATH and the Subsidiaries
required to be filed on or prior to the Closing Date ("Seller's Returns").
Seller shall timely pay or cause to be paid all Taxes shown as due and payable
on Seller's Returns ("Seller's Taxes"). If ATH and the Subsidiaries are
permitted under any applicable state or local income tax law to treat the
Closing Date as the last day of a taxable period, Buyer and Seller shall treat
(and cause their respective affiliates to treat) the Closing Date as the last
day of a taxable period.
7.3. Buyer's Taxes.
-------------
Buyer shall timely prepare and file or cause to be prepared and filed
all Tax Returns required by law of ATH and the Subsidiaries that are not
required to be prepared and filed by Seller pursuant to Section 7.2 ("Buyer's
Returns"). Buyer shall timely pay or cause to be paid all Taxes relating to
Buyer's Returns ("Buyer's Taxes"). In the event a taxable period reflected in a
Buyer's Return includes a period prior to the Closing Date (a "Straddle
Return"), (i) such Return shall be prepared in a manner consistent with Seller's
past practice and (ii) Seller shall be liable for amounts unpaid net of amounts
prepaid representing the portion of Buyer's Taxes allocable to the period up to
and including the Closing Date ("Sellers' Accrued Taxes").
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Such allocable portion shall, in the case of real and personal property Taxes,
be apportioned ratably on a per diem basis and, in the case of other Taxes, be
apportioned based on the actual operations of ATH and the Subsidiaries, provided
that federal income Taxes shall be allocated in accordance with the provisions
of Treasury regulations (S)1.1502-76(b), determined without regard to the
ratable allocation provision of Treasury regulations (S)1.1502-76(b)(2)(ii) or
(iii). At least 21 days prior to the filing of any Straddle Return, Buyer shall
deliver a copy of such Return to Seller, together with Buyer's reasonably
detailed computation of Seller's Accrued Taxes for such Return, for Seller's
review and comment. Seller shall within ten days following receipt of the
Return, deliver to Buyer any objections regarding the calculation of Taxes or
Seller's Accrued Taxes with respect to the Return. Seller and Buyer shall
attempt in good faith to resolve any disputes regarding such calculations,
provided that if they are unable to resolve such disputes within thirty days
after delivery of Seller's objections, the dispute shall be submitted to Coopers
& Lybrand LLP ("Arbiter") for final resolution, with the costs of Arbiter to be
borne equally by Buyer and Seller.
7.4. Tax Cooperation.
---------------
(a) After the Closing Date, Seller shall submit to Buyer blank
Tax Return workpaper packages reasonably necessary for Seller (or its parent) to
prepare any Sellers' Returns. Buyer shall cause ATH to prepare completely and
accurately all information that Seller shall reasonably request in such
workpaper packages and shall submit to Seller such packages within the later of
90 days after Buyer's receipt thereof or 90 days after the close of the taxable
period to which a workpaper package relates.
(b) Each party shall cooperate with the other in connection with
(i) the filing of any Tax Return, amended Tax Return or claim for refund; (ii)
the determination of any Tax liability or right to claim a refund, or (iii) the
conduct or defense of any investigation, audit or other proceeding related to
Taxes. Buyer, ATH, the Subsidiaries and Seller and their respective affiliates
shall preserve all information, returns, books, records and documents relating
to any liabilities for Taxes with respect to a taxable period until the later of
the expiration of all applicable statutes of limitation and extensions thereof,
or the conclusion of all litigation with respect to Taxes for such period.
7.5. Indemnification.
---------------
(a) After the Closing Date, Seller shall indemnify and hold
harmless Buyer from and against any Tax liability with respect to (i) any
Seller's Taxes; (ii) Buyer's Taxes, to the extent of Seller's Accrued Taxes; and
(iii) any increase in Tax liability resulting from ATH and the Subsidiaries
being severally liable for any Taxes of Seller's consolidated group or any other
consolidated group of which ATH and the Subsidiaries were members prior to the
Closing Date pursuant to Treasury Regulations (S)1.1502-6 or any analogous state
or local tax provision. Seller shall pay such amounts as they are obligated to
pay to Buyer under the preceding sentence within 15 days after payment of any
applicable Tax liability by Buyer, ATH or any Subsidiary and to the extent not
paid by Seller or Seller Parent within such 15-day period such unpaid amounts
shall thereafter include interest thereon at prime rate plus 2% per annum.
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(b) After the Closing Date, Buyer shall indemnify and hold
harmless Seller and their affiliates from and against any Tax liability with
respect to (i) Buyer's Taxes that are allocable to or apportioned to a period
after the Closing Date. Buyer shall pay such amounts within 15 days after
payment of any such Tax liability by Seller, Seller Parent or any affiliate and
to the extent not paid by Buyer within such 15-day period such unpaid amounts
shall thereafter include interest thereon at the prime rate plus 2% per annum.
7.6. Notification of Proceedings; Control.
------------------------------------
(a) In the event that Buyer, ATH or any Subsidiary receives
notice, whether orally or in writing, of any pending or threatened federal,
state, local, municipal or foreign examinations, claims settlements, proposed
adjustments, assessments or reassessments or related matters with respect to
Taxes that could affect Seller or any affiliate, or if Seller or any affiliate
receives notice of matters that could affect Buyer, ATH or any Subsidiary, the
party receiving notice shall promptly notify in writing the potentially affected
party. The failure of any party to give the notice required by this paragraph
shall not impair that party's rights under this Agreement except to the extent
that the other parties demonstrate that they have been damaged thereby.
(b) Seller or Buyer, as applicable (the "Controlling Party"),
shall have the right, at its own expense, to control any audit or examination by
any taxing authority, initiate any claim for refund, file any amended Return,
contest, resolve and defend against any assessment, notice of deficiency or
other adjustment or proposed adjustment relating to or with respect to any Taxes
for which the Controlling Party is required to indemnify any other party
pursuant to Section 7.5; provided, that, in the event that any such adjustment
could have an adverse effect on the Tax liability of the other party (or affect
Buyer by having an effect on the Tax liability of ATH and the Subsidiaries) (the
"Affected Party"), the Controlling Party shall (i) give the Affected Party
written notice of any such adjustment, (ii) permit the Affected Party to
participate in the proceeding to the extent the adjustment may affect the Tax
liability of the Affected Party and (iii) not settle or otherwise compromise
such proceeding without the prior written consent of the Affected Party, which
consent shall not be unreasonably withheld.
7.7. Tax Effect of Payments.
----------------------
Any indemnification payments made pursuant to this Article VII shall
be treated for tax purposes as an adjustment to the Purchase Price unless
otherwise required by applicable law.
ARTICLE VIII
------------
CERTAIN DEFINITIONS
-------------------
8.1. Certain Definitions.
-------------------
As used in this Agreement, in addition to the terms defined elsewhere,
the following terms shall have the meanings set forth below:
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(a) "Accounting Principles" means generally accepted accounting
principles, subject to Schedule 8.1(a).
(b) "Federal Health Care Programs" means the Federal Health Care
Programs as defined in Section 1128B of the Social Security Act or any
regulations promulgated thereunder.
(c) "knowledge," "actual knowledge," "best knowledge," and
similar phrases shall mean the actual knowledge of Seller, ATH or Buyer, as the
case may be, based on the knowledge of the persons set forth as follows:
i. For Seller: T. Jerald Moore, Executive Vice President,
Scott Tabakin, Executive Vice President and Chief Financial Officer, David
Merrell, Vice President Financial Planning and Robert Pommerville, General
Counsel;
ii. For ATH: T. Jerald Moore, President, Steve Munroe, Vice
President and Chief Financial Officer, Jane Chambers, Vice President Human
Resources, Greg Sassman, Vice President Development, Patrick Gandy, Group Vice
President of Operations, Patricia McCullough, Group Vice President of
Operations, Terri Votava, Group Vice President of Operations (and any person
with a higher title in such area) and Caroline Fears, Vice President of
Marketing (and any person with a higher title in such area);
iii. For Buyer: the President, Chief Executive Officer, or
any officer whose title includes "Vice President" of Buyer.
(d) "Material Adverse Effect" means an event, change or effect
(or series of related events, changes or effects) that is materially adverse to
the financial condition, properties, assets, liabilities (contingent or
otherwise), businesses or operations of ATH and its Subsidiaries, taken as a
whole.
(e) "Related Party" means the Seller, any of the officers or
directors of ATH or any Subsidiary, any affiliate, associate or relative of the
Seller, ATH or any Subsidiary, or any of their respective officers or directors,
or any business or entity in which the Seller, ATH, any Subsidiary or any
affiliate, associate or relative of any such person has any material direct or
indirect interest.
ARTICLE IX
----------
MISCELLANEOUS
-------------
9.1. Nature and Survival of Representations.
--------------------------------------
The representations, warranties, covenants and agreements of Buyer and
the Seller and ATH contained in this Agreement, and all statements contained in
this Agreement or any exhibit or schedule hereto or any certificate, financial
statement or report or other document delivered pursuant to this Agreement or in
connection with the transactions contemplated hereby,
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shall be deemed to constitute representations, warranties, covenants and
agreements of the respective party delivering the same. All such representations
and warranties shall survive the Closing for a period of fifteen months;
provided, however, that the foregoing time limitation shall not apply to: (i)
any of the representations and warranties contained in Sections 2.1, 2.2, 2.5
and 2.17, each of which shall survive indefinitely; (ii) the representations and
warranties contained in Sections 2.10, 2.15, 2.25, 2.28, 2.29, 2.30, 2.31 and
2.32, each of which shall survive until thirty days following expiration of the
applicable statute of limitations; and (iii) any such claims which have been the
subject of a good faith written notice prior to the expiration of the applicable
survival period, which notice asserts such claim and specifies in reasonable
detail the nature and basis for such claim. The covenants and agreements under
this Agreement or in any statement or certificate furnished or to be furnished
pursuant hereto or in connection with the transactions contemplated hereby shall
survive without limitation.
9.2. Notices.
-------
All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered or, if sent by telecopy, when received or, if sent by nationally
recognized overnight delivery service, when delivered or, if mailed, three
business days after being mailed by United States first-class, certified or
registered mail, postage prepaid, to the other party at the following addresses
(or at such other address as shall be given in writing by any party to the
other):
If to Buyer at any time or to ATH after the Closing, to:
Select Medical Corporation
4718 Old Gettysburg Road
P.O. Box 2034
Mechanicsburg, PA 17055
Attention: Michael E. Tarvin, General Counsel
---------
with a required copy to:
Dechert Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, PA 19103
Attention: Henry N. Nassau
---------
If to the Seller:
Beverly Enterprises, Inc.
5111 Rogers Avenue
Suite 40A
Fort Smith, AR 72919
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Attention: David Merrell, Vice President
---------
with a copy to:
Beverly Enterprises, Inc.
5111 Rogers Avenue
Suite 40A
Fort Smith, AR 72919
Attention: General Counsel
---------
with an additional required copy to:
Latham & Watkins
233 South Wacker Drive
Sears Tower
Suite 5800
Chicago, IL 60606
Attention: David L. Shapiro
---------
If to ATH prior to the Closing, to:
American Transitional Hospitals, Inc.
c/o Beverly Enterprises, Inc.
5111 Rogers Avenue
Suite 40A
Fort Smith, AR 72919
Attention: David Merrell, Vice President
---------
with a copy to:
Beverly Enterprises, Inc.
5111 Rogers Avenue
Suite 40A
Fort Smith, AR 72919
Attention: General Counsel
---------
With an additional required copy to:
Latham & Watkins
233 South Wacker Drive
Sears Tower
Suite 5800
Chicago, IL 60606
Attention: David L. Shapiro
---------
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9.3. Successors and Assigns.
----------------------
This Agreement, and all rights and powers granted hereby, will bind
and inure to the benefit of the parties hereto and their respective successors
and assigns. This Agreement may not be assigned, whether by contract or
operation of law, by any party hereto without the prior written consent of the
other parties except that Buyer may assign all or part of its rights hereunder
without such consent to a wholly-owned subsidiary.
9.4. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Tennessee without giving effect to principles
of conflicts of laws.
9.5. Headings.
--------
The headings preceding the text of the sections and subsections hereof
are inserted solely for convenience of reference, and shall not constitute a
part of this Agreement, nor shall they affect its meaning, construction or
effect.
9.6. Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but which together shall constitute one and
the same instrument.
9.7. Further Assurances.
------------------
Each party shall cooperate and take such action as may be reasonably
requested by another party in order to carry out the provisions and purposes of
this Agreement and the transactions contemplated hereby.
9.8. Amendment and Waiver.
--------------------
The parties may by mutual agreement amend this Agreement in any
respect, and any party, as to such party, may (a) extend the time for the
performance of any of the obligations of any other party, (b) waive any
inaccuracies in representations by any other party, (c) waive compliance by any
other party with any of the agreements contained herein and performance of any
obligations by such other party, and (d) waive the fulfillment of any condition
that is precedent to the performance by such party of any of its obligations
under this Agreement. To be effective, any such amendment or waiver must be in
writing and be signed by the party against whom enforcement of the same is
sought.
9.9. Entire Agreement.
----------------
This Agreement and the Schedules and Exhibits hereto, each of which is
hereby incorporated herein, set forth all of the promises, covenants,
agreements, conditions and
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undertakings between the parties hereto with respect to the subject matter
hereof, and supersede all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written.
9.10. Risk of Loss.
------------
The parties agree and acknowledge that the risk of loss with respect
to the Stock and the assets and business of ATH and each Subsidiary remains with
the Seller and ATH prior to the Closing.
9.11. Post-Closing Mergers.
--------------------
Buyer acknowledges that no representation or warranty set forth herein
of Seller or ATH shall be breached because of the consummation of the
contemplated post-Closing mergers set forth in the Background section hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
SELECT MEDICAL CORPORATION
By: /s/ Robert A. Ortenzio
----------------------------------
Name:
Title:
BEVERLY ENTERPRISES, INC.
By: /s/ David G. Merrell
----------------------------------
Name:
Title:
AMERICAN TRANSITIONAL HOSPITALS, INC.
By: /s/ David G. Merrell
----------------------------------
Name:
Title:
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