<PAGE>
_______________________________________________________________________________
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________
(Mark One)
___
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
___
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-6639
CHARTER MEDICAL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 58-1076937
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
577 Mulberry Street, Macon, Georgia 31298
(Address of principal executive offices)
(Zip Code)
(912) 742-1161
(Registrant's telephone number, including area code)
See Table of Additional Registrants below.
___________
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
___________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
The number of shares of the Registrant's Common Stock outstanding as of
April 29, 1994, was 26,750,955.
_______________________________________________________________________________
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<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Ambulatory Resources, Inc. Georgia 58-1456102 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
Atlanta MOB, Inc. Georgia 58-1558215 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
Beltway Community Hospital, Texas 58-1324281 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
C.A.C.O. Services, Inc. Ohio 58-1751511 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
CCM, Inc. Nevada 58-1662418 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
CMCI, Inc. Nevada 88-0224620 1061 East Flamingo Road
Suite One
Las Vegas, NV 89119
(702) 737-0282
CMFC, Inc. Nevada 88-0215629 1061 East Flamingo Road
Suite One
Las Vegas, NV 89119
(702) 737-0282
CMSF, Inc. Florida 58-1324269 3550 Colonial Boulevard
Fort Myers, FL 33906
(813) 939-0403
CPS Associates, Inc. Virginia 58-1761039 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
Charter Alvarado Behavioral California 58-1394959 577 Mulberry Street
Health System, Inc. Macon, Georgia 31298
(912) 742-1161
Charter Augusta Behavioral Georgia 58-1615676 3100 Perimeter Parkway
Health System, Inc. Augusta, GA 30909
(404) 868-6625
-i-
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Bay Harbor Behavioral Florida 58-1640244 577 Mulberry Street
Health System, Inc. Macon, Georgia 31298
(912) 742-1161
Charter Beacon Behavioral Indiana 58-1524996 1720 Beacon Street
Health System, Inc. Fort Wayne, IN 46805
(219) 423-3651
Charter Behavioral Health System Georgia 58-1513304 240 Mitchell Bridge Road
of Athens, Inc. Athens, GA 30604
(404) 546-7277
Charter Behavioral Health System Texas 58-1440665 8402 Cross Park Drive
of Austin, Inc. Austin, TX 78754
(512) 837-1800
Charter Behavioral Health System Florida 58-1527678 577 Mulberry Street
of Bradenton, Inc. Macon, GA 31298
(912) 742-1161
Charter Behavioral Health System Georgia 58-1408670 3500 Riverside Drive
of Central Georgia, Inc. Macon, GA 31209
(912) 474-6200
Charter Behavioral Health System South Carolina 58-1761157 2777 Speissegger Drive
of Charleston, Inc. Charleston, SC 29405-8299
(803) 747-5830
Charter Behavioral Health System Virginia 58-1616917 2101 Arlington Boulevard
of Charlottesville, Inc. Charlottesville, VA
22903-1593
(804) 977-1120
Charter Behavioral Health System Illinois 58-1315760 4700 North Clarendon Avenue
of Chicago, Inc. Chicago, IL 60640
(312) 728-7100
Charter Behavioral Health System California 58-1473063 577 Mulberry Street
of Chula Vista, Inc. Macon, GA 31298
(912) 742-1161
Charter Behavioral Health System Missouri 61-1009977 200 Portland Street
of Columbia, Inc. Columbia, MO 65201
(314) 876-8000
-ii-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Behavioral Health System Texas 58-1513305 3126 Rodd Field Road
of Corpus Christi, Inc. Corpus Christi, TX 78414
(512) 993-8893
Charter Behavioral Health System Texas 58-1513306 6800 Preston Road
of Dallas, Inc. Plano, TX 75024
(214) 964-3939
Charter Behavioral Health System Texas 58-1643151 6201 Overton Ridge Blvd.
of Fort Worth, Inc. Fort Worth, TX 76132
(817) 292-6844
Charter Behavioral Health System Mississippi 58-1616919 East Lakeland Drive
of Jackson, Inc. Jackson, MS 39208
(601) 939-9030
Charter Behavioral Health System Florida 58-1483015 3947 Salisbury Road
of Jacksonville, Inc. Jacksonville, FL 32216
(904) 296-2447
Charter Behavioral Health System Kansas 58-1603154 8000 West 127th Street
of Kansas City, Inc. Overland Park, KS 66213
(913) 897-4999
Charter Behavioral Health System Louisiana 72-0686492 577 Mulberry Street
of Lafayettte, Inc. Macon, GA 31298
(912) 742-1161
Charter Behavioral Health System Louisiana 62-1152811 4250 Fifth Avenue, South
of Lake Charles, Inc. Lake Charles, LA 70605
(318) 474-6133
Charter Behavioral Health System Alabama 58-1569921 5800 Southland Drive
of Mobile, Inc. Mobile, AL 36609
(205) 661-3001
Charter Behavioral Health System Nevada 58-1321317 7000 West Spring Mountain
of Nevada, Inc. Road
Las Vegas, NV 89180
(702) 876-4357
Charter Behavioral Health System New Mexico 58-1479480 5901 Zuni Road, SE
of New Mexico, Inc. Albuquerque, NM 87108
(505) 265-8800
-iii-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Behavioral Health System California 58-1857277 101 Cirby Hills Drive
of Northern California, Inc. Roseville, CA 95678
(916) 969-4666
Charter Behavioral Health System Arkansas 58-1449455 4253 Crossover Road
of Northwest Arkansas, Inc. Fayetteville, AR 72701
(501) 521-5731
Charter Behavioral Health System Indiana 58-1603160 101 West 61st Avenue
of Northwest Indiana, Inc. State Road 51
Hobart, IN 46342
(219) 947-4464
Charter Behavioral Health System Kentucky 61-1006115 435 Berger Road
of Paducah, Inc. Paducah, KY 42002-7609
(502) 444-0444
Charter Behavioral Health System California 58-1747020 577 Mulberry Street
of San Jose, Inc. Macon, GA 31298
(912) 742-1161
Charter Behavioral Health System Georgia 58-1750583 1150 Cornell Avenue
of Savannah, Inc. Savannah, GA 31416
(912) 354-3911
Charter Behavioral Health System California 58-1366605 577 Mulberry Street
of Southern California, Inc. Macon, GA 31298
(912) 742-1161
Charter Behavioral Health System Florida 58-1616916 4004 North Riverside Drive
of Tampa Bay, Inc. Tampa, FL 33603
(813) 238-8671
Charter Behavioral Health System California 95-2685883 2055 Kellogg Drive
of the Inland Empire, Inc. Corona, CA 91720
(714) 735-2910
Charter Behavioral Health System Ohio 58-1731068 1725 Timberline Road
of Toledo, Inc. Maumee, Ohio 43537
(419) 891-9333
Charter Behavioral Health System North Carolina 56-1050502 3637 Old Vineyard Road
of Winston-Salem, Inc. Winston-Salem, NC 27104
(919) 768-7710
-iv-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Behavioral Health Georgia 58-1900736 577 Mulberry Street
Systems of Atlanta, Inc. Macon, GA 31298
(912) 742-1161
Charter Brawner Behavioral Georgia 58-0979827 577 Mulberry Street
Health System, Inc. Macon, GA 31298
(912) 742-1161
Charter By-The-Sea Georgia 58-1351301 2927 Demere Road
Behavioral Health System, Inc. St. Simons Island, GA 31522
(912) 638-1999
Charter Canyon Behavioral Health Utah 58-1557925 175 West 7200 South
System, Inc. Midvale, UT 84047
(801) 561-8181
Charter Centennial Peaks Colorado 58-1761037 577 Mulberry Street
Behavioral Health System, Inc. Macon, GA 31298
(912) 742-1161
Charter Colonial Institute, Virginia 58-1492652 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
Charter Community Hospital, California 58-1398708 21530 South Pioneer
Inc. Boulevard
Hawaiian Gardens, CA
90716
(310) 860-0401
Charter Community Hospital Iowa 58-1523702 577 Mulberry Steet
of Des Moines, Inc. Macon, GA 31298
(912) 742-1161
Charter Crescent Pines Behavioral Georgia 58-1249663 577 Mulberry Street
Health System, Inc. Macon, GA 31298
(912) 742-1161
Charter Fairmount Behavioral Pennsylvania 58-1616921 561 Fairthorne Avenue
Health System, Inc. Philadelphia, PA 19128
(215) 487-4000
Charter Financial Offices, Inc. Georgia 58-1527680 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
-v-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Forest Behavioral Louisiana 58-1508454 9320 Linwood Avenue
Health System, Inc. Shreveport, LA 71106
(318) 688-3930
Charter Grapevine Behavioral Texas 58-1818492 2300 William D. Tate Ave.
Health System, Inc. Grapevine, TX 76051
(817) 481-1900
Charter Greensboro Behavioral North Carolina 58-1335184 700 Walter Reed Drive
Health System, Inc. Greensboro, NC 27403
(919) 852-4821
Charter Health Management Texas 58-2025056 577 Mulberry Street
of Texas, Inc. Macon, GA 31298
(912) 742-1161
Charter Hospital of Ohio 58-1598899 577 Mulberry Street
Columbus, Inc. Macon, GA 31298
(912) 742-1161
Charter Hospital of Denver, Colorado 58-1662413 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
Charter Hospital of Ft. Collins, Colorado 58-1768534 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
Charter Hospital of Laredo, Inc. Texas 58-1491620 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
Charter Hospital of Miami, Florida 61-1061599 11100 N.W. 27th Street
Inc. Miami, FL 33172
(305) 591-3230
Charter Hospital of Mobile, Alabama 58-1318870 251 Cox Street
Inc. Mobile, AL 36604
(205) 432-4111
Charter Hospital of Northern New Jersey 58-1852138 577 Mulberry Street
New Jersey, Inc. Macon, GA 31298
(912) 742-1161
-vi-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Hospital of Santa New Mexico 58-1584861 577 Mulberry Street
Teresa, Inc. Macon, GA 31298
(912) 742-1161
Charter Hospital of St. Louis, Missouri 58-1583760 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
Charter Hospital of Torrance, California 58-1402481 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
Charter Indianapolis Behavioral Indiana 58-1674291 5602 Caito Drive
Health System, Inc. Indianapolis, IN 46226
(317) 545-2111
Charter Lafayette Behavioral Indiana 58-1603158 3700 Rome Drive
Health System, Inc. Lafayette, IN 47905
(317) 448-6999
Charter Lakeside Behavioral Tennessee 62-0892645 2911 Brunswick Road
Health System, Inc. Memphis, TN 38134
(901) 377-4700
Charter Laurel Heights Georgia 58-1558212 577 Mulberry Street
Behavioral Health System, Inc. Macon, GA 31298
(912) 742-1161
Charter Laurel Oaks Behavioral Florida 58-1483014 577 Mulberry Street
Health System, Inc. Macon, GA 31298
(912) 742-1161
Charter Little Rock Behavioral Arkansas 58-1747019 1601 Murphy Drive
Health System, Inc. Maumelle, AR 72118
(501) 851-8700
Charter Louisville Behavioral Kentucky 58-1517503 1405 Browns Lane
Health System, Inc. Louisville, KY 40207
(502) 896-0495
Charter MOB of Virginia 58-1761158 1023 Millmont Avenue
Charlottesville, Inc. Charlottesville, VA 22901
(804) 977-1120
-vii-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Medfield Behavioral Florida 58-1705131 1950 Benoist Farms Road
Health System, Inc. West Palm Beach, FL 33411
(407) 687-1511
Charter Medical - California, Georgia 58-1357345 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
Charter Medical - Clayton Georgia 58-1579404 577 Mulberry Street
County, Inc. Macon, GA 31298
(912) 742-1161
Charter Medical - Cleveland, Texas 58-1448733 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
Charter Medical - Dallas, Texas 58-1379846 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
Charter Medical - Long California 58-1366604 6060 Paramount Boulevard
Beach, Inc. Long Beach, CA 90805
(310) 220-1000
Charter Medical - New York, New York 58-1761153 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
Charter Medical Executive Georgia 58-1538092 577 Mulberry Street
Corporation Macon, GA 31298
(912) 742-1161
Charter Medical Information Georgia 58-1530236 577 Mulberry Street
Services, Inc. Macon, GA 31298
(912) 742-1161
Charter Medical International, Nevada 58-1605110 577 Mulberry Street
S.A., Inc. Macon, GA 31298
(912) 742-1161
Charter Medical Management Georgia 58-1195352 577 Mulberry Street
Company Macon, GA 31298
(912) 742-1161
-viii-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Medical of East Arizona 58-1643158 2190 N. Grace Boulevard
Valley, Inc. Chandler, AZ 85224
(602) 899-8989
Charter Medical of North Arizona 58-1643154 6015 W. Peoria Avenue
Phoenix, Inc. Glendale, AZ 85311
(602) 878-7878
Charter Medical of Orange Florida 58-1615673 577 Mulberry Street
County, Inc. Macon, GA 31298
(912) 742-1161
Charter Mid-South Behavioral Tennessee 58-1860496 577 Mulberry Street
Health System, Inc. Macon, GA 31298
(912) 742-1161
Charter Milwaukee Behavioral Wisconsin 58-1790135 11101 West Lincoln Avenue
Health System, Inc. West Allis, WI 53227
(414) 327-3000
Charter Mission Viejo Behavioral California 58-1761156 23228 Madero
Health System, Inc. Mission Viejo, CA 92691
(714) 830-4800
Charter North Behavioral Alaska 58-1474550 2530 DeBarr Road
Health System, Inc. Anchorage, AK 99508-2996
(907) 258-7575
Charter Northridge Behavioral North Carolina 58-1463919 400 Newton Road
Health System, Inc. Raleigh, NC 27615
(919) 847-0008
Charter Northside Hospital, Georgia 58-1440656 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
Charter Oak Behavioral California 58-1334120 1161 East Covina Boulevard
Health System, Inc. Covina, CA 91724
(818) 966-1632
Charter Palms Behavioral Texas 58-1416537 1421 E. Jackson Avenue
Health System, Inc. McAllen, TX 78502
(512) 631-5421
-ix-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter Peachford Behavioral Georgia 58-1086165 2151 Peachford Road
Health System, Inc. Atlanta, GA 30338
(404) 455-3200
Charter Pines Behavioral North Carolina 58-1462214 3621 Randolph Road
Health System, Inc. Charlotte, NC 28211
(704) 365-5368
Charter Plains Behavioral Texas 58-1462211 801 N. Quaker Avenue
Health System, Inc. Lubbock, TX 79408
(806) 744-5505
Charter Psychiatric Hospitals, Delaware 58-1852072 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
Charter Real Behavioral Texas 58-1485897 8550 Huebner Road
Health System, Inc. San Antonio, TX 78240
(512) 699-8585
Charter Regional Medical Texas 74-1299623 577 Mulberry Street
Center, Inc. Macon, Georgia 31298
(912) 742-1161
Charter Richmond Behavioral Virginia 58-1761160 577 Mulberry Street
Health System, Inc. Macon, GA 31298
(912) 742-1161
Charter Ridge Behavioral Kentucky 58-1393063 3050 Rio Dosa Drive
Health System, Inc. Lexington, KY 40509
(606) 269-2325
Charter Rivers Behavioral South Carolina 58-1408623 2900 Sunset Boulevard
Health System, Inc. West Columbia, SC 29171
(803) 796-9911
Charter San Diego Behavioral California 58-1669160 11878 Avenue of Industry
Health System, Inc. San Diego, CA 92128
(619) 487-3200
Charter Sioux Falls Behavioral South Dakota 58-1674278 2812 South Louise Avenue
Health System, Inc. Sioux Falls, SD 57106
(605) 361-8111
-x-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charter South Bend Behavioral Indiana 58-1674287 6704 North Gumwood Drive
Health System, Inc. Granger, IN 46530
(219) 272-9799
Charter Springs Behavioral Florida 58-1517461 3130 S.W. 27th Avenue
Health System, Inc. Ocala, FL 32678
(904) 237-7293
Charter Suburban Hospital Texas 75-1161721 577 Mulberry Street
of Mesquite, Inc. Macon, GA 31298
(912) 742-1161
Charter Terre Haute Behavioral Indiana 58-1674293 1400 Crossing Boulevard
Health System, Inc. Terre Haute, IN 47802
(812) 299-4196
Charter Thousand Oaks Behavioral California 58-1731069 150 Via Merida
Health System, Inc. Thousand Oaks, CA 91361
(805) 495-3292
Charter Treatment Center of Michigan 58-2025057 577 Mulberry Street
Michigan, Inc. Macon, GA 31298
(912) 742-1161
Charter Westbrook Behavioral Virginia 54-0858777 1500 Westbrook Avenue
Health System, Inc. Richmond, VA 23227
(804) 266-9671
Charter Wichita Behavioral Kansas 58-1634296 8901 East Orme
Health System, Inc. Wichita, KS 67207
(316) 686-5000
Charter Woods Behavioral Alabama 58-1330526 700 Cottonwood Road
Health System, Inc. Dothan, AL 36302
(205) 794-4357
Charter of Alabama, Inc. Alabama 63-0649546 577 Mulberry Street
Macon, Georgia 31298
(912) 742-1161
Charter-Provo School, Inc. Utah 58-1647690 4501 North University Ave.
Provo, UT 84603
(801) 227-2000
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</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Charterton/LaGrange, Inc. Kentucky 61-0882911 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
Desert Springs Hospital, Inc. Nevada 88-0117696 577 Mulberry Street
Macon, Georgia 31298
(912) 742-1161
Employee Assistance Services, Georgia 58-1501282 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
Florida Health Facilities, Florida 58-1860493 21808 State Road 54
Inc. Lutz, Fl 33549
(813) 948-2441
Group Practice Affiliates, Inc. Georgia 58-2101378 577 Mulberry Street
Macon, Georgia 31298
(912) 742-1161
Gwinnett Immediate Care Georgia 58-1456097 577 Mulberry Street
Center, Inc. Macon, GA 31298
(912) 742-1161
HCS, Inc. Georgia 58-1527679 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
Holcomb Bridge Immediate Georgia 58-1374463 577 Mulberry Street
Care Center, Inc. Macon, GA 31298
(912) 742-1161
Hospital Investors, Inc. Georgia 58-1182191 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
Mandarin Meadows, Inc. Florida 58-1761155 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
Metropolitan Hospital, Inc. Georgia 58-1124268 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
-xii-
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ADDITIONAL REGISTRANTS(1)
Address including zip code,
State or other and telephone number
Exact name of jurisdiction of I.R.S. Employer including area code,
registrant as specified incorporation Identification of registrant's principal
in its charter or organization Number executive offices
<S> <C> <C> <C>
Middle Georgia Hospital, Inc. Georgia 58-1121715 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
Pacific-Charter Medical, Inc. California 58-1336537 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
Rivoli, Inc. Georgia 58-1686160 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
Shallowford Community Hospital, Georgia 58-1175951 577 Mulberry Street
Inc. Macon, GA 31298
(912) 742-1161
Sistemas De Terapia Georgia 58-1181077 577 Mulberry Street
Respiratoria, S.A., Inc. Macon, GA 31298
(912) 742-1161
Strategic Advantage, Inc. Georgia 41-1558541 577 Mulberry Street
Macon, GA 31298
(912) 742-1161
Stuart Circle Hospital Virginia 54-0855184 577 Mulberry Street
Corporation Macon, GA 31298
(912) 742-1161
Western Behavioral California 58-1662416 577 Mulberry Street
Systems, Inc. Macon, GA 31298
(912) 742-1161
(1) The Additional Registrants listed are wholly-owned subsidiaries of the Registrant and are
guarantors of the Registrant's 7.5% Senior Subordinated Debentures due 2003. The Additional
Registrants have been conditionally exempted, pursuant to Section 12(h) of the Securities
Exchange Act of 1934, from filing reports under Section 13 of the Securities Exchange Act of
1934.
-xiii-
</TABLE>
<PAGE>
<PAGE>
FORM 10-Q
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I - Financial Information:
Condensed Consolidated Balance Sheets -
September 30, 1993 and March 31, 1994......................... 4
Condensed Consolidated Statements of Operations -
For the Six Months and Quarters ended March 31, 1993
and 1994...................................................... 6
Condensed Consolidated Statement of Changes in
Stockholders' Equity - For the Six Months and Quarter
ended March 31, 1994.......................................... 7
Condensed Consolidated Statements of Cash Flows -
For the Six Months ended March 31, 1993 and 1994.............. 8
Notes to Condensed Consolidated Financial Statements........... 9
Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 14
PART II - Other Information:
Item 6. - Exhibits and Reports on Form 8-K..................... 19
Signatures.......................................................... 20
</TABLE>
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
PART I - FINANCIAL INFORMATION
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
September 30 March 31
ASSETS 1993 1994
<S> <C> <C>
Current Assets
Cash and cash equivalents....................... $ 86,002 $ 40,535
Cash collateral account......................... 5,426 8,207
Accounts receivable, net........................ 119,638 129,117
Supplies........................................ 5,051 4,933
Other current assets............................ 15,798 13,748
Total Current Assets......................... 231,915 196,540
Property and Equipment
Land............................................ 95,886 93,850
Buildings and improvements...................... 310,649 307,768
Equipment....................................... 67,421 69,017
473,956 470,635
Accumulated depreciation........................ (30,098) (43,109)
443,858 427,526
Construction in progress........................ 928 2,194
444,786 429,720
Other Long-Term Assets............................ 104,284 100,195
Reorganization Value in Excess of Amounts
Allocable to Identifiable Assets, net............ 57,201 41,601
__________ __________
$ 838,186 $ 768,056
</TABLE>
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except shares and per share data)
<TABLE>
<CAPTION>
September 30 March 31
LIABILITIES AND STOCKHOLDERS' EQUITY 1993 1994
<S> <C> <C>
Current Liabilities
Accounts payable.................................. $ 52,264 $ 39,021
Accrued expenses and other current liabilities.... 149,377 135,041
Current maturities of long-term debt and
capital lease obligations........................ 70,957 41,010
Total Current Liabilities.................... 272,598 215,072
Long-Term Debt and Capital Lease Obligations........ 350,205 321,192
Deferred Income Taxes............................... 38,789 36,439
Reserve for Unpaid Claims........................... 99,675 98,268
Deferred Credits and Other Long-Term Liabilities.... 19,621 14,976
Stockholders' Equity
Common Stock, par value $0.25 per share
Authorized - 80,000,000 shares
Issued and outstanding - 25,001,042 shares at
September 30, 1993 and 26,750,950 shares
at March 31, 1994.............................. 6,250 6,688
Other Stockholders' Equity
Additional paid-in capital...................... 237,581 240,162
Accumulated deficit............................. (59,423) (62,166)
Unearned compensation under ESOP................ (122,724) (98,125)
Warrants outstanding............................ 274 182
Cumulative foreign currency adjustments......... (4,660) (4,632)
Stockholders' Equity.......................... 57,298 82,109
Commitments and Contingencies
__________ __________
$ 838,186 $ 768,056
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these balance sheets.
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
For the Quarter ended For the Six Months ended
March 31 March 31
1993 1994 1993 1994
<S> <C> <C> <C> <C>
Net revenue...................... $233,160 $212,610 $459,550 $421,427
Costs and expenses
Operating expenses............. 163,613 153,147 323,367 305,589
Bad debt expense............... 16,493 16,159 34,870 32,288
Depreciation and amortization.. 6,635 6,904 13,802 13,579
Amortization of reorgani-
zation value in excess of
amounts allocable to identi-
fiable assets................. 10,750 7,800 21,500 15,600
Interest, net.................. 18,323 8,418 37,307 16,785
ESOP expense................... 8,965 12,300 17,970 24,599
Stock option expense........... 29,016 656 31,277 6,851
253,795 205,384 480,093 415,291
Income (Loss) from continuing
operations before income
taxes........................... (20,635) 7,226 (20,543) 6,136
Provision for (Benefit from)
income taxes.................... (3,756) 6,103 364 8,879
Income (Loss) from continuing
operations...................... (16,879) 1,123 (20,907) (2,743)
Loss from discontinued
operations (net of income tax
provision of $3,178 and $6,123
for the quarter and six
months, respectively)........... (2,812) -- (6,008) --
Net income (loss)................ $(19,691) $ 1,123 $(26,915) $ (2,743)
Average number of common shares
outstanding..................... 24,857 26,743 24,842 25,936
Earnings per common share:
Income (Loss) from continuing
operations.................... $(.68) $ .04 $ (.84) $(.11)
Loss from discontinued
operations.................... (.11) -- (.24) --
Net income (loss).............. $(.79) $ .04 $(1.08) $(.11)
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(Unaudited)
(In thousands)
Other Stockholders' Equity
Cumulative
Additional Unearned Foreign
Common Stock Paid-in Accumulated Compensation Warrants Currency
Shares Amount Capital Deficit Under ESOP Outstanding Adjustments
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993..... 25,001 $6,250 $237,581 $(59,423) $(122,724) $ 274 $(4,660)
Additions (Deductions):
Net loss........................ -- -- -- (3,866) -- -- --
ESOP expense.................... -- -- -- -- 12,299 -- --
Stock option expense accrual.... -- -- 6,195 -- -- -- --
Exercise of stock options....... 1,682 421 (14,096) -- -- -- --
Exercise of warrants............ 37 9 277 -- -- (91) --
Tax benefit related to exercise
of stock options............... -- -- 9,424 -- -- -- --
Foreign currency translation
loss........................... -- -- -- -- -- -- (642)
Balance at December 31, 1993...... 26,720 $6,680 $239,381 $(63,289) $(110,425) $ 183 $(5,302)
Additions (Deductions):
Net income...................... -- -- -- 1,123 -- -- --
ESOP expense.................... -- -- -- -- 12,300 -- --
Stock option expense accrual.... -- -- 656 -- -- -- --
Exercise of stock options....... 30 8 120 -- -- -- --
Exercise of warrants............ 1 -- 5 -- -- (1) --
Foreign currency translation
gain........................... -- -- -- -- -- -- 670
Balance at March 31, 1994......... 26,751 $6,688 $240,162 $(62,166) $ (98,125) $ 182 $(4,632)
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of this statement.
</TABLE>
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the Six Months ended
March 31
1993 1994
<S> <C> <C>
Cash Flows From Operating Activities
Net loss.......................................... $(26,915) $ (2,743)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Loss from discontinued operations............. 6,008 --
Depreciation and amortization................. 35,302 29,179
ESOP expense.................................. 17,970 24,599
Stock option expense.......................... 31,277 6,851
Non-cash interest expense..................... 2,950 1,375
Cash flows from changes in assets and
liabilities, net of effects from sales and
acquisitions of businesses:
Accounts receivable, net................... (12,433) (9,475)
Other assets............................... (201) 4,443
Accounts payable and other accrued
liabilities............................... (23,492) (21,829)
Reserve for unpaid claims.................. 1,659 (847)
Income taxes payable....................... (2,845) (9,057)
Other liabilities.......................... 8,436 (5,464)
Other......................................... (469) 1,515
Total adjustments............................ 64,162 21,290
Net cash provided by operating
activities............................. 37,247 18,547
Cash Flows From Investing Activities
Capital expenditures.............................. (4,702) (6,964)
Acquisitions of businesses........................ -- (1,733)
Decrease in assets restricted for settlement of
unpaid claims.................................... 587 4,058
Proceeds from sale of assets...................... 11,882 7,857
Cash flows from discontinued operations........... 19,698 --
Net cash provided by investing
activities.............................. 27,465 3,218
Cash Flows From Financing Activities
Proceeds from issuance of debt.................... 17,200 --
Payments on debt and capital lease obligations.... (117,001) (60,527)
Proceeds from exercise of stock options and
warrants......................................... 141 866
Tax benefit related to the exercise of stock
options.......................................... -- 9,424
Income tax payments made on behalf of stock
optionee......................................... -- (14,214)
Increase in cash collateral account............... (372) (2,781)
Net cash used in financing activities.... (100,032) (67,232)
Net decrease in cash and cash equivalents........... (35,320) (45,467)
Cash and cash equivalents at beginning of period.... 140,803 86,002
Cash and cash equivalents at end of period.......... $105,483 $ 40,535
</TABLE>
The accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these statements.
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994
(Unaudited)
NOTE A - Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments, consisting of
normal recurring adjustments considered necessary for a fair presentation,
have been included. These financial statements should be read in conjunction
with the audited consolidated financial statements of the Company for the year
ended September 30, 1993, included in the Company's Annual Report on Form 10-K.
NOTE B - Nature of Business
The Company's business is seasonal in nature, with a reduced demand for
certain services generally occurring in the fourth fiscal quarter and around
major holidays, such as Thanksgiving and Christmas. The Company's business is
also subject to general economic conditions and other factors. Accordingly,
the results of operations for the interim periods are not necessarily
indicative of the results expected for the year.
NOTE C - Supplemental Cash Flow Information
Below is supplemental cash flow information related to the six months
ended March 31, 1993 and 1994:
<TABLE>
<CAPTION>
For the Six Months ended
March 31
1993 1994
(In thousands)
<S> <C> <C>
Income taxes paid, net of refunds received....... $ 9,525 $ 8,532
Interest paid, net of amounts capitalized........ 36,184 16,331
Payments to ESOP................................. 52,669 30,000
</TABLE>
<PAGE>
<PAGE>
NOTE D - Long-Term Debt and Leases
Information with regard to the Company's long-term debt and capital lease
obligations at September 30, 1993 and March 31, 1994 follows (in thousands):
<TABLE>
<CAPTION>
September 30 March 31
1993 1994
<S> <C> <C>
Financing under the Credit Agreement:
Tranche A Facility (6.75% at
March 31, 1994)............................... $ 93,871 $ 65,932
Tranche B Facility (5.7375% to 8.375% at
March 31, 1994)............................... 67,619 37,619
Debentures due 2003 (net of discount of
$43,997 at September 30, 1993 and $42,622
at March 31, 1994).............................. 156,003 157,378
8% to 16% Mortgage and other
collateralized notes payable through
1998............................................ 21,502 19,916
Variable rate secured notes due through
2013 (2.15% to 2.5% at March 31, 1994).......... 64,175 63,825
7.5% Swiss Bonds due currently................... 6,443 6,443
2.2% to 11.5% Capital lease obligations
due through 2014................................ 11,965 11,780
421,578 362,893
Less amounts due within one year............... 70,957 41,010
Less debt service funds........................ 416 691
$350,205 $321,192
</TABLE>
The Company made a mandatory payment under the Credit Agreement of
approximately $3.1 million in January 1994 which represented actual excess
cash over estimated excess cash at September 30, 1993. Additionally, in
January 1994 the Company made a voluntary prepayment under the Credit
Agreement of $30 million.
On March 1, 1994 the Company made a mandatory prepayment under the Credit
Agreement of approximately $1.9 million which represented 75% of net proceeds
from asset sales and on March 31, 1994 made a scheduled payment of $2.5
million.
NOTE E - Contingencies
General and Professional Liability
The Company is self-insured for a substantial portion of general and
professional liability risks. The reserves for self-insured general and
professional liability losses, including loss adjustment expenses, are based
on actuarial estimates using the Company's historical claims experience
adjusted for current industry trends. The reserve for unpaid claims is
adjusted as such claims mature, to reflect revised actuarial estimates based
on actual experience. While management and its actuaries believe that the
present reserve is reasonable, ultimate settlement of losses may vary from the
amount provided.
<PAGE>
<PAGE>
Litigation
In addition to general and professional liability claims, the Company is
subject to other claims, suits, surveys and investigations. This includes a
federal investigation of certain business practices of a subsidiary of the
Company that operates one psychiatric hospital. In the opinion of management,
the ultimate resolution of such other pending legal proceedings will not have
a material adverse effect on the Company's financial position or results of
operations.
NOTE F - Acquisition
On March 30, 1994 the Company announced that it had entered into an asset
purchase agreement with NME providing for the purchase of substantially all of
the assets of 36 psychiatric hospitals, eight chemical-dependency treatment
facilities, two residential treatment centers and one physician outpatient
practice (including related outpatient facilities and other associated assets,
the "Target Hospitals"). The purchase price for the Target Hospitals will be
approximately $151.9 million in cash plus an additional cash amount, estimated
to be approximately $50 million, subject to adjustment, for the net working
capital of the Target Hospitals at the closing of the acquisition. The Target
Hospitals have an aggregate capacity of 3,496 licensed beds and are located in
20 states. During their fiscal year ended May 31, 1993 and the six month
period ended November 30, 1993, the Target Hospitals had, respectively,
approximately 40,000 and 19,000 patient admissions, net revenue of
approximately $407.5 million and $177.5 million and Target Hospital EBITDA
(defined as net revenue less operating expenses and bad debt expenses) of
approximately $55.1 million and $23.9 million.
Subject to obtaining licensure and other regulatory approvals, the
Company anticipates that it will purchase the Target Hospitals in multiple
closings.
NOTE G - Subsequent Events
On May 2, 1994 the Company entered into a Second Amended and Restated
Credit Agreement with certain financial institutions for a five-year reducing,
revolving credit facility in an aggregate committed amount of $300 million
(the "Revolving Credit Agreement"). Proceeds from the Revolving Credit
Agreement were or will be used (i) to refinance certain mortgage indebtedness
of certain subsidiaries of the Company in the principal amount of
approximately $14.7 million and the loans to certain subsidiaries of the
Company outstanding under the Credit Agreement in the principal amount of
approximately $46.8 million, (ii) for continued credit enhancement of certain
currently outstanding variable rate demand notes issued by or for the benefit
of certain subsidiaries of the Company and (iii) for working capital and other
general corporate purposes, including to finance, in part, the acquisition of
certain psychiatric facilities from National Medical Enterprises, Inc. ("NME")
and to finance other permitted acquisitions and investments. As of May 2,
1994, approximately $134.6 million in loans and letters of credit were
outstanding under the Revolving Credit Agreement.
<PAGE>
<PAGE>
The Revolving Credit Agreement will be reduced by the amounts and on the
dates indicated below:
Amount Date
$ 25,000,000 March 31, 1996
50,000,000 March 31, 1997
50,000,000 March 31, 1998
175,000,000 March 31, 1999
In addition to the scheduled reductions above the Revolving Credit
Agreement shall be reduced (i) by an amount equal to 70% (or if a default or
an event of default exists, 100%) of the net proceeds of certain asset sales,
(ii) by an amount equal to 25% (or if a default or an event of default exists,
100%) of the net proceeds of certain issuances or sales of the Company's
capital stock or other equity interests, except that no such reduction shall
be required if the Company meets specified financial ratios and no default or
event of default has occurred and is continuing, and (iii) by an amount equal
to the principal amount of permitted subordinated indebtedness subject to a
required repurchase or repurchase offer by the Company as a result of any
asset sale. All such reductions described in the foregoing clauses (i)
through (iii) shall be applied first on a pro rata basis to all scheduled
reductions of the Revolving Credit Agreement other than the last scheduled
reduction of the Revolving Credit Agreement, and thereafter to the last
scheduled reduction.
The loans outstanding under the Revolving Credit Agreement will bear
interest (subject to certain potential adjustments) at a rate per annum equal
to (a) the sum of the Base Lending Rate plus 3/4%, or (b) at the option of the
Company, the sum of the maximum reserve-adjusted one, two, three or six-month
LIBOR plus 1 3/4%. The Base Lending Rate is the higher of (x) the rate
announced from time to time as Bankers Trust Company's prime lending rate, (y)
the Federal Reserve's reported weekly average dealer offering rate for
three-month certificates of deposit, adjusted for maximum reserves, plus 1/2
of 1%, and (z) the Federal Funds Rate plus 1/2 of 1%.
Also on May 2, 1994, the Company issued $375 million of 11.25% Senior
Subordinated Notes which mature on April 15, 2004 (the "Notes") and are
general unsecured obligations of the Company. Interest on the Notes is
payable semi-annually on each April 15 and October 15, commencing on
October 15, 1994. Proceeds of $181.8 million from the sale of the Notes were
used to defease, and subsequently on June 9, 1994, to redeem the Company's
outstanding 7.5% Senior Subordinated Debentures due 2003. Certain remaining
proceeds will be used, along with proceeds from the Revolving Credit
Agreement, to finance the acquisition of NME facilities discussed above. The
Notes are guaranteed on an unsecured senior subordinated basis by
substantially all of the Company's existing subsidiaries and certain
subsidiaries created after the issuance of the Notes.
The Notes are not redeemable at the option of the Company prior to
April 15, 1999. Thereafter, the Notes will be subject to redemption at the
option of the Company, in whole or in part, at the redemption prices
(expressed as a percentage of the principal amount) set forth below, plus
accrued and unpaid interest thereon to the applicable redemption date, if
<PAGE>
<PAGE>
redeemed during the twelve-month period beginning April 15 of the years
indicated below:
Redemption
Year Prices
1999..................... 105.625%
2000..................... 103.750%
2001..................... 101.875%
2002 and thereafter...... 100.000%
The indenture for the Notes contains certain covenants which, among other
things, restrict the Company's ability and the ability of certain of the
Company's subsidiaries to pay dividends, make unscheduled payments on
indebtedness that is subordinated in right of payment to the Notes or make
certain investments. The covenants also place limitations on the Company's
ability to incur additional indebtedness or liens and places restrictions on
the use of proceeds from asset sales.
<PAGE>
<PAGE>
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
March 31, 1994
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Acquisitions
On March 30, 1994, the Company announced that it had signed a definitive
agreement with National Medical Enterprises, Inc. to purchase 46 psychiatric
hospitals and one psychiatric outpatient facility for approximately $151.9
million plus approximately $50 million, subject to adjustment, for the net
working capital of the facilities.
On May 2, 1994, the Company announced that it had signed a letter of
intent to acquire Schizophrenia Treatment and Rehabilitation, Inc. ("STAR"),
which is a leading developer of partial hospitalization programs specializing
in schizophrenic disorders in adults. The Company intends to support the
expansion of STAR's treatment model to other urban centers and to expand the
program model for adolescent treatment.
Results of Operations
Discontinued Operations
The results of operations of the general hospitals sold on September 30,
1993 have been reported as discontinued operations in the Company's financial
statements. Included in these amounts are net interest expenses related to
debt specifically identifiable as debt of the general hospitals. For the
quarter and six months ended March 31, 1993, the core general hospitals had
net revenue of approximately $87.9 million and $176.3 million, respectively,
and net losses of approximately $3.0 million and $6.4 million, respectively.
Hospital Operations
As of October 1, 1993, the Company removed from the Noncore Hospital
group a psychiatric hospital previously held for sale. Also, during the final
two quarters of fiscal 1993, the Company sold or closed three hospitals which
were considered core hospitals during the first half of fiscal 1993.
Selected statistics for the 75 psychiatric hospitals in operation at
March 31, 1994 ("same store comparison"), by quarter for fiscal 1993 and
fiscal 1994 follow:
<TABLE>
<CAPTION>
Fiscal Fiscal %
1993 1994 Change
<S> <C> <C> <C>
Licensed beds at:
December 31............................. 6,999 6,985 --
March 31................................ 7,049 6,970 (1)%
June 30................................. 7,037
September 30............................ 6,977
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Fiscal Fiscal %
1993 1994 Change
<S> <C> <C> <C>
Net revenue (in thousands):
Quarter:
First................................. $ 212,683 $198,129 (7)%
Second................................ 217,954 198,947 (9)
Third................................. 218,568
Fourth................................ 194,637
Year.................................... $ 843,842
Patient days:
Quarter:
First................................. 339,194 320,664 (5)
Second................................ 353,709 329,267 (7)
Third................................. 342,424
Fourth................................ 323,530
Year.................................... 1,358,857
Equivalent patient days:
Quarter:
First................................. 362,822 349,947 (4)
Second................................ 379,228 362,538 (4)
Third................................. 371,887
Fourth................................ 351,431
Year.................................... 1,465,368
Net revenue per equivalent patient day:
Quarter:
First................................. $586 $566 (3)
Second................................ 575 549 (5)
Third................................. 588
Fourth................................ 554
Year.................................... 576
Admissions:
Quarter:
First................................. 19,624 21,875 11%
Second................................ 22,380 25,037 12
Third................................. 21,702
Fourth................................ 22,361
Year.................................... 86,067
Average length of stay:
Quarter:
First................................. 16.9 14.5 (14)
Second................................ 15.7 13.4 (15)
Third................................. 16.0
Fourth................................ 14.4
Year.................................... 15.7
</TABLE>
The Company's patient days decreased 7% and 6% for the quarter and six
months ended March 31, 1994, respectively, as compared to the same periods of
fiscal 1993. The decreases in patient days occurred despite increases of 12%
in admissions for the same periods. These decreases in patient days were due
<PAGE>
<PAGE>
primarily to 15% decreases in each period in the average length of stay per
patient caused primarily by increasingly stringent utilization criteria
imposed by third party payors regarding inpatient treatment. The declines in
net revenue per equivalent patient day were due primarily to a shift in payor
mix toward more Medicare, Medicaid and other cost-based business.
Net revenue for the quarter and six months ended March 31, 1994 decreased
9% and 8%, respectively. These decreases resulted from the declines in
patient days and net revenue per equivalent patient day discussed above and
the closing of four hospitals during fiscal 1993.
The Company experienced a 6% and 5% decrease in operating costs other
than bad debt expenses for the quarter and six months ended March 31, 1994,
respectively, as compared to the same periods of fiscal 1993. These decreases
were due primarily to reductions in salaries and benefits and other purchased
services.
Bad debt expenses for the quarter ended March 31, 1994 decreased 2% from
the same period of the previous fiscal year. Bad debt expenses as a
percentage of net revenue increased to 7.6% in the second quarter of fiscal
1994 from 7.1% in the second quarter of fiscal 1993. Bad debt expenses for
the six months ended March 31, 1994 decreased 7% from the same period of the
previous fiscal year. Bad debt expenses as a percentage of net revenue
increased to 7.7% in the first six months of fiscal 1994 from 7.6% in the
first six months of fiscal 1993.
Reorganization value in excess of amounts allocable to identifiable
assets (the "Excess Reorganization Value") is being amortized over the three
year period ending June 1995. During fiscal 1993, Excess Reorganization Value
was reduced by approximately $21 million to reflect the recognition of tax
benefits related to pre-Reorganization tax loss carryforwards, and accordingly
amortization expense for the Excess Reorganization Value decreased 27% for the
quarter and six months ended March 31, 1994 from the same periods in fiscal
1993.
Net interest expense for the quarter and six months ended March 31, 1994
decreased 54% and 55%, respectively, from the same periods of the previous
fiscal year, due to the debt reductions resulting from the sale of the general
hospitals, mandatory and voluntary prepayments and scheduled payments in
fiscal 1993 and the first half of fiscal 1994.
ESOP expense for the second quarter and first six months of fiscal 1994
increased 37% over the same periods of fiscal 1993 due primarily to changes in
eligibility requirements, which increased the number of employees who
participate in the ESOP.
Stock option expense for the second quarter and first half of fiscal 1994
decreased from the same periods of the previous year due to a one-time charge
during the second quarter of fiscal 1993 of $21.3 million related to the
vesting of options by a former employee and director. Under terms of the 1992
Stock Option Plan, upon the satisfaction of certain financial targets and the
termination of his employment, all of the employee's options vested
immediately and the option prices were reduced to $.25 per share. During
December 1993, the former employee and director exercised approximately 2.2
million options to purchase shares of the Company's common stock and
surrendered approximately 570,000 of such optioned shares as consideration for
<PAGE>
<PAGE>
the payment of required withholding taxes. As a result, the Company was
required to make withholding tax payments on behalf of the former employee of
approximately $14.2 million which was charged against additional paid-in
capital. This charge was offset by a tax benefit recorded in additional
paid-in capital of approximately $9.4 million related to additional stock
option expense deductible for income tax purposes.
Liquidity and Sources of Capital
During the quarter ended March 31, 1994 the Company made scheduled
payments and prepayments under the Credit Agreement of approximately $37.5
million.
On May 2, 1994 the Company entered into a Second Amended and Restated
Credit Agreement with certain financial institutions for a five-year reducing,
revolving credit facility in an aggregate committed amount of up to $300
million (the "Revolving Credit Agreement"). Proceeds from the Revolving
Credit Agreement were or will be used to refinance certain mortgage
indebtedness of certain subsidiaries of the Company in the principal amount of
approximately $14.7 million and the loans to certain subsidiaries of the
Company outstanding under the Credit Agreement in the principal amount of
approximately $46.8 million and, among other things, other general corporate
purposes, including to finance, in part, the acquisition of certain
psychiatric facilities from NME. As of May 2, 1994, approximately $134.6
million in loans and letters of credit were outstanding under the Revolving
Credit Agreement.
The Revolving Credit Agreement provides for scheduled reductions and
certain mandatory prepayments through March 31, 1999. The loans will bear
interest at various rates based on prime or LIBOR rates.
Also on May 2, 1994, the Company issued $375 million of 11.25% Senior
Subordinated Notes which mature on April 15, 2004 (the "Notes") and are
general unsecured obligations of the Company. Interest on the Notes is
payable semi-annually on each April 15 and October 15, commencing on
October 15, 1994. Proceeds of $181.8 million from the sale of the Notes were
used to defease, and subsequently on June 9, 1994 to redeem the Company's
outstanding 7.5% Senior Subordinated Debentures due 2003. Certain remaining
proceeds will be used, along with proceeds from the Revolving Credit
Agreement, to finance the acquisition of NME facilities discussed above. The
Notes are guaranteed on an unsecured senior subordinated basis by
substantially all of the Company's existing subsidiaries and certain
subsidiaries created after the issuance of the Notes.
The Notes are not redeemable prior to April 15, 1999. The Notes will be
subject to redemption at a premium of 5.625% beginning April 15, 1999 and
declining to 0.0% as of April 15, 2002.
The Company expects to obtain increased operational and financial
flexibility by entering into the Revolving Credit Agreement and issuing the
Notes because the covenants contained in the Revolving Credit Agreement and
the indenture for the Notes will be less restrictive than those formerly in
effect. However, the Revolving Credit Agreement and the indenture for the
Notes contain a number of restrictive covenants, which, among other things,
limit the ability of the Company and certain subsidiaries to incur other
indebtedness, engage in transactions with affiliates, incur liens, make
<PAGE>
<PAGE>
certain restricted payments, and enter into certain business combination and
asset sale transactions. The Revolving Credit Agreement also limits the
Company's ability to incur capital expenditures and requires the Company to
maintain certain specified financial ratios.
During the first six months of fiscal 1994, the Company incurred
approximately $7 million in capital expenditures primarily for routine capital
replacement. The Company also incurred expenditures of approximately $1.7
million for the acquisition of a business related to the implementation of the
Company's new growth and expansion strategy. The capital outlays were
financed from cash provided by operations. The Company anticipates that
capital expenditures for fiscal 1994 relating to existing hospitals will be
approximately $15 million and will be financed from cash provided by
operations.
The number of days net patient revenue in net patient accounts receivable
was 62 days at March 31, 1994 and 61 days at September 30, 1993.
<PAGE>
<PAGE>
FORM 10-Q
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. - Exhibits and Reports on Form 8-K
(a) Exhibits
4(a) Indenture Supplement Number 1, dated as of February 18, 1994,
among the Company, the Guarantors, Strategic Advantage, Inc.
and Society National Bank, as trustee, under the Indenture,
dated as of July 21, 1992, relating to the Company's 7.5%
Senior Subordinated Debentures due 2003.
4(b) Indenture Supplement Number 2, dated as of April 27, 1994,
among the Company, the Guarantors, Group Practice Affiliates,
Inc. and Society National Bank, as trustee, under the
Indenture, dated as of July 21, 1992, relating to the
Company's 7.5% Senior Subordinated Debentures due 2003.
10(a) Asset Sale Agreement, dated as of March 29, 1994 among the
Company, as buyer, and National Medical Enterprises, Inc., as
seller. The exhibits and schedules are listed in the table of
contents but are not filed with the agreement. The Company
agrees to furnish to the Commission upon request a copy of any
omitted exhibit or schedule.
(b) Report on Form 8-K
There were no Current Reports on Form 8-K filed by the Registrant
with the Securities and Exchange Commission during the quarter ended
March 31, 1994.
<PAGE>
<PAGE>
FORM 10-Q
CHARTER MEDICAL CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHARTER MEDICAL CORPORATION
(Registrant)
Date: May 16, 1994 /s/ Lawrence W. Drinkard
Lawrence W. Drinkard
Executive Vice President - Finance
(Chief Financial Officer)
Date: May 16, 1994 /s/ John R. Day
John R. Day
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
INDENTURE SUPPLEMENT
NO. 1
This Indenture Supplement No. 1 (the "Supplement"), dated
as of February 18, 1994, among Society National Bank, as
Trustee, Charter Medical Corporation, (the "Company"), the
Guarantors listed in the below described Indenture and
Strategic Advantage, Inc. All defined terms used in this
Supplement and not otherwise defined shall have the meanings
ascribed to such terms in the below described Indenture.
For and in consideration of the premises, the Company, the
Guarantors and the Trustee agree as follows:
1. Recital. This Supplement relates to the
Indenture, dated as of July 21, 1992, among the Company, the
Guarantors listed therein and Society National Bank, with
respect to the Company's Senior Subordinated Debentures due
2003 (the "Indenture"). This Supplement is executed by the
Trustee pursuant to Section 10.01(4) of the Indenture.
2. Supplement. The Indenture is supplemented by
adding Strategic Advantage, Inc., a Subsidiary of the Company,
as a Guarantor, pursuant to the provisions of Section 5.18 of
the Indenture relating to additional Guarantors. By executing
this Supplement, Strategic Advantage, Inc. agrees that,
effective as of the date first above written, it is a Guarantor
under the Indenture.
3. Miscellaneous.
(a) Instruments to be Read Together. This
Indenture Supplement No. 1 is an indenture supplemental to the
Indenture, and such Indenture, and this Indenture Supplement
No. 1 shall henceforth be read together.
(b) Confirmation. The Indenture as amended
and supplemented by this Indenture Supplement No. 1, is in all
respects confirmed and preserved.
(c) Governing Law. This Indenture Supplement
No. 1 shall be construed in accordance with and governed by the
laws of the State of New York, without reference to principles
of conflicts of law.
(d) Severability. Any provision of this
Indenture Supplement No. 1 which is prohibited or unenforceable
in any jurisdiction shall not invalidate the remaining
provisions hereof, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
<PAGE>
<PAGE>
(e) Headings. Section, subsection and other
headings used in this Indenture Supplement No. 1 are for
convenience only and shall not affect the construction of this
Indenture Supplement No. 1.
(f) Counterparts. This Indenture Supplement
No. 1 may be executed in any number of counterparts, each of
which, when so executed in any number of counterparts, shall be
deemed to be an original and all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused
this Indenture Supplement No. 1 to be duly executed as of the
date and year first above written.
SOCIETY NATIONAL BANK,
as Trustee
By: /s/ D. Kovach
Name: D. Kovach
Title: Trust Officer
Attest:
/s/ M. Bachman
Name: M. Bachman CHARTER MEDICAL CORPORATION
Title: Assistant Secretary
By: /s/ James R. Bedenbaugh
Name: James R. Bedenbaugh
Title: Treasurer
Attest:
/s/ Howard McLure
Name: Howard McLure
Title: Assistant Secretary
<PAGE>
<PAGE>
Each of the Guarantors listed
in the Indenture
By: /s/ Charlotte A. Sanford
Name: Charlotte A. Sanford
Title: Treasurer
Attest:
/s/ James M. Filush
Name: James M. Filush
Title: Secretary
STRATEGIC ADVANTAGE, Inc.
By: /s/ Charlotte A. Sanford
Name: Charlotte A. Sanford
Title: Treasurer
Attest:
/s/ James M. Filush
Name: James M. Filush
Title: Secretary
<PAGE>
<PAGE>
OFFICER'S CERTIFICATE UNDER SECTION 11.04
OF THE INDENTURE, DATED AS OF JULY 21, 1992,
RELATING TO CHARTER MEDICAL CORPORATION'S
SENIOR SUBORDINATED DEBENTURES DUE 2003
The undersigned officers of the Corporations described in
this certificate hereby certify to Society National Bank, as
Trustee under an Indenture, dated as of July 21, 1992, among
Charter Medical Corporation (the "Company"), Society National
Bank, as Trustee, and the Guarantors signatories to the
Indenture, as follows:
1. This certificate is given pursuant to
Section 11.04 of the Indenture by officers of the Company
and the Guarantors relating to the admission of Strategic
Advantage, Inc. as a Guarantor under the Indenture,
pursuant to Indenture Supplement No. 1 (the
"Supplement"). Defined terms used in this certificate
shall have the meanings given to such terms in the
Indenture, except as otherwise stated.
2. All conditions precedent to the Supplement
pursuant to Section 10.01 of the Indenture have been
satisfied, as follows:
(a) The certificates and opinions
required by Section 11.04 of the Indenture in order
to supplement the Indenture pursuant to Section
10.01 of the Indenture for the purpose of admitting
an additional Guarantor pursuant to Section 5.18
have been executed and delivered to the Trustee.
(b) The Boards of Directors of the
Company and the Guarantors, pursuant to Section
10.01 of the Indenture, have adopted resolutions
authorizing and approving this Supplement.
3. Pursuant to the provisions of Section
11.05 of the Indenture, the undersigned officers of the
Company and the Guarantors certify to the Trustee as
follows:
(a) The undersigned officers of the
Company and the Guarantors have read the applicable
provisions of the Indenture, including but not
limited to Sections 5.18, 10.01, 11.04 and 11.05.
(b) In connection with the giving of
this certificate, the undersigned officers of the
Company and the Guarantors have examined the
Indenture and have determined that Strategic
Advantage, Inc. has guaranteed the Bank Obligations
and is required to become a Guarantor pursuant to
Section 5.18 of the Indenture.
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<PAGE>
(c) In the opinion of the
undersigned officers of the Company and the
Guarantors, they have made such examination or
investigation as is necessary to enable them to
express an informed opinion as to whether or not the
conditions precedent to the Supplement have been
satisfied.
(d) In the opinion of the
undersigned officers of the Company and the
Guarantors the conditions precedent to this
Supplement have been satisfied.
IN WITNESS WHEREOF, this certificate has been duly
executed by the officers listed below of the Company and the
Guarantors, this 18th day of February, 1994.
CHARTER MEDICAL CORPORATION
By: /s/ James R. Bedenbaugh
Title: Treasurer
By: /s/ Howard A. McLure
Title: Asst. Secretary
Each of the Guarantors signatories to the
Indenture
By: /s/ Charlotte A. Sanford
Title: Treasurer
By: /s/ James M. Filush
Title: Secretary
<PAGE>
<PAGE>
INDENTURE SUPPLEMENT
NO. 2
This Indenture Supplement No. 2 (the "Supplement"), dated as of
April 27, 1994, among Society National Bank, as Trustee, Charter Medical
Corporation, (the "Company"), the Guarantors listed in the below described
Indenture and Group Practice Affiliates, Inc. All defined terms used in this
Supplement and not otherwise defined shall have the meanings ascribed to such
terms in the below described Indenture.
For and in consideration of the premises, the Company, the
Guarantors and the
Trustee agree as follows:
1. Recital. This Supplement relates to the Indenture, dated as
of July 21, 1992, among the Company, the Guarantors listed therein and Society
National Bank, with respect to the Company's Senior Subordinated Debentures
due 2003 (the "Indenture"). This Supplement is executed by the Trustee
pursuant to Section 10.01(4) of the Indenture.
2. Supplement. The Indenture is supplemented by adding Group
Practice Affiliates, Inc., a Subsidiary of the Company, as a Guarantor,
pursuant to the provisions of Section 5.18 of the Indenture relating to
additional Guarantors. By executing this Supplement, Group Practice
Affiliates, Inc. agrees that, effective as of the date first above written, it
is a Guarantor under the Indenture.
3. Miscellaneous.
(a) Instruments to be Read Together. This Indenture
Supplement No. 2 is an indenture supplemental to the Indenture, and such
Indenture, and this Indenture Supplement No. 2 shall henceforth be read
together.
(b) Confirmation. The Indenture as amended and supplemented
by this Indenture Supplement No. 2, is in all respects confirmed and preserved.
(c) Governing Law. This Indenture Supplement No. 2 shall be
construed in accordance with and governed by the laws of the State of New
York, without reference to principles of conflicts of law.
(d) Severability. Any provision of this Indenture
Supplement No. 2 which is prohibited or unenforceable in any jurisdiction
shall not invalidate the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(e) Headings. Section, subsection and other headings used
in this Indenture Supplement No. 2 are for convenience only and shall not
affect the construction of this Indenture Supplement No. 2.
<PAGE>
<PAGE>
(f) Counterparts. This Indenture Supplement No. 2 may be
executed in any number of counterparts, each of which, when so executed in any
number of counterparts, shall be deemed to be an original and all of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
Supplement No. 2 to be duly executed as of the date and year first above
written.
SOCIETY NATIONAL BANK,
as Trustee
By: /s/ D. Kovach
Name: D. Kovach
Title: Trust Officer
Attest:
/s/ M. Bachman
Name: M. Bachman CHARTER MEDICAL CORPORATION
Title: Assistant Secretary
By: /s/ James R. Bedenbaugh
Name: James R. Bedenbaugh
Title: Treasurer
Attest:
/s/ Linton Newlin
Name: Linton Newlin
Title: Secretary
<PAGE>
<PAGE>
Each of the Guarantors listed
in the Indenture
By: /s/ Charlotte A. Sanford
Name: Charlotte A. Sanford
Title: Treasurer
Attest:
/s/ James M. Filush
Name: James M. Filush
Title: Secretary
GROUP PRACTICE AFFILIATES, Inc.
By: /s/ Howard A. Mclure
Name: Howard A. McLure
Title: Treasurer
Attest:
/s/ Patrick M. Connolly
Name: Patrick M. Connolly
Title: Secretary
Each of the Guarantors listed
in the Indenture
By: /s/ Charlotte A. Sanford
Name: Charlotte A. Sanford
Title: Treasurer
Attest:
/s/ Linton Newlin
Name: Linton Newlin
Title: Secretary
<PAGE>
<PAGE>
OFFICER'S CERTIFICATE UNDER SECTION 11.04
OF THE INDENTURE, DATED AS OF JULY 21, 1992,
RELATING TO CHARTER MEDICAL CORPORATION'S
SENIOR SUBORDINATED DEBENTURES DUE 2003
The undersigned officers of the Corporations described in this
certificate hereby certify to Society National Bank, as Trustee under an
Indenture, dated as of July 21, 1992, among Charter Medical Corporation (the
"Company"), Society National Bank, as Trustee, and the Guarantors signatories
to the Indenture, as follows:
1. This certificate is given pursuant to Section 11.04 of
the Indenture by officers of the Company and the Guarantors relating to
the admission of Group Practice Affiliates, Inc. as a Guarantor under the
Indenture, pursuant to Indenture Supplement No. 2 (the "Supplement").
Defined terms used in this certificate shall have the meanings given to
such terms in the Indenture, except as otherwise stated.
2. All conditions precedent to the Supplement pursuant to
Section 10.01 of the Indenture have been satisfied, as follows:
(a) The certificates and opinions required by
Section 11.04 of the Indenture in order to supplement the Indenture
pursuant to Section 10.01 of the Indenture for the purpose of
admitting an additional Guarantor pursuant to Section 5.18 have
been executed and delivered to the Trustee.
(b) The Boards of Directors of the Company and the
Guarantors, pursuant to Section 10.01 of the Indenture, have
adopted resolutions authorizing and approving this Supplement.
3. Pursuant to the provisions of Section 11.05 of the
Indenture, the undersigned officers of the Company and the Guarantors
certify to the Trustee as follows:
(a) The undersigned officers of the Company and the
Guarantors have read the applicable provisions of the Indenture,
including but not limited to Sections 5.18, 10.01, 11.04 and 11.05.
(b) In connection with the giving of this
certificate, the undersigned officers of the Company and the
Guarantors have examined the Indenture and have determined that
Group Practice Affiliates, Inc. has guaranteed the Bank Obligations
and is required to become a Guarantor pursuant to Section 5.18 of
the Indenture.
(c) In the opinion of the undersigned officers of
the Company and the Guarantors, they have made such examination or
investigation as is necessary to enable them to express an informed
opinion as to whether or not the conditions precedent to the
Supplement have been satisfied.
<PAGE>
<PAGE>
(d) In the opinion of the undersigned officers of
the Company and the Guarantors the conditions precedent to this
Supplement have been satisfied.
IN WITNESS WHEREOF, this certificate has been duly executed by the
officers listed below of the Company and the Guarantors, this of April, 1994.
CHARTER MEDICAL CORPORATION
By: /s/ James R. Bedenbaugh
Title: Treasurer
By: /s/ Howard A. McLure
Title: Asst. Secretary
Each of the Guarantors signatories to the
Indenture
By: /s/ Charlotte A. Sanford
Title: Treasurer
By: /s/ James M. Filush
Title: Secretary
Each of the Guarantors signatories to the
Indenture
By: /s/ Charlotte A. Sanford
Title: Treasurer
By: /s/ Linton Newlin
Title: Secretary
<PAGE>
ASSET SALE AGREEMENT
******
NATIONAL MEDICAL ENTERPRISES, INC.
As Seller
AND
CHARTER MEDICAL CORPORATION
As Buyer
Dated: March 29, 1994
<PAGE>
<PAGE>
ASSET SALE AGREEMENT
Table of Contents
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 . . . . . . . . . . . . . . . . 1
DEFINITIONS
Section 1.1 Certain Defined Terms. . . . . . . . . . . . . . 1
Section 1.2 Index of Other Defined Terms . . . . . . . . . . 3
ARTICLE 2 . . . . . . . . . . . . . . . . 7
BASIC TRANSACTIONS
Section 2.1 Purchased Assets . . . . . . . . . . . . . . . . 7
Section 2.2 Excluded Assets. . . . . . . . . . . . . . . . . 12
Section 2.3 Assumed Liabilities. . . . . . . . . . . . . . . 14
Section 2.4 Excluded Liabilities . . . . . . . . . . . . . . 16
Section 2.5 Purchase Price . . . . . . . . . . . . . . . . . 18
Section 2.6 Payment of Purchase Price. . . . . . . . . . . . 19
(a) Payment of Tentative Purchase Price. . . . . . . 19
(b) Determination of Interim Net Book Values . . . . 20
(c) Determination of Final Net Book Values . . . . . 21
(d) Seller as Agent of Subsidiaries. . . . . . . . . 22
Section 2.7 Allocation of Purchase Price . . . . . . . . . . 23
Section 2.8 Contingent Lease Obligations . . . . . . . . . . 23
Section 2.9 Remittances and Receivables. . . . . . . . . . . 24
(a) In General . . . . . . . . . . . . . . . . . . . 24
(b) Receivables. . . . . . . . . . . . . . . . . . . 25
(c) Straddle Patient Receivables . . . . . . . . . . 27
(i)Cut-Off Billings. . . . . . . . . . . . . . . . 27
(ii)Cut-Off Billings Not Accepted . . . . . . . . . 27
(d) Cooperation in Collecting Receivables
and Excluded Assets. . . . . . . . . . . . . . . 28
(e) Non-Assignable Receivables . . . . . . . . . . . 28
(f) Collection Fee . . . . . . . . . . . . . . . . . 29
Section 2.10 Employee Matters . . . . . . . . . . . . . . . . 30
(a) Pension Plans. . . . . . . . . . . . . . . . . . 30
<PAGE>
<PAGE>
(b) Retained Employees . . . . . . . . . . . . . . . 30
(c) Hiring of Retained Employees . . . . . . . . . . 32
(d) Health Benefits. . . . . . . . . . . . . . . . . 32
(e) Acknowledgement of Responsibility. . . . . . . . 33
Section 2.11 Use of Names . . . . . . . . . . . . . . . . . . 34
Section 2.12 No Assignment If Breach; Seller's
Discharge of Assumed Liabilities . . . . . . . . 35
Section 2.13 Closings . . . . . . . . . . . . . . . . . . . . 38
(a) The First Closing. . . . . . . . . . . . . . . . 38
(b) The Second Closing . . . . . . . . . . . . . . . 38
(c) The Final Closing. . . . . . . . . . . . . . . . 39
(d) Deliveries by Seller . . . . . . . . . . . . . . 39
(e) Deliveries by Buyer. . . . . . . . . . . . . . . 40
(f) Escrow . . . . . . . . . . . . . . . . . . . . . 41
Section 2.14 Purchase Price Adjustment. . . . . . . . . . . . 42
Section 2.15 Transfer of Assets in Corporate Form . . . . . . 43
Section 2.16Assignment of Rights and Obligations
to Buyer Subsidiaries. . . . . . . . . . . . . . 44
Section 2.17 Certain Other Assets and Liabilities . . . . . . 45
Section 2.18 Rejection of Certain Contracts . . . . . . . . . 46
Section 2.19 Remaining Schedules. . . . . . . . . . . . . . . 48
ARTICLE 3 . . . . . . . . . . . . . . . . 48
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 Organization and Corporate Power . . . . . . . . 48
Section 3.2 Subsidiaries . . . . . . . . . . . . . . . . . . 48
Section 3.3 Authority Relative to this Agreement . . . . . . 50
Section 3.4 Absence of Breach. . . . . . . . . . . . . . . . 50
Section 3.5 Private Party Consents . . . . . . . . . . . . . 51
Section 3.6 Governmental Consents. . . . . . . . . . . . . . 51
Section 3.7 Brokers. . . . . . . . . . . . . . . . . . . . . 52
Section 3.8 Title to Property. . . . . . . . . . . . . . . . 52
Section 3.9 Assumed Contracts. . . . . . . . . . . . . . . . 53
Section 3.10 Licenses . . . . . . . . . . . . . . . . . . . . 54
Section 3.11 U.S. Person; Resident of Georgia . . . . . . . . 54
Section 3.12 Employee Relations . . . . . . . . . . . . . . . 55
Section 3.13 Employee Plans . . . . . . . . . . . . . . . . . 55
Section 3.14 Litigation . . . . . . . . . . . . . . . . . . . 56
Section 3.15 Inventory. . . . . . . . . . . . . . . . . . . . 56
<PAGE>
<PAGE>
Section 3.16 Hazardous Substances . . . . . . . . . . . . . . 57
Section 3.17 Financial Information. . . . . . . . . . . . . . 58
Section 3.18 Changes Since Balance Sheet. . . . . . . . . . . 60
Section 3.19 Transferred Business Names . . . . . . . . . . . 61
Section 3.20 Compliance with Laws and Accreditation . . . . . 62
Section 3.21 Cost Reports, Third Party Receivables and
Conditions of Participation. . . . . . . . . . . 63
Section 3.22 Medical Staff. . . . . . . . . . . . . . . . . . 63
Section 3.23 Hill-Burton Care . . . . . . . . . . . . . . . . 64
Section 3.24 Assets Used in the Operation of the
Facilities . . . . . . . . . . . . . . . . . . . 64
Section 3.25 Taxes. . . . . . . . . . . . . . . . . . . . . . 64
Section 3.26 Lists of Other Data. . . . . . . . . . . . . . . 64
Section 3.27 Certain Transactions . . . . . . . . . . . . . . 65
ARTICLE 4 . . . . . . . . . . . . . . . . 66
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1 Organization and Corporate Power . . . . . . . . 66
Section 4.2 Buyer Subsidiaries . . . . . . . . . . . . . . . 66
Section 4.3 Authority Relative to this Agreement . . . . . . 67
Section 4.4 Absence of Breach. . . . . . . . . . . . . . . . 68
Section 4.5 Private Party Consents . . . . . . . . . . . . . 68
Section 4.6 Governmental Consents. . . . . . . . . . . . . . 68
Section 4.7 Brokers. . . . . . . . . . . . . . . . . . . . . 69
Section 4.8 Qualified for Licenses . . . . . . . . . . . . . 69
Section 4.9 Financial Ability to Perform . . . . . . . . . . 69
Section 4.10 No Knowledge of Seller's Breach. . . . . . . . . 69
Section 4.11 No Assurance . . . . . . . . . . . . . . . . . . 69
ARTICLE 5 . . . . . . . . . . . . . . . . 70
COVENANTS OF EACH PARTY
Section 5.1 Efforts to Consummate Transactions . . . . . . . 70
Section 5.2 Cooperation; Regulatory Filings. . . . . . . . . 71
Section 5.3 Further Assistance . . . . . . . . . . . . . . . 72
Section 5.4 Cooperation Respecting Proceedings . . . . . . . 72
Section 5.5 Expenses . . . . . . . . . . . . . . . . . . . . 72
Section 5.6 Announcements; Confidentiality . . . . . . . . . 74
<PAGE>
<PAGE>
Section 5.7 Preservation of and Access to Certain Records. . 76
ARTICLE 6 . . . . . . . . . . . . . . . . 78
ADDITIONAL COVENANTS OF SELLER
Section 6.1 Conduct Pending Closing. . . . . . . . . . . . . 78
Section 6.2 Access and Information; Environmental
Survey; Remediation or Adjustment. . . . . . . . 80
Section 6.3 Updating . . . . . . . . . . . . . . . . . . . . 83
Section 6.4 No Solicitation. . . . . . . . . . . . . . . . . 84
Section 6.5 Name Changes . . . . . . . . . . . . . . . . . . 84
Section 6.6 Filing of Cost Reports . . . . . . . . . . . . . 85
Section 6.7 Purchase of Supplies . . . . . . . . . . . . . . 85
Section 6.8 Covenant Not to Compete. . . . . . . . . . . . . 85
(a) Covenant . . . . . . . . . . . . . . . . . . . . 85
(b) Exceptions . . . . . . . . . . . . . . . . . . . 86
(i)Psychiatric Facilities and Contracts Not
Acquired By Buyer. . . . . . . . . . . . . . . . 86
(ii)Facilities Outside Geographic Area. . . . . . . 86
(iii)Acute Hospitals . . . . . . . . . . . . . . . . 87
(iv)Divestiture of Acquired Psychiatric Facilities . 87
(v)Acquired Entities. . . . . . . . . . . . . . . . 87
(c) Acute Hospital Affiliations. . . . . . . . . . . 88
(d) Covenant Period. . . . . . . . . . . . . . . . . 89
(e) Severability . . . . . . . . . . . . . . . . . . 89
(f) Injunctive Relief. . . . . . . . . . . . . . . . 90
(g) Value. . . . . . . . . . . . . . . . . . . . . . 90
Section 6.9 Audited Statements . . . . . . . . . . . . . . . 90
Section 6.10 Post-Closing Insurance . . . . . . . . . . . . . 91
Section 6.11 Use of Controlled Substance Licenses . . . . . . 91
Section 6.12 Non-Disturbance Agreements . . . . . . . . . . . 91
ARTICLE 7 . . . . . . . . . . . . . . . . 92
ADDITIONAL COVENANTS OF BUYER
Section 7.1 Waiver of Bulk Sales Law Compliance. . . . . . . 92
Section 7.2 Resale Certificate . . . . . . . . . . . . . . . 92
Section 7.3 Cost Reports and Audit Contests. . . . . . . . . 92
Section 7.4 Tax Matters. . . . . . . . . . . . . . . . . . . 92
<PAGE>
<PAGE>
Section 7.5 Letters of Credit. . . . . . . . . . . . . . . . 94
Section 7.6 Conduct Pending Closing. . . . . . . . . . . . . 94
Section 7.7 Securities Offerings . . . . . . . . . . . . . . 94
ARTICLE 8 . . . . . . . . . . . . . . . . 95
BUYER'S CONDITIONS TO CLOSING
Section 8.1 Performance of Agreement . . . . . . . . . . . . 95
Section 8.2 Accuracy of Representations
and Warranties . . . . . . . . . . . . . . . . 95
Section 8.3 Officers' Certificate. . . . . . . . . . . . . . 95
Section 8.4 Consents . . . . . . . . . . . . . . . . . . . . 95
Section 8.5 Absence of Injunctions . . . . . . . . . . . . . 96
Section 8.6 Opinion of Counsel . . . . . . . . . . . . . . . 97
Section 8.7 Title to Real Property . . . . . . . . . . . . . 97
Section 8.8 Receipt of Other Documents . . . . . . . . . . . 99
Section 8.9 Licenses and Permits . . . . . . . . . . . . . . 99
Section 8.10 Casualty; Condemnation . . . . . . . . . . . . . 100
Section 8.11 Reasonable Assurances. . . . . . . . . . . . . . 101
Section 8.12 Certain Events . . . . . . . . . . . . . . . . . 101
ARTICLE 9 . . . . . . . . . . . . . . . . 102
SELLER'S CONDITIONS TO CLOSING
Section 9.1 Performance of Agreement . . . . . . . . . . . . 102
Section 9.2 Accuracy of Representations and
Warranties . . . . . . . . . . . . . . . . . . 102
Section 9.3 Officers' Certificate. . . . . . . . . . . . . . 102
Section 9.4 Consents . . . . . . . . . . . . . . . . . . . . 102
Section 9.5 Absence of Injunctions . . . . . . . . . . . . . 103
Section 9.6 Opinion of Counsel . . . . . . . . . . . . . . . 104
Section 9.7 Receipt of Other Documents . . . . . . . . . . . 104
ARTICLE 10. . . . . . . . . . . . . . . . 105
TERMINATION
Section 10.1 Termination. . . . . . . . . . . . . . . . . . . 105
Section 10.2 Effect of Termination. . . . . . . . . . . . . . 105
<PAGE>
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ARTICLE 11. . . . . . . . . . . . . . . . 106
SURVIVAL AND REMEDIES; INDEMNIFICATION
Section 11.1 Survival . . . . . . . . . . . . . . . . . . . . 106
Section 11.2 Exclusive Remedy . . . . . . . . . . . . . . . . 106
Section 11.3 Indemnity by Seller. . . . . . . . . . . . . . . 107
Section 11.4 Indemnity by Buyer . . . . . . . . . . . . . . . 110
Section 11.5 Further Qualifications Respecting
Indemnification. . . . . . . . . . . . . . . . . 112
Section 11.6 Procedures Respecting Third Party Claims 112
ARTICLE 12. . . . . . . . . . . . . . . . 113
GENERAL PROVISIONS
Section 12.1 Notices. . . . . . . . . . . . . . . . . . . . . 113
Section 12.2 Attorneys' Fees. . . . . . . . . . . . . . . . . 115
Section 12.3 Successors and Assigns . . . . . . . . . . . . . 115
Section 12.4 Counterparts . . . . . . . . . . . . . . . . . . 115
Section 12.5 Captions and Paragraph Headings. . . . . . . . . 115
Section 12.6 Entirety of Agreement; Amendments. . . . . . . . 115
Section 12.7 Construction . . . . . . . . . . . . . . . . . . 116
Section 12.8 Waiver . . . . . . . . . . . . . . . . . . . . . 116
Section 12.9 Governing Law. . . . . . . . . . . . . . . . . . 116
Section 12.10 Severability . . . . . . . . . . . . . . . . . . 117
Section 12.11 Consents Not Unreasonably Withheld . . . . . . . 117
Section 12.12 Time Is of the Essence . . . . . . . . . . . . . 117
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . 118
<PAGE>
<PAGE>
EXHIBITS
A. Forms of Bill of Sale and Assignment
B. Form of Assignments with Respect to
Real Property Leases
C. Forms of Assumption Agreement
D. Form of Purchasing Contract
E. Remaining Schedules
LIST OF SCHEDULES
A-1 Subsidiaries and Their
Respective States of Incorporation;
Ownership of Subsidiary Stock
A-2 Facilities
2.1(a) Real property owned in fee by Subsidiaries
2.1(b) Real Property Leases
2.1(c) Venture Agreements
2.1(f) Other Assigned Contracts
2.1(h) Transferred Business Names
2.1(k) Prepayments
2.2(j) Other Excluded Assets
2.3(a) Capitalized Leases and Capitalized Lease
Liabilities
2.3(f) Other Assumed Liabilities
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2.4(i) Indebtedness
2.4(j) Other Excluded Liabilities
2.7 Allocation Schedule
2.10(a) Pension Plans
2.12(c) Schedule of Required Consents
2.13A Core Facilities
2.13B Assigned EBITDA
2.17 PHIS System Assets, Liabilities and Rates
3.5 Private Party Consents
3.7 Seller's Brokers
3.8(a) Liens
3.8(b)(i) Other Real Property
and
3.8(b)(ii)
3.9 Assumed Contracts
3.10 Licenses
3.12 Certain Employee Relations Matters
3.14 Litigation
3.16 Environmental Matters
3.17(a) EBITDA Statements
3.17(b) Balance Sheet
3.18 Changes Since Balance Sheet
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3.19 Conflicts With Transferred Business Names
3.20 Compliance With Laws and Accreditations
3.21 Cost Reports, Third Party Receivables and
Conditions of Participation
3.22 Medical Staff
3.23 Hill-Burton Care
3.24 Assets Used in the Operation of the Facilities
3.26(a) Depreciation Schedules
3.26(b) Insurance
3.26(c) Employee Benefit Arrangements
3.26(d) Paid Time Off
3.26(e) Certain Contracts
3.26(f) Certain Indebtedness
3.26(g) Certain Financing Arrangements
3.26(h) Certain Contracts Related to Liens
3.27 Certain Transactions
4.5 Private Party Consents
4.7 Buyer's Brokers
4.11 Certain Scheduled Meetings
6.1 Exceptions to Conduct
6.7 National Purchasing Contracts
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<PAGE>
7.5 Letters of Credit
6.8(c) Specified Acute Hospitals
8.7(b) Disapproved Title Exceptions
<PAGE>
<PAGE>
ASSET SALE AGREEMENT
This ASSET SALE AGREEMENT (the "Agreement") is made and
entered into as of the 29th day of March 1994 by and among
NATIONAL MEDICAL ENTERPRISES, INC., a Nevada corporation
("Seller"), the Subsidiaries (as defined) and CHARTER MEDICAL
CORPORATION, a Delaware corporation ("Buyer"), with reference
to the following facts:
A. Through wholly-owned subsidiary corporations
identified on Schedule A-1 hereto (the "Subsidiaries"), Seller
engages in the business of delivering psychiatric health care
services to the public through the inpatient, outpatient and
substance abuse recovery facilities, residential treatment
centers and medical office buildings identified in Schedule A-2
(the "Facilities").
B. Buyer desires to purchase from the Subsidiaries,
through wholly-owned subsidiaries of the Buyer (each, a "Buyer
Subsidiary" and collectively, the "Buyer Subsidiaries"), and
Seller desires to cause the Subsidiaries to sell to the
applicable Buyer Subsidiaries, such Facilities together with
related assets (the "Transactions").
NOW, THEREFORE, in consideration of the foregoing recitals
and the agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be
legally bound, do hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Defined Terms. For purposes of this
Agreement, the following terms shall have the following
meanings:
"Affiliate" of a specified person shall mean any
corporation, partnership, sole proprietorship or other person
or entity which directly or indirectly through one or more
intermediaries controls, is controlled by or is under common
control with the person specified. The term "control" means
the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a person
or entity. The term "Affiliate" shall include, without
limitation, (i) with respect to Seller, each Subsidiary, and
(ii) with respect to Buyer, each Buyer Subsidiary.
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<PAGE>
"Cost Report" means the cost report required to be
filed, as of the end of a provider cost year or for any other
required period, with cost-based Payors with respect to cost
reimbursement.
"Environmental Law" shall mean any Law regulating or
otherwise relating to Hazardous Materials, the environment,
natural resources, pollution, environmental protection, waste
management, industrial hygiene, health, or safety.
"Hazardous Materials" means any chemicals, materials,
substances, or items in any form, whether solid, liquid,
gaseous, semisolid, or any combination thereof, whether waste
materials, raw materials, chemicals, finished products,
by-products, or any other materials or articles, which are
regulated by or form the basis of liability under any
Environmental Laws, including, without limitation, any
hazardous waste, medical waste, biohazardous waste, industrial
waste, special waste, solid waste, hazardous substance,
pollutant, hazardous air pollutant, contaminant, asbestos,
polychlorinated biphenyls ("PCBs"), petroleum (including, but
not limited to, petroleum-derived substances, waste or
breakdown or decomposition products thereof, or any fraction
thereof), coal (including, but not limited to, coal-derived
substances, waste or breakdown or decomposition products
thereof, or any fraction thereof), natural gas (including, but
not limited to, natural gas-derived substances, waste or
breakdown or decomposition products thereof, or any fraction
thereof), formaldehyde, industrial solvents, flammables,
explosives, and radioactive substances.
"knowledge" of a party shall mean the best of the
knowledge of any person who serves as of the date of this
Agreement as a duly elected officer of such party.
"Laws" shall mean all statutes, rules, regulations,
ordinances, orders, codes, permits, licenses and agreements
with or of federal, state, local and foreign governmental and
regulatory authorities and any order, writ, injunction,
settlement agreement or decree issued or approved by any court,
arbitrator or governmental agency or in connection with any
judicial, administrative or other non-judicial proceeding
(including, without limitation, arbitration or reference).
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<PAGE>
"Licenses" shall mean certificates of need,
accreditations, registrations, licenses, permits and other
consents or approvals of governmental agencies or accreditation
organizations.
"Payor" shall mean Medicare, Medicaid, CHAMPUS and
Medically Indigent Assistance programs, Blue Cross, Blue Shield
or any other third party payor (including an insurance company
and self-insured employer), or any health care provider (such
as a health maintenance organization, preferred provider
organization, peer review organization, or any other managed
care program).
"Release" means any release, spill, emission,
leaking, pumping, emptying, dumping, injection, abandonment,
deposit, disposal, discharge, dispersal, leaching, or migration
of Hazardous Materials (including, but not limited to, the
abandonment or discarding of Hazardous Materials in barrels,
drums, or other containers) into or within the environment,
including, without limitation, the migration of Hazardous
Materials into, under, on, through, or in the air, soil,
subsurface strata, surface water, groundwater, drinking water
supply, any sediments associated with any water bodies, or any
other environmental medium, regardless of where such migration
originates.
"Taxes" shall mean (i) all federal, state, county and
local sales, use, property, recordation and transfer taxes,
(ii) all state, county and local taxes, levies, fees,
assessments or surcharges (however designated, including
privilege taxes, room or bed taxes and user fees) which are
based on the gross receipts, net operating revenues or patient
days of a Facility for a period ending on, before or including
the relevant Closing Date (as defined in Section 2.13) or a
formula taking any one of the foregoing into account, and (iii)
any interest, penalties and additions to tax attributable to
any of the foregoing, but shall not include income and other
taxes described in Sections 2.4(a) and (b).
Section 1.2 Index of Other Defined Terms. In addition to
those terms defined above, the following terms shall have the
respective meanings given thereto in the sections indicated
below:
Defined Term Section
Account Parties 2.9(b)
Accrued Operating Assets 2.5(b)
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<PAGE>
Accrued Operating Expenses 2.3(g)
Acquired Acute Hospitals 6.8(c)
Acquisition Date 6.8(c)
Acute Hospitals 6.8(b)(iii)
Adjustment Sections 2.14
Agreement Preamble
Allocation Schedule 2.7
Assumed Contracts 2.3(a)
Assumed Guaranties 2.3(a)
Assumed Liabilities 2.3
Balance Sheet 3.17(b)
Buyer Preamble
Buyer Subsidiary Preamble
Charter Documents 3.4
Claim Notice 11.6
Closing Date 2.13
COBRA 2.10(d)
Code 3.11
Competing Business 6.8(a)
Consents 8.5
Consultant 6.2(b)
Contingent Contract 2.18
Cost Report Settlements 2.2(i)
Covenant Period 6.8(d)
Covered Facilities 6.8(b)(ii)
Covered Parties 6.8(a)
Deductible Amount 11.3(b)(i)(B)
Document Retention Period 5.7(b)
EBITDA 3.17(a)
EBITDA Statements 3.17(a)
Eligible Receivables 2.9(b)(ii)
Employee Benefit Arrangements 3.26(c)
Environmental Survey 6.2(b)
Equipment 2.1(d)
ERISA 2.10(a)
Escrow Agent 2.13(f)
Estimated Net Book Values 2.6(a)
Excluded Assets 2.2
Excluded Liabilities 2.4
Exempted Competing Business 6.8(c)
Facilities Recitals
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<PAGE>
Final Closing 2.13
Final Closing Date 2.13
Final Net Book Values 2.6(c)
Financial Schedule 3.17(b)
First Closing 2.13
Hired Employees 2.10(c)
Hospital Records 5.7(a)
HSR Act 3.4
Indemnitee 11.5
Indemnitor 11.5(a)
Insurance Program 6.10
Intercompany Transactions 2.1(f)(y)
Interim Net Book Values 2.6(b)
Inventory 2.1(e)
JCAHO 3.20
Leased Real Property 2.1(b)
Loan Commitment Agreements 2.1(f)
Loan Commitment Notes 2.1(f)
Losses 11.3(a)
Manuals 2.11(b)
Material Adverse Effect 3.4
Multiemployer Plans 2.10(a)
Net Book Values 2.5(b)
1993 EBITDA 2.13(b)
Other Assigned Contracts 2.1(f)
Original Closing Date 2.14
Owned Real Property 2.1(a)
Paid Time Off 2.3(c)
Panel 2.14
Patient Records 5.7(a)
Pension Plans 2.10(a)
Permitted Encumbrances 3.8(a)
Permitted Expansions 6.8(b)(iv)
PHIS System 2.17
Prepayments 2.1(k)
Purchase Price 2.5
Real Property Leases 2.1(b)
Receivables 2.1(l)
Related Agreements 3.4
Reorganization 6.8(b)(v)
Retained Employees 2.10(b)(iii)
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<PAGE>
Schedule of Required Consents 2.12(c)
Scheduled Closing 2.13
Second Closing 2.13
Seller Preamble
Specified Acute Hospital 6.8(c)
Specified Capacity 6.8(a)
Straddle Patients 2.9(c)
Straddle Patient Payments 2.9(c)(ii)
Subject Transferred Assets 2.13
Subsidiaries Recitals
TEFRA 2.9(c)(ii)
Tentative Purchase Price 2.6(a)
Termination Date 10.1(b)
Third Party Claims 11.5(a)
Title Insurer 8.7
Title Policies 8.7
Transactions Recitals
Transferred Business Names 2.1(h)
Trigger Amount 11.3(b)(i)(B)
Unusual Proceedings 3.14
Venture Agreements 2.1(c)
Ventures 2.1(c)
WARN Act 2.10(e)
Working Capital Adjustment Date 2.6(c)
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<PAGE>
ARTICLE 2
BASIC TRANSACTIONS
Section 2.1 Purchased Assets. On the terms and subject
to the conditions contained in this Agreement, Buyer shall, or
shall cause the applicable Buyer Subsidiary to, purchase from
each Subsidiary, and Seller shall cause each Subsidiary to
sell, convey, assign, transfer and deliver to Buyer or the
applicable Buyer Subsidiary, the following assets of each such
Subsidiary that are used in and necessary for the conduct of
the operations of the Facilities (the "Transferred Assets"),
but excluding all Excluded Assets as defined in Section 2.2:
(a) All of the Subsidiary's right, title and
interest in and to the real property owned in fee (the "Owned
Real Property") that is identified in Schedule 2.1(a) on which
Facilities are located and all other real property owned in fee
by the Subsidiary and used in and necessary for the conduct of
the operations of the Facilities, together with the Facilities,
construction work-in-progress, and all other buildings,
fixtures and improvements thereon, and all rights, privileges,
permits and easements appurtenant thereto.
(b) All of the Subsidiary's right, title and
interest, as lessee or sublessee, in and to the leasehold
estates and the related lease or sublease agreements (the "Real
Property Leases") respecting land, Facilities, buildings,
fixtures and real property improvements (whether owned or
leased) (the "Leased Real Property") identified in Schedule
2.1(b), together with all construction work-in-progress in
respect of same and all rights, privileges and easements
appurtenant thereto.
(c) All of the Subsidiary's right, title and
interest in and to the joint ventures or partnerships
identified in Schedule 2.1(c) hereto (the "Ventures") that
relate to partnerships or joint ventures that own or lease
Facilities or other Transferred Assets, together with all of
the Subsidiary's right, title and interest in and to the joint
venture or partnership agreements, also identified in such
Schedule (the "Venture Agreements"), that govern such
partnerships or joint ventures, and, subject to the provisions
of Section 7.6, in and to all distributions and allocations
which the Subsidiary is entitled to receive as of the relevant
Scheduled Closing (as defined in Section 2.13).
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(d) All of the Subsidiary's right, title and
interest in and to fixed machinery and equipment, other
fixtures and fittings, moveable plant, machinery, equipment and
furniture, trucks, tractors, trailers and other vehicles, tools
and other similar items of tangible personal property (collec-
tively "Equipment") (i) that are not consumed, disposed of or
held for sale or as inventory in the ordinary course of
business, (ii) that are used, owned, held or leased by the
Subsidiary as of the relevant Scheduled Closing, and (iii) that
are used in and necessary for the conduct of the operations of
the Facilities.
(e) All of the Subsidiary's right, title and
interest in and to inventories of supplies, drugs, food,
janitorial and office supplies, maintenance and shop supplies,
and other similar items of tangible personal property intended
to be consumed, disposed of or sold in the ordinary course of
business (collectively, the "Inventory") that are used, owned
or held by the Subsidiary as of the relevant Scheduled Closing
and that are used by the Subsidiary in and necessary for the
conduct of the operations of the Facilities.
(f) All of the Subsidiary's right, title and
interest in and to all written contracts and agreements (the
"Other Assigned Contracts") to which the Subsidiary is a party
at the relevant Scheduled Closing, other than the Real Property
Leases and the Venture Agreements, (i) that are listed on
Schedule 2.1(f), (ii) pursuant to which the Subsidiary paid or
received less than $25,000 during its last fiscal year or
pursuant to which it expects to pay or receive less than
$25,000 during its current fiscal year, or (iii) with respect
to Other Assigned Contracts not described in clauses (i) or
(ii) above, for which Buyer has not provided Seller with
written notice of its rejection of such contract or agreement
within sixty (60) days following the relevant Scheduled
Closing, provided that the Other Assigned Contracts shall not
include any contract or agreement that relates to or covers
healthcare facilities or operations of Seller other than the
Facilities that are being sold, assigned, transferred or
conveyed at such relevant Scheduled Closing except to the
extent the portion of such contract or agreement related to
such Facilities may be assigned together with the sale,
assignment, transfer or conveyance of such Facilities.
Schedule 2.1(f) contains a list by Facility of the following
categories of Other Assigned Contracts pursuant to which a
Subsidiary paid or received $25,000 or more during its last
fiscal year or expects to pay or receive $25,000 or more during
its current fiscal year: construction contracts relating to
construction work-in-progress at the Facilities; Equipment
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<PAGE>
leases (whether operating or capitalized leases) and
installment purchase contracts where the annualized lease or
installment payments exceed $25,000; contracts or arrangements
binding on a Facility which contain any covenant not to compete
or otherwise significantly restrict the nature of the business
activities in which the Facility may engage; provider
agreements with Payors other than Medicare and Medicaid (as
defined in Section 1.1); bridge and other loan commitment
agreements (the "Loan Commitment Agreements") pursuant to which
a Subsidiary has agreed to provide advances or income
guarantees from time to time to lessors or sublessors under the
Real Property Leases or to healthcare professionals, groups or
entities providing services to the Facilities, together with
promissory notes (the "Loan Commitment Notes") evidencing
amounts owed to the Subsidiary as a result of any such advances
or guarantees; agreements with healthcare professionals; leases
as lessor or sublessor; and any other contracts in force
pursuant to which the Subsidiary paid or received over $25,000
during its last fiscal year or expects to pay or receive
$25,000 or more during its current fiscal year.
Notwithstanding the foregoing, the Other Assigned Contracts
shall not include and Schedule 2.1(f) need not contain:
(w) Any contract which evidences indebtedness
for money borrowed or the deferred portion of the purchase
price for Owned Real Property and is therefore an Excluded
Liability under the provisions of Section 2.4(i), unless the
parties mutually agree, in accordance with the provisions of
such Section 2.4(i), that such indebtedness will be assumed
by Buyer, in which case the contract or contracts evidencing
such indebtedness will be Transferred Assets, provided that
if the indebtedness evidenced by any such contract is
secured by a lien on any Transferred Asset, Seller shall
cause such lien to be released at or prior to the relevant
Scheduled Closing unless Buyer agrees to assume such
indebtedness pursuant to Section 2.4(i);
(x) Any contract respecting an intercompany
transaction between the Subsidiary, on the one hand, and
Seller or an Affiliate (as defined in Section 1.1) of
Seller, on the other, whether or not such transaction
relates to the provision of goods and services, tax sharing
arrangements, payment arrangements, intercompany charges or
balances, or the like ("Intercompany Transactions"), except
that transactions arising in connection with open purchase
orders where the Seller has acted as an intermediary for a
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Subsidiary and transactions between Seller or an Affiliate
of Seller, on the one hand, and the ventures and
partnerships described in Section 2.1(c) that are not wholly
owned by Seller and its Affiliates, on the other hand, shall
not be regarded as Intercompany Transactions;
(y) Employment contracts, if any, between the
Subsidiary or a Facility and the chief executive or chief
financial officer of such Facility, whether or not such
officer is a Hired Employee (as defined in Section 2.10(c));
and
(z) Collective bargaining agreements in respect of
the employees of a Facility, unless Buyer elects to assume
such agreements (it being understood, however, that nothing
herein is intended to affect Buyer's obligations with
respect thereto, if any, under the National Labor Relations
Act).
(g) All of the Subsidiary's right, title and interest in
and to the right to receive mail and other communications
addressed to Seller or the Subsidiary insofar as such mail or
other communication relates to the operation of the Facilities
after the relevant Scheduled Closing, or to Receivables,
Inventory, Prepayments or Accrued Operating Expenses (as herein
defined).
(h) All of the Subsidiary's right, title and
interest in and to the business names set forth in Schedule
2.1(h) (the "Transferred Business Names").
(i) All of the Subsidiary's right, title and
interest in and to Licenses (as defined in Section 1.1) in
favor of the Subsidiary as of the relevant Scheduled Closing
that are related to, necessary for, or used in connection with
the operation of the Facilities transferred in such Scheduled
Closing as presently operated by the Subsidiary, provided that
Licenses in favor of the Subsidiary shall be included in the
Transferred Assets only to the extent they are lawfully
transferable.
(j) All of the Subsidiary's right, title and
interest in and to unexpired warranties as of the relevant
Scheduled Closing that are transferable to Buyer which the
Subsidiary has received from third parties with respect to the
Transferred Assets, including, but not limited to, such
warranties as are set forth in any construction agreement,
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lease agreement, equipment purchase agreement, consulting
agreement or agreement for architectural and engineering
services.
(k) All of the Subsidiary's right, title and
interest in and to advance payments, prepayments, prepaid
expenses, deposits and the like (i) made by the Subsidiary or
Seller on its behalf in the ordinary course of business with
respect to Subject Transferred Assets (as defined in Section
2.13) prior to the relevant Scheduled Closing, (ii) which exist
as of such Scheduled Closing, (iii) with respect to which Buyer
will receive the benefit after the relevant Scheduled Closing,
and (iv) which Buyer agrees to acquire (Buyer hereby agreeing
not to withhold such agreement unreasonably) (collectively,
"Prepayments"), which Prepayments are listed by Facility,
category and approximate amount as of November 30, 1993 (or a
later date if mutually agreed upon), in Schedule 2.1(k).
(l) Subject to the further provisions of Section
2.9, all of the Subsidiary's right, title and interest as of
the Closing in and to accounts receivable recorded by the
Subsidiary as an account receivable from Payors, patients and
other third parties (whether or not billed) arising from or in
connection with the operation of the Facilities, together with
rights to payment for services rendered through the relevant
Closing Date to Straddle Patients referred to in Section 2.9(c)
(collectively, "Receivables"), provided that any account
receivable that would, under Sections 2.9(b)(ii)(B) or (C),
qualify as an "Eligible Receivable" as of the end of the month
ending prior to the relevant Scheduled Closing shall, at the
option of Buyer, not be a receivable included in the Scheduled
Closing and shall be an Excluded Asset.
(m) All of the Subsidiary's right, title and
interest in and to the goodwill of the businesses evidenced by
the Transferred Assets, and, except for Excluded Assets, any
and all other assets of the Subsidiary used in and necessary
for the conduct of the operations of the Facilities as
conducted prior to the relevant Scheduled Closing, whether or
not such assets have any value for accounting purposes,
provided that with respect to NME Hospitals, Inc., NME
Properties Corp., NME Psychiatric Properties, Inc., NME
Specialty Hospitals, Inc. and any subsidiary of NME Specialty
Hospitals, Inc. (including, without limitation, NME Psychiatric
Hospitals, Inc.), only those assets described in Section
2.1(a)-(l) above (other than Excluded Assets) shall be included
in the Transferred Assets.
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Section 2.2 Excluded Assets. The following properties
and assets (the "Excluded Assets") are not included in
Transferred Assets:
(a) Except for the Inventory, Receivables,
Prepayments and current amounts represented by the Loan
Commitment Notes, all assets constituting working capital,
whether cash, cash equivalents, securities, or other current
assets, and all claims, choses in action, rights of recovery,
rights of set-off, rights to refunds, and similar rights.
(b) Except for the Transferred Business Names,
Licenses and Other Assigned Contracts included in the
Transferred Assets and except for manuals relating to equipment
and other tangible property included in the Transferred Assets,
all privileged or proprietary (to Seller or a Subsidiary)
materials, documents, information, media, methods and processes
owned by Seller or a Subsidiary, and any and all rights to use
same, including, but not limited to, all intangible assets of
an intellectual property nature such as trademarks, service
marks and trade names (whether or not registered), computer
software that is proprietary to Seller or a Subsidiary, all
procedures and manuals that are proprietary to Seller or a
Subsidiary, all promotional or marketing materials (including
all marketing computer software), and any and all names under
which the Subsidiaries or the Facilities have done business or
offered programs, other than the Transferred Business Names,
and all abbreviations and variations thereof, provided,
however, that Buyer shall have the rights set forth in Section
2.11.
(c) The rights of Seller or any Subsidiary under any
insurance policy, if any, included in the Transferred Assets
which relate to any Excluded Asset or Excluded Liability (as
defined in Section 2.4) (it being understood, however, that
Buyer shall have no obligation to take any action under any
such policy to seek any recovery except at the reasonable
request, and at the sole expense, of Seller or a Subsidiary or
to continue any such policies in force).
(d) The rights of Seller or of any Subsidiary to
receive mail and other communications addressed to any of them
with respect to Excluded Assets or Excluded Liabilities.
(e) Subject to the provisions of Section 5.7, any
and all business and patient records of or related to the
operation of the Facilities, whether or not maintained at or by
the Facilities.
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(f) All property, plant, equipment and other assets
pertaining to the psychiatric healthcare business of Seller or
any subsidiary of Seller that relate primarily to any general
hospital, acute hospital or so-called "campus facility" of
Seller or any subsidiary of Seller and all outpatient
facilities and other assets primarily related thereto.
(g) Any and all contracts and agreements pursuant to
which a Subsidiary provides management services to third
parties other than a Facility, except for such contracts and
agreements as are specifically listed on Schedule 2.1(f).
(h) Subject to Sections 2.17 and 6.7, any and all
rights respecting computer and data processing hardware or
firmware that is proprietary to Seller or any Affiliate of
Seller, and any computer and data processing hardware or
firmware, whether or not located at a Facility, that is part of
a computer system the central processing unit for which is not
located at a Facility.
(i) All of the right, title and interest of Seller
and the Subsidiaries in assets resulting from any resolution
with Payors of amounts due with respect to Cost Reports ("Cost
Report Settlements") to the extent such Cost Reports cover any
period through the relevant Scheduled Closing with respect to a
Facility and other rights of Seller respecting Cost Reports
described in Section 6.6, including any assets or liabilities
resulting from any gain or loss on the sale of the Facilities
in connection with the Transactions.
(j) (i) All amounts due to the Subsidiaries arising
from Intercompany Transactions, and (ii) such other assets, if
any, specifically described in Schedule 2.2(j) and assets which
would be Transferred Assets except for the operation of
Sections 2.12, 6.2(c), 8.5, 8.7 or 9.5 or other provisions of
this Agreement.
(k) All "800" telephone lines and related Equipment
and contract rights and all advertising containing any name
other than a Transferred Business Name.
Seller shall remove at any time prior to or within thirty (30)
days following the relevant Closing Date or, with respect to
the Hospital Records (as defined in Section 5.7(a)), Seller may
remove from time to time within the relevant Document Retention
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Period (as defined in Section 5.7(b)) (in each case, at
Seller's expense, but without charge by Buyer for storage), any
and all of the Excluded Assets from the Facilities, provided
that Seller shall do so in a manner that does not unduly or
unnecessarily disrupt Buyer's normal business activities at the
Facilities.
Section 2.3 Assumed Liabilities. Subject to the terms
and conditions set forth in this Agreement, Buyer shall assume
and pay, discharge and perform as and when due only the
following obligations and liabilities of Seller and the
Subsidiaries and no others (the "Assumed Liabilities"), as such
obligations and liabilities may exist at the time they are
assumed by Buyer in accordance with the terms hereof:
(a) All liabilities and obligations of the
Subsidiaries which pertain to or are to be performed during the
period following the relevant Closing Date, and which arise
under any contract, license, permit, agreement, arrangement,
understanding or undertaking included in the Transferred
Assets, including the Real Property Leases, the Venture
Agreements, the Other Assigned Contracts and the Licenses, and
any obligation or liability (the "Assumed Guarantees") of
Seller or any Affiliate of Seller (including letters of credit
and performance bonds) which is in the nature of a guaranty of
the foregoing (together, the "Assumed Contracts"), including
without limitation, the capitalized lease liabilities and
obligations listed on Schedule 2.3(a).
(b) Without affecting the provisions of Sections
2.1(k), 2.6(a), 2.6(b) or 2.6(c), all liabilities and
obligations under open purchase orders at a Facility included
in the Subject Transferred Assets that were entered into by
Seller or a Subsidiary in the ordinary course of business with
respect to operation of such Facility on or prior to the
relevant Closing Date and which provide for the delivery of
goods or services subsequent to the relevant Closing Date.
(c) All obligations and liabilities to any Hired
Employee for paid time off that is vested and with respect to
which the Hired Employee would be entitled to payment upon
termination of his or her employment with Seller or an
Affiliate of Seller (including, for all purposes of this
Agreement, "old paid days leave," "paid time off," sick leave
and vacation pay to the extent that they are vested rights that
are subject to payment upon termination of employment;
collectively, "Paid Time Off") through the relevant Closing
Date in accordance with the employment policies of Seller and
its Affiliates as they exist on the date of this Agreement;
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provided that if Seller satisfies any portion of such
obligations and liabilities existing at the relevant Scheduled
Closing by payment to a Hired Employee, then such payment shall
be treated as a reduction of Accrued Operating Expenses (as
defined in Section 2.3(g)).
(d) Without limiting Seller's representations and
warranties contained in Article 3 or Buyer's rights under
Article 11 for a breach thereof, all liabilities and
obligations respecting any changes or improvements needed to
the Facilities for them to be in material compliance following
the relevant Scheduled Closing with respect to such Facilities
with safety, building, fire, land use, access (including
without limitation the Americans With Disabilities Act) or
similar Laws (as defined in Section 1.1) respecting the
physical condition of the Facilities.
(e) All liabilities and obligations respecting
employee matters assumed by Buyer pursuant to the provisions of
Section 2.10.
(f) Any liability or obligation which becomes an
Assumed Liability by operation of Section 2.4(i) and such other
liabilities and obligations, if any, specifically described in
Schedule 2.3(f).
(g) Any accrued and unpaid liabilities (whether or
not due) of the Subsidiaries in existence on the relevant
Scheduled Closing Date which relate to the Facilities, which
were incurred in the ordinary course of the operation of the
Facilities and which represent (i) trade payables incurred to
suppliers of goods or services; (ii) water, gas, electricity
and other utility charges; (iii) license fees; (iv) rent,
common area maintenance charges, operating expenses and other
charges arising under the Real Property Leases; (v) insurance
premiums (but only with respect to policies that will be
continued in force by Buyer after the relevant Scheduled
Closing); (vi) salaries and other payroll costs respecting
Hired Employees accrued in accordance with the normal
accounting practices of Seller and the Subsidiaries (but not
including bonuses or other incentive compensation or accrued
benefits with respect to benefit plans that are not assumed by
Buyer); (vii) Taxes, except for Taxes referred to in Section
5.5 relating to expenses of the Transactions and payroll taxes
respecting employees who are not Hired Employees; and (viii)
similar liabilities incurred in the ordinary course of the
operation of the Facilities and customarily recorded as a
current liability, other than the current portion of long-term
liabilities and obligations (the liabilities referred to in
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this Section 2.3(g), together with the liabilities and
obligations for Paid Time Off assumed under Section 2.3(c),
being herein referred to as "Accrued Operating Expenses").
Section 2.4 Excluded Liabilities. The parties agree that
liabilities and obligations of Seller and the Subsidiaries not
expressly described in Section 2.3 as Assumed Liabilities are
not part of the Assumed Liabilities, and Buyer shall not assume
or become obligated with respect to any other obligation or
liability of Seller or any Subsidiary or any Affiliate of
either of any nature whatsoever (whether express or implied,
fixed or contingent, liquidated or unliquidated, known or
unknown, accrued, due or to become due) (collectively,
"Excluded Liabilities"), including, but not limited to, the
liabilities and obligations described in this Section, all of
which shall remain the sole responsibility of Seller or the
pertinent Subsidiary or Affiliate, as the case may be. Without
limiting the generality of the foregoing, Buyer shall not
assume and shall have no liability or obligation of any kind
for or with respect to any of the following liabilities or
obligations:
(a) Subject to Section 5.5 respecting certain
expenses incurred in connection with the Transactions, any of
Seller's or any of the Subsidiaries' (or their respective
Affiliates') liabilities or obligations (including, but not
limited to, any liabilities or obligations under any tax
sharing agreements) with respect to franchise taxes and with
respect to foreign, federal, state or local taxes imposed upon
or measured, in whole or in part, by the income for any period
of Seller and/or such Subsidiaries or any member of a combined
or consolidated group of companies of which Seller and/or such
Subsidiaries are, or were at any time, a part, or with respect
to interest, penalties or additions to any of such taxes, and
any income, franchise, tax recapture, transfer tax, sales tax
or use tax that may arise upon consummation of the transactions
contemplated by this Agreement and be due or payable by Seller
or any Subsidiary, it being understood that Buyer shall not
be deemed to be Seller's or any Subsidiary's transferee with
respect to any such tax liability.
(b) Any of Seller's or any of its Subsidiaries' or
Affiliates' liabilities or obligations with respect to the
recapture of foreign, federal, state or local tax deductions or
credits taken by Seller or such Subsidiary imposed upon, or any
taxable gain recognized by, Seller or such Subsidiary on
account of the Transactions contemplated hereby.
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(c) Liabilities or obligations of Seller, its
Affiliates or a Subsidiary arising from the breach by Seller or
such Subsidiary on or prior to the relevant Closing Date of any
term, covenant, or provision of any of the Assumed Contracts.
(d) Liabilities or obligations of Seller, a
Subsidiary or Seller's Affiliates now existing or which may
hereafter exist by reason of any violation or alleged violation
of Law or Laws by Seller or any of its Affiliates or by a
Subsidiary, or by an employee or independent contractor of any
of the foregoing where any of the foregoing is or is alleged to
be responsible for the acts or omissions of any such person,
occurring on or prior to the
relevant Scheduled Closing Date.
(e) Liabilities or obligations of Seller or a
Subsidiary now existing or which may hereafter exist by reason
of any liability to refund any payment or reimbursement
received by Seller or a Subsidiary from any Payor which is
attributable to any period of time ending on or prior to the
relevant Closing Date respecting such Facilities for which such
payment or reimbursement was received.
(f) Liabilities or obligations of Seller or a
Subsidiary under any Assumed Contract which would be included
in the Transferred Assets but for the provisions of Section
2.12, unless Buyer is provided with the benefits thereunder as
contemplated in Section 2.12.
(g) Liabilities of Seller and the Subsidiaries
arising from or in connection with litigation described in
Section 3.14, including, but not limited to, the Unusual
Proceedings described therein, and any and all liabilities or
obligations of Seller and the Subsidiaries for claims for
personal injury (including sickness, trauma, disease, pain and
suffering, loss of future earnings, punitive damages and the
like), property damage, and other damage and injury in
existence (i.e., all elements of the claim are complete) at or
prior to the relevant Scheduled Closing, whether or not any
claim has been made or litigation has been instituted with
respect thereto and whether or not any claim is covered
partially or fully by insurance.
(h) Subject to Section 2.12, liabilities of Seller
and the Subsidiaries incurred in connection with their
obtaining any consent, authorization or approval necessary for
them to sell, convey, assign, transfer or deliver any
Transferred Asset to Buyer hereunder.
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(i) Any liability of Seller or a Subsidiary
representing indebtedness for money borrowed or the deferred
portion of the purchase price for any Owned Real Property or
Equipment (and any refinancing thereof), including without
limitation the indebtedness identified on Schedule 2.4(i);
provided that if, prior to the relevant Scheduled Closing, the
parties mutually agree that any such indebtedness or obligation
will be assumed by Buyer and further agree upon an equitable
reduction in the cash portion of the Purchase Price (as defined
in Section 2.5) to reflect Buyer's assumption of such
indebtedness or obligation, then any such indebtedness or
obligation will be deemed to constitute an Assumed Liability
for all purposes of this Agreement; and provided further that
with respect to any such indebtedness or obligation not so
assumed by Buyer that constitutes a lien or encumbrance upon
any Transferred Asset, Seller agrees that on or prior to the
relevant Scheduled Closing it will either pay or discharge such
indebtedness or liability in full or otherwise cause such lien
or encumbrance to be removed from such Transferred Asset, so
that such Transferred Asset is sold, conveyed, assigned,
transferred and delivered to Buyer at such Scheduled Closing
free and clear of such lien or encumbrance.
(j) Such other liabilities and obligations, if any,
specifically described in Schedule 2.4(j) and liabilities which
would be Assumed Liabilities but for the provisions of Sections
2.12, 8.5, 8.7 or 9.5.
(k) Amounts due from the Subsidiaries arising from
Intercompany Transactions.
(l) Liabilities and obligations respecting Cost
Report Settlements to the extent such Cost Reports cover any
period through the relevant Closing Date and other obligations
of Seller respecting Cost Reports described in Section 6.6.
(m) Subject to Section 2.10(f), liabilities and
obligations for bonuses, other incentive compensation and
benefits under benefit plans to the extent not specifically
included in Accrued Operating Expenses.
Section 2.5 Purchase Price. The purchase price (the
"Purchase Price") in the aggregate for all of the Transferred
Assets shall be equal to the sum of (a) One Hundred Forty-Eight
Million Eight Hundred Seventy Thousand Dollars ($148,870,000),
subject to such adjustments, if any, as may occur pursuant to
Sections 2.12, 2.14, 6.2(c), 8.5, 8.7, or 9.5 or other
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provisions of this Agreement, including the book value as of
the relevant Scheduled Closing of capitalized lease liabilities
assumed and the value of any assumption of debt pursuant to
Section 2.4(i), plus (b) an amount equal to the net book values
as of the relevant Scheduled Closing of the Loan Commitment
Notes, Inventory, Receivables and Prepayments (collectively,
"Accrued Operating Assets") included in the Transferred Assets
less Accrued Operating Expenses, plus (c) an amount (determined
on the basis of the Venture's balance sheet) equal to the net
book value as of the relevant Scheduled Closing of (i) the sum
of each Venture's current assets and distributions payable to
partners or venturers, less (ii) the sum of each such Venture's
current liabilities, indebtedness for money borrowed and
capitalized lease liabilities, pro-rated in each case to the
equity percentage in such Venture held by Seller and the
Subsidiaries (the amounts in clauses (b) and (c) being referred
to as the ("Net Book Values"). In addition, at the First
Closing, Buyer shall pay to Seller the sum of Three Million
Dollars ($3,000,000) for the covenant not to compete described
in Section 6.8.
Section 2.6 Payment of Purchase Price. That portion of
the Purchase Price due and payable for the Transferred Assets
actually sold, assigned, transferred and conveyed to Buyer and
the applicable Buyer Subsidiaries
hereunder shall be paid as follows:
(a) Payment of Tentative Purchase Price. No less
than five (5) business days prior to each Scheduled Closing,
Seller shall deliver to Buyer a certificate executed on the
Seller's behalf by a responsible officer setting forth the
Seller's estimate of what the Net Book Values will be as of
such Scheduled Closing for the Subject Transferred Assets (as
defined in Section 2.13) (the "Estimated Net Book Values"), and
additionally setting forth (i) the Net Book Values for the
Subject Transferred Assets recorded by Seller as of the most
recent month-end prior to the delivery of such certificate for
which data is available, and (ii) the methodology used by
Seller for updating changes in Net Book Values since such
month-end data to arrive at such estimate. All determinations
made with respect to the Net Book Values shall be based upon
the internal records of, and the valuation methods customarily
used by, Seller and the Subsidiaries, absent error, and
consistent with generally accepted accounting principles with
respect to the recording and accruing of the types of assets
and liabilities included in Net Book Values. On the terms and
subject to the conditions contained in this Agreement, at each
Scheduled Closing Buyer shall pay to Seller, in the manner set
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forth herein, an amount equal to (iii) the portion of the
Purchase Price arising under Section 2.5(a) (including any debt
assumptions pursuant to Section 2.4(i)) due at such Scheduled
Closing as calculated on the basis of the values assigned to
the pertinent Subject Transferred Assets in the Allocation
Schedule (as defined in Section 2.7) plus (iv) an amount equal
to one hundred percent (100%) of the Estimated Net Book Values
related to the Subject Transferred Assets,(the sum of clauses
(iii) and (iv) being referred to as the "Tentative Purchase
Price"), less (v) the book value of any capitalized leases
assumed at such Scheduled Closing, less (vi) the value of any
debt assumed pursuant to Section 2.4(i) at such Scheduled
Closing.
(b) Determination of Interim Net Book Values. As
soon as practicable, but in no event later than sixty (60) days
after each Scheduled Closing, Seller shall cause a schedule to
be prepared and delivered to Buyer showing an interim
calculation of the Net Book Values with respect to the Subject
Transferred Assets (the "Interim Net Book Values") as of the
relevant Closing Date derived by Seller from the internal books
and records of Seller and the Subsidiaries and otherwise in
accordance with the second sentence of Section 2.6(a) with
respect to the Facilities included in such Subject Transferred
Assets, as well as from a physical inventory, taken after the
date hereof and prior to or as of such relevant Closing Date,
of property which would constitute Inventory if the relevant
Scheduled Closing had occurred on the date of such physical
inventory. If such schedule as submitted by Seller is not
challenged in writing by Buyer within thirty (30) days of its
receipt of same, then it shall be deemed accepted by Buyer. If
it is so challenged, then, unless otherwise resolved by
agreement of the parties within thirty (30) days from the date
of Buyer's challenge or such later date as the parties may
mutually agree upon, such disagreement shall be mutually
submitted by the parties to their respective independent
certified public accountants for resolution. If such
accountants cannot resolve the disagreement within thirty (30)
days of such submission, then they shall submit the matter to a
third accounting firm of national standing selected by them,
whose determination shall be final and binding, and shall be
rendered within thirty (30) days of the date on which the
matter is submitted to such firm. Any such third accounting
firm shall determine the issues in dispute following such
procedures, consistent with the language of this Agreement, as
it deems appropriate to the circumstances and with reference to
the amounts in issue. No particular procedures are intended to
be imposed upon such third accounting firm, it being the desire
of the parties that any such dispute shall be resolved as
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expeditiously and inexpensively as reasonably practicable. In
the event that the Interim Net Book Values differ from the
Estimated Net Book Values, whether determined on the basis of
the schedule prepared by Seller, or agreement of the parties,
or decision by independent public accountants, as the case may
be, then and in such event, within five (5) business days
following such determination of the Interim Net Book Values,
either Buyer shall pay to Seller, or Seller shall pay to Buyer,
as the case may be, in immediately available funds, the amount
by which the Interim Net Book Values differs from the Estimated
Net Book Values. The pendency of a dispute shall not affect
the payment obligation hereunder of either Buyer or Seller to
the extent such payment is not disputed.
(c) Determination of Final Net Book Values. Within
ten (10) business days following expiration of six (6) months
from each Scheduled Closing, Buyer shall provide a certificate
to Seller, executed on Buyer's behalf by a responsible officer,
setting forth a proposed calculation of final Net Book Values
with respect to the Subject Transferred Assets (the "Final Net
Book Values") as of the end of such six (6) month period (a
"Working Capital Adjustment Date") which shall contain a
reconciliation as of the relevant Closing Date of the Interim
Net Book Values, adjusted only for (i) errors claimed by Buyer
to exist in Seller's accruals for Accrued Operating Assets and
Accrued Operating Expenses and the Ventures' calculations of
partners' equity, partners' distributions payable and the net
book value of Venture fixed assets, (ii) Buyer's ability to
collect Receivables and the Ventures' ability to collect their
accounts receivable in existence as of the relevant Closing
Date, on or before the Working Capital Adjustment Date, in
excess of the carrying value therefor as of the relevant
Closing Date net of reserves, (iii) Buyer's inability to
collect Receivables and the Ventures' inability to collect
their accounts receivable in existence as of the relevant
Closing Date, on or before the Working Capital Adjustment
Date, in accordance with their net carrying values as of the
relevant Closing Date, and (iv) Buyer's ability to pay Accrued
Operating Expenses and the Ventures' ability to pay similar
expenses of the Venture at less than their book value as of the
relevant Closing Date or Buyer's or the Ventures' payment of
the same at more than their book value as of the relevant
Closing Date to the extent legally required to do so. For
purposes of any such calculation, (v) the accuracy of Seller's
or the Ventures' accrual for real and personal property taxes
shall be based upon the last notice of tax assessment
respecting such property prior to the relevant Scheduled
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Closing that does not reflect the Transactions contemplated to
occur at the relevant Scheduled Closing, (vi) variable or
undetermined charges arising under Real Property Leases shall
be accrued as of the relevant Scheduled Closing on an
historical basis, (vii) payments received on account of
Receivables shall be applied in accordance with Sections 2.9(b)
and (c), and (viii) expenses for such items as real and
personal property taxes, utility charges, charges arising under
leases, insurance premiums and the like shall be pro-rated as
of the relevant Scheduled Closing. In the event that Buyer
elects to reassign to Seller any Loan Commitment Notes on or
prior to the relevant Working Capital Adjustment Date, then the
Final Net Book Values shall be deemed to be further reduced by
an amount equal to the uncollected portion thereof, in which
case Buyer shall execute such documents of re-assignment as are
reasonably satisfactory to Seller and such Loan Commitment
Notes as are reassigned shall thereafter to be deemed to be
Excluded Assets. Any dispute concerning Buyer's calculation of
the Final Net Book Values that is unresolved for thirty (30)
days shall be submitted for resolution by the parties'
independent certified public accountants in accordance with the
procedures contained in Section 2.6(b). Within five (5)
business days following determination of the Final Net Book
Values for a Scheduled Closing, either Buyer shall pay to
Seller, or Seller shall pay to Buyer, as the case may be, in
immediately available funds, the amount by which the Final Net
Book Values differ from the Estimated Net Book Values, as
adjusted for payments, if any, on account of the Interim Net
Book Values. The pendency of a dispute shall not affect the
payment obligation hereunder of either Buyer or Seller to the
extent such payment is not disputed.
(d) Seller as Agent of Subsidiaries. Seller shall,
at or prior to the relevant Scheduled Closing, cause each
Subsidiary transferring Subject Transferred Assets thereat to
irrevocably designate (with an original copy being provided to
Buyer) Seller as its agent to receive on its behalf delivery of
that portion of all payments made by Buyer hereunder to which
such Subsidiary may be entitled as a result of its
participation in such Scheduled Closing, including without
limitation that portion of the Purchase Price attributable to
the Subject Transferred Assets sold to Buyer by it, and to
acknowledge that delivery of such payments, including the
Purchase Price, to Seller in accordance with the terms of this
Agreement shall be conclusive and binding evidence against such
Subsidiary that any payments or consideration due to such
Subsidiary in respect of the Subject Transferred Assets sold to
Buyer by it, or in respect of other payments due to it from
Buyer under the terms of this Agreement, have been delivered.
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Section 2.7 Allocation of Purchase Price. The Purchase
Price shall be allocated to the Transferred Assets on a
Facility by Facility basis in accordance with Schedule 2.7 (the
"Allocation Schedule"), except that the portion of the Purchase
Price attributable to the Net Book Values shall be allocated in
accordance with the amounts actually paid therefor in
accordance with the provisions of Sections 2.5(b) and (c).
Seller and Buyer shall, and Seller shall cause the Subsidiaries
to, allocate the Purchase Price in accordance with the
Allocation Schedule and allocate the Net Book Values portion
thereof in accordance with the amounts paid therefor, to be
bound by such allocations for all purposes, to account for and
report the purchases and sales contemplated hereby for all
purposes (including, without limitation, financial, accounting,
Medicare reimbursement and federal and state tax purposes) in
accordance with such allocations, and not to take any position
(whether in financial statements, Cost Reports, tax returns,
Cost Report or tax audits, or otherwise), including without
limitation any claim to an adjustment in the basis of such
assets by Buyer or its successors and assigns for Medicare
purposes which is inconsistent with such allocations without
the prior written consent of the other party, except to the
extent, if any, required by applicable Law or generally
accepted accounting principles.
Section 2.8 Contingent Lease Obligations. With respect
to each Real Property Lease for which Seller or a Subsidiary
remains or will remain contingently liable after the relevant
Scheduled Closing as lessee, sublessee, guarantor or assignor,
Buyer hereby agrees to exercise its best efforts:
(a) To cause the contingent liability of Seller or
such Subsidiary, as the case may be, to be removed on or prior
to any extension, renewal or modification of such Real Property
Lease by Buyer or a Buyer Subsidiary;
(b) To procure for Seller and the applicable
Subsidiaries a security interest, in form reasonably
satisfactory to Seller, in all of the right, title and interest
of Buyer and the applicable Buyer Subsidiaries in such Real
Property Lease, junior only to the security interest of Buyer's
most senior secured lenders, in order to secure the due and
punctual performance by Buyer and the applicable Buyer
Subsidiaries of the Assumed Liabilities represented by such
Real Property Lease; and
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(c) To procure for Seller and the applicable
Subsidiaries the right to acquire such right, title and
interest in such Real Property Lease, at fair market value, in
the event that Buyer and the applicable Buyer Subsidiaries fail
to pay, perform and discharge when due the Assumed Liabilities
represented by such Real Property Lease and such failure
results in Seller or any Subsidiary being required to pay,
perform or discharge any of such Assumed Liabilities.
Section 2.9 Remittances and Receivables.
(a) In General.
(i) All remittances, mail and other
communications relating to the Excluded Assets or Excluded
Liabilities received by Buyer or a Buyer Subsidiary at any time
after a relevant Scheduled Closing shall be promptly turned
over by Buyer to the addressee thereof, or if the addressee is
no longer affiliated with Seller, to Seller, and pending such
delivery, Buyer shall have no interest in the same and shall
hold such remittances, mail and other communications in trust
for the benefit of Seller and the Subsidiaries. All
remittances, mail and other communications relating to the
Transferred Assets or the Assumed Liabilities received by
Seller or any Subsidiary at any time after the relevant
Scheduled Closing at which such Transferred Assets are
transferred and such Assumed Liabilities are assumed by Buyer
shall be promptly turned over by Seller or such Subsidiary to
the addressee thereof, or if the addressee is no longer
affiliated with Buyer, to Buyer, and pending such delivery,
Seller or such Subsidiary shall have no interest in the same
and shall hold such remittances, mail and other communications
in trust for the benefit of Buyer.
(ii) With regard to the Medicare, Medicaid and
CHAMPUS programs, and any Blue Cross program that requires a
Cost Report or retains the right of offset, Buyer and Seller
mutually covenant and agree as follows. Seller acknowledges
that, from time to time, Buyer or Buyer Subsidiaries, after a
relevant Scheduled Closing, may receive a demand for payment in
connection with overpayments or alleged overpayments from one
or more of such programs, or both, which demand relates to
the operation of a Facility prior to the relevant Scheduled
Closing at which such Facility was included in the Subject
Transferred Assets. Buyer shall provide notice to Seller of
such demand within ten (10) days of Buyer's receipt of same.
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Seller covenants and agrees with Buyer that Seller shall,
within thirty (30) days of its receipt of written notice from
Buyer of such request for any such payment, which notice shall
state the basis thereof in reasonable detail, pay in cash to
Buyer an amount equal to any and all such overpayments claimed
or (by an election made in writing, within twenty (20) days
after receiving notice of any such demand) diligently pursue a
contest of such claim of overpayment and indemnify and hold
Buyer harmless from any liability resulting therefrom, but the
right to contest without first paying shall not be available to
Seller if the programs collect the alleged overpayment by means
of a setoff against Buyer, unless Seller first reimburses Buyer
in an amount equal to the amount so setoff, provided that in
all events Buyer shall provide notice to Seller of such demand
within ten (10) days of Buyer's receipt of same. Subject to
the foregoing, if any such program, with or without notice,
collects an alleged overpayment or other amount allegedly owed
by Seller or a Subsidiary by offset against Buyer or Buyer
Subsidiary, Seller shall promptly pay to Buyer an amount equal
to such offset amount provided that Buyer shall have provided
Seller with any notice related to such offset within ten (10)
days of Buyer's receipt of same, or, if no such notice was
received by Buyer, Buyer shall have provided notice to Seller
of such offset within ten (10) days of Buyer's obtaining notice
of such offset being taken. Nothing in this Section 2.9(a)(ii)
shall limit Buyer's obligations under Section 7.3.
(b) Receivables.
(i) Buyer shall exercise commercially
reasonable efforts to collect Receivables. Any payments
received by Buyer or its successors and assigns after a
Scheduled Closing Date, from patients, Payors, clients,
customers or others who are the obligors on Receivables
transferred as of such Scheduled Closing Date (collectively,
"Account Parties"), shall be applied to the oldest remaining
Receivables transferred as of such Scheduled Closing Date
from such Account Party in the order in which they arose
unless, in the case of an Account Party who is a patient,
otherwise indicated by the patient's Payor.
(ii) On the tenth day of the first month that
begins at least thirty (30) days after a Scheduled Closing,
on the tenth day of each month thereafter until the Working
Capital Adjustment Date with respect to such Scheduled
Closing, and on the tenth day following such Working Capital
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Adjustment Date, Buyer shall execute appropriate instruments
of assignment to re-assign back to Seller, and shall turn
over to Seller all evidences of and documents pertaining to,
any Receivable which, as of the end of the immediately
preceding month and/or such Working Capital Adjustment Date,
as the case may be, was uncollected and which either (A) is
a Receivable in respect of a non-Medicare patient as to
which Buyer has decided to cease collection activity, or (B)
is a Receivable in respect of a non-Medicare patient which,
as of such month end or such Working Capital Adjustment
Date, has remained unpaid for a period of at least one
hundred eighty (180) days following the date of such
patient's discharge from a Facility, (C) is a Receivable in
respect of a Medicare patient which relates to amounts that
represent such patient's deductible or co-insurance
obligations, and which, as of such month end or Working
Capital Adjustment Date, has remained unpaid for a period of
at least one hundred eighty (180) days following the date
after which the patient is first billed, or (D) is a
Receivable from Medicare in respect of a Medicare patient
for which payment has been denied by Medicare provided that
Buyer has filed a request for reconsideration within the
period required. Such Receivables which are eligible to be
turned over to Seller are herein referred to as "Eligible
Receivables." Any Eligible Receivable that is assigned back
to Seller within thirty (30) days following the first
opportunity to do so under the provisions of this clause
(ii) shall, for purposes of the adjustments contemplated by
Section 2.6(c), be deemed to have not been collected by
Buyer, and any Eligible Receivable that is not so assigned
back to Seller within thirty (30) days following the first
opportunity to do so under the provisions of this clause
(ii) shall, for purposes of the adjustments contemplated by
Section 2.6(c), be deemed to have been collected by Buyer.
With respect to any such Eligible Receivable re-assigned
back to Seller, Seller and the Subsidiaries shall be free to
institute such collection efforts, including, without
limitation, initiating such legal proceedings, with respect
thereto as they shall, in their sole discretion determine.
(iii) In the event of any adjustment in the Net
Book Values arising under Section 2.6(c)(iii), then upon
such determination, Buyer shall execute instruments of
assignment, effective as of the relevant Working Capital
Adjustment Date, respecting any unpaid Receivables which are
not collected or deemed collected as of such date (it being
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agreed that any unpaid Receivables not so assigned shall be
deemed collected as of or prior to such Working Capital
Adjustment Date).
(c) Straddle Patient Receivables. To compensate
Seller and the Subsidiaries for services rendered and medicine,
drugs and supplies provided through a Scheduled Closing Date
with respect to patients ("Straddle Patients") who were
admitted to a Facility on or before the date of the Scheduled
Closing in which such Facility was transferred and were
discharged by the Facility after such Scheduled Closing Date,
the following shall apply:
(i) Cut-Off Billings. Seller shall, or shall
cause the Subsidiaries to, prepare cut-off billings for all
Straddle Patients as of the close of business on the
relevant Closing Date. All payments which are received by
Buyer (or its successors in interest or assigns) after the
relevant Closing Date with respect to Straddle Patients and
which relate to such cut-off billings shall constitute
Receivables for purposes of calculating the Tentative
Purchase Price and the Interim Net Book Values for such
Scheduled Closing.
(ii) Cut-Off Billings Not Accepted. If the Payor
of any Straddle Patient cannot or does not for any reason
accept cut-off billings, then Buyer shall notify Seller of
same, and Seller shall, or shall cause the Subsidiaries to,
deliver to Buyer a statement calculating the total charges
made by Seller and the Subsidiaries for services rendered
and medicine, drugs and supplies provided through the
relevant Closing Date with respect to such Straddle
Patient. Within ten (10) days following the discharge of
each such Straddle Patient, Buyer shall deliver to Seller a
statement reflecting the total charges for the services
rendered and medicine, drugs and supplies billed to such
Straddle Patient after the relevant Closing Date and the
patient receivable (the "Straddle Patient Payments") of
Buyer with respect to such Straddle Patient (including any
cost per discharge limit imposed by the Tax Equity and
Fiscal Responsibility Act of 1982, as amended ("TEFRA") and
all deductibles and co-insurance payments). For purposes of
calculating the Final Net Book Values for any Scheduled
Closing, the pro rata share of the Straddle Patient Payments
which shall be treated as a Receivable shall be equal to the
amount obtained by multiplying the Straddle Patient Payments
by a fraction, the numerator of which is the total charges
of Seller and the Subsidiaries with respect to such Straddle
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Patient through the relevant Closing Date and the
denominator of which is the total charges of Buyer, Seller
and the Subsidiaries with respect to such Straddle Patient.
Seller or Buyer, as may be applicable, may have such
statements as submitted by Buyer or Seller verified by their
respective independent public accountants within thirty (30)
days from delivery. If such statements, as submitted by
Buyer or Seller, are acceptable, then such statements shall
fix the value of the services, medicine, drugs and supplies
provided by Seller and the Subsidiaries, on the one hand,
and by Buyer, on the other, to each such Straddle Patient.
If any such statement is challenged by Seller or Buyer, then
unless otherwise resolved by agreement of the parties within
thirty (30) days of any such challenge, such statement shall
be deemed in dispute, which dispute shall be resolved by the
parties' independent certified public accountants. If such
accountants cannot resolve the matter within thirty (30)
days, then it shall be submitted by them to a third
accounting firm in accordance with the procedures contained
in Section 2.6(b). If Seller or Buyer does not give written
notice to the party preparing the statement of its challenge
of such statement within the first said thirty (30) day
period, the receiving party shall be deemed to have accepted
the same.
(d) Cooperation in Collecting Receivables and
Excluded Assets. Buyer agrees to cooperate with Seller and the
Subsidiaries and to provide access to records (both medical and
financial) to assist in the collection, rebilling and auditing
(by Seller or its representatives, including its independent
public accountants) of the Receivables and the Excluded Assets
(including, but not limited to, any and all Receivables from
Account Parties or amounts due to or from any Payor). Without
limiting the generality of the foregoing agreements of Buyer to
cooperate with Seller, until six (6) months after the relevant
Closing Date, (i) Seller may locate one or more of its or its
subsidiaries' employees at any or all of the Facilities
transferred at such Closing Date, without charge, in order to
facilitate such collection, rebilling and auditing, (ii) Buyer
shall provide such employees, without charge, adequate and
proper space to facilitate the performance of such duties, and
(iii) Buyer shall provide reasonable assistance of the
employees of Buyer, without charge.
(e) Non-Assignable Receivables. Notwithstanding
anything in this Agreement that might be construed to the
contrary, this Agreement shall not constitute an agreement to
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assign any Receivable (including any Receivable respecting a
Straddle Patient) the assignment of which is either prohibited
by Law or by the terms of any contract with a Payor. However,
without limiting the generality of the foregoing, the Net Book
Value of such non-assignable Receivables shall be included in
the Net Book Values for all purposes of this Agreement,
including, but not limited to, Sections 2.5 through 2.7 and
this Section 2.9, as modified by the provisions of this Section
2.9(e). That portion of the Purchase Price which, but for the
provisions of this Section 2.9(e), would otherwise be
attributable to the Net Book Value of such non-assignable
Receivables shall be deemed to be a loan from Buyer to Seller
and to the pertinent Subsidiary that will be repaid from the
proceeds of such Receivables collected and held by Buyer and
from the adjustments to Estimated Net Book Values contemplated
by Sections 2.6, 2.9(b), and 2.9(c). All procedures and
requirements specified herein (including, without limitation,
Buyer's obligations under Section 2.9(b)) for the collection of
Receivables (including any Receivables in respect of a Straddle
Patient) shall be fully applicable to such non-assignable
Receivables, except that (i) Buyer shall be deemed to collect
and hold the proceeds of such non-assignable Receivables as
agent for the Seller and the Subsidiaries and shall apply such
proceeds to the repayment of such loan, and (ii) any provision
herein that would otherwise require or provide for Buyer's
"reassignment" of a Receivable (including an Eligible
Receivable) that is non-assignable to Buyer in the first
instance shall be construed to require or provide that Buyer,
as agent for Seller and the Subsidiaries, return pertinent
documentation respecting such Receivable to Seller and the
Subsidiaries to permit collection of such Receivable by them
(in accordance with such collection efforts and procedures as
they, in their sole discretion, shall determine).
(f) Collection Fee. Buyer shall be entitled to a
collection fee from Seller equal to fifteen (15%) of the amount
of Receivables collected, or deemed, under the provisions of
this Agreement, to be collected by Buyer. On the tenth day of
the first month that begins at least sixty (60) days after a
Scheduled Closing, on the tenth day of every other month
thereafter until the Working Capital Adjustment Date, and on
the tenth day following the Working Capital Adjustment Date,
Buyer shall submit a report to Seller as of the nearest
month-end in reasonable detail, specifying those Receivables
included in the Net Book Values which have been, or are deemed
to have been, collected by Buyer during the period covered by
such report, and the amounts so collected. Within five (5)
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business days following receipt of each such report, Seller
shall pay to Buyer, by wire transfer of immediately available
funds, the collection fee due with respect to the Receivables
covered by such report. Any Receivable for which a collection
fee is so paid shall, to the extent of such Receivable on which
such a fee is paid, no longer qualify as an Eligible Receivable.
Section 2.10 Employee Matters.
(a) Pension Plans. Schedule 2.10(a) lists all
"employee pension benefit plans" ("Pension Plans") within the
meaning of Section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") in which Retained
Employees (as defined in Subsection (b) below) directly
employed to work at the Facilities participate. Seller shall,
or shall cause the Subsidiaries to, (i) terminate as of the
relevant Closing Date the active participation of all such
employees in the Pension Plans who constitute Hired Employees,
(ii) cause the Pension Plans to make timely appropriate
distributions following the relevant Closing Date, to the
extent required, to such employees in accordance with, and to
the extent permitted by, the terms and conditions of such
Pension Plans, and (iii) in connection with the termination of
the active participation of all such employees in such Pension
Plans, comply, and cause each Pension Plan to comply, with all
applicable Laws. Prior to the relevant Closing Date, Seller
shall have delivered to Buyer, for information purposes only,
forms of any letters or other written communications which
Seller or the Subsidiaries shall distribute generally to such
employees notifying them of their rights in respect of their
cessation of active participation in the Pension Plans. There
are no "multiemployer plans" within the meaning of Section
3(37) of ERISA ("Multiemployer Plans") in which Retained
Employees directly employed to work at the Facilities
participate.
(b) Retained Employees.
(i) Buyer shall have the right to offer to
hire at each Scheduled Closing each of the direct employees
of Seller or an Affiliate of Seller, who is not a Facility's
chief executive or chief financial officer and who, as of
such Scheduled Closing, works at the Facilities (including
any such direct employees who are on medical disability or
leaves of absence and who worked at the Facilities
immediately prior to such disability or leave) included in
the Subject Transferred Assets, and shall additionally have
the right to offer to hire at the First Closing each
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employee of Seller or an Affiliate of Seller who is
primarily employed in connection with Seller's PHIS System
described in Section 2.17 whether direct or indirect
employees with respect to the PHIS System, provided that
Buyer may not offer to hire those employees covered by this
clause (i), if any, who are designated by Seller at least
five (5) days prior to the relevant Scheduled Closing and
provided further that Buyer shall extend offers of
employment to a sufficient number of employees at each
Facility so as to avoid any liability on the part of Seller
and the Subsidiaries under the WARN Act (as defined in
Section 2.10(e)) with respect to the Transactions
contemplated hereby. Seller will advise Buyer of the number
of employees terminated at each Facility during the ninety
(90) day period preceding the relevant Scheduled Closing.
(ii) Buyer shall additionally have the right
to offer to hire at each Scheduled Closing such other
employees of Seller and its Affiliates who are mutually
agreed upon by Buyer and Seller and who are either (A)
indirect employees with respect to the operation of the
Facilities included in the Subject Transferred Assets, or
(B) a chief executive or chief financial officer of a
Facility included in the Subject Transferred Assets,
provided that in the event that Buyer wishes to hire a chief
executive or chief financial officer and Seller does not
agree to such hiring, Seller shall not employ such chief
executive or chief financial officer in such capacity at a
healthcare facility operated or managed by Seller or its
subsidiaries for a period of at least one (1) year following
such Scheduled Closing.
(iii) All such direct and indirect employees
to whom Buyer has the right to make offers of employment
pursuant to clauses (i) or (ii) above are herein referred to
as the "Retained Employees."
(iv) Any such offer of employment to a
Retained Employee by Buyer shall be to perform comparable
services, in such position and for such compensation as is
comparable to the position such Retained Employee held with,
and the compensation paid to such Retained Employee by,
Seller or any of its subsidiaries as of the Scheduled
Closing. Seller or its Affiliates shall have the right (but
not the obligation) to employ or offer to employ any
Retained Employee (including, but not limited to, the chief
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executive officer and the chief financial officer of each
Facility without regard to the provisions of Section
2.10(b)(ii)(B)) who declines Buyer's offer of employment.
(c) Hiring of Retained Employees. Buyer shall hire at
each Scheduled Closing each Retained Employee who elects to
accept employment with Buyer (the "Hired Employees") and shall
continue to employ each such Hired Employee for a period of no
less than ninety (90) days following the relevant Closing Date,
unless the employment of such Hired Employee is terminated for
cause or as a result of the Hired Employee's resignation.
Subject to the proviso to Section 2.3(c), Buyer agrees to give
the Hired Employees full credit for the Paid Time Off earned or
accrued by them during, and to which they are entitled as a
result of, their employment by Seller and/or its subsidiaries,
by allowing such Hired Employees such Paid Time Off as to which
such Hired Employees would have been entitled as of the
relevant Closing Date under the policies of Seller and/or its
subsidiaries if such Hired Employees had remained employees of
Seller and/or its subsidiaries and, upon termination of
employment, by making full payment to such Hired Employees of
the Paid Time Off that such employees would have received had
they taken such Paid Time Off.
(d) Health Benefits. Buyer shall provide the Hired
Employees a program of health care benefits which is comparable
in the aggregate to the program of health care benefits
currently provided by Seller or its pertinent Subsidiaries, as
the case may be, provided, however, that such health care
benefits shall be immediately available to the Hired Employees
as of the relevant Closing Date, and the Hired Employees shall
become as of the relevant Closing Date participants thereunder,
without regard to any applicable waiting period or any
limitation with respect to preexisting conditions except
insofar as such waiting period or limitation gives full credit
to such Hired Employees for the period of time during which he
or she was employed by Seller and its Affiliates and, provided
further, that Buyer may make modifications or changes in such
health care benefits at any time following a Scheduled
Closing. Buyer acknowledges and agrees that, with respect to
the Hired Employees, Buyer is a successor employer for purposes
of the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended ("COBRA"), that the Hired Employees will not, as a
result, be deemed to have had a termination of employment for
purposes of COBRA and that any COBRA notices or coverages
required to be given or made available to any Hired Employee
shall be given or made by Buyer and not Seller or the
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Subsidiaries, provided that Buyer does not assume, and shall
not be deemed to have assumed, any COBRA obligations which
Seller or any Subsidiary may have to former employees of Seller
or such Subsidiary whose employment was terminated on or prior
to the relevant Closing Date, or to any Retained Employees who
do not accept employment with Buyer, and provided further that
Seller shall be responsible for any COBRA coverages required to
be made available to any Hired Employee who is entitled to
COBRA coverage under existing plans of Seller or any Subsidiary
as a result of the Transactions.
(e) Acknowledgement of Responsibility. Buyer
acknowledges and agrees that as of the date and time a
Scheduled Closing is effective, Buyer shall be considered for
purposes of the Worker Adjustment and Retraining Notification
Act (the "WARN Act") the employer of the Retained Employees
related to the Transferred Assets transferred at such Scheduled
Closing and that Buyer (and not Seller or the Subsidiaries)
shall thereupon be responsible for complying with the WARN Act
with respect to such Retained Employees and that prior to such
time none of such Retained Employees shall be, nor shall they
be deemed to be, terminated. Buyer shall indemnify and hold
Seller and its Affiliates harmless, in accordance with Sections
11.4, 11.5 and 11.6, from and against all Losses (i) resulting
from any compliance obligation (including, without limitation,
the obligation to give notice or pay money) that Seller and its
Affiliates or Buyer has under the WARN Act arising from the
termination of any Retained Employee or (ii) resulting from any
claims of the Hired Employees (including, without limitation,
claims for health care coverage or benefits); provided,
however, Buyer shall neither be responsible for, nor indemnify
Seller and its Affiliates for the consequences of any WARN
event which may be caused by the actions of Seller or its
Affiliates with respect to employees whom Seller and its
Affiliates retain pursuant to rights set forth in Section
2.10(b) above.
Notwithstanding the foregoing, nothing in this Section 2.10
shall, or shall be deemed to, create any rights in favor of any
person not a party hereto or to constitute an employment
agreement or condition of employment for any employee of Seller
or any Affiliate of Seller or any Retained Employee.
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Section 2.11 Use of Names.
(a) Although trade names of Seller and the
Subsidiaries, other than the Transferred Business Names, are
Excluded Assets, such names appear on certain of the fixed
Transferred Assets, such as certain fixtures and Equipment, and
on supplies, materials, stationery and similar consumable items
which will be on hand at the Facilities at a Scheduled Closing
with respect to such Facilities. Notwithstanding that such
names are Excluded Assets, Buyer shall be entitled to use such
consumable items for a period of three (3) months following the
Scheduled Closing in which such items are transferred and shall
have up to six (6) months following such Scheduled Closing to
remove such names from fixed Transferred Assets, provided that
Buyer shall not send correspondence or other materials to third
parties on any stationery that contains a trade name (other
than a Transferred Business Name) of Seller or any Affiliate of
Seller.
(b) Seller hereby grants to Buyer, for the period
from the relevant Closing Date through the expiration of the
ninetieth day thereafter, the non-exclusive right and license
to use, solely in connection with the operation of the
Facilities transferred on such Closing Date, the clinical
policy and procedures manuals of Seller and/or the Subsidiaries
(the "Manuals") presently used at such Facilities. Such
license shall be on the following terms and conditions:
(i) Buyer shall accept the Manuals in their
present condition, "AS IS" and "WITH ALL FAULTS" and without
any representation or warranty of any kind whatsoever,
either express or implied, by Seller, including, but not
limited to, any representation or warranty that the Manuals
are adequate for Buyer's operation of the relevant
Facilities after the relevant Scheduled Closing or are in
compliance with any Laws;
(ii) Buyer agrees that Seller shall have no
obligation whatsoever to update or otherwise revise the
Manuals, even if Seller or its Affiliates are revising
similar manuals at other healthcare facilities, and that
Buyer shall have sole responsibility for updating
and revising such manuals;
(iii) Buyer acknowledges and agrees that the
Manuals are confidential and proprietary information of
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Seller and its Affiliates and Buyer agrees that it will not,
directly or indirectly, reproduce, distribute or disclose
the contents of the Manuals except as may be required in the
operation of such Facilities (including, but not limited to,
as may be required by any Laws) and shall exercise due care
to otherwise preserve and protect the proprietary nature
thereof, provided that Seller and the Subsidiaries
acknowledge that the Manuals used by Buyer and the Buyer
Subsidiaries more likely than not contain information that
is substantially similar to information contained in the
Manuals;
(iv) Upon the termination of Buyer's use of
the Manuals pursuant to this Section, Buyer shall return to
Seller all originals and copies of the Manuals; and
(v) Buyer shall implement its own policy and
procedure manuals promptly following the relevant Closing
Date, and in any event by the date on which the license
hereby granted to Buyer terminates.
(c) Notwithstanding the assignment to Buyer of the
Transferred Business Names, Seller and its Affiliates and their
assignees shall have the nonexclusive right to use such
Transferred Business Names, consistent with past practices, in
connection with the operation of previously and currently
operated healthcare facilities of Seller and its Affiliates not
included in the Transferred Assets, and Buyer, on behalf of
itself and each Buyer Subsidiary, hereby grants Seller and its
Affiliates and their assignees a fully paid-up, perpetual right
and license to use such Transferred Business Names in such
manner in connection with the operation of such facilities,
such license to be effective as of the relevant Scheduled
Closing in which such Transferred Business Names are assigned
to Buyer and the Buyer Subsidiaries.
Section 2.12 No Assignment If Breach; Seller's Discharge
of Assumed Liabilities.
(a) Notwithstanding anything contained in this
Agreement to the contrary, this Agreement shall not constitute
an agreement to assign any Transferred Asset, or assume any
Assumed Liability, if the attempted assignment or assumption of
the same, as a result of the absence of the consent or
authorization of a third party or failure of a right of first
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refusal notice period to expire, would constitute a breach or
default under any lease, agreement, encumbrance or commitment,
would violate any Law or would in any way adversely affect the
rights, or increase the obligations, of Buyer, Seller or any
Subsidiary with respect thereto; provided that the assignment
of any contract, including without limitation Medicare,
Medicaid and similar provider agreements, which may lawfully be
made subject to customary conditions subsequent (such as needs
surveys, evaluations of Buyer or other determinations by the
counterparties to such agreements) shall be deemed not to
constitute a default under, or to in any way adversely affect
the rights or increase the obligations of Buyer with respect
to, such lease, agreement, encumbrance or commitment, whether
or not such condition or conditions subsequent are met on or
prior to the relevant Scheduled Closing. Except as provided in
Section 2.12(c), if any such consent or authorization is not
obtained, or if an attempted assignment or assumption would be
ineffective or would adversely affect the rights or increase
the obligations of Seller, a Subsidiary or Buyer, with respect
to any such lease, agreement, encum- brance or commitment, so
that Buyer would not, in fact, receive all such rights, or
assume the obligations, of Seller or Subsidiary with respect
thereto as they exist prior to such attempted assignment or
assumption, then Seller and Buyer shall, and Seller shall cause
each Subsidiary to, enter into such reasonable cooperative
arrangements as may be reasonably acceptable to both Buyer and
Seller (including without limitation, sublease, agency,
management, indemnity or payment arrangements and enforcement
at the cost and for the benefit of Buyer of any and all rights
of Seller and the Subsidiaries against an involved third party)
to provide for or impose upon Buyer the benefits of such
Transferred Asset or the obligations of such Assumed Liability,
as the case may be, and any transfer or assignment to Buyer by
Seller or a Subsidiary of any such Transferred Asset, or any
assumption by Buyer of any such Assumed Liability, which shall
require such consent or authorization of a third party that is
not obtained shall be made subject to such consent or
authorization being obtained. Except as provided in Section
2.12(c), if the parties cannot agree on any such arrangement,
or any such arrangement would not be reasonably practicable, to
provide Buyer with materially all the benefits of such
Transferred Asset or materially all the obligations of such
Assumed Liability, then such Transferred Asset or Assumed
Liability, as the case may be, shall be excluded from the
Transactions and shall be deemed to be an Excluded Asset or an
Excluded Liability, as the case may be, and Buyer and Seller
shall negotiate in good faith an equitable adjustment in the
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Purchase Price, or resolve any disagreement respecting such
adjustment, in accordance with the procedures of Section 2.14.
(b) Notwithstanding any other provision of this
Agreement, during the period between the date hereof and the
relevant Scheduled Closing, Seller may, for the purpose of
facilitating consummation of the Transactions and with the
consent of Buyer (which will not be unreasonably withheld),
cause any Subsidiary to acquire a fixed asset, or any direct or
indirect interest therein, that results in the simultaneous
discharge of all or any part of a liability that exists as of
the date hereof which, but for such acquisition, would be an
Assumed Liability; provided that in each such case it gives
prompt notice of such acquisition to Buyer. In the event of
any such acquisition, Buyer and Seller shall negotiate in good
faith an equitable adjustment to the Purchase Price, or resolve
any disagreement respecting such adjustment, in accordance with
the procedures of Section 2.14.
(c) The provisions of Section 2.12(a)
notwithstanding, neither Buyer nor Seller shall be obligated to
close with respect to a given Facility if any private third
party consent or authorization in respect of Transferred Assets
and Assumed Liabilities related to such Facility that is
enumerated in Schedule 2.12(c) (the "Schedule of Required
Consents") is not obtained, unless both Buyer and Seller waive
in writing their respective conditions precedent that such
consent or authorization be obtained prior to the transfer of
such Facility. With respect to all other private third party
consents or authorizations with respect to such Facility that
have not been obtained by the relevant Scheduled Closing, if
the parties have not entered into a cooperative arrangement in
respect of the Transferred Asset or Assumed Liability to which
such consent or authorization relates, then, subject to the
provisions of Section 2.18 regarding Buyer's right to reject
certain contracts within sixty (60) days following the
Scheduled Closing at which such contracts are assigned or
purported to be assigned, (i) Buyer hereby agrees to accept the
assignment of any such pertinent Transferred Asset, and to
assume any such pertinent Assumed Liability, as the case may
be, whether or not such assignment or assumption is made
subject to such consent or authorization being obtained after
the relevant Scheduled Closing, and (ii) the parties agree to
continue to cooperate with one another, pursuant to the
provisions of Sections 5.2 and 5.3, to obtain any such
requisite consent
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Section 2.13 Closings. All of Seller's and the
Subsidiaries' right, title and interest in a Facility and all
other Transferred Assets and Assumed Liabilities which relate
to, or constitute a part of, a Facility shall be transferred to
Buyer or the applicable Buyer Subsidiaries at a "Scheduled
Closing" (as defined below). Subject to the terms and
conditions hereof, the Transferred Assets shall be transferred
to Buyer at one of three Scheduled Closings: The "First
Closing" (as defined below), the "Second Closing" (as defined
below) or the "Final Closing" (as defined below). The First
Closing, Second Closing and Final Closing, collectively, are
the "Scheduled Closings" and each is a "Scheduled Closing." A
date on which a Scheduled Closing actually occurs is a "Closing
Date," and the Closing Date of the Final Closing is the "Final
Closing Date." A Scheduled Closing shall be effective for all
purposes as to each Facility which is the subject of such
Scheduled Closing (and the Transferred Assets and Assumed
Liabilities related thereto or constituting a part thereof)
(collectively, the "Subject Transferred Assets") at 11:59 p.m.
on the relevant Closing Date, as determined by reference to the
local time zone in which the Facility is located.
Notwithstanding the foregoing, either the First or Second
Closing may also be a Final Closing and if the First Closing is
the Final Closing, there shall be no Second Closing.
(a) The First Closing. Provided that no Scheduled
Closing shall occur after the Termination Date set forth in
Section 10.1(b), the "First Closing" shall occur at a mutually
agreeable time and place or places within five (5) business
days after the first date on which all of the conditions set
forth in Article 8 and Article 9 hereof are capable of being
satisfied as to (i) at least seven (7) out of nine (9)
Facilities identified on Schedule 2.13A hereto, and (ii)
Transferred Assets and Assumed Liabilities related thereto or
constituting a part thereof, together with all other
Facilities, Transferred Assets and Assumed Liabilities to be
transferred at such First Closing account in the aggregate for
at least Twenty-Nine Million Dollars ($29,000,000) of the
EBITDA (as defined in Section 3.17(a)) assigned to Facilities
for this purpose as shown on Schedule 2.13B hereto, and all
such Facilities, Transferred Assets and Assumed Liabilities
shall be the Subject Transferred Assets with respect to the
First Closing.
(b) The Second Closing. Provided that the First
Closing has occurred and that no Scheduled Closing shall occur
after the Termination Date, the "Second Closing" shall occur at
a mutually agreeable time and place or places, on the date
which is within five (5) business days after the first date on
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which all of the conditions set forth in Article 8 and Article
9 hereof are capable of being satisfied as to at least five (5)
additional Facilities and the Transferred Assets and Assumed
Liabilities related thereto or constituting a part thereof, not
the subject of the First Closing, and such Facilities,
Transferred Assets and Assumed Liabilities shall be the Subject
Transferred Assets with respect to the Second Closing, provided
that the Second Closing shall be held, in any event, within
thirty (30) days of the First Closing with respect to any
Facilities for which the conditions to Closing have been met as
of such date.
(c) The Final Closing. Provided that a First
Closing has occurred, the "Final Closing" shall occur with
respect to Facilities that are not the subject of the First or
Second Closings at a mutually agreeable place or places and at
a mutually agreeable time as follows:
(i) If all of the conditions set forth in
Articles 8 and 9 hereof are capable of being satisfied on or
prior to the Termination Date as to all Facilities that are
not included in the First Closing or the Second Closing,
then the Final Closing shall occur within five (5) business
days after the first date upon which such conditions may be
satisfied, but in no event later than the Termination Date.
(ii) If all of the conditions set forth in
Articles 8 and 9 hereof are capable of being satisfied on or
prior to the Termination Date as to some, but not all, of
the Facilities that are not included in the First Closing or
the Second Closing, then the Final Closing shall occur
within five (5) business days after the parties have
mutually agreed on the Facilities as to which such
conditions will not be satisfied, but in no event later than
the Termination Date.
(d) Deliveries by Seller. At each Scheduled Closing
Seller shall deliver, or cause the Subsidiaries to deliver, to
Buyer:
(i) A Bill or Bills of Sale and Assignment in
substantially the form of Exhibit A executed by each
Subsidiary with respect to the Subject Transferred Assets of
the Subsidiary covered thereby;
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(ii) Grant deeds (or equivalent special or
limited warranty deeds for Owned Real Properties outside
California), properly executed and acknowledged by each
Subsidiary with respect to the Owned Real Properties of the
Subsidiary included in the Subject Transferred Assets;
(iii) Separate assignments and assumptions in
substantially the form of Exhibit B executed by each
Subsidiary with respect to each Real Property Lease of the
Subsidiary included in the Subject Transferred Assets that
is designated by either Buyer or Seller;
(iv) Instruments of transfer, sufficient to transfer
personal property interests of each Subsidiary that are
included in the Subject Transferred Assets but not otherwise
transferred by the Bills of Sale and Assignment referred to in
clause (i) above, executed by each Subsidiary in the form
customarily used in commercial transactions in the areas in
which such other personal property of such Subsidiary is
located;
(v) Such other instruments of transfer,
executed by each of the pertinent Subsidiaries necessary to
transfer to and vest in Buyer all of Seller's and the
Subsidiaries' rights, title and interest in and to the
Subject Transferred Assets or which may be required by the
Title Insurer (as defined in Section 8.7), including owner's
and lessee's affidavits, if any; and
(vi) Possession of the Subject Transferred Assets.
All such documents of transfer shall be in a form and substance
reasonably satisfactory to Buyer.
(e) Deliveries by Buyer. At each Scheduled Closing,
Buyer shall deliver to Seller:
(i) Immediately available funds, by way of
wire transfer to an account or accounts designated by
Seller, in an amount equal to the amounts then due pursuant
to Sections 2.5 and 2.6(a) (including, with respect to the
First Closing, the amount due for the covenant not to
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compete as specified by the last sentence of Section 2.5),
as adjusted by the expenses due at such Scheduled Closing
pursuant to Section 5.5;
(ii) Separate assignments and assumptions in
substantially the form of Exhibit C executed by Buyer and
the applicable Buyer Subsidiaries with respect to each Real
Property Lease included in the Subject Transferred Assets
that is designated by either Buyer or Seller; and
(iii) An Assumption Agreement or Assumption
Agreements with respect to the Assumed Liabilities assumed
at such Scheduled Closing, in substantially the form of
Exhibit C, executed by Buyer and the applicable Buyer
Subsidiaries in favor of Seller and each of the applicable
Subsidiaries.
All such documents of transfer shall be in a form and substance
reasonably satisfactory to Seller.
(f) Escrow. If either of the parties desires to
consummate a Scheduled Closing through an escrow, an escrow
shall be opened with, and the escrow agent shall be, Chicago
Title Company (the "Escrow Agent"), by depositing a fully
executed copy of this Agreement with Escrow Agent to serve as
escrow instructions. This Agreement shall be considered the
primary escrow instructions between the parties, but the
parties shall execute such additional escrow instructions as
Escrow Agent shall require and the parties may agree upon in
order to clarify the duties and responsibilities of Escrow
Agent. In the event of any conflict between this Agreement and
such additional escrow instructions, this Agreement shall
prevail. If a Scheduled Closing is to be consummated through
the Escrow Agent, then on or prior to the Closing Date, Buyer
shall cause the funds required by Subsection (e)(i) above to be
wired to Escrow Agent, and the parties shall deliver the
instruments of sale, assignment, conveyance and assumption
called for by Subsections (d) and (e) above to be delivered to
the Escrow Agent, and on the Closing Date, the Escrow Agent
shall close the escrow with respect to such Scheduled Closing
by:
(i) Causing the deeds for the Owned Real
Properties, the assignments of the Real Property Leases, and
any other documents which the parties may mutually designate
to be recorded in the official records of the appropriate
counties in which the pertinent Subject Transferred Assets
are located;
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(ii) Delivering to Seller by wire transfer of
immediately available funds, to an account or accounts
designated by Seller, the amounts called for by Subsection
(e)(i) above; and
(iii) Delivering to Buyer or Seller, as the
case may be, the other instruments referred to in
Subsections (d) and (e) above.
Section 2.14 Purchase Price Adjustment. If circumstances
exist that require the parties to negotiate in good faith
equitable adjustments in the Purchase Price pursuant to the
provisions of Section 2.12 (respecting absence of consents),
Sections 8.5 and 9.5 (dealing with certain prohibitions and
restraints), Section 6.2(c) (respecting Seller's obligations
with respect to environmental conditions), Section 8.7
(respecting the condition of title to interests in real
property) or Section 8.10 (respecting casualty losses or
condemnation) (Sections 2.12, 6.2(c), 8.5, 8.7, 8.10, 9.5 and
this Section 2.14 being collectively referred to as the
"Adjustment Sections"), then and in any of such events, such
negotiations, and the resolution of disagreements arising
therefrom, shall be conducted in accordance with the provisions
of this Section 2.14. The parties shall negotiate such
equitable adjustments in the Purchase Price in good faith prior
to any relevant Closing Date (as may be extended by mutual
agreement of the parties), provided, that any adjustment in the
Purchase Price shall be consistent with the Allocation
Schedule. If the parties are unable to agree by the day prior
to such relevant Closing Date, then such relevant Closing Date
(the "Original Closing Date") (and the Termination Date, if
necessary) shall be extended for up to fifteen (15) business
days to provide for the opportunity to resolve such
disagreement pursuant to the provisions of this Section 2.14.
On the day a Scheduled Closing would have occurred but for the
absence of agreement between the parties, each party shall
designate an individual (who may not be a present or former
officer, director, partner or employee of the party or of any
present or former investment banker, accounting firm, law firm
or attorney of or for the party) to mediate such disagreement,
and advise the other party in writing of the identity of such
individual, which advice shall be accompanied by a list of up
to ten (10) suggested neutral individuals to serve as a third
mediator. The mediators originally designated by each party
shall promptly confer about the selection of a third mediator
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from such lists, and within five (5) business days following
the Original Closing Date (or Termination Date, as the case may
be), the originally designated mediators shall agree upon and
(subject to availability) select the third mediator from the
lists submitted by the parties or otherwise, provided that if
the originally designated mediators cannot agree upon a third
mediator by such date, the third mediator shall be a retired
judge designated by Judicial and Arbitration Mediation
Services, Inc., located in Los Angeles, California. The three
mediators so selected are herein referred to as the "Panel".
Within two (2) business days following the designation of the
third mediator, each party shall submit to the Panel in
writing, its proposed equitable adjustments in the Purchase
Price. Such proposals shall be materially in accordance with
the last proposals made by such party to the other party during
the course of the aforementioned good faith negotiations
between the parties. The parties shall additionally submit
such memoranda, arguments, briefs and evidence in support of
their respective positions, and in accordance with such
procedures, as a majority of the Panel may determine. Within
seven (7) business days following the designation of the third
mediator, as to each adjustment of the Purchase Price about
which there is disagreement, the Panel shall, by majority vote,
select the proposed adjustment of the Purchase Price proposed
by one of the parties, it being agreed that the Panel shall
have no authority to alter any such proposal in any way.
Thereafter, the parties shall, subject to the terms and
conditions of this Agreement, consummate the Transactions on
the basis of such adjustments at a mutually agreeable time and
place or places, in accordance with and subject to the
provisions of Section 2.13, which shall be no later than the
fifteenth (15th) business day following the Original Closing
Date or such later date as the parties may agree upon. Subject
to the foregoing, the Panel may determine the issues in dispute
following such procedures, consistent with the language of this
Agreement, as it deems appropriate to the circumstances and
with reference to the amounts in issue, but in any event
consistent with the Allocation Schedule to the extent
applicable. No particular procedures are intended to be
imposed upon the Panel, it being the desire of the parties that
any such disagreement shall be resolved as expeditiously and
inexpensively as reasonably practicable. No member of the
Panel shall have any liability to the parties in connection
with service on the Panel, and the parties shall provide such
indemnities to the members of the Panel as they shall request.
Section 2.15 Transfer of Assets in Corporate Form. If
Buyer consents in writing in its sole and absolute discretion,
Seller may, prior to any Scheduled Closing, cause any
Transferred Asset or Assumed Liability to be assigned and
transferred by way of an assignment to Buyer of the stock of a
subsidiary of Seller (including the stock of any Subsidiary),
in which case all right, title and interest of Seller and any
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of its Affiliates in such subsidiary (which shall constitute
all of the outstanding capital stock and rights to acquire
capital stock in such subsidiary) shall be transferred to Buyer
at the Scheduled Closing as a Subject Transferred Asset. Any
such agreement of the parties shall become an amendment to this
Agreement.
Section 2.16 Assignment of Rights and Obligations to
Buyer Subsidiaries. Notwithstanding any contrary provisions
contained herein, the parties hereto agree that, prior to a
Scheduled Closing, Buyer, in its sole discretion, may assign
any or all of its rights and obligations with respect to the
Subject Transferred Assets and the Assumed Liabilities to be
transferred at such Scheduled Closing to one or more Buyer
Subsidiaries, provided that no such assignment shall relieve
Buyer of any obligation or liability to Seller hereunder, and
provided further that the following shall apply:
(a) Buyer will provide Seller with prompt written
notice of any such assignment.
(b) No such assignment shall be effected if the
making of the assignment will result in Seller's inability to
obtain any consent or authorization reasonably required to
consummate the Transactions or to avoid economic detriment to
the Seller arising from the consummation of the Transactions.
(c) Each such Buyer Subsidiary that is an assignee
of Buyer shall irrevocably appoint Buyer as its sole and
exclusive representative and agent authorized to act for and to
receive notices and payments on behalf of the Buyer
Subsidiaries in all matters arising from or related to this
Agreement and the Transactions.
(d) As a condition to Seller's agreement to such
assignments, Buyer hereby agrees that Buyer will at all times
be the ultimate parent entity of the consolidated group of
companies of which Buyer is a group member or that, in the
event of any reorganization involving Buyer and its
subsidiaries, the ultimate parent entity of the consolidated
group of companies emerging from such reorganization that
includes Buyer and its successors and assigns shall, prior to
any such reorganization, execute such documents as are
reasonably necessary to confirm the assumption by such ultimate
parent entity of Buyer's obligations to Seller hereunder.
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(e) Buyer shall remain jointly and severally liable
to Seller and the Subsidiaries and to third parties with
respect to any Assumed Liabilities transferred to a Buyer
Subsidiary, and, without limiting the generality of the
foregoing, hereby absolutely and unconditionally guarantees the
full, prompt and faithful performance by each Buyer Subsidiary
of all covenants and obligations to be performed by such Buyer
Subsidiary under this Agreement and any Related Agreement (as
defined in Section 3.4) which are assigned to such Buyer
Subsidiary, including but not limited to, the payment of all
sums stipulated to be paid by such Buyer Subsidiary pursuant to
such assignment, it being understood that each such covenant
and obligation constitutes the direct and primary obligation of
Buyer and that a separate action or actions may be brought and
prosecuted against Buyer whether action is brought against the
pertinent Buyer Subsidiary or whether such Buyer Subsidiary is
joined in any such action or actions (Buyer hereby waiving any
right to require Seller or a Subsidiary to proceed against a
Buyer Subsidiary). Buyer hereby authorizes Seller, without
notice and without affecting Buyer's liability hereunder, from
time to time to (x) renew, compromise, extend, accelerate, or
otherwise change the terms of any obligation of a Buyer
Subsidiary hereunder with the agreement of such Buyer
Subsidiary, (y) take and hold security for the obligations
guaranteed, and exchange, enforce, waive and release any such
security, and (z) apply such security and direct the order or
manner of sale thereof as Seller in its discretion may
determine. Buyer hereby further waives:
(i) Any defense that may arise by reason of
the incapacity or lack of authority of any Buyer Subsidiary;
(ii) Any defense based upon a statute or rule
of law which provides that the obligations of a surety must
be neither larger in amount nor in other respects more
burdensome than those of the principal; and
(iii) Any duty on the part of Seller or a
Subsidiary to disclose to Buyer any facts that Seller or a
Subsidiary may now or hereafter know about a Buyer
Subsidiary.
Section 2.17 Certain Other Assets and Liabilities.
Effective as of, and subject to the occurrence of, the First
Closing, Seller and Buyer shall enter into sublease and license
arrangements respecting Seller's Psychiatric Hospital
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Information System, all as more particularly set forth on
Schedule 2.17 hereto (the "PHIS System"). Notwithstanding the
provisions of Schedule 2.17 or such sublease and license
arrangements, the Seller's database of business and patient
information upon which the PHIS System operates shall continue
to be owned and retained by Seller and shall be an Excluded
Asset for all purposes hereunder, subject to the provisions of
Section 5.7. For the period identified in Schedule 2.17, Buyer
shall provide Seller and its Affiliates, and, pursuant to the
contracts identified in Schedule 2.17, to the third parties
identified therein, access to and support and services from the
PHIS System and the employees of Buyer who operate it for the
benefit of the psychiatric healthcare facilities and businesses
of Seller and its Affiliates that are currently owned or
operated by Seller and its Affiliates and that are not or do
not become Transferred Assets hereunder and for the benefit of
such third parties pursuant to the terms of such third party
contracts. Such support and services shall be provided in the
same manner and to the same extent that they are currently
provided to such facilities, businesses and third parties. As
of such Closing Date, Buyer will grant to Seller and its
Affiliates a fully paid-up and royalty-free right and license
for such period of time to have access to and to utilize the
PHIS System for such purposes.
Section 2.18 Rejection of Certain Contracts. The
provisions of this Section 2.18 shall apply to the following
categories of Assumed Contracts: (i) those subject to the
provisions of Section 2.1(f)(iii); (ii) those subject to the
provisions of the second sentence of Section 2.12(c); and (iii)
those subject to Section 6.1(f) that are entered into by Seller
or a Subsidiary after the date hereof in violation of Section
6.1(f). With respect to each such contract (a "Contingent
Contract"):
(a) Buyer or the pertinent Buyer Subsidiary shall
have the right to reject such Contingent Contract by giving a
written notice of such rejection to Seller within sixty (60)
days following the relevant Scheduled Closing, such written
notice to be accompanied by originals of the contract then in
Buyer's or the Buyer Subsidiary's possession, copies of any
written communications between Buyer or the Buyer Subsidiary
and the counterparty to such contract relating to the subject
matter thereof, and instruments evidencing the reassignment of
such contract to Seller or the pertinent Subsidiary in form
reasonably satisfactory to Buyer and Seller, in which case such
contract shall be treated as an Excluded Asset, and the
liabilities related thereto shall be treated as an Excluded
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Liability, for all purposes of this Agreement, subject to the
further provisions of this Section 2.18.
(b) In the event that Seller or the pertinent
Subsidiary incurs any costs in connection with the termination
of any such Contingent Contract so rejected by Buyer (including
payments during any applicable notice period required to
terminate such contract) and Buyer or the pertinent Buyer
Subsidiary continues to do business with the counterparty to
such contract related to the subject matter thereof during any
period for which Seller or the applicable Subsidiary is
obligated to make payments to such counterparty, then Buyer
will reimburse Seller for one-half of the payments that Seller
or the applicable Subsidiary is obligated to make to such
counterparty in connection with such termination, but not in
excess of one-half of the payments that Seller or the
applicable Subsidiary is obligated to make to such counterparty
under such contract for a period of ninety (90) days.
(c) With respect to any Contingent Contract subject
to clause (ii) of this Section 2.18 that is not also subject to
either clause (i) or clause (iii) of this Section 2.18 and that
is not rejected by Buyer pursuant to Subsection (a) above,
Buyer agrees to indemnify and hold harmless Seller and the
Subsidiaries, in accordance with the provisions of Sections
11.3 through 11.6, from and against any and all Losses arising
from or related to the lack of any consent or authorization in
connection with the assignment of such Contingent Contract to
Buyer (or the pertinent Buyer Subsidiary) hereunder.
(d) In the event Buyer rejects a Contingent Contract
pursuant to Subsection (a), then, notwithstanding any other
provision of this Agreement, Seller shall have no liability to
Buyer and the Buyer Subsidiaries for Losses under the
provisions of Sections 11.3 through 11.6 related to such
Contingent Contract for the period prior to such rejection or
for the amounts due Seller under Subsection (b) above.
(e) With respect to any Contingent Contract subject
to clause (iii) of this Section 2.18 that appears on an updated
Schedule 2.1(f) delivered pursuant to Section 6.3 and that is
not rejected by Buyer pursuant to Subsection (a) above, then,
notwithstanding any other provision of this Agreement, Seller
shall have no liability to Buyer and the Buyer Subsidiaries for
Losses under the provisions of Sections 11.3 through 11.6 for
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violation of Section 6.1(f) with respect to such Contingent
Contract.
Section 2.19 Remaining Schedules. Notwithstanding
anything to the contrary herein, this Agreement shall be deemed
cancelled and of no further force and effect if the parties
shall have failed to agree upon the Schedules enumerated in
Exhibit E, if any, within five (5) business days following the
date hereof, the parties hereby agreeing to cooperate with one
another in good faith and to work expeditiously to agree upon
such Schedules within such period. Such agreement shall be
evidenced by a duly executed amendment of this Agreement that
deletes this Section 2.19.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer, as of the
date hereof, as follows, except as set forth in Schedules
numbered in relation to the Sections set forth below:
Section 3.1 Organization and Corporate Power. Seller is
a corporation duly incorporated and validly existing under the
laws of, and is authorized to exercise its corporate powers,
rights and privileges and is in good standing in, the State of
Nevada and has full corporate power to carry on its business as
presently conducted and to own or lease and operate its
properties and assets now owned or leased and operated by it
and to perform the transactions on its part contemplated by
this Agreement and all other agreements contemplated hereby.
Section 3.2 Subsidiaries.
(a) Each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its
state of incorporation (which, in the case of Subsidiaries
existing on the date of this Agreement, is indicated on
Schedule A-1). Each Subsidiary has all requisite power and
authority (corporate and otherwise) to carry on its business as
presently conducted and to own or lease and operate its
properties and assets now owned or leased and operated by it
and to perform the transactions on its part contemplated by
this Agreement and all other agreements contemplated
hereby.
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(b) All of the outstanding capital stock of each
Subsidiary has been duly authorized and is validly issued,
fully paid and nonassessable and, except as indicated on
Schedule A-1, is owned beneficially and of record by Seller or
another subsidiary of Seller as indicated on Schedule A-1.
Except as provided in Schedule A-1, there are no (i) rights,
subscriptions, warrants, options, conversion rights or
agreements of any kind outstanding to purchase or otherwise
acquire any shares of capital stock of any Subsidiary, or (ii)
securities or obligations of any kind convertible into or
exchangeable for any shares of capital stock of any Subsidiary,
or (iii) obligations of any kind obligating Seller to sell or
dispose of all or any part of Seller's ownership interest
therein. The Subsidiaries listed on Schedule A-1 are, on the
date hereof, the only subsidiaries of Seller that have any
right or interest in, or title to the Facilities.
(c) The board of directors of each Subsidiary and,
if required, its shareholders, have duly and effectively
authorized (i) the sale of the Transferred Assets to be sold by
such Subsidiary and (ii) the execution, delivery and
performance of the Related Agreements (as defined in Section
3.4) and all other agreements contemplated hereby and thereby
to which such Subsidiary is a party. No other corporate act or
proceeding on the part of any Subsidiary, its board of
directors or its shareholders is necessary to authorize any
Related Agreement or other agreement contemplated hereby and
thereby or the transactions contemplated hereby and thereby.
(d) The Related Agreements and all other agreements
contemplated hereby and thereby to which any Subsidiary is a
party will, as of each Scheduled Closing, have been duly
executed and delivered by each such Subsidiary, and each such
agreement, when executed and delivered, will constitute a valid
and binding obligation of such Subsidiary, enforceable against
such Subsidiary in accordance with its terms, except as it may
be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereafter in effect
relating to creditors' rights generally and that the remedy of
specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding may be
brought.
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Section 3.3 Authority Relative to this Agreement. The
execution, delivery and performance of this Agreement and all
other agreements contemplated hereby and the consummation of
the transactions contemplated hereby and thereby have been duly
and effectively authorized by the board of directors of Seller;
no other corporate act or proceeding on the part of Seller, its
board of directors or its shareholders is necessary to
authorize this Agreement, any such other agreement or the
transactions contemplated hereby and thereby. This Agreement
has been, and each of the other agreements contemplated hereby
will, as of each Scheduled Closing, have been, duly executed
and delivered by Seller, and this Agreement constitutes, and
each such other agreement when executed and delivered will
constitute, a valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except
as it may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereafter in effect
relating to creditors' rights generally and that the remedy of
specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding may be
brought.
Section 3.4 Absence of Breach. Subject to the provisions
of Sections 3.5 and 3.6 below regarding private party and
governmental consents, and except for compliance with the
requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), and any regulatory or
licensing Laws applicable to the businesses and assets
represented by the Transferred Assets, the execution, delivery
and performance by Seller of this Agreement and all other
agreements contemplated hereby or executed in connection
herewith (the "Related Agreements"), and the execution and
delivery by any Subsidiary of the Related Agreements to which
it is a party, and the performance by the Subsidiaries of the
transactions contemplated by this Agreement and the Related
Agreements entered into by the Subsidiaries, do not, (a)
conflict with or result in a breach of any of the provisions of
the Articles or Certificates of Incorporation or Bylaws or
similar charter documents (the "Charter Documents") of Seller
or of any of the Subsidiaries, (b) contravene any Law or cause
the suspension or revocation of any License presently in
effect, which affects or binds Seller or any of the
Subsidiaries, or any of their properties, except where such
contravention, suspension or revocation will not have a
Material Adverse Effect (as defined below) on the Transferred
Assets and will not affect the validity or enforceability of
this Agreement and the Related Agreements or the validity of
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the Transactions contemplated hereby and thereby, or (c)
conflict with or result in a breach of or default (with or
without notice or lapse of time or both) under any indenture or
loan or credit agreement or any other agreement or instrument
to which Seller or any of the Subsidiaries is a party or by
which it or they or any of their properties may be affected or
bound, the effect of which conflict, breach, or default, either
individually or in the aggregate, would be a Material Adverse
Effect on the Transferred Assets. As used herein, a "Material
Adverse Effect": (x) when used with respect to the Transferred
Assets, means a material adverse effect on the Transferred
Assets and on the businesses operated therefrom, including
their condition (financial or otherwise) and results of
operations, taken as a whole; (y) when used with respect to any
portion of the Transferred Assets (including, without
limitation, a Facility), means a material adverse effect on
such portion of the Transferred Assets and on the businesses
operated therefrom, including their condition (financial or
otherwise) and results of operations, taken as a whole; and (z)
when used with respect to an entity, such as Seller, a
Subsidiary or Buyer, means a material adverse effect on the
business, condition (financial or otherwise) and results of
operations of such entity taken as a whole (including any
subsidiaries of such entity).
Section 3.5 Private Party Consents. Except as set forth
in Schedule 3.5, the execution, delivery and performance by
Seller of this Agreement and the Related Agreements, and the
execution and delivery by any Subsidiary of the Related
Agreements to which it is a party, and the performance by the
Subsidiaries of the transactions contemplated by this Agreement
and the Related Agreements to be performed by the Subsidiaries,
do not require the authorization, consent or approval of any
non-governmental third party of such a nature that the failure
to obtain the same would have a Material Adverse Effect on the
Transferred Assets or a Facility.
Section 3.6 Governmental Consents. The execution,
delivery and performance by Seller of this Agreement and the
Related Agreements, and the execution and delivery by any
Subsidiary of the Related Agreements to which it is a party,
and the performance by the Subsidiaries of the transactions
contemplated by this Agreement and the Related Agreements to be
performed by the Subsidiaries, do not require the
authorization, consent, approval, certification, license or
order of, or any filing with, any court or governmental agency
of such a nature that the failure to obtain the same would have
a Material Adverse Effect on the Transferred Assets or a
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Facility, except for compliance with the HSR Act and except for
such governmental authorizations, consents, approvals,
certifications, licenses and orders that customarily accompany
the transfer of health care facilities such as the Facilities.
Section 3.7 Brokers. Except as shown on Schedule 3.7, no
broker, finder, or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection
with this Agreement or the Transactions contemplated hereby
based upon any agreements or arrangements or commitments,
written or oral, made by or on behalf of Seller or any of its
Affiliates. Seller shall be solely responsible for the payment
of any such fee or commission to any person or entity listed on
Schedule 3.7 as an exception to the foregoing.
Section 3.8 Title to Property.
(a) Each Subsidiary has good and defensible title,
or valid and effective leasehold rights in the case of leased
property, to all tangible personal property included in the
Transferred Assets to be sold, conveyed, assigned, transferred
and delivered to Buyer by such Subsidiary, free and clear of
all liens, charges, claims, pledges, security interests,
equities and encumbrances of any nature whatsoever, except for
those created or allowed to be suffered by Buyer and except for
the following (individually and collectively, the "Permitted
Encumbrances"): (i) the lien of current taxes not delinquent,
(ii) liens listed on Schedules 3.8(a) and 3.8(b), (iii) the
Assumed Liabilities, (iv) such consents, authorizations,
approvals and licenses referred to in Sections 3.5 and 3.6, and
(v) liens, charges, claims, pledges, security interests,
equities and encumbrances which will be discharged or released
either prior to, or substantially simultaneously with, the
Scheduled Closing at which such property is sold, conveyed,
assigned and transferred to Buyer and other possible minor
matters that in the aggregate are not substantial in amount and
do not materially detract from or interfere with the present or
intended use of such property. All such tangible personal
property is in good operating condition and repair, subject to
ordinary wear and tear and ordinary and routine maintenance,
and is reasonably adequate for the operation of the Facilities
as they are presently operated.
(b) Except as set forth on Schedule 3.8(b), and
except for the Owned Real Property and the Leased Real
Property, no Subsidiary owns any fee or leasehold or other
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interests in any real property used in and necessary for the
conduct of the operations of any Facility as presently
conducted. Each Subsidiary has good and marketable title to
all Owned Real Property, or valid and effective leasehold
rights in the case of the Leased Real Property, included in the
Transferred Assets to be sold, conveyed, transferred and
delivered to Buyer by such Subsidiary, free and clear of all
liens except for those created or allowed to be suffered by
Buyer and except for the following: (i) Permitted
Encumbrances, (ii) liens (not including liens for borrowed
money or the deferred purchase price of property) that do not
materially impair the use of the Owned Real Property subject
thereto, as such Owned Real Property is being used on the date
hereof, (iii) easements and similar encumbrances disclosed by
current standard ALTA Preliminary Title Reports, delivered to
and approved by Buyer prior to the date hereof (except for such
easements or similar encumbrances shown on Schedule 8.7(b)),
and (iv) zoning, set back, building and other similar
restrictions including, without limitation, restrictions and
requirements affecting the Owned Real Property and the Leased
Real Property imposed by deeds, leases, development agreements,
declarations, and redevelopment authorities, which are not
being violated in any manner that would cause a Material
Adverse Effect on any Facility as currently used and operated.
The condition of the Owned and Leased Real Property is such
that it will not materially adversely affect the operations of
the Transferred Assets on or from such Owned and Leased Real
Property. All of the improvements on land included in the
Transferred Assets are in good condition and repair, subject to
those matters disclosed in Section 3.16 or Schedule 3.16,
ordinary wear and tear and ordinary and routine maintenance,
and in view of the purpose for which such improvements are
being used, free of any material structural or engineering
defects.
Section 3.9 Assumed Contracts. Except for such matters
that, when viewed in the aggregate, do not have a Material
Adverse Effect on a Facility, (a) there is no liability to any
person by reason of the default by Seller or a Subsidiary under
any Assumed Contract, (b) neither Seller nor any Subsidiary has
received written or other notice that any person intends to
cancel or terminate any Assumed Contract, (c) all of the
Assumed Contracts are in full force and effect and without any
material default by any party or to the knowledge of Seller and
the Subsidiaries, any event which, with the passage of time or
the giving of notice or both would be such a material default,
(d) subject to the provisions of Sections 3.5 and 3.6, the
consummation of the transactions contemplated by this Agreement
will not constitute and, to the best of Seller's current actual
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knowledge, no event has occurred which, with or without the
passage of time or the giving of notice or both, would
constitute a material breach or default by Seller or a
Subsidiary of such Assumed Contract, or would cause the
acceleration of any obligation of Seller or any Subsidiary or
the creation of any lien (except for Permitted Encumbrances)
upon any Transferred Asset, and (e) neither Seller nor any
Subsidiary has waived any right under any Assumed Contract;
provided that Seller makes no separate representation or
warranty under this Section 3.9 respecting compliance with the
provisions of any Assumed Contract related to title to or
condition of property, licenses, environmental conditions,
hazardous substances or environmental laws, taxes, or
compliance with laws generally, it being the intent of the
parties that warranties respecting such matters shall be made
exclusively under the provisions of Sections 3.8, 3.10, 3.16,
3.20, and 3.25. Seller has previously delivered to Buyer true
and complete copies of all written Assumed Contracts except
where the failure to so deliver a copy thereof will not have a
Material Adverse Effect on a Facility.
Section 3.10 Licenses. Except as set forth on Schedule
3.10, (a) the Subsidiaries possess all Licenses necessary for
their operation of the Facilities at the locations and in the
manner presently operated (other than such Licenses the absence
of which would not have a Material Adverse Effect on a
Facility), (b) if required, such Facilities are accredited by
applicable accrediting agencies as necessary for their
operations in the manner presently operated, and (c) such
Facilities are certified for participation in the Medicare
program and have current and valid provider contracts with such
program. Schedule 3.10 lists each License held by a Subsidiary
and related to the ownership or operation of a Facility and a
true and correct copy of each has previously been delivered to
Buyer by Seller (other than such Licenses the absence of which
would not have a Material Adverse Effect on a Facility). All
such Licenses are in full force and effect.
Section 3.11 U.S. Person; Resident of Georgia. Neither
Seller nor any Subsidiary is a "foreign person" for purposes of
Section 1445 of the Internal Revenue Code of 1986, as amended
(the "Code"), or any other Laws requiring withholding of
amounts paid to foreign persons. For purposes of the
withholding tax imposed by Section 48-7-128 of the Official
Code of Georgia Annotated, each Subsidiary that owns
Transferred Assets constituting Owned Real Property located in
Georgia and related tangible personal property is a corporation
the principal place of business of which is located in the
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State of Georgia. The Seller shall, or shall cause the
relevant Subsidiaries to, provide an appropriate affidavit of
each such Subsidiary's residence. Seller acknowledges that
jurisdictions other than Georgia may impose withholding
obligations similar to those imposed by Georgia and that it is
Seller's obligation to provide evidence of exemptions from such
withholding taxes.
Section 3.12 Employee Relations. With respect to the
Retained Employees, except as set forth on Schedule 3.12:
(a) Neither Seller, nor any Subsidiary nor any
Facility is a party to any agreement with any union, trade
association or other similar employee organization, no written
demand has been made for recognition by a labor organization,
and to Seller's knowledge it has received no notice of any
union organizing activities by or with respect to any such
employees;
(b) There are no controversies (including, without
limitation, any unfair labor practice complaints, labor
strikes, arbitrations, disputes, work slowdowns or work
stoppages) pending, or to the best of Seller's current actual
knowledge, threatened, which could have a Material Adverse
Effect on any Facility; and
(c) Each Subsidiary has been and is in material
compliance with all federal and state laws respecting
employment and employment practices, terms and conditions of
employment, and wages and hours (including, but not limited to,
the Fair Labor Standards Act, Title VII of the Civil Rights Act
of 1964, as amended, the Occupational Safety and Health Act,
the Age Discrimination in Employment Act of 1967, the Americans
with Disabilities Act of 1990 and the Family and Medical Leave
Act).
Section 3.13 Employee Plans.
(a) With respect to each Multiemployer Plan, there
has occurred no "complete withdrawal" or "partial withdrawal,"
as each is defined in Sections 4203 and 4205, respectively, of
ERISA, and all payments required to be made to such
Multiemployer Plans by a Subsidiary under any collective
bargaining agreement have been made.
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(b) Neither Buyer nor any Buyer Subsidiary shall
have any obligation or liability to Seller, any Subsidiary or
any present or former employee of any of them for or with
respect to any benefit plan, employee benefit plan or employee
health or welfare program or other Employee Benefit
Arrangements (as defined in Section 3.26(c)), except for
specifically listed Assumed Liabilities and other express
obligations of Buyer and the Buyer Subsidiaries under this
Agreement.
Section 3.14 Litigation. Except for (a) matters
associated with or within the scope of the significant legal
proceedings and investigations of an unusual nature referred to
in Seller's filings with the Securities and Exchange Commission
(the "Unusual Proceedings"), (b) ordinary routine claims and
litigation incidental to the businesses represented by the
Facilities (including, but not limited to, actions for
negligence, professional malpractice, workers' compensation
claims, so-called "slip-and-fall" claims and the like), (c)
governmental inspections and reviews customarily made of
businesses such as those operated from the Facilities, and (d)
as set forth on Schedule 3.14, there are no actions, suits,
claims or proceedings pending, or to the knowledge of Seller or
any Subsidiary, threatened against or affecting the Transferred
Assets or relating to the operations of the Facilities, at law
or in equity, or before or by any federal, state, municipal or
other governmental department, commission, agency or
instrumentality. The claims and litigation referred to in
clause (b) above are covered by insurance currently maintained
by Seller except where the failure to be so covered (i) would
not have a Material Adverse Effect on any Facility or (ii) is
of a nature that is not ordinarily subject to insurance
coverage (e.g., demands for punitive damages). Neither Seller
nor any Subsidiary is in default under any judgment, order or
decree of any governmental agency or authority applicable to
the conduct of the business conducted at the Facilities.
Except as disclosed on Schedule 3.14, there is no condemnation
proceeding pending or, to the knowledge of Seller or any
Subsidiary, threatened against any of the Owned or Leased Real
Property. Schedule 3.14 includes an accurate and complete list
of each malpractice claim or lawsuit pending or to Seller's or
any Subsidiary's knowledge, threatened against any Facility or
Subsidiary.
Section 3.15 Inventory. All Inventory included in the
Transferred Assets and included in the Net Book Values will
consist of a quality and quantity usable and salable in the
ordinary course of business, except for items of obsolete
materials and materials of below-standard quality at any given
Facility, all of which in the aggregate are immaterial to the
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financial condition or results of operations of the businesses
operated from such Facility taken as a whole, or have been, or
prior to the relevant Scheduled Closing will be, written down
to realizable market value.
Section 3.16 Hazardous Substances. To Seller's and the
Subsidiaries' knowledge, except as disclosed by the
Environmental Survey (as defined in Section 6.2(b)) or
otherwise on Schedule 3.16:
(a) There has not been a Release of Hazardous
Material on or otherwise affecting the Owned Real Properties or
the Leased Real Properties, (other than Releases involving de
minimis quantities of Hazardous Materials) that would: (i)
constitute a violation of any Environmental Law by Seller or
the Subsidiaries, or by any third party if the effect of such
violation by such third party imposes a remediation obligation
on the part of Seller or any Subsidiary; (ii) trigger any
release-reporting obligations of Seller or the Subsidiaries
under any Environmental Law; or (iii) trigger any clean-up or
remediation obligations or Seller or the Subsidiaries under any
Environmental Law;
(b) Seller and the Subsidiaries have complied with
and currently are in compliance in all material respects with
all Environmental Laws that govern the Owned Real Properties,
the Leased Real Properties, and the businesses operated from
any such properties;
(c) Seller and the Subsidiaries have obtained all
material Licenses required under the Environmental Laws for
operation of their businesses related to the Owned Real
Properties and the Leased Real Properties, have complied with
and currently are in compliance in all material respects with
all such Licenses, and have not received any notice that: (i)
any such existing License will be revoked; or (ii) any pending
application for any new such License will be denied;
(d) Seller and the Subsidiaries have not received
any currently outstanding notice of any proceedings, action, or
other claim or liability arising under any Environmental Laws
(including, without limitation, notice of potentially
responsible party status under the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. subsection
9601 et seq. or any state counterpart) from any person or
governmental agency regarding the Owned Real Properties, the
Leased Real Properties, or the businesses operated from such
properties;
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(e) Neither Seller nor any Subsidiary has received
any currently outstanding notice, which notice is specifically
directed to an Owned or Leased Real Property (rather than to
all property owners or operators in a given geographic area),
that any of the Owned Real Properties or any of the Leased Real
Properties is the subject of a material deed restriction,
material title-transfer restriction, other material land-use
restriction, or material lien arising in each case under any
Environmental Law;
(f) Neither the Owned Real Properties, the Leased
Real Properties, nor any of the businesses conducted on any
such properties is the subject of any outstanding order,
decree, or agreement with or involving any governmental agency,
court, or other party respecting any material aspect of the
operation of such properties and businesses that relates to or
arises under any Environmental Law (other than orders, decrees
or agreements affecting or directed to the healthcare industry
generally, or in the case of Leased Real Properties, lease
agreements requiring compliance with applicable Environmental
Law);
(g) No portion of the Owned Real Properties or
Leased Real Properties contains or has ever contained any
underground storage tank, surface impoundment or similar device
used for the management of wastewater, or other waste
management unit dedicated to the disposal, treatment, or
long-term (greater than 90 days) storage of waste materials;
and
(h) Neither Seller, any Subsidiary nor any other
person has improperly disturbed or encroached upon any
floodplain areas, waters, or wetlands associated with any of
the Owned Real Properties or Leased Real Properties in
violation of any Environmental Law.
Section 3.17 Financial Information.
(a) Attached hereto as Schedule 3.17(a) is an
unaudited statement of combined earnings from the operations of
the Transferred Assets and Assumed Liabilities of the
Facilities (as they were comprised on the as of date of such
schedule) before interest, income taxes, depreciation and
amortization ("EBITDA") for the fiscal year ended May 31, 1993
and for the fiscal period ended November 30, 1993
(collectively, the "EBITDA Statements"). The EBITDA Statements
present fairly the combined EBITDA of such operations, taken as
a whole, as of the dates and for the periods shown, and were
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derived from and are in accordance with the internal books and
records of the Subsidiaries and the regularly prepared
unaudited internal financial statements of the Facilities,
which are prepared in accordance with the generally accepted
accounting principles utilized in the preparation of the
published financial statements of Seller.
(b) Attached hereto as Schedule 3.17(b) is an
internally prepared unaudited combined statement of certain
assets and liabilities of the Facilities as of November 30,
1993 (the "Balance Sheet"; collectively, the Balance Sheet and
the EBITDA Statements are the "Financial Schedule"). The
Balance Sheet has been prepared from, and is in accordance
with, the internal books and records of the Subsidiaries and
presents fairly the financial condition of the Facilities with
respect to the Transferred Assets and Assumed Liabilities,
taken as a whole, as of the date shown. The Balance Sheet was
prepared in accordance with Seller's practices for the
preparation of internal financial statements, consistently
applied, and is in accordance with the generally accepted
accounting principles utilized in the preparation of the
published financial statements of Seller.
(c) Notwithstanding the foregoing, (i) the Financial
Schedule does not (A) reflect all intercompany eliminations,
adjustments and accruals that are reflected in financial
statements of Seller, (B) reflect any reserves for the Unusual
Proceedings, (C) reflect any anticipation of the divestiture of
the Transferred Assets and any adjustments to the carrying
values of the Transferred Assets occasioned thereby, (D)
contain footnotes or other explanatory material associated with
financial statements prepared in accordance with generally
accepted accounting principles, or (E) contain normal year-end
adjustments with respect to interim periods, (ii) the EBITDA
Statements do not reflect allocations of indirect costs and
non-hospital overhead or the corresponding cost reimbursement
impact of claiming such costs in a Facility Cost Report, and
(iii) certain earnings, assets and liabilities have been
excluded from the EBITDA Statements or the Balance Sheets, as
applicable, as noted in the footnotes or other explanatory
material associated with the Financial Statements. In
addition, the Financial Schedule is to be read in conjunction
with, and is subject to, all notes and other explanatory
material set forth therein.
(d) The Balance Sheet reflects the amount of
Receivables (which for this purpose may include Eligible
Receivables) as of the date thereof, net of allowances
customarily recorded by the Subsidiaries for uncollectible and
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doubtful accounts, and contractual allowances pursuant to
agreements with Payors, all in conformity with Seller's
practices for the preparation of internal financial statements
and in accordance with the generally accepted accounting
principles utilized in the preparation of the published
financial statements of the Seller. To the knowledge of Seller
and each Subsidiary, all such Receivables included in the
Balance Sheet represent amounts validly owed to the applicable
Subsidiary by reason of the provision of goods, services and
other consideration by such Subsidiary, and, to the knowledge
of Seller and each Subsidiary, are not valued in excess of the
amounts expected to be collected with respect thereto. Each
Subsidiary maintains its accounting records in sufficient
detail to substantiate the Receivables reflected on the Balance
Sheet. Since the date of Seller's most recent audited
financial statements, neither Seller nor any Subsidiary has
changed any principle or practice with respect to the
recordation of accounts receivable or the calculation of
reserves therefor, or any material collection, discount or
write-off policy or procedure.
Section 3.18 Changes Since Balance Sheet. Since the date
of the Balance Sheet and up to and including the date of this
Agreement, other than as contemplated or permitted by this
Agreement, the Subsidiaries have conducted the businesses
represented by the Transferred Assets only in the ordinary and
normal course, except for (i) matters associated with the
Unusual Proceedings, (ii) as shown on Schedule 3.18, (iii) the
institution or completion of compliance programs, or (iv)
events in anticipation of the divestiture of the Transferred
Assets, and there has not been:
(a) Any entry into or termination by Seller or a
Subsidiary of any material commitment, contract, agreement or
transaction (including, without limitation, any borrowing or
lending transaction or capital expenditure) related to the
Transferred Assets except for transactions in the ordinary
course of business and renegotiation of credit agreements to
which Seller and certain of its subsidiaries are parties which
renegotiations will not have a Material Adverse Effect on the
Transferred Assets or on any Facility;
(b) Any casualty, physical damage, destruction or
physical loss respecting, or change in the physical condition
of, any Facility or Equipment that has had a Material Adverse
Effect on a Facility;
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(c) Any transfer of or rights granted under any
contract which would have been an Assumed Contract on the date
of the Balance Sheet except for transactions in the ordinary
course of business;
(d) Other than in the ordinary course of business,
(i) any sale or other disposition of any fixed asset included
in the Balance Sheet having a net book value in excess of
$100,000, or (ii) any material mortgage, pledge or imposition
of any lien or other encumbrances on any such asset, or (iii)
sales or dispositions of, or the imposition of material
encumbrances on, fixed assets included in such Balance Sheet
having a net book value that exceeds $1,000,000 in the
aggregate, or (iv) any sale or other disposition of Inventories
included in the Balance Sheet;
(e) Any material amendment (other than general
amendments which the carrier makes for a category of policy) or
termination of any material insurance policy or failure to
renew any material insurance policy covering the Transferred
Assets;
(f) Any default or breach by Seller or a Subsidiary
under any contract that would have been an Assumed Contract on
the date of the Balance Sheet which, when viewed individually
or in the aggregate of all such breaches or defaults, has had a
Material Adverse Effect on any Facility;
(g) Any material adverse change in the trend of the
business, financial condition or results of operations of any
Facility as compared to the trend of the business, financial
condition or results of operations, as applicable, of such
Facility for the two year period ended November 30, 1993; or
(h) Any increase made in the compensation levels of
any chief executive officer or chief financial officer of any
Facility, or any general increase made in the compensation
levels of the other Retained Employees, except in the ordinary
course of business.
Section 3.19 Transferred Business Names. Seller or one
of the Subsidiaries owns or has the right to use the
Transferred Business Names, free of any liens. Schedule 2.1(h)
sets forth for each Transferred Business Name, if any, that is
the subject of a trademark registration the date of
registration, the registration number and the expiration date.
To the knowledge of Seller and the Subsidiaries, no aspect of
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registered trademarks included in the Transferred Business
Names, if any, has been adjudged invalid or unenforceable or
has been cancelled or revoked. Except as set forth on Schedule
3.19, to the knowledge of Seller and the Subsidiaries, the use
by the Subsidiaries of the Transferred Business Names in
connection with the Facilities does not conflict with or
violate any valid rights of third parties, including any
patents, trademarks, trade names or copyrights of others, in
any way which would have a Material Adverse Effect on the
Transferred Assets or a Facility; neither Seller nor any
Subsidiary has received any notice of a conflict with the
asserted rights of others in connection therewith which, if
determined adversely, would have a Material Adverse Effect on
any Facility. Neither Seller nor any of the Subsidiaries is
obligated to pay any amount, whether as a royalty, license fee
or other payment, to any person in order to use any of the
Transferred Business Names.
Section 3.20 Compliance with Laws and Accreditation. To
Seller's and each Subsidiary's knowledge, Seller and each
Subsidiary has complied in all material respects with all laws,
regulations and orders, and as materially required for
participation in the Medicare, CHAMPUS and Medicaid
reimbursement programs and is in material compliance with the
indigent care conditions, if any, contained in or related to
certificates of need obtained by it except (a) as set forth in
Schedule 3.20, (b) as described in Sections 3.10, 3.12, 3.16,
and 3.21 and the Schedules, if any related thereto, and (c) for
matters related to the Unusual Proceedings. With respect to
each Facility, Seller has previously delivered to Buyer true
and complete copies of the most recent Joint Commission on
Accreditation of Health Care Organizations ("JCAHO")
accreditation survey report and deficiency list, if any; the
most recent Statement of Deficiencies and Plan of Correction on
Form HCFA-2567; the most recent state licensing report and list
of deficiencies, if any; the most recent fire marshall's survey
and deficiency list, if any; and the corresponding plans of
correction or other responses except, in each case, such
surveys, reports or deficiency lists which do not reflect any
deficiency which would have a Material Adverse Effect on any
Facility. Seller or the relevant Subsidiary has taken or is in
the process of taking all reasonable steps to correct all
material deficiencies noted therein and a description of any
material uncorrected deficiency is listed in Schedule 3.20.
There are no provisions in, or other agreements to which Seller
or a Subsidiary is a party relating to any Licenses, which
would preclude or limit Buyer from operating the Transferred
Assets substantially as they are now operated and using the
beds of any Facility substantially as they are currently
classified.
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Section 3.21 Cost Reports, Third Party Receivables and
Conditions of Participation. The Cost Reports of the Facilities
for Medicare, Medicaid (if required) and Blue Cross (if required)
reimbursement have been audited through the periods set forth in
Schedule 3.21, and Blue Cross and Medicare Cost Reports of the
Facilities were filed when due. Except for matters related to the
Unusual Proceedings, and as set forth in Schedule 3.21: to the
knowledge of Seller, (a) neither Seller nor any Subsidiary has
received notice of any material dispute between a Facility and
Blue Cross, governmental authorities or the Medicare fiscal
intermediary regarding such Cost Reports for periods subsequent to
the period specified in Schedule 3.21 other than with respect to
adjustments thereto made in the ordinary course of business which
do not involve individual amounts in excess of ten thousand
dollars ($10,000) per Cost Report; (b) there are no pending or
threatened material claims by any of such programs against any
Facility; (c) each Facility currently meets, without material
exception, the conditions for participation in the Medicare
program; and (d) no Facility has been subject to loss of waiver of
liability for utilization review denials with respect to any such
program during the past two years.
Section Medical Staff. Seller has previously delivered to
Buyer, with respect to each Facility, a true and correct copy of
the blank forms generally used with respect to medical staff
privilege and membership application or delineation of privilege;
all current medical staff bylaws, rules and regulations and
amendments thereto respecting Facilities; and all written
contracts with physicians, physician groups, or other members of
the medical staffs of the Facilities. With regard to the active
medical staffs of the Facilities, there are no material pending or
threatened disciplinary or corrective actions or appeals therefrom
involving physician applicants or active medical staff members
except as set forth in Schedule 3.22. Schedule 3.22 also sets
forth a materially complete and accurate list and description of
(a) the name of each member of the medical staff of each Facility
as of the date shown on such Schedule, (b) the approximate age of
each active medical staff member as of such date, (c) the
specialty, if any, of each medical staff member, (d) readily
available reports regarding the number of patient admissions of
each medical staff member for the period shown on such Schedule
3.22, and (e) readily available reports regarding the aggregate
patient days of patients admitted by each medical staff member for
the period shown on such Schedule 3.22.
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Section 3.23 Hill-Burton Care. Except as set forth in
Schedule 3.23, no Subsidiary or Facility has an outstanding loan,
grant or loan guarantee pursuant to the Hill-Burton Act (42 U.S.C.
section 291a, et seq.) and the transactions contemplated hereby
will not result in any obligation on the part of the Buyer or a
Buyer Subsidiary to repay any such loans, grants or loan
guarantees or provide uncompensated care in consideration thereof.
Section 3.24 Assets Used in the Operation of the
Facilities. There are no assets or properties that are used in
and necessary for the conduct of the operations of the Facilities
that are owned by Seller and the Subsidiaries, and which
individually or in the aggregate, are necessary for the operation
of the Facilities that are not included in the Transferred Assets
except for such Assumed Contracts which Buyer has elected or will
elect to reject pursuant to Section 2.18. Except as set forth in
Schedule 3.24 and subject to Section 2.18, the Transferred Assets
include all assets and properties that are properly recordable on
the Balance Sheet, other than assets and properties disposed of
by the Seller or a Subsidiary in the ordinary course of business
since the date of the Balance Sheet and without violation of this
Agreement.
Section 3.25 Taxes. All tax returns of every kind
(including, without limitation, returns of all income taxes,
franchise taxes, real and personal property taxes, intangibles
taxes, patient revenue or other healthcare taxes, withholding
taxes, employee compensation taxes and all other taxes of any kind
applicable to Seller or any Subsidiary) that are due to have been
filed in accordance with applicable laws have been duly filed, and
all taxes shown to be due and payable on such returns have been
paid in full.
Section 3.26 Lists of Other Data. Schedule 2.1(f) contains
a list, materially complete and correct as of the dates shown
thereon, of the Other Assigned Contracts, and Schedules 3.26(a)
through (h) contain lists or other information, materially
complete and correct as of the dates shown thereon, of the
following:
(a) The most recent regularly generated depreciation
schedules related to tangible personal property constituting
Equipment, together with copies of such schedules;
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(b) A brief description of all insurance in force
covering (i) fixed assets that would constitute Transferred
Assets, or (ii) the operations of any Facility as of such date;
(c) All compensation, bonus, incentive, deferred
payments, retirement, pension, severance, profit-sharing, stock
purchase and stock option plans, group life, automobile, medical,
dental, disability, welfare or other employee benefit plans or
insurance policies, and other similar arrangements (collectively,
"Employee Benefit Arrangements") generally applicable to the
Retained Employees or a substantial part thereof or generally
applicable to the chief executive or chief financial officers, or
a substantial part thereof, of the Facilities as of such date;
(d) The aggregate accrued Paid Time Off for all
employees at each Facility, as of the date shown;
(e) Any contract relating to clean-up, abatement or
other actions in connection with the remediation of any existing
environmental liabilities or relating to the performance of any
environmental audit or study with respect to the Facilities other
than with respect to the Environmental Survey and entered into in
the three years preceding the date hereof;
(f) Any indenture, mortgage, loan, credit or other
written contract under which any of the Subsidiaries, directly or
indirectly, is indebted for money borrowed or is the issuer of any
note, bond, indenture or other evidence of indebtedness for money
borrowed or guarantor of similar financial obligations of others,
whether or not reflected on the Balance Sheet;
(g) Any contract with any bank, finance company or
similar organization pursuant to which such organization acquires
receivables from the Subsidiaries; and
(h) Any contract granting any person a lien, security
interest or mortgage on any Transferred Asset (other than
Permitted Encumbrances), including, without limitation, any
factoring agreement or agreement for the assignment of accounts
receivable or inventory.
Section 3.27 Certain Transactions. Except as set forth in
Schedule 3.27, and except for remuneration as employees, since
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November 30, 1992 (i) no Facility has been a party to any
transaction or series of similar transactions in which the amount
involved exceeds $60,000 and in which the chief executive officer,
chief financial officer or medical director of such Facility has a
direct or indirect material interest, and (ii) no chief executive
officer, chief financial officer or medical director of any
Facility has been indebted to Seller or any Subsidiary in an
amount in excess of $60,000.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller, as of the
date hereof, as follows, except as set forth in Schedules numbered
in relation to the Sections set forth below:
Section 4.1 Organization and Corporate Power. Buyer is a
corporation duly incorporated and validly existing under the laws
of, and is authorized to exercise its corporate powers, rights and
privileges and is in good standing in, the State of Delaware and
has full corporate power to carry on its business as presently
conducted and to own or lease and operate its properties and
assets now owned or leased and operated by it and to perform the
transactions on its part contemplated by this Agreement and all
other agreements contemplated hereby.
Section 4.2 Buyer Subsidiaries.
(a) As of each Scheduled Closing, each Buyer Subsidiary
will be a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation. Each Buyer
Subsidiary will have, at the First Closing and at each Scheduled
Closing thereafter, all requisite power and authority (corporate
and otherwise) to carry on its business as then conducted and to
own or lease and operate its properties and assets then owned or
leased and operated by it and to perform the transactions on its
part contemplated by this Agreement and all other agreements
contemplated hereby.
(b) The board of directors of each Buyer Subsidiary
and, if required, its shareholders, will have, by the date of the
First Closing, duly and effectively authorized (i) the purchase of
the Transferred Assets to be purchased by such Buyer Subsidiary;
and (ii) the execution, delivery and performance of the Related
Agreements and all other agreements contemplated hereby and
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thereby to which such Buyer Subsidiary is a party. No other
corporate act or proceeding on the part of any Buyer Subsidiary,
its board of directors or its shareholders will be necessary to
authorize any Related Agreement or other agreement contemplated
hereby and thereby or the transactions contemplated hereby and
thereby.
(c) The Related Agreements and all other agreements
contemplated hereby and thereby to which any Buyer Subsidiary is a
party will, as of each Scheduled Closing, have been duly executed
and delivered by each such Buyer Subsidiary, and each such
agreement, when executed and delivered will constitute, a valid
and binding obligation of such Buyer Subsidiary, enforceable
against such Buyer Subsidiary in accordance with its terms, except
as it may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereafter in effect
relating to creditors' rights generally and that the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding may be brought.
Section 4.3 Authority Relative to this Agreement. The
execution, delivery and performance of this Agreement and the
Related Agreements and the consummation of the transactions
contemplated hereby and thereby have been duly and effectively
authorized by the board of directors of Buyer; no other corporate
act or proceeding on the part of Buyer, its board of directors or
shareholders is necessary to authorize this Agreement, any such
Related Agreement or the transactions contemplated hereby and
thereby. This Agreement has been, and each of the Related
Agreements contemplated hereby will, as of each Scheduled Closing,
have been, duly executed and delivered by Buyer and by each
applicable Buyer Subsidiary, and this Agreement constitutes, and
each such Related Agreement when executed and delivered will
constitute, a valid and binding obligation of Buyer and each Buyer
Subsidiary party thereto, enforceable against Buyer and each Buyer
Subsidiary party thereto, in accordance with its terms, except as
it may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereafter in effect
relating to creditors' rights generally and that the remedy of
specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion
of the court before which any proceeding may be brought.
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Section 4.4 Absence of Breach. Subject to the provisions of
Sections 4.5 and 4.6 below regarding private party and
governmental consents, and except for compliance with the
requirements of the HSR Act and any regulatory or licensing Laws
applicable to the businesses and assets represented by the
Transferred Assets, the execution, delivery and performance by
Buyer of this Agreement and the Related Agreements, and the
execution and delivery by any Buyer Subsidiary of the Related
Agreements to which it is a party, and the performance by the
Buyer Subsidiaries of the transactions to be performed by them and
contemplated by this Agreement and the Related Agreements entered
into by the Buyer Subsidiaries, do not, (a) conflict with or
result in a breach of any of the provisions of Charter Documents
of Buyer or of any of the Buyer Subsidiaries, (b) contravene any
Law or cause the suspension or revocation of any License presently
in effect, which affects or binds Buyer or any of the Buyer
Subsidiaries or any of their material properties, or (c) conflict
with or result in a breach of or default under any indenture or
loan or credit agreement or any other agreement or instrument to
which Buyer or any of the Buyer Subsidiaries is a party or by
which it or they or any of their properties may be affected or
bound.
Section 4.5 Private Party Consents. Except as set forth on
Schedule 4.5, the execution, delivery and performance by Buyer of
this Agreement and the Related Agreements and the execution and
delivery by any Buyer Subsidiary of the Related Agreements to
which it is a party, and the performance by the Buyer Subsidiaries
of the transactions contemplated by this Agreement and the Related
Agreements to be performed by the Buyer Subsidiaries, do not
require the authorization, consent or approval of any
non-governmental third party.
Section 4.6 Governmental Consents. The execution, delivery
and performance by Buyer of this Agreement and the Related
Agreements, and the execution and delivery by any Buyer Subsidiary
of the Related Agreements to which it is a party, and the
performance by the Buyer Subsidiaries of the transactions
contemplated by this Agreement and the Related Agreements to be
executed, delivered or performed by the Buyer Subsidiaries, do not
require the authorization, consent, approval, certification,
license or order of, or any filing with, any court or governmental
agency, except for compliance with the HSR Act and except for such
governmental authorizations, consents, approvals, certifications,
licenses and orders that customarily accompany the transfer of
health care facilities such as the Facilities.
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Section 4.7 Brokers. Except as set forth on Schedule 4.7,
no broker, finder, or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with
this Agreement or the transactions contemplated hereby based upon
any agreements or arrangements or commitments, written or oral,
made by or on behalf of Buyer or any of its Affiliates. Buyer
shall be solely responsible for the payment of any such fee or
commission to any person or entity listed on Schedule 4.7 as an
exception to the foregoing.
Section 4.8 Qualified for Licenses. Buyer or a Buyer
Subsidiary is qualified to obtain any Licenses and program
participations necessary for the operation by Buyer or a Buyer
Subsidiary of the Transferred Assets as of the relevant Scheduled
Closing in the same manner as the Transferred Assets are presently
operated by Seller and the Subsidiaries.
Section 4.9 Financial Ability to Perform. Buyer has liquid
capital or committed sources therefor sufficient to permit it to
perform timely its obligations hereunder, including, but not
limited to, the payment of the Tentative Purchase Price to Seller
at the Scheduled Closings and the other payments to Seller
required hereunder. Promptly after its receipt of letters of
commitment or other documents related to the financing of its
obligations hereunder, Buyer will provide copies of the same to
Seller.
Section 4.10 No Knowledge of Seller's Breach. Neither Buyer
nor, to the knowledge of Buyer, any of its Affiliates has
knowledge of any breach of any representation or warranty by
Seller or of any other condition or circumstance that would excuse
Buyer from its timely performance of its obligations hereunder.
Buyer shall notify Seller as promptly as practicable if any such
information comes to its attention before any relevant Closing
Date.
Section 4.11 No Assurance. Buyer acknowledges and agrees
that the rates or bases used in calculating payments or
reimbursements to it or a Buyer Subsidiary by any Payor (including
but not limited to Medicare) may differ from the rates and bases
used in calculating such payments or reimbursements to Seller and
the Subsidiaries. In entering into the transactions contemplated
by this Agreement and the Related Agreements, Buyer is relying
solely on the express representations, warranties and covenants of
Seller and the Subsidiaries contained in this Agreement and the
Related Agreements and upon no other representations or statements
of Seller, the Subsidiaries or any of their representatives, and
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acknowledges and agrees that nothing in this Agreement or the
Related Agreements shall be deemed to create any implied duty,
disclosure obligation or responsibility on the part of Seller or
the Subsidiaries. Buyer further acknowledges that during the
course of the due diligence investigation, material information
related to the matters that are the subject of the Unusual
Proceedings may not have been discovered by or disclosed to it.
Seller represents and warrants that, at those scheduled
confidential meetings held among counsel for Buyer and Seller on
the dates referenced in Schedule 4.11, which meetings were held
for the purpose of conducting Buyer's due diligence regarding the
Unusual Proceedings, statements of fact concerning the Unusual
Proceedings made by Seller's counsel present at such meetings were
not materially inaccurate.
ARTICLE 5
COVENANTS OF EACH PARTY
Section 5.1 Efforts to Consummate Transactions. Subject to
the terms and conditions herein provided including, without
limitation, Articles 8 and 9 hereof, each of the parties hereto
agrees to use its reasonable commercial efforts to take, or to
cause to be taken, all reasonable actions and to do, or to cause
to be done, all reasonable things necessary, proper or advisable
under applicable Laws to consummate and make effective, as soon as
reasonably practicable, the Transactions contemplated hereby,
including the satisfaction of all conditions thereto set forth
herein. Such actions shall include, without limitation, exerting
their reasonable efforts to obtain the consents, authorizations
and approvals of all private parties and governmental authorities
whose consent is reasonably necessary to effectuate the
Transactions contemplated hereby, and effecting all other
necessary registrations and filings, including but not limited to
filings under Laws relating to the transfer or obtaining of
necessary Licenses, under the HSR Act and all other necessary
filings with governmental authorities. The foregoing
notwithstanding, it shall be the responsibility of Buyer to use
its reasonable commercial efforts and to act diligently and at its
expense to obtain any authorizations, approvals and consents in
connection with acquiring Licenses and program participations that
will permit it to operate the Facilities after the Scheduled
Closings, provided that Buyer will seek to obtain Licenses and
program participations subject to the existing conditions under
which the Subsidiaries operate the Facilities and will not seek to
change the same until the Transferred Assets and Assumed
Liabilities respecting the Facilities in question have been
transferred to and assumed by Buyer. Seller and its Subsidiaries
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shall cooperate with Buyer's efforts to obtain the requisite
regulatory consents, provided neither Seller nor any of its
Subsidiaries shall be obligated to incur any liabilities or assume
any obligations in connection therewith. Other than Buyer's and
Seller's obligations under Section 5.5, neither party shall have
any liability to the other if, after using its reasonable
commercial efforts (and, in the case of Buyer's efforts to obtain
requisite Licenses, acting diligently), it is unable to obtain any
consents, authorizations or approvals necessary for such party to
consummate the Transactions. As used herein, the terms
"reasonable commercial efforts" or "reasonable efforts" do not
include the provision of any consideration to any third party or
the suffering of any economic detriment to a party's ongoing
operations for the procurement of any such consent, authorization
or approval except for the costs of gathering and supplying data
or other information or making any filings, fees and expenses of
counsel and consultants and for customary fees and charges of
governmental authorities and accreditation organizations.
Section 5.2 Cooperation; Regulatory Filings. Prior to and
after the Final Closing, upon prior reasonable written request,
each party agrees to cooperate with the other in every reasonable
commercial way to consummate the Transactions. Notwithstanding
the foregoing, all analyses, appearances, presentations,
memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of either party hereto in connection
with proceedings under or relating to the HSR Act or any other
federal or state antitrust or fair trade law, or made or submitted
by or on behalf of Buyer in connection with proceedings to obtain
the Licenses and program participations referred to in Section 5.1
hereof, shall be subject to the joint approval or disapproval and
the joint control of Buyer and Seller, acting with the advice of
their respective counsel, it being the intent of the foregoing
that the parties hereto will consult and cooperate with one
another, and consider in good faith the views of one another, in
connection with any such analysis, presentation, memorandum,
brief, argument, appearance, opinion or proposal; provided that
nothing herein shall prevent either party hereto or any of their
Affiliates or their authorized representatives from (a) making or
submitting any such analysis, appearance, presentation,
memorandum, brief, argument, opinion or proposal in response to a
subpoena or other legal process or as otherwise required by Law,
or (b) submitting factual information to the United States
Department of Justice, the Federal Trade Commission, any other
governmental agency or any court or administrative law judge in
response to a request therefor or as otherwise required by Law.
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Section 5.3 Further Assistance. From time to time, at the
reasonable request of either party, whether on or after a
Scheduled Closing, without further consideration, either party, at
its expense and within a reasonable amount of time after request
hereunder is made, shall execute and deliver such further
instruments of assignment, transfer and assumption and take such
other action as may be reasonably required to more effectively
assign and transfer the Transferred Assets to, and vest the
Assumed Liabilities in, Buyer, deliver or make the payment of the
Purchase Price to Seller or any amounts due from one party to the
other pursuant to the terms of this Agreement or confirm Seller's
ownership of the Excluded Assets and obligations with respect to
the Excluded Liabilities.
Section 5.4 Cooperation Respecting Proceedings. After the
Scheduled Closings, upon prior reasonable written request, each
party shall cooperate with the other, at the requesting party's
expense (but including only out-of-pocket expenses to third
parties and not the costs incurred by any party for the wages or
other benefits paid to its officers, directors or employees), in
furnishing information, testimony and other assistance in
connection with any inquiries, actions, tax or Cost Report audits,
proceedings, arrangements or disputes involving either of the
parties hereto (other than in connection with disputes between the
parties hereto) and based upon contracts, arrangements or acts of
Seller or any of the Subsidiaries which were in effect or occurred
on or prior to any Scheduled Closing and which relate to the
Transferred Assets, including, without limitation, arranging
discussions with (and the calling as witness of) officers,
directors, employees, agents, and representatives of Buyer.
Section 5.5 Expenses. Whether or not the Transactions
contemplated hereby are consummated, except as otherwise provided
in this Agreement, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such expenses. Notwithstanding the
foregoing:
(a) Costs associated with preliminary title reports and
title policies shall be borne by Seller up to the costs that would
have been incurred had the title policies been standard coverage
policies of title insurance, and the remaining costs, if any,
including costs for Extended Coverage and any surveys in
connection therewith, shall be borne by Buyer;
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(b) All costs of the Environmental Survey referred to
in Section 6.2(b) shall be borne one-half by Buyer and one-half by
Seller, other than any cost incurred in connection with any "Phase
II" investigation conducted by Buyer's environmental consultant
(which shall be borne by Buyer);
(c) All escrow charges, appraisal fees, and charges of
any neutral independent public accountant or mediator, and related
costs, shall be borne one-half by Buyer and one-half by Seller (it
being agreed that each party shall bear the costs of its own
independent public accountant or designated mediator);
(d) All recording costs and charges respecting real
property will be borne one-half by Seller and one-half by Buyer;
(e) All transfer taxes respecting real property will be
borne one-half by Buyer and one-half by Seller;
(f) All fees and expenses relating to the filings under
the HSR Act shall be borne by the party incurring such fees and
expenses;
(g) All fees and charges of governmental authorities
and accreditation agencies in connection with the transfer,
issuance or authorization of any License, accreditation or program
participation shall be borne by Buyer;
(h) All fees or costs associated with the issuance of
any bond or the establishment of any escrow required by Section
2.10(a) shall be borne by Buyer;
(i) All fees, charges or costs (other than internal
costs of Seller or any Subsidiary), including auditing fees and
expenses, incurred as a result of Buyer's compliance with the
Securities Exchange Act of 1934, as amended, or the Securities Act
of 1933, as amended, and the rules and regulations thereunder,
shall be borne by Buyer;
(j) Out-of-pocket costs incurred by Seller and the
Subsidiaries in connection with providing transitional assistance
to Buyer shall be borne by Buyer, whether such assistance is
provided before or after a Scheduled Closing, including costs
associated with attendance at meetings requested by Buyer;
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(k) All liabilities or obligations of Seller or a
Subsidiary for Taxes in the nature of sales taxes incurred as a
result of the sale of the Transferred Assets hereunder to Buyer
shall be borne one-half by Seller and one-half by Buyer; and
(l) All fees, charges and costs of economists and other
experts, if any, jointly retained by Buyer and Seller in
connection with submissions made to any government agency and
advice in connection therewith respecting approval of the
Transactions, including proceedings under the HSR Act, will be
borne one-half by Buyer and one-half by Seller. All such charges
and expenses shall be promptly settled between the parties at the
relevant Scheduled Closing or upon termination or expiration of
further proceedings under this Agreement, or with respect to such
charges and expenses not determined as of such time, as soon
thereafter as is reasonably practicable.
Section 5.6 Announcements; Confidentiality. Prior to the
Final Closing Date, no press or other public announcement, or
public statement or comment in response to any inquiry, relating
to the transactions contemplated by this Agreement shall be issued
or made by Buyer or Seller or any Subsidiary without the joint
approval of Buyer and Seller; provided that a press release or
other public announcement, regulatory filing, statement or comment
made without such joint approval shall not be in violation of this
Section if it is made in order to comply with applicable
securities Laws or stock exchange policies and in the reasonable
judgment of the party making such release or announcement, based
upon advice of counsel, prior review and joint approval, despite
reasonable efforts to obtain the same, would prevent dissemination
of such release or announcement in a timely enough fashion to
comply with such Laws or policies, provided that in all instances
prompt notice from one party to the other shall be given with
respect to any such release, announcement, statement or comment.
Subject to the foregoing, the parties hereto recognize and agree
that all information, instruments, documents and details
concerning the businesses of Buyer, Seller and the Subsidiaries
are strictly confidential, and Seller and Buyer expressly covenant
and agree with each other that, prior to and after the Scheduled
Closings, they will not, nor will they allow any of their
respective officers, directors, employees, representatives or
agents (including professional advisors) to disclose or publicly
comment upon any matters relating to the business of the other or
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relating to this Agreement, including, without limitation, the
terms, timing or progress of the transactions contemplated hereby,
or its negotiation, terms, provisions or conditions, including
Purchase Price, except for disclosure to their respective
professional advisors and lenders or prospective financing sources
(each of whom shall agree not to disclose the same) which is
reasonably necessary to effectuate the Transactions contemplated
hereby and in a manner consistent with the provisions of this
Agreement. Each party shall keep all information (i) obtained
from the other either before or after the date of this Agreement,
or (ii) related to Buyer's proposed purchase of the Transferred
Assets, Seller's proposed sale of the Transferred Assets, the
contents of this Agreement or the negotiation of this Agreement
confidential, and neither party shall reveal such information to,
nor produce copies of any written information for, any person
outside its management group or its professional advisors
(including lenders and prospective financing sources) without the
prior written consent of the other party, unless such party is
compelled to disclose such information by judicial or
administrative process or by any other requirements of Law or
disclosure is reasonably necessary to obtain a License or a
consent listed on the Schedule of Required Consents. If the
Transactions contemplated by this Agreement should fail to close
for any reason, each party shall return to the other as soon as
practicable all originals and copies of written information
provided to such party by or on behalf of the other party and none
of such information shall be used by either party, or their
employees, agents or representatives in the business operations of
any person. Notwithstanding the foregoing, (i) each party's
obligations under this Section shall not apply to any information
or document which is or becomes available to the public other than
as a result of a disclosure by the other party in violation of
this Agreement or other obligation of confidentiality under which
such information may be held or becomes available to the party on
a non-confidential basis from a source other than the other party
or its officers, directors, employees, representatives or agents
and (ii) without the prior written consent of Seller, or except as
may be required by Law (as determined by the written opinion of
independent counsel in form and substance satisfactory to Seller)
the schedules to this Agreement shall not be disclosed to or filed
with any person (including any governmental entity or regulatory
board) if such filing or disclosure could result in such schedules
becoming available to the public. The parties' obligations under
this Section shall survive the termination of this Agreement.
Nothing in this Section shall, or is intended to, impair or modify
any of the rights or obligations of Buyer or its Affiliates under
that certain letter agreement dated as of September 15, 1993, all
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of which remain in effect until termination of such letter
agreement in accordance with its terms.
Section 5.7 Preservation of and Access to Certain Records.
(a) As set forth in Section 2.2(e), all or any portion
of the medical, clinical and other records directly or indirectly
associated with the admission, care and treatment of patients on
or prior to the relevant Closing Date on which the relevant
Facility is transferred (collectively, for all Facilities, the
"Patient Records") and all financial and other records of, or
located at, a Facility for the period ending on or prior to the
relevant Closing Date, whether or not maintained at or by a
Facility (the Patient Records and such other records for all
Facilities are collectively referred to as the "Hospital Records")
shall be Excluded Assets. Notwithstanding the foregoing, the
parties will cooperate in providing copies and access to such
records as set forth below.
(b) Notwithstanding that the Hospital Records are
Excluded Assets, to the extent required by applicable Law or at
Seller's election, Seller may choose not to remove the Hospital
Records from a transferred Facility or otherwise acquire
possession of them after a Scheduled Closing. Unless and until
removed by Seller, the Buyer shall, in accordance with applicable
Laws, maintain the Hospital Records at the Facilities (or at such
other mutually approved locations) at Buyer's cost, and as agent
of and bailee for Seller, until the expiration of seven (7) years
from the relevant Scheduled Closing (and, if at the expiration
thereof any tax or Payor audit or judicial proceeding is in
progress or the applicable statute of limitations has been
extended, for such longer period as such audit or proceeding is in
progress or such statutory period is extended)(the "Document
Retention Period"). After a Scheduled Closing and subject to
applicable Laws, Buyer shall grant Seller full access to the
Hospital Records (including any Patient Records) as needed for any
lawful purpose (including Seller's inspection and copying of
same), and Seller shall have the same rights of access to inspect
and copy (at Seller's cost) any or all of the Hospital Records
that Seller had prior to the Scheduled Closing. Buyer shall
instruct the appropriate employees of the Facilities to cooperate
in providing access to such records to Seller and its authorized
representatives as contemplated herein. Access to such records
shall be, wherever reasonably possible, during normal business
hours, with reasonable prior written notice to Buyer of the time
when such access shall be needed. Seller's employees,
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representatives and agents shall conduct themselves in such a
manner so that Buyer's normal business activities shall not be
unduly or unnecessarily disrupted. After the expiration of the
aforementioned Document Retention Period, Buyer shall not, without
ninety-one (91) days' prior written notification to Seller,
destroy any Hospital Records in its possession. Within ninety
(90) days after its receipt of such notice of intent to destroy,
Seller shall have the right, at its own expense, to require Buyer
to deliver any such records to Seller in accordance with Seller's
reasonable instructions. Buyer shall adopt a record retention
policy with respect to the Hospital Records which requires that
all Hospital Records be maintained for the Document Retention
Period and destroyed only after compliance with the notice
provisions of this Subsection (b) (including the passage of time),
and shall take all reasonable steps necessary to inform its
employees of such policy.
(c) Buyer acknowledges and agrees that Seller shall
have the right to remove, and may remove, from time to time on or
prior to the relevant Closing Date and during the Document
Retention Period any or all of the Hospital Records. In the event
of Seller's removal of any Hospital Records from a Facility, it
shall, at Seller's cost and subject to applicable Laws, provide
Buyer with copies (or originals, if required by applicable law or
accreditation standards) of the following Hospital Records if
Buyer elects to retain such copies: (i) the Patient Records for
patients who are patients of the Facilities at the relevant
Scheduled Closing or who are the subject of Receivables
transferred to Buyer hereunder, (ii) the personnel records of the
Hired Employees, and (iii) any records Buyer would be required to
have to comply with accreditation standards. If the Hospital
Records are removed by Seller, then it shall maintain such
Hospital Records at its expense during such period of time and at
such location as is deemed appropriate by Seller in its sole and
absolute discretion. For so long as the Hospital Records are
maintained by Seller, Seller shall make Hospital Records (other
than those protected by or subject to the attorney-client
privilege) available to Buyer, subject to applicable Laws, as
needed by Buyer for any lawful purpose and if reasonably necessary
to permit Buyer to operate the Facilities or other Transferred
Assets. Seller shall instruct its appropriate employees to
cooperate in providing access to such records to Buyer and its
authorized representatives as contemplated herein. Buyer's access
to such Hospital Records shall be during normal business hours,
with reasonable prior written notice to Seller of the time when
such access shall be needed. Buyer may make copies of or extracts
from any such Hospital Records to which Buyer has access hereunder
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at Buyer's sole cost and expense. Notwithstanding the foregoing,
Buyer's access to, or right to copies of, any Patient Records
shall be subject to any applicable Law, accreditation standard or
rule of confidentiality or privilege.
(d) After Closing, Buyer or the applicable Buyer
Subsidiary shall have the right to assign to an entity which
purchases from Buyer or a Buyer Subsidiary a Facility or
substantially all the assets of a Facility, all of the rights of
Buyer under this Section 5.7, provided that such entity expressly
assumes all obligations of Buyer under this Section 5.7 with
respect to the purchased Facility.
ARTICLE 6
ADDITIONAL COVENANTS OF SELLER
Seller hereby additionally covenants, promises and agrees as
follows:
Section 6.1 Conduct Pending Closing. Prior to consummation
of the Transactions contemplated hereby or the termination or
expiration of this Agreement pursuant to its terms, unless Buyer
shall otherwise consent in writing, which consent shall not be
unreasonably withheld or delayed, and except for actions taken
pursuant to Assumed Contracts, or which arise from or are related
to the anticipated transfer of the Transferred Assets, the conduct
or resolution of the Unusual Proceedings or effectuation of
ongoing compliance programs, or as otherwise contemplated by this
Agreement or disclosed in Schedule 6.1 or another Schedule to this
Agreement, Seller shall, and shall cause the Subsidiaries to:
(a) Conduct the business represented by, and otherwise
deal with, the Transferred Assets only in the usual and ordinary
course, materially consistent with practices followed prior to the
execution of this Agreement;
(b) Use reasonable efforts to keep intact the
Transferred Assets and the business they represent and to preserve
relationships beneficial to such business that doctors, patients,
Payors, suppliers, employees and others have with the Facilities;
(c) Except as required by their terms, not amend,
terminate, renew, fail to renew or renegotiate any material
contract, except in the ordinary course of business and consistent
with practices of the recent past, or default (or take or omit to
take any action that, with or without the giving of notice or
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passage of time, would constitute a default) in any of its
obligations under any such contracts, that would be an Assumed
Contract as of the date hereof;
(d) Not (i) sell, lease, transfer or dispose of, or
make any contract for the sale, lease, transfer or disposition of,
any assets or properties which would be included in the
Transferred Assets in an amount in excess of $1,000,000 in the
aggregate (other than sales in the ordinary course of business);
(ii) incur, assume, guaranty, or otherwise become liable in
respect of any indebtedness for money borrowed which would result
in Buyer assuming such liability hereunder after the Closing;
(iii) purchase or make any contract for the purchase of a material
amount of assets or properties which would be included in the
Transferred Assets (other than purchases in the ordinary course of
business and other than capital expenditures within the aggregate
thresholds set forth in clause (v) below); (iv) accelerate or
delay the purchase of Inventory, or the payment of amounts due to
or from the Subsidiaries in a manner inconsistent with past
practice; (v) make any new commitments which would require an
expenditure of more than $50,000 in the aggregate other than in
the ordinary course of business; (vi) encumber or voluntarily
subject to any lien any Transferred Asset (except for Permitted
Encumbrances); or (vii) assign or transfer accounts receivable to
collection agencies in a manner inconsistent with past practice.
(e) Maintain in force and effect the insurance policies
identified in Section 3.26(b);
(f) Not enter into any contract or amendment of a
contract that, had such contract or amendment been entered into
prior to the date hereof, would have been included on Schedule
2.1(f), unless Buyer has failed to disapprove of such contract or
amendment in a written notice to Seller given within two (2)
business days of Seller's written notice to Buyer of such contract
or amendment accompanied by a copy thereof, provided that Buyer's
disapproval of such contract or amendment shall not be
unreasonable, and provided further that any contract entered into
in violation of this Section 6.1(f) shall be subject to the
provisions of Section 2.18;
(g) Not grant any general or uniform increase in the
rates of pay or benefits to Retained Employees (or a class
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thereof) or any increase in salary or benefits of any chief
executive or financial officer of any Facility, except for
compensation previously agreed to prior to the date hereof; or
(h) Subject to Section 6.3, not take any action which
would cause any of Seller's representations and warranties set
forth in Article 3 to be false as of the relevant Scheduled
Closing; provided that nothing in this Section shall (i) obligate
Seller or any Subsidiary to make expenditures other than in the
ordinary course of business and consistent with practices of the
recent past or to otherwise suffer any economic detriment, (ii)
preclude Seller from paying, prepaying or otherwise satisfying any
liability which, if outstanding as of a Closing Date, would be an
Assumed Liability or an Excluded Liability, (iii) preclude Seller
from incurring any liabilities or obligations to any third party
in connection with obtaining such party's consent to any
transaction contem- plated by this Agreement or the Related
Agreements provided such liabilities and obligations under this
clause (iii) shall be Excluded Liabilities pursuant to Section
2.4(h) hereof if not approved in advance by Buyer (which approval
shall not be unreasonably withheld), or (iv) preclude Seller from
instituting or completing any program designed to promote
compliance or comply with Laws or other good business practices
respecting the Facilities.
Section Access and Information; Environmental Survey;
Remediation or Adjustment.
(a) Subject to the restrictions set forth in Section
5.6 respecting confidentiality and provided that Buyer has
complied with each and every provision thereof, Seller shall, and
shall cause the Subsidiaries to, afford Buyer, and the counsel,
accountants and other representatives of Buyer, reasonable access,
throughout the period from the date hereof to the relevant Closing
Date, to the Transferred Assets and the employees, personnel and
medical staff associated therewith and all the properties, books,
contracts, commitments, Cost Reports and records respecting the
Transferred Assets (regardless of where such information, may be
located) which Seller has or to which it has access. Such access
shall be afforded to Buyer after no less than 24 hours prior
written notice, during normal business hours and only in such
manner so as not to disturb patient care or to interfere with the
normal operations of the Facilities; provided, however, that,
notwithstanding the foregoing and subject to the provisions
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concerning nondisclosure set forth in Section 5.6, without first
obtaining the written consent of Mr. Donald Thayer which consent
shall not be unreasonably withheld, neither Buyer nor its counsel,
accountants and other representatives shall tour or visit the
Facilities or contact any of the employees, personnel or medical
staff thereof; and provided further that until the first to occur
of the Termination Date or the Final Closing, under no circum-
stances shall Buyer directly or indirectly solicit the employment
of any employees of Seller or its Subsidiaries, except as Hired
Employees pursuant to the terms hereof or except as may be
permitted with the prior written consent of a responsible officer
of Seller. Seller's covenants under this Section are made with
the understanding that Buyer shall use all such information in
compliance with all Laws. The foregoing notwithstanding, Buyer
acknowledges and agrees that Buyer's access to the books and
records of the Transferred Assets shall not include access to, and
Seller shall not have any obligation to deliver to Buyer, any
information concerning any alleged dispute or any pending
litigation, investigation or proceeding involving Seller or its
Affiliates that is protected by or subject to the attorney-client
privilege, or the disclosure of which is restricted by an
agreement entered into in connection with such dispute,
litigation, investiga- tion or proceeding or an order entered by
any court, or (in the case of the Unusual Proceedings) certain
non-public information; moreover, Buyer shall not have access to
patient or employee records or any other records the disclosure of
which would be prohibited by any Law, accreditation standards, or
rule or agreement (express or implied) of confidentiality, except
that Buyer may be granted access to such records to the extent
they are appropriately redacted and in conformity with such other
reasonable procedures as may be required to conform to any such
requirements of Law, accreditation standards or rule or agreement
of confidentiality.
(b) Seller has provided (or, with respect to Facility
No. 30, will reasonably soon provide) to Buyer copies of an
environmental survey conducted with respect to each of the
Facilities (the "Environmental Survey"). The Environmental Survey
was conducted by an environmental consulting firm or firms (the
"Consultant") in accordance with applicable professional standards
in effect at the time the Environmental Survey was conducted and
such reasonable procedures as were determined by Seller. In the
event of a disagreement between Buyer and Seller concerning the
procedures employed by the Consultant, Buyer may at Buyer's
expense employ a separate environmental consultant to conduct such
procedures requested by Buyer (subject to Seller's prior approval
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of such procedures, which shall not unreasonably be withheld), and
the findings of the Buyer's Environmental consultant shall be
included as an addendum to the Environmental Survey. The results
of any such Environmental Survey shall be delivered to and owned
by Seller, and all proceedings in connection with the
Environmental Survey and the results thereof shall be subject to
the confidentiality provisions of Section 5.6. Buyer acknowledges
and agrees that the Environmental Survey is and shall be only an
initial "Phase I" environmental site assessment. If subsequently
determined by Seller, the Consultant and the Buyer, to be
necessary or prudent to conduct sampling, laboratory analyses, or
additional investigation work at any of the Facilities, Seller
shall direct the Consultant to undertake a further "Phase II"
investiga- tion involving additional investigation and appropriate
sampling and laboratory analyses respecting such Facilities the
results of which are to be included in the Environmental Survey.
In any "Phase II" investigation, Seller shall give Buyer no less
than 24 hours' notice before the Consultant enters onto any
Facility, and the "Phase II" Environmental Survey shall be
conducted so as not to interfere with the normal operation of the
Facilities. Buyer shall be permitted to have one of its employees
or agents present during all inspections of, and sample gatherings
(including borings) from the soil or any floor tile, insulation or
other internal component of, a Facility and shall be entitled to
split samples upon Buyer's request. In the event that Buyer
considers it necessary to conduct any "Phase II" investigation
work that Seller refuses to order, Buyer may at Buyer's expense
employ a separate environmental consultant to conduct such "Phase
II" investigation work at least thirty (30) days before the First
Closing. Buyer shall give Seller no less than 24 hours' notice
before Buyer's environmental consultant enters onto any Facility,
and any such "Phase II" work performed by Buyer's environmental
consultant shall be conducted so as not to interfere with the
normal operations of the Facilities. Seller shall be permitted to
have one of its employees or agents present during all inspections
of and sample gatherings (including borings) from the soil or any
floor tile, insulation, or other internal component of a Facility
performed by Buyer's environmental consultant and shall be
entitled to split samples upon Seller's request. Buyer shall be
liable for any repairs or other costs required to correct damage
to the Facilities resulting from such "Phase II" investigation.
The findings of any Phase II investigation prepared by Buyer's
environmental consultant shall be included as an addendum to the
Environmental Survey. Notwithstanding the foregoing, Seller may
elect not to permit Buyer to conduct a "Phase II" investigation
through its own environmental consultant, in which case Buyer can
exclude the affected Facility, and the Transferred Assets and
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Assumed Liabilities respecting such Facility from the
Transactions, in which case the parties shall negotiate in good
faith an equitable adjustment to the Purchase Price, or if they
cannot agree upon the same, such adjustment shall be determined in
accordance with Section 2.14.
(c) With respect to any matters disclosed by such
Environmental Survey or listed on Schedule 3.16 that would
constitute a breach of Seller's warranties in Section 3.16, but
for the qualifications to such warranties based on Seller's
knowledge or disclosures in the Environmental Survey or on such
Schedule 3.16, Seller will at its election, either (i) clean up or
otherwise remediate such matters in a reasonable manner prior to
the Closing Date related to such Facility, at its expense; or (ii)
agree in writing prior to the Closing Date to reimburse Buyer for
the costs specified in such written agreement of such reasonable
clean-up or remediation incurred by Buyer after the Closing Date
related to such Facility, and to promptly reimburse Buyer after
Buyer incurs such expenses subsequent to the Closing Date related
to such Facility; or (iii) elect to exclude the affected Facility,
and Transferred Assets and Assumed Liabilities respecting such
Facility, from the Transactions, in which case the parties shall
negotiate in good faith an equitable adjustment to the Purchase
Price, or if they cannot agree upon the same, such adjustment
shall be determined in accordance with Section 2.14; provided,
however, that in no case will Seller be required to remove or
otherwise remediate (or bear the costs of same) any Hazardous
Materials used as construction materials in structures or
improvements constituting the Facilities, or in equipment
contained therein, unless the current condition of such Hazardous
Materials has resulted in either: (i) noncompliance with any
Environmental Law or License issued pursuant to an Environmental
Law; or (ii) an unreasonable hazard to human health, human safety
or the environment.
Section 6.3 Updating. Seller shall notify Buyer of any
changes or additions to any of Seller's Schedules to this
Agreement with respect to a particular Facility or the Transferred
Assets or Assumed Liabilities related thereto by the delivery of
updates thereof, if any, as of a reasonably current date prior to
the relevant Scheduled Closing not later than three (3) business
days prior to the Scheduled Closing with respect to such Subject
Transferred Assets, provided, however, that the Financial Schedule
shall not be updated to cover any period or periods subsequent to
the respective dates thereof. No such updates made pursuant to
this Section shall be deemed to cure any breach of any
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representation or warranty made in this Agreement, unless Buyer
specifically agrees thereto in writing, nor shall any such
notification be considered to constitute or give rise to a waiver
by Buyer of any condition set forth in this Agreement.
Section 6.4 No Solicitation. Seller will not, and shall
cause the Subsidiaries not to, and will use its best efforts to
cause its and their officers, employees, agents and
representatives (including any investment banker) not to, directly
or indirectly, solicit, encourage or initiate any discussions
with, or, subject to fiduciary duties to shareholders, negotiate
or otherwise deal with, or provide any information to, any
corporation, partnership, person or other entity or group, other
than Buyer and its officers, employees and agents, concerning any
sale of or similar transactions involving the Transferred Assets
or the stock of the Subsidiaries. None of the foregoing shall
prohibit providing information to others in a manner in keeping
with the ordinary conduct of Seller's or the Subsidiaries'
businesses. Seller shall notify Buyer promptly of any inquiry,
proposal or offer received by Seller concerning the sale of or
similar transactions involving the Transferred Assets or the stock
of the Subsidiaries. Subject to the foregoing, in the exercise of
its aforementioned fiduciary duties to shareholders, Seller may
terminate this Agreement on written notice to Buyer, which
termination shall have the effect set forth in Section 10.2,
provided that upon consummation prior to the first anniversary of
this Agreement of any transaction or transactions with one or more
third parties covering substantially all of the Transferred
Assets, Seller shall be obligated to pay Buyer the sum of Fifteen
Million Dollars ($15,000,000), and provided further that the
payment of such sum shall be deemed to constitute liquidated
damages in lieu of any and all other liability of Seller and the
Subsidiaries to Buyer and the Buyer Subsidiaries in connection
with or related to or arising from this Agreement or the
transactions contemplated hereby, or in connection with or related
to or arising from the termination hereof.
Section 6.5 Name Changes. To the extent that the corporate
names of any of the Subsidiaries incorporate or are substantially
similar to the Transferred Business Names, Seller agrees to cause
the Subsidiaries promptly after the relevant Scheduled Closing to
take all action necessary to change such names so as not to
incorporate or be substantially similar to the Transferred
Business Names.
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Section 6.6 Filing of Cost Reports. Seller shall cause to
be prepared and timely filed all Cost Reports and all other
filings which are required to be filed with Medicare and any other
cost-based Payors with respect to the operations of the Facilities
for any and all periods ending on or prior to a relevant Closing
Date. Seller and the Subsidiaries shall retain all rights to any
amounts receivable from Medicare or other Payors with respect to
such reports or filings or with respect to such periods and, as
between Buyer, on the one hand, and Seller and Subsidiaries, on
the other, shall remain obligated for all amounts due Medicare or
such other Payors with respect to such reports or filings or with
respect to such periods, and the parties hereby acknowledge and
agree that Buyer is not being assigned or otherwise receiving and
is not hereby assuming any of the same. Seller's rights shall
include, without limitation, the right to dispute or to appeal any
determina- tions relating to such reports.
Section 6.7 Purchase of Supplies. Buyer may request Seller
or its Affiliates to permit Facilities transferred at such
Scheduled Closing to participate in specified national purchasing
contracts of Seller or its Affiliates for a fee to be agreed
upon. If Buyer wishes to enter into such an agreement with
Seller, it shall notify Seller no later than five (5) days prior
to such Scheduled Closing, and at the Scheduled Closing the
parties shall execute a Purchasing Contract substantially in the
form of Exhibit D hereto. Schedule 6.7 lists all of the national
purchasing contracts of Seller and its Affiliates in effect as of
the date thereof which do not preclude participation by persons
which are not Affiliates of Seller.
Section 6.8 Covenant Not to Compete.
(a) Covenant. Subject to the further provisions of this
Section 6.8, during the "Covenant Period" (as defined in Section
6.8(d)), none of the Subsidiaries, Seller or any other
subsidiaries of Seller in which Seller owns a majority of the
voting interests (collectively, "Covered Parties") shall, directly
or indirectly (whether through a majority-owned subsidiary or
otherwise), in any Specified Capacity (as defined in this Section
6.8), engage in the business of delivering mental health or
alcohol or substance abuse services through the operation of a
hospital or otherwise, including without limitation through the
delivery of inpatient, partial hospitalization, residential or
outpatient services (as limited by the provisions of Section
6.8(b), a "Competing Business"). For purposes hereof, the term
"Specified Capacity" shall mean, subject to Section 6.8(b), each
of the following capacities:
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(i) As an operator, manager or sole owner of the
Competing Business, whether directly or indirectly;
(ii) As a constituent partner, joint venturer or
equity shareholder of an entity engaged in the Competing
Business if the voting equity interest held is greater than 10%
of all voting equity interests in such entity;
(iii) As a lender of money to, or a guarantor of
indebtedness for money borrowed by, any other entity engaged in
a Competing Business in a principal amount in excess of
$1,000,000, except for (A) loans or guarantees made in the
ordinary course of business and not as an investment in such
entity; (B) loans or guarantees made or entered into in
connection with the sale of a Competing Business by a Covered
Party; or (C) loans represented by publicly traded instruments.
(b) Exceptions. The provisions of this Section 6.8
shall not apply to and shall not prohibit the following:
(i) Psychiatric Facilities and Contracts Not
Acquired By Buyer. The conduct of a Competing Business from
any facility (including renovations and expansions thereof) at
which a Covered Party, in any Specified Capacity, primarily
engages in a Competing Business as of the Final Closing, or
pursuant to any contract (including modifications, extensions
and renewals thereof) under which a Covered Party, in any
Specified Capacity, engages in a Competing Business as of the
Final Closing, if (A) such facility, contract or Specified
Capacity is not acquired or assumed by Buyer or a Buyer
Subsidiary pursuant to this Agreement, or (B) such facility,
contract or Specified Capacity, is, after the Final Closing,
reacquired by a Covered Party from Buyer or a Buyer Subsidiary
pursuant to this Agreement;
(ii) Facilities Outside Geographic Area. The
conduct of a Competing Business from any location that is not
within twenty-five (25) miles of a Facility (not including
satellite locations) that (A) was acquired by Buyer or a Buyer
Subsidiary pursuant to this Agreement, and (B) at the time in
question, is still owned, operated or managed by Buyer or by a
person or entity which, directly or indirectly, controls, is
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controlled by or is under common control with Buyer (Facilities
meeting the requirements of both clauses (A) and (B) being
herein referred to as "Covered Facilities");
(iii) Acute Hospitals. The conduct of a
Competing Business from or through any hospital, commonly
referred to as an acute care hospital, that is licensed to
provide general medical and surgical services, including
related facilities that operate on the same campus as, or under
the auspices of, such acute care hospital (such hospitals and
related facilities being herein referred to as "Acute
Hospitals"), including the provision of management services to
an Acute Hospital, provided that the conduct of any Competing
Business from or through a Specified Acute Hospital or an
Acquired Acute Hospital (as each such term is defined in
Section 6.8(c)) shall be subject to the further provisions of
Section 6.8(c);
(iv) Divestiture of Acquired Psychiatric
Facilities. Other than an Acquired Acute Hospital, the conduct
of a Competing Business in a Specified Capacity first acquired
by any Covered Party after the date hereof as part of the
acquisition of interests in healthcare assets other than the
Competing Business, provided that no Covered Party engages in
such Competing Business after the expiration of twelve (12)
months from such acquisition and no such Competing Business is
expanded during such twelve (12) month period, except for
expansions for which regulatory approval exists, or for which
capital expenditures have been undertaken or are in process, or
which are required by existing contracts (together, "Permitted
Expansions"); or
(v) Acquiring Entities. The conduct of a
Competing Business for, on behalf of, or by (A) any entity that
is not a Covered Party that acquires majority ownership or
substantially all the assets of a Covered Party after the date
hereof, (B) any entity that is not a Covered Party that
acquires a Competing Business from a Covered Party after the
date hereof, (C) any surviving entity (other than a Covered
Party) of a consolidation, merger, reorganization or spinoff
(each, a "Reorganization") involving a Covered Party as a
result of which shareholders directly or indirectly owning a
majority of such Covered Party immediately before such
Reorganization do not own a majority of such surviving entity
immediately after such Reorganization, or (D) any
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majority-owned subsidiary of any such acquiring or surviving
entity that is not a Covered Party.
(c) Acute Hospital Affiliations. With respect to an
Acute Hospital listed on Schedule 6.8(c) (a "Specified Acute
Hospital"), and except as set forth below, the exception provided
by Section 6.8(b)(iii) above shall apply but only to the extent
such Specified Acute Hospital conducts a Competing Business
(including Permitted Expansions, the "Exempted Competing
Business") on the Scheduled Closing Date with respect to the
Facility shown on Schedule 6.8(c) as the Specified Acute
Hospital's "Affiliation Facility." On and after such Scheduled
Closing Date, a Specified Acute Hospital shall not expand its
services or its Competing Business beyond the Exempted Competing
Business except in accordance with, and subject to, clauses (i)
through (iii) below. With respect to any Acute Hospital acquired
by a Covered Party after the date of this Agreement and which is
within twenty (20) miles of a Covered Facility (an "Acquired Acute
Hospital"), the exception provided by Section 6.8(b)(iii) shall
apply but only to the extent of such Acquired Acute Hospital's
Exempted Competing Business on the date the acquisition of such
Acquired Acute Hospital is consummated (the "Acquisition Date").
On and after such Acquisition Date, an Acquired Acute Hospital
shall not expand its services or its Competing Business beyond the
Exempted Competing Business except in accordance with, and subject
to, clauses (i) through (iii) below.
(i) Seller or its relevant Affiliate must first
provide Buyer notice that it proposes to expand its services or
Competing Business beyond the Exempted Competing Business, and
shall briefly describe the nature and scope of the expanded
Competing Business in which it proposes to engage. Within
thirty (30) days following its receipt of such notice, Buyer
shall cause (A) the Affiliation Facility with respect to a
Specified Acute Hospital (as noted in Schedule 6.8(c)) to offer
the Specified Acute Hospital the opportunity to enter into an
affiliation agreement with its Affiliation Facility, or (B) the
closest Covered Facility with respect to an Acquired Acute
Hospital to offer the Acquired Acute Hospital the opportunity
to enter into an affiliation agreement. All affiliation
agreements must be on customary industry terms, pursuant to
which the relevant Covered Facility will agree to provide all
services comprising the expanded Competing Business to Payors
and patients of, and to subscribers or other participants in
services or programs provided by, the Acute Hospital at the
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Covered Facility's usual and customary prices, terms and
conditions which the parties shall negotiate expeditiously and
in good faith. The term of the affiliation agreement shall be
for the Covenant Period for such Specified or Acquired Acute
Hospital and shall give the Specified Acute Hospital or
Acquired Acute Hospital, as the case may be, the right to
extend the agreement for two successive one-year periods.
(ii) The Covered Facility must have the capacity
to provide the desired services in a quantity and manner
comparable to the quantity and manner in which such services
are proposed to be provided by the Specified or Acquired Acute
Hospital.
(iii) The entry into such affiliation agreement
by the Specified Acute Hospital or Acquired Acute Hospital, and
the performance thereof by the Specified Acute Hospital or
Acquired Acute Hospital (including, without limitation, the
failure to provide such Competing Business by the Specified
Acute Hospital or Acquired Acute Hospital) will not violate or
conflict with, or cause a default under, the terms of any
License, accreditation standard or Payor contract to which the
Specified Acute Hospital or Acquired Acute Hospital is then
subject. If the terms and conditions set forth in clause (i)
through (iii) (other than the first sentence of clause (i)) are
not met as to the expanded Competing Business of a Specified or
Acquired Acute Hospital, the exception provided by Section
6.8(b)(iii) above shall apply to such expanded Competing
Business of such Specified or Acquired Acute Hospital.
(d) Covenant Period. The term of the covenant (the
"Covenant Period") set forth in Section 6.8(a) shall expire on the
third anniversary of the Final Closing, except (i) as to a
Specified Acute Hospital, the covenant shall expire on the earlier
of the third anniversary of the Final Closing or the date on which
such Specified Acute Hospital's Affiliation Facility is no longer
a Covered Facility, and (ii) as to an Acquired Acute Hospital, the
covenant shall expire on the earlier of the third anniversary of
the Final Closing or the second anniversary of the Acquisition
Date for such Acquired Acute Hospital.
(e) Severability. To the extent that this covenant or
any provision of this Section 6.8 shall be deemed illegal or
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unenforceable by a court or other tribunal of competent
jurisdiction with respect to (i) any geographic area, (ii) any
part of the time period covered by this covenant, (iii) any
activity or Specified Capacity covered by this covenant, or (iv)
any other aspect of this covenant, such determination shall not
affect this covenant with respect to any other geographic area,
time period, activity or other aspect covered by this covenant.
(f) Injunctive Relief. Each of the parties to this
Agreement acknowledges that (i) the covenant and restrictions
contained in this Section 6.8 are necessary, fundamental and
required for the protection of the business of Buyer and its
operation (through the Buyer Subsidiaries) of the Facilities; (ii)
this covenant relates to matters which are of a special character
and which give this covenant a special value; and (iii) a breach
of the covenant contained in this Section 6.8 will result in
irreparable harm and damages to Buyer and Buyer Subsidiaries which
cannot be adequately compensated for by a monetary award.
Accordingly, it is expressly agreed that in addition to all other
remedies available in law or in equity, Buyer and Buyer
Subsidiaries shall be entitled to the remedy of a temporary
restraining order, preliminary injunction or such other form of
injunctive or equitable relief as may be issued by any court of
competent jurisdiction to restrain or enjoin a Covered Party from
breaching this covenant or any provision of this Section 6.8 or
otherwise to specifically enforce the provisions of this covenant.
(g) Value: The parties agree that the value of the
covenant contained in this Section 6.8 is the value assigned to it
in Section 2.5 and that each will account for and report the value
of such covenant in accordance with such valuation and all of the
terms and provisions of Section 2.7.
Section 6.9 Audited Statements. Prior to and after any
relevant Scheduled Closing, Seller shall make the books and
records (other than those protected by or subject to the
attorney-client privilege) and unaudited financial statements of
the Subsidiaries which are related to the Facilities and are for
periods prior to such Scheduled Closing available to Buyer and
Buyer's and Seller's independent accountants at reasonable times
and in a manner so as to not unduly interfere with Seller's
operations, and otherwise cooperate with Buyer in order to permit
an audit of the Subsidiaries' financial statements for periods
prior to such Scheduled Closing. The audit (including, without
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limitation, all services of Seller's independent accountants
rendered in connection therewith) will be paid for by Buyer.
Section 6.10 Post-Closing Insurance. Seller for five years
after the Final Closing, shall maintain its existing comprehensive
general liability and hospital professional liability insurance
coverages with respect to the Facilities for all periods prior to
the Closing in substantially their present form as described on
Schedule 3.26(b) (the "Insurance Program"), provided that (a)
Seller shall have the right to reduce (but not increase beyond
$2,000,000 per occurrence) the existing deductible under the
Insurance Program and (b) shall have the right to cancel or
terminate, or have cancelled or terminated, the coverages under
the Insurance Program so long as Seller acquires (from (i) its
present insurance company or (ii) another reasonably acceptable
insurance company under a reasonably acceptable policy) an
extended discovery period of not less than five years after any
such cancellation or termination for periods prior to the Final
Closing. Such Insurance Program, if maintained, shall be
maintained at Seller's expense, and if such Insurance Program is
maintained Seller shall cause Buyer and each Buyer Subsidiary to
be named as an additional insured with respect to the applicable
Facility and Seller shall provide Buyer with copies thereof and
copies of renewals prior to the expiration of the prior policy or
policies. Seller shall use commercially reasonable efforts to
avoid invalidating the insurance policies referred to in this
Section 6.10.
Section 6.11 Use of Controlled Substance Licenses. To the
extent permitted by Law, Buyer shall have the right, for a period
not to exceed sixty (60) days following a relevant Scheduled
Closing, to operate under the Licenses of the Subsidiaries
relating to controlled substances and the operation of pharmacies,
until Buyer is able to obtain such Licenses for itself. Seller
shall cause the pertinent Subsidiaries to execute and deliver to
Buyer any powers of attorney and other instruments which Buyer or
the appropriate governmental agency may reasonably require in
connection with Buyer's use of such Licenses. Buyer acknowledges
that it shall apply for all such Licenses as soon as reasonably
possible before or after the relevant Scheduled Closing and
diligently pursue such applications in accordance with Section 5.1.
Section 6.12 Non-Disturbance Agreements. Seller hereby
agrees to exercise its reasonable commercial efforts, prior to the
relevant Scheduled Closing, to obtain from each existing mortgagee
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of each Facility identified below a non-disturbance agreement
providing in substance that in the event the lessor or sublessor
of such Facility defaults in its obligations to the mortgagee
respecting indebtedness existing at the relevant Scheduled Closing
and as a result thereof the mortgagee forecloses upon, exercises a
power of sale or otherwise succeeds to the ownership of such
property, then and in such event, such foreclosure or other change
in ownership shall not terminate or affect the validity of the
Real Property Lease respecting such Facility assigned to Buyer
hereunder, provided that Buyer hereby agrees that, in connection
with Seller's obtaining any such non-disturbance agreement, Buyer
will execute such reasonable agreements in favor of such mortgagee
confirming the attornment of Buyer to such mortgagee or its
assigns, and subordinating the Real Property Lease to the interest
of such mortgagee, under such circumstances. In the event that
Seller shall be unable to obtain any such non-disturbance
agreement and the lessor's or sublessor's default under
indebtedness existing at the relevant Scheduled Closing results in
the termination of any such Real Property Lease prior to the
expiration of the current term and any renewal terms available in
the Real Property Lease as of the relevant Scheduled Closing, then
Seller shall indemnify Buyer, in accordance with the provisions of
Section 11.3(a)(ii), for Losses arising therefrom but not in
excess of the portion of the Purchase Price allocated to such
Facility in the Allocation Schedule, provided that Buyer shall
provide Seller with notice of any such default or claimed default
by the lessor or sublessor reasonably promptly following Buyer's
receipt of any notice or knowledge respecting same. The
Facilities and Real Property Leases to which this Section shall
apply are the Real Property Leases respecting the hospitals
numbered as Facility Nos. 40, 44, 46, 49 and 50.
ARTICLE 7
ADDITIONAL COVENANTS OF BUYER
Section 7.1 Waiver of Bulk Sales Law Compliance. Subject to
the indemnification provisions of Section 11.3(a)(iii) hereof,
Buyer hereby waives compliance by Seller and the Subsidiaries with
the requirements, if any, of Article 6 of the Uniform Commercial
Code as in force in any state in which Transferred Assets are
located and all other similar laws applicable to bulk sales and
transfers.
Section 7.2 Resale Certificate. Buyer agrees to furnish to
Seller and the Subsidiaries any resale certificate or certificates
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or other similar documents reasonably requested by Seller to
comply with pertinent sales and use tax laws.
Section 7.3 Cost Reports and Audit Contests. After each
Scheduled Closing and for the period of time necessary to conclude
any pending or potential audit or contest of any Cost Reports with
respect to the Facilities transferred at such Scheduled Closing
that include periods ending on or before the relevant Closing
Date, Buyer shall (a) properly keep and preserve all financial
books and records delivered to Buyer by Seller and the
Subsidiaries (if any) and utilized in preparing such Cost Reports,
including, without limitation, accounts payable invoices, Medicare
logs and billing information in accordance with Section 5.7, and
(b) within five (5) days of Buyer's receipt of the same, forward
to Seller all information received from Payors relating to periods
prior to and as of the relevant Closing Date including, without
limitation, Cost Report Settlements, notices of program
reimbursements, demand letters for payment and proposed audit
adjustments. Upon reasonable written notice by Seller, Seller (or
its agents) shall be entitled, at Seller's expense, during regular
business hours, to have access to, inspect and make copies of all
such books and records. Upon the reasonable request of Seller,
Buyer shall assist Seller and the Subsidiaries in obtaining
information deemed by Seller to be necessary or desirable in
connection with any audit or contest of such reports. To the
extent required to meet its obligations under this Section, Buyer
shall provide the reasonable support of its employees at no cost
to Seller.
Section 7.4 Tax Matters. After each Scheduled Closing,
Buyer shall be responsible for causing its employees, at no cost
to Seller, to assist Seller and the Subsidiaries, in the same
manner and to the extent that personnel of the Facilities
currently provide such assistance, in the preparation and filing
of all returns relating to taxes imposed upon the businesses
operated through the Transferred Assets that relate to periods
ending on or prior to the relevant Scheduled Closing but are due
after the relevant Closing Date and that are not related to Taxes
included in the Assumed Liabilities, including without limitation,
income tax and information returns. It is further acknowledged by
Buyer that Taxes (including, without limitation, the Florida
indigent care tax) imposed upon the right or privilege to do
business from the Facilities after the Closing shall be Buyer's
responsibility even if measured by gross receipts, net operating
revenues or patient days for a period ending on, before or
including a Closing Date and that Taxes included in Accrued
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Operating Expenses shall be only those properly accruable, in
accordance with generally accepted accounting principles, for the
right or privilege of doing business through the relevant Closing
Date. Buyer further agrees to exercise its reasonable commercial
efforts to have the income tax year of any venture or partnership
referred to in Section 2.1(c) terminated as of the relevant
Scheduled Closing with respect to the pertinent Subsidiary or
Subsidiaries transferring its interests therein.
Section 7.5 Letters of Credit. Subject to the terms and
conditions hereof, at the relevant Scheduled Closing, Buyer shall
cause letters of credit and indemnity or performance bonds to be
provided to substitute for those letters of credit and bonds
listed in Schedule 7.5, so that at and as of such Scheduled
Closing Seller and its Affiliates shall have no further obligation
to provide such designated letters of credit or bonds.
Section 7.6 Conduct Pending Closing. Prior to consummation
of the Transactions contemplated hereby or the termination or
expiration of this Agreement pursuant to its terms, unless Seller
shall otherwise consent in writing, Buyer shall not, and shall not
permit any Buyer Subsidiary to, take any action which would cause
any of Buyer's representations and warranties set forth in Article
4 to be false as of the relevant Scheduled Closing.
Section 7.7 Securities Offerings. Buyer hereby agrees to
indemnify and hold harmless Seller and each of its Affiliates, in
accordance with the provisions of Section 11.4(a)(ii), against any
and all Losses, as incurred, arising out of the offer or sale by
Buyer of securities, except to the extent that such Loss arises
from any untrue statement or alleged untrue statement of a
material fact contained in any such securities offering materials
or prospectus used by Buyer or its representatives, or from the
omission or alleged omission therefrom of a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, which
untrue or alleged untrue statement or omission or alleged omission
is made in reliance upon and in conformity with written
information furnished to Buyer by Seller under a cover letter from
Seller's counsel stating that such information is expressly for
use in such offering materials or prospectus.
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ARTICLE 8
BUYER'S CONDITIONS TO CLOSING
The obligations of Buyer to consummate the Transactions with
respect to a Facility and the Transferred Assets and Assumed
Liabilities related thereto shall be subject to the requirements
of Section 2.13 and to the fulfillment at or prior to the relevant
Scheduled Closing of the following conditions, unless Buyer waives
in writing such fulfillment:
Section 8.1 Performance of Agreement. Seller shall have
performed in all material respects its agreements and obligations
contained in this Agreement required to be performed on or prior
to the Scheduled Closing.
Section 8.2 Accuracy of Representations and Warranties. The
representations and warranties of Seller set forth in Article 3 of
this Agree- ment shall be true in all respects as of the date of
this Agreement (unless the inaccuracy or inaccuracies which would
otherwise result in a failure of this condition have been cured by
the Scheduled Closing) and as of the Scheduled Closing (as updated
by the revising of Schedules contemplated by Section 6.3) as if
made as of such time, except where such inaccuracy or inaccuracies
would not individually or in the aggregate result in a Material
Adverse Effect on the Facility in question.
Section 8.3 Officers' Certificate. Buyer shall have
received from Seller an officers' certificate, executed on
Seller's behalf by its chief executive officer, president, chief
financial officer or treasurer (in his or her capacity as such)
dated the Closing Date and stating that to the knowledge of such
individual, the conditions in Sections 8.1 and 8.2 above have been
met.
Section 8.4 Consents. The waiting period under the HSR Act
shall have expired or been terminated, and, subject to the
provisions of Section 2.12, all approvals, consents,
authorizations and waivers from governmental and accreditation
agencies the absence of which would render Buyer unable to operate
the facility in the manner operated prior to such Scheduled
Closing, and all approvals, consents, authorizations and waivers
from other third parties to the extent shown on the Schedule of
Required Consents (collectively "Consents") required for Buyer to
consummate the Transactions with respect to such Facility, shall
have been obtained, except that a Consent from a third party to
the sale and assignment of a Transferred Asset, such as a Medicare
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or Medicaid provider agreement, or the assumption of an Assumed
Liability with respect thereto, shall not constitute a condition
to Buyer's consummation of the Transactions with respect to a
Facility if such sale, assignment or assumption may lawfully be
made subject to a customary condition subsequent that the Consent
be obtained from the third party based upon determinations of such
third party, including without limitation needs surveys or
evaluations of Buyer, to be completed after the Scheduled
Closing. As to each of the Real Property Leases listed on the
Schedule of Required Consents, Buyer shall have received an
estoppel certificate, identifying the lease and stating that such
lease is in full force and effect, that the lessee under such
lease is current in all of its obligations under such lease and
that the lessor is not aware of any default by lessee under such
lease.
Section 8.5 Absence of Injunctions. There shall be no:
(a) Injunction, restraining order or order of any nature
issued by any court of competent jurisdiction or governmental
agency which directs that the Transactions related to such
Facility contemplated hereby shall not be consummated as herein
provided or compels or would compel Buyer to dispose of or
discontinue, or materially restrict the operations of, such
Facility or any significant portion of the Transferred Assets with
respect thereto as a result of the consummation of the
Transactions contemplated hereby;
(b) Suit, action or other proceeding by any governmental
agency pending before any court, governmental agency or
non-governmental, self-regulatory organization, or threatened
(pursuant to a written notification), wherein such complainant
seeks the restraint or prohibition of the consummation of the
Transactions related to such Facility or asserts the illegality of
the Transactions related to such Facility; or
(c) Action taken, or law enacted, promulgated or deemed
applicable to the Transactions related to such Facility, by any
governmental agency which would render consummation of such
Transactions illegal or which would threaten the imposition of any
penalty or material economic detriment upon Buyer if such
Transactions were consummated; provided that the parties will use
their reasonable efforts to litigate against, or to obtain the
lifting of, any such injunction, restraining or other order,
restraint, prohibition, action, suit, law or penalty, and the
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existence of any temporary restraining order or injunction or
pending or threatened proceeding or action shall operate only to
delay the Scheduled Closing (and extend the Termination Date, if
necessary) until the tenth day following the lifting of any such
order or injunction or the termination of such pending or
threatened proceedings or action, except that such delay may not
extend the original Termination Date for more than three (3)
months; and provided further that clauses (a) through (c) above
notwithstanding, the effect of any such event, action or suit
shall be to exclude the affected Facility from the Scheduled
Closing and, if such Facility is not transferred in a subsequent
Closing, to adjust the Purchase Price pursuant to the Allocation
Schedule or, if the parties do not agree on such adjustment,
pursuant to Section 2.14.
Section 8.6 Opinion of Counsel. Buyer shall have received,
on and as of the Closing Date, an opinion of Mr. Scott Brown,
general counsel to Seller, substantially as to the matters set
forth in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6 and 3.14, subject
to customary conditions and limitations.
Section 8.7 Title to Real Property. Title to Transferred
Assets related to the Facility comprised of interests in real
property shall have been evidenced by the willingness of Chicago
Title Insurance Company (or an Affiliate thereof) (the "Title
Insurer") to issue at regular rates ALTA (or the local equivalents
thereof) owner's, or lessee's, as the case may be, extended
coverage policies of title insurance (1990 Form B) (the "Title
Policies"), with the survey exception removed, in amounts equal to
the respective portions of the Purchase Price allocated to such
interests, showing title to such interests in such real property
vested in Buyer subject to transfer of such interest to Buyer.
Each such Title Policy shall be free of exceptions relating to
(i), except for Title Policies respecting Facilities located in
Texas, any claim which arises out of the transaction vesting in
Buyer the estate or interest insured by the Title Policy, by
reason of the operation of federal bankruptcy, state insolvency or
similar creditors's rights laws, and (ii) rights of the United
States of America, and the state in which the real property
covered by the Title Policy is located, or either or them, to
recover any federal funds advanced as provided in the Hill-Burton
Act, 42 U.S.C subsection 291 et. seq. Such Title Policies shall
additionally be free of all other exceptions, including other
standard exceptions, other than the following:
(a) A lien or liens to secure payment of real estate
taxes, not delinquent;
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(b) Exceptions, other than those listed on Schedule
8.7(b), disclosed by current standard ALTA Preliminary Title
Reports, delivered to and approved (except as shown on Schedule
8.7(b)) by Buyer prior to the date hereof (as indicated by Buyer's
signature of approval appended thereto) together with copies of
all documents underlying the exceptions contained therein; and
(c) Other possible minor matters that in the aggregate
are not substantial in amount and do not materially detract from
or interfere with the present or intended use of such real
property, including such minor matters as may be disclosed by
surveys taken after the date hereof. The willingness of the Title
Insurer to issue the Title Policies shall be evidenced either by
the issuance thereof at the relevant Scheduled Closing or the
written commitments or binders, dated as of the relevant Scheduled
Closing, of the Title Insurer to issue such Title Policies within
a reasonable time after the relevant Closing Date, subject to
actual transfer of the real property in question. If the Title
Insurer is unwilling to issue any such Title Policy, it shall be
required to provide Buyer and Seller, in writing, notice setting
forth the reason(s) for such unwillingness on or before the
relevant Closing Date. Seller shall have the right to seek to
cure any defect which is the reason for such unwillingness, and,
if such notice by the Title Insurer is given less than ten (10)
business days prior to the then Scheduled Closing, then the
relevant Closing Date (and, to the extent necessary, the
Termination Date) shall be extended for a period of up to ten (10)
business days to provide to Seller such opportunity to cure. In
the event that, despite Seller's efforts to cure, the Title
Insurer remains unwilling to issue any such Title Policy on the
Final Closing Date (as may be extended as provided herein), then,
at the election of Buyer, and without affecting the other
conditions of the parties to consummation of the Transactions,
such real property interests not covered by such a Title Policy
shall not be included in the Transferred Assets and shall be
deemed to be Excluded Assets, and liabilities associated therewith
that would otherwise be Assumed Liabilities shall be deemed to be
Excluded Liabilities; and Buyer and Seller shall negotiate in good
faith prior to the Final Closing Date an adjustment in the
Purchase Price based on the Allocation Schedule. If the parties
cannot agree upon such adjust- ment, then the disagreement shall
be resolved in accordance with Section 2.14. Notwithstanding the
foregoing, Buyer may accept such title to any such interests as
the pertinent Subsidiary may be able to convey, and such title
insurance with respect to the same as the Title Insurer is willing
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to issue, in which case such interests shall be conveyed as part
of the Transferred Assets without reduction of the Purchase Price
or any credit or allowance against the same and without any other
liability on the part of Seller or the Subsidiaries.
Section 8.8 Receipt of Other Documents. Buyer shall have
received the following:
(a) Certified copies of the resolutions of Seller's and
each relevant Subsidiary's board of directors respecting this
Agreement, the Related Agreements and the Transactions, together
with certified copies of any shareholder resolutions which are
necessary to approve the execution and delivery of this Agreement
and any Agreements and/or the performance of the obligations of
Seller and the Subsidiaries hereunder and thereunder;
(b) Certified copies of Seller's and each relevant
Subsidiary's Charter Documents, together with a certificate of the
corporate secretary of each that none of such documents have been
amended;
(c) One or more certificates as to the incumbency of
each officer of Seller or of any Subsidiary who has signed the
Agreement, any Related Agreement or any certificate, document or
instrument delivered pursuant to the Agreement or any Related
Agreement;
(d) Good standing certificates for Seller and each of
the relevant Subsidiaries from the Secretaries of State of their
respective states of incorporation, dated as of a date not earlier
than fifteen (15) business days prior to the relevant Closing Date;
(e) Copies of all third party and governmental
consents, permits and authorizations that Seller or any Subsidiary
has received in connection with the Agreement, the Related
Agreements and the Transactions to occur at the relevant Scheduled
Closing; and
(f) Certificates of non-foreign status in the form
required by Section 1445 of the Code duly executed by Seller and
the relevant Subsidiaries.
Section 8.9 Licenses and Permits. The Buyer shall have
obtained any and all authorizations, approvals and consents in
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connection with acquiring Licenses that will permit it to operate
the Facility after the relevant Scheduled Closing substantially as
operated by the relevant Subsidiary immediately prior to the
relevant Scheduled Closing.
Section 8.10 Casualty; Condemnation.
(a) Casualty. If any part of the Transferred Assets
related to the Facility are damaged, lost or destroyed (whether by
fire, theft, vandalism or other casualty) in whole or in part
prior to the relevant Scheduled Closing, and the fair market value
of such damage or destruction is less than thirty percent (30%) of
the allocated portion of the Purchase Price for such Facility set
forth in the Allocation Schedule, Seller shall, at its option,
either (i) reduce the Purchase Price by the fair market value of
the assets destroyed, such value to be determined as of the date
immediately prior to such destruction or, as the case may be, by
the estimated cost to restore damaged assets, (ii) provided that
the proceeds are obtainable without delay and are sufficient to
fully restore the damaged assets, upon the relevant Scheduled
Closing transfer the proceeds or the rights to the proceeds of
applicable insurance to Buyer, and Buyer may restore the
improvements, or (iii) repair or restore such damages or destroyed
improvements. If any part of the Transferred Assets related to
the Facility are damaged, lost or destroyed (whether by fire,
theft, vandalism or other cause or casualty) in whole or in part
prior to the relevant Scheduled Closing and the fair market value
of such damages is greater than thirty percent (30%) of such
allocated portion of the Purchase Price, Buyer may elect either to
(i) require Seller upon the relevant Scheduled Closing to transfer
the proceeds (or the right to the proceeds) of applicable
insurance to Buyer and Buyer may restore the improvements, or (ii)
terminate this Agreement with respect to the damaged assets or
Facility only, with a reduction in the Purchase Price determined
as follows. The reduction in Purchase Price shall be mutually
determined by Buyer and Seller on the basis of the Allocation
Schedule, or if the Buyer and Seller fail to agree, then such
reduction shall be determined in accordance with Section 2.14.
(b) Condemnation. From the date hereof until the
relevant Scheduled Closing, in the event that any portion of the
Transferred Assets related to the Facility becomes subject to or
is threatened with any condemnation or eminent domain proceedings
(except for an immaterial portion), then Buyer, at its sole
option, may elect to terminate this Agreement with respect only to
that part which is condemned or threatened to be condemned with a
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reduction in the Purchase Price determined as provided in Section
8.10(a).
Section 8.11 Reasonable Assurances. There shall not have
been any actions taken by the United States government to indicate
that it is reasonably likely that either the Unusual Proceedings
or any proceeding, investigation, claim or lawsuit relating
thereto, in each case relating to periods prior to the relevant
Scheduled Closing, (a) shall be applied to or be expanded to
include an assertion against Buyer or the applicable Buyer
Subsidiaries with respect to their operation of the Facility after
the relevant Scheduled Closing, or (b) would be the basis of any
investigation or proceeding to exclude Buyer or the applicable
Buyer Subsidiaries from participation in any government healthcare
program with respect to the operations of the Facility after the
relevant Scheduled Closing, or (c) would result in the Transferred
Assets being subjected to forfeiture under 18 U.S.C. section
1961-1966 or otherwise.
Section 8.12 Certain Events. During the thirty (30) days
preceding the date of the relevant Scheduled Closing, there shall
not have occurred or be continuing (a) any suspension of trading
on the New York Stock Exchange or material governmental
restrictions (not in force on the date hereof) on trading in
securities generally, or (b) any banking moratorium declared by
Federal, California or New York authorities, or (c) any material
disruption of or any material adverse change in the financial,
banking or capital markets, or (d) any outbreak or material
escalation of hostilities affecting the United States of America
or other calamity, panic or crisis, the effect of which on the
financial markets of the United States in each case described in
clauses (a), (b), (c) or (d) above, is that lending institutions
have generally ceased providing funding for transactions of the
size contemplated hereby, provided that the occurrence of such
event shall operate only to delay the Scheduled Closing (and
extend the Termination Date, if necessary) until the tenth day
following the date upon which lending institutions generally have
resumed providing funding for transactions of the size
contemplated hereby and that such delay may not extend the
original Termination Date for more than sixty (60) days, after
which time there shall be deemed to be a failure of this condition.
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ARTICLE 9
SELLER'S CONDITIONS TO CLOSING
The obligations of Seller to consummate the Transactions with
respect to a Facility and the Transferred Assets and Assumed
Liabilities related thereto shall be subject to the fulfillment at
or prior to the relevant Scheduled Closing of the following
conditions, unless Seller waives in writing such fulfillment:
Section 9.1 Performance of Agreement. Buyer shall have
performed in all material respects its agreements and obligations
contained in this Agreement required to be performed on or prior
to the Scheduled Closing.
Section 9.2 Accuracy of Representations and Warranties. The
representations and warranties of Buyer set forth in Article 4 of
this Agreement shall be true in all material respects as of the
date of this Agreement (unless the inaccuracy or inaccuracies
which would otherwise result in a failure of this condition have
been cured by the Scheduled Closing) and as of the Scheduled
Closing as if made as of such time.
Section 9.3 Officers' Certificate. Seller shall have
received from Buyer an officers' certificate, executed on Buyer's
behalf by its chief executive officer, president, chief financial
officer or treasurer (in his or her capacity as such) dated the
Closing Date and stating that to the actual knowledge of such
individual, the conditions in Sections 9.1 and 9.2 above have been
met. Section 9.4 Consents. The waiting period under the HSR Act
shall have expired or been terminated, and, subject to the
provisions of Section 2.12, all Consents required for Seller to
consummate the Transactions with respect to such Facility shall
have been obtained, except that a Consent from a third party to
the sale and assignment of a Transferred Asset, such as a Medicare
or Medicaid provider agreement, or the assumption of an Assumed
Liability with respect thereto, shall not constitute a condition
to Seller's consummation of the Transactions with respect to such
Facility if such sale, assignment or assumption may lawfully be
made subject to a customary condition subsequent that the Consent
be obtained from the third party based upon determinations of such
third party, including without limitation needs surveys or
evaluations of Buyer, to be completed after the Scheduled Closing,
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whether or not such third party indicates prior to the Scheduled
Closing that any such Consent is likely or not likely to be given.
Section 9.5 Absence of Injunctions. There shall be no:
(a) Injunction, restraining order or order of any nature
issued by any court of competent jurisdiction or governmental
agency which directs that the Transactions related to such
Facility contemplated hereby shall not be consummated as herein
provided;
(b) Suit, action or other proceeding by any
governmental agency pending before any court, governmental agency
or non-governmental, self-regulatory organization, or threatened
(pursuant to a written notification), wherein such complainant
seeks the restraint or prohibition of the consummation of the
Transactions related to such Facility or asserts the illegality of
the Transactions related to such Facility; or
(c) Action taken, or law enacted, promulgated or deemed
applicable to the Transactions related to such Facility, by any
governmental agency which would render consummation of such
Transactions illegal or which would threaten the imposition of any
penalty or material economic detriment upon Seller or the
Subsidiaries if such Transactions were consummated; provided that
the parties will use their reasonable efforts to litigate against,
or to obtain the lifting of, any such injunction, restraining or
other order, restraint, prohibition, action, suit, law, penalty or
damages, and the existence of any temporary restraining order or
injunction or pending or threatened proceeding or action shall
operate only to delay the Scheduled Closing (and extend the
Termination Date, if necessary) until the tenth day following the
lifting of any such order or injunction or the termination of such
pending or threatened proceedings or action, except that such
delay may not extend the original Termination Date for more than
three (3) months; and provided further that clauses (a) through
(c) above notwithstanding, the effect of any such event, action or
suit shall be to exclude the affected Facility from the Scheduled
Closing and, if such Facility is not transferred in a subsequent
Closing, to adjust the Purchase Price pursuant to the Allocation
Schedule or, if the parties do not agree on such adjustment,
pursuant to Section 2.14.
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Section 9.6 Opinion of Counsel. Seller shall have received,
on and as of the Closing Date, an opinion of King & Spalding,
counsel to Buyer, substantially as to the matters set forth in
Sections 4.1, 4.2, 4.3, 4.4, and 4.5, subject to customary
conditions and limitations.
Section 9.7 Receipt of Other Documents. Seller shall have
received the following:
(a) Certified copies of the resolutions of Buyer's and
each relevant Buyer Subsidiary's board of directors respecting
this Agreement, the Related Agreements and the Transactions;
(b) Certified copies of Buyer's and each relevant Buyer
Subsidiary's Charter Documents, together with a certificate of
Buyer's and each Buyer Subsidiary's corporate secretary that none
of such documents have been amended;
(c) One or more certificates as to the incumbency of
each officer of Buyer who has signed the Agreement, any Related
Agreement, or any certificate, document or instrument delivered
pursuant to the Agreement or any Related Agreement;
(d) Good standing certificates for Buyer and for each
relevant Buyer Subsidiary from the Secretaries of State of their
respective states of incorporation, dated as of a date not earlier
than fifteen (15) business days prior to the relevant Closing Date;
(e) Copies of all third party and governmental
consents, permits and authorizations that Buyer has received in
connection with the Agreement, the Related Agreements and the
Transactions; and
(f) A certificate of Buyer executed on its behalf by
the Chief Executive Officer and the Chief Financial Officer of
Buyer stating that to the best of their knowledge and belief,
specifying in reasonable detail their basis for same, after giving
effect to the Transactions, neither Buyer nor any relevant Buyer
Subsidiary is insolvent or will be rendered insolvent by
obligations incurred in connection therewith, or will be left with
unreasonably small capital with which to engage in their
businesses, or will have incurred obligations beyond their
respective abilities to perform the same as and when due.
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ARTICLE 10
TERMINATION
Section 10.1 Termination. Any Transactions contemplated
hereby that have not been consummated may be terminated:
(a) At any time, by mutual written consent of Seller
and Buyer; or
(b) By either Buyer or Seller upon written notice to
the other party, if (i) the relevant Scheduled Closing shall not
have occurred by its Termination Date; or (ii)(A) in the case of
termination by Seller, the conditions set forth in Section 2.13
and Article 9 for the relevant Scheduled Closing cannot reasonably
be met by its Termination Date or Seller has terminated this
Agreement pursuant to Section 6.4, and (B) in the case of
termination by Buyer, the conditions set forth in Section 2.13 and
Article 8 for the relevant Scheduled Closing cannot reasonably be
met by its Termination Date, unless in either of the cases
described in clauses (A) or (B), the failure of the condition is
the result of the material breach of this Agreement by the party
seeking to terminate. The Termination Date for the First Closing
shall be August 1, 1994, and provided the First Closing has
occurred, the Termination Date for any subsequent Scheduled
Closing and the Final Closing shall be September 30, 1994. Each
such date, or such later date as may be specifically provided for
in this Agreement or agreed upon by the parties, is herein
referred to as the "Termination Date." Each party's right of
termination hereunder is in addition to any other rights it may
have hereunder or otherwise.
Section 10.2 Effect of Termination. If there has been a
termination pursuant to Section 10.1 prior to the First Closing,
then this Agreement shall be deemed terminated, and all further
obligations of the parties hereunder shall terminate, except that
the obligations set forth in Sections 5.5 and 5.6 and in Articles
11 and 12 shall survive. In the event of termination of this
Agreement as provided above, there shall be no liability on the
part of a party to another under and by reason of this Agreement
or the transactions contemplated hereby except as set forth in
Article 11 and except for intentionally fraudulent acts by a
party, the remedies for which shall not be limited by the
provisions of this Agreement. In the event of a termination after
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the First Closing, then all further obligations of the parties
respecting Transactions that have not been consummated shall
terminate, except that the obligations set forth in Sections 5.5
and 5.6 and in Articles 11 and 12 shall survive, and there shall
be no liability on the part of a party to another in respect of
such unconsummated Transactions except as set forth in Article 11
and except for intentionally fraudulent acts by a party, the
remedies for which shall not be limited by this Agreement. The
foregoing provisions shall not, however, limit or restrict the
availability of specific performance or other injunctive or
equitable relief to the extent that specific performance or such
other relief would otherwise be available to a party hereunder.
ARTICLE 11
SURVIVAL AND REMEDIES; INDEMNIFICATION
Section 11.1 Survival. Except as may be otherwise expressly
set forth in this Agreement, the representations, warranties,
covenants and agreements of Buyer and Seller set forth in this
Agreement, or in any writing required to be delivered in
connection with this Agreement, shall survive the Scheduled
Closings and the consummations of the Transactions.
Section 11.2 Exclusive Remedy. Absent intentional fraud or
unless otherwise specifically provided herein, the sole exclusive
remedy for damages of a party hereto for any breach of the
representations, warranties, covenants and agreements of the other
party contained in this Agreement and the Related Agreements shall
be the remedies contained in this Article 11. Notwithstanding the
foregoing, with respect to any matters associated with any of the
Owned Real Properties or Leased Real Properties involving
environmental contamination or noncompliance with any applicable
Environmental Law, if the First Closing occurs, nothing in this
Article 11 shall limit or restrict a party's rights or remedies
against, or obligations to, another party or any third party
arising under any Environmental Law, if such matter (a) was in
existence on or prior to the relevant Scheduled Closing, (b) was
not identified in the Environmental Survey or Schedule 3.16 (or an
update thereto pursuant to Section 6.3), (c) was unknown to Seller
or any Subsidiary as of the relevant Scheduled Closing, and (d)
would not constitute a breach of Seller's warranties in Section
3.16.
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Section 11.3 Indemnity by Seller.
(a) Seller shall indemnify Buyer and the Buyer
Subsidiaries and hold them harmless from and against any and all
claims, demands, suits, loss, liability, damage and expense,
including reasonable attorneys' fees and costs of investigation,
litigation, settlement and judgment (collectively "Losses"), which
they may sustain or suffer or to which they may become subject as
a result of:
(i) The inaccuracy of any representation or the
breach of any warranty made by Seller herein or by Seller or a
Subsidiary in a Related Agreement, provided, that any such
inaccuracy or breach shall be determined without regard to any
qualification of such representation or warranty relating to
materiality or any Material Adverse Effect;
(ii) The nonperformance or breach of any
covenant or agreement made or undertaken by Seller in this
Agreement or by Seller or a Subsidiary in a Related Agreement;
and
(iii) If a Scheduled Closing occurs, the failure
of Seller or any Subsidiary to pay, discharge or perform as and
when due, any of the Excluded Liabilities (including, without
limitation, the Excluded Liabilities enumerated in Sections
2.4(c), (d), (e) and (g), and any Losses as a result of or in
connection with the failure of Seller and the Subsidiaries to
comply with any Bulk Sales Laws referred to in Section 7.1).
(b) The indemnification obligations of Seller provided
above shall, in addition to the qualifications and conditions set
forth in Sections 11.5 and 11.6, be subject to the following
qualifications:
(i) Buyer and the Buyer Subsidiaries shall not
be entitled to indemnity under Subsection (a)(i) above (except
for claims arising under Sections 3.1, 3.2, 3.3 and 3.7) unless:
(A) Written notice to Seller of such claim
specifying the basis thereof is made, or an action at law or
in equity with respect to such claim is served, before the
second anniversary of the earlier to occur of the relevant
Closing Date or the date on which this Agreement is
terminated, as the case may be;
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(B) If a Scheduled Closing occurs, the
Losses sustained or suffered by Buyer and the Buyer
Subsidiaries or to which they may be subject as a result of
circumstances described in such Subsection (a)(i) exceed, in
the aggregate, the sum of Three Million Dollars ($3,000,000)
(the "Trigger Amount"), in which case Buyer and the Buyer
Subsidiaries shall be entitled only to recover the amount by
which Losses exceed Two Million Dollars ($2,000,000) (the
"Deductible Amount"), provided, however, that individual
claims of Two Thousand Dollars ($2,000) or less shall not be
aggregated for purposes of calculating either the Trigger
Amount, the Deductible Amount or the excess of Losses over
the Deductible Amount;
(C) If a Scheduled Closing occurs, in no
event shall Seller be liable to Buyer and the Buyer
Subsidiaries under Subsection (a)(i) for Losses in the
nature of consequential damages, lost profits, damage to
reputation or the like, but such damages shall be limited to
out-of-pocket Losses and diminution in value; and
(D) If a Scheduled Closing occurs, in no
event shall Seller be liable to Buyer and the Buyer
Subsidiaries under Subsection (a)(i) for amounts which, in
the aggregate, exceed the sum of the amounts specified in
Section 2.5(a) and the last sentence of Section 2.5;
provided that in the event Buyer and the Buyer Subsidiaries
make claims in the aggregate for Losses with respect to a
Facility that exceed seventy-five percent (75%) of the
portion of the Purchase Price allocated to such Facility in
the Allocation Schedule, then substantially concurrently
with the making of such claim or claims, Buyer shall cause
such Facility to be offered in writing for resale to Seller
at a cash price equal to such allocated portion of the
Purchase Price less amounts, if any, previously paid by
Seller to Buyer with respect to Buyer's claims for Losses
with respect to such Facility and on an "as is, where is"
basis, in which case:
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(1) Seller shall have thirty (30)
days to accept such offer in writing;
(2) If Seller accepts such offer, it
shall have one hundred fifty (150) days to close such
transaction;
(3) At the closing of such
transaction, Buyer shall cause all of the right, title
and interest of its Affiliates in such Facility and
related assets to be conveyed to Seller (or a designee of
Seller) in the same condition of title as the Facility
and related assets were originally sold, assigned,
transferred and conveyed by Seller and the Subsidiaries
hereunder, and Seller (or such designee) shall assume
disclosed operating liabilities of the Facility of the
same types as the Assumed Liabilities provided that if
the dollar amount of such liabilities exceeds the dollar
amount of the Assumed Liabilities respecting such
Facility originally assumed by Buyer hereunder, then
there shall be a dollar-for-dollar reduction in the
purchase price payable by Seller (or its designee) to the
extent of such excess; and
(4) Simultaneous with such closing,
Buyer and the Buyer Subsidiaries shall release Seller
from further liability under Subsection (a)(i) for Losses
with respect to such Facility.
(ii) If a Scheduled Closing occurs, Buyer and
the Buyer Subsidiaries shall not be entitled to indemnity under
Subsections (a)(ii)-(iii) above except for out-of-pocket Losses
actually suffered or sustained by them or to which they may
become subject as a result of circumstances described in such
Subsections (a)(ii)-(iii), and such indemnity shall not include
Losses in the nature of consequential damages, lost profits,
diminution in value, damage to reputation or the like; except
that the provisions of this clause (b)(ii) shall not apply to
breaches of Sections 5.6 and 6.8, provided that the liability
of Seller and the Subsidiaries for breaches of such Sections
shall be subject to the provisions of Subsection (b)(i)(D)
above and that the liability of Seller and the Subsidiaries for
breaches of such Sections shall be aggregated with the
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liability of Seller under Subsection (a)(i) for purposes of
Subsection (b)(i)(D).
(iii) Seller shall have no liability for Losses
arising from the breach of any warranty related to Net Book
Values, including without limitation the warranties contained
in Sections 3.17 and 3.18, and no such Losses shall be applied
against the Trigger Amount or the Deductible Amount or the
excess of Losses over the Deductible Amount, it being agreed
that the liability of the Seller with respect to Net Book
Values, if any, shall be resolved in accordance with the
provisions of Sections 2.6(a), (b) and (c). Section 11.4
Indemnity by Buyer. (a) Buyer shall indemnify Seller and the
Subsidiaries and hold Seller and the Subsidiaries harmless from
and against any and all Losses which they may sustain or suffer
or to which they may become subject as a result of:
(i) The inaccuracy of any representation or the
breach of any warranty made by Buyer herein or by Buyer or a
Buyer Subsidiary in a Related Agreement, provided that any such
inaccuracy or breach shall be determined without regard to any
qualification of such representation or warranty relating to
materia-lity or any Material Adverse Effect;
(ii) The nonperformance or breach of any
covenant or agreement made or undertaken by Buyer in this
Agreement or by Buyer or a Buyer Subsidiary in a Related
Agreement;
(iii) If a Scheduled Closing occurs, the failure
of Buyer to pay, discharge or perform as and when due, any of
the Assumed Liabilities; and
(iv) If a Scheduled Closing occurs, the ongoing
operations of Buyer and the Transferred Assets after the
relevant Closing Date, including but not limited to the
continuation or performance by Buyer after the relevant Closing
Date of any agreement or practice of the Seller or the
Subsidiaries.
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(b) The indemnification obligations of Buyer provided
above shall, in addition to the qualifications and conditions set
forth in Sections 11.5 and 11.6, be subject to the following
qualifications:
(i) Seller and the Subsidiaries shall not be
entitled to indemnity under Subsection (a)(i) above (except for
claims under Sections 4.1, 4.2, 4.3 and 4.7) unless:
(A) Written notice to Buyer of such claim
specifying the basis thereof is made, or an action at law or
in equity with respect to such claim is served, before the
second anniversary of the earlier to occur of the relevant
Closing Date or the date on which this Agreement is
terminated, as the case may be;
(B) If a Scheduled Closing occurs, the
Losses sustained or suffered by Seller and the Subsidiaries
or to which they may be subject as a result of circumstances
described in such Subsection (a)(i) exceed, in the
aggregate, the Trigger Amount, in which case Seller and the
Subsidiaries shall be entitled only to recover the amount by
which such Losses exceed, in the aggregate, the Deductible
Amount, provided, however, that individual claims of Two
Thousand Dollars ($2,000) or less shall not be aggregated
for purposes of calculating either the Trigger Amount, the
Deductible Amount or the excess of Losses over the
Deductible Amount; and
(C) If a Scheduled Closing occurs, in no
event shall Buyer be liable to Seller and the Subsidiaries
under Subsection (a)(i) for Losses in the nature of
consequential damages, lost profits, damage to reputation or
the like, but such damages shall be limited to out-of-pocket
Losses and diminution in value.
(ii) If a Scheduled Closing occurs, Seller and
the Subsidiaries shall not be entitled to indemnity under
Subsections (a)(ii)-(iv) above except for out-of-pocket Losses
actually suffered or sustained by them or to which they may
become subject as a result of circumstances described in such
Subsections (a)(ii)-(iv), and such indemnity shall not include
Losses in the nature of consequential damages, lost profits,
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diminution in value, damage to reputation or the like, except
that the provisions of this clause (b)(ii) shall not apply to
breaches of Sections 5.6 or 5.7.
Section 11.5 Further Qualifications Respecting Indemnification.
The right of a party (an "Indemnitee") to indemnity hereunder
shall be subject to the following additional qualifications:
(a) The Indemnitee shall promptly upon its discovery of
facts or circumstances giving rise to a claim for indemnification,
including receipt by it of notice of any demand, assertion, claim,
action or proceeding, judicial, governmental or otherwise, by any
third party (such third party actions being collectively referred
to herein as "Third Party Claims"), give notice thereof to the
indemnifying party (the "Indemnitor"), such notice in any event to
be given within sixty (60) days from the date the Indemnitee
obtains actual knowledge of the basis or alleged basis for the
right of indemnity or such shorter period as may be necessary to
avoid material prejudice to the Indemnitor; and
(b) In computing Losses, such amounts shall be computed
net of any related recoveries to which the Indemnitee is entitled
under insurance policies or other related payments received or
receivable from third parties and net of any tax benefits actually
received by the Indemnitee or for which it is eligible, taking
into account the income tax treatment of the receipt of
indemnification.
Section 11.6 Procedures Respecting Third Party Claims. In
providing notice to the Indemnitor of any Third Party Claim (the
"Claim Notice"), the Indemnitee shall provide the Indemnitor with
a copy of such Third Party Claim or other documents received and
shall otherwise make available to the Indemnitor all relevant
information material to the defense of such claim and within the
Indemnitee's possession. The Indemnitor shall have the right, by
notice given to the Indemnitee within fifteen (15) days after the
date of the Claim Notice, to assume and control the defense of the
Third Party Claim that is the subject of such Claim Notice,
including the employment of counsel selected by the Indemnitor
after consultation with the Indemnitee, and the Indemnitor shall
pay all expenses of, and the Indemnitee shall cooperate fully with
the Indemnitor in connection with, the conduct of such defense.
The Indemnitee shall have the right to employ separate counsel in
any such proceeding and to participate in (but not control) the
defense of such Third Party Claim, but the fees and expenses of
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such counsel shall be borne by the Indemnitee unless the
Indemnitor shall agree otherwise; provided, however, if the named
parties to any such proceeding (including any impleaded parties)
include both the Indemnitee and the Indemnitor, the Indemnitor
requires that the same counsel represent both the Indemnitee and
the Indemnitor, and representation of both parties by the same
counsel would be inappropriate due to actual or potential
differing interests between them, then the Indemnitee shall have
the right to retain its own counsel at the cost and expense of the
Indemnitor. If the Indemnitor shall have failed to assume the
defense of any Third Party Claim in accordance with the provisions
of this Section, then the Indemnitee shall have the absolute right
to control the defense of such Third Party Claim, and, if and when
it is finally determined that the Indemnitee is entitled to
indemnification from the Indemnitor hereunder, the fees and
expenses of Indemnitee's counsel shall be borne by the Indemnitor,
provided that the Indemnitor shall be entitled, at its expense, to
participate in (but not control) such defense. The Indemnitor
shall have the right to settle or compromise any such Third Party
Claim for which it is providing indemnity so long as such
settlement does not impose any obligations on the Indemnitee
(except with respect to providing releases of the third party).
The Indemnitor shall not be liable for any settlement effected by
the Indemnitee without the Indemnitor's consent except where the
Indemnitee has assumed the defense because Indemnitor has failed
or refused to do so. The Indemnitor may assume and control, or
bear the costs, of any such defense subject to its reservation of
a right to contest the Indemnitee's right to indemnification
hereunder, provided that it gives the Indemnitee notice of such
reservation within fifteen (15) days of the date of the Claim
Notice.
ARTICLE 12
GENERAL PROVISIONS
Section 12.1 Notices. All notices, requests, demands,
waivers, consents and other communications hereunder shall be in
writing, shall be delivered either in person, by telegraphic,
facsimile or other electronic means, by overnight air courier or
by mail, and shall be deemed to have been duly given and to have
become effective (a) upon receipt if delivered in person or by
telegraphic, facsimile or other electronic means, (b) one business
day after having been delivered to an air courier for overnight
delivery or (c) three business days after having been deposited in
the mails as certified or registered mail, return receipt
requested, all fees prepaid, directed to the parties or their
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permitted assignees at the following addresses (or at such other
address as shall be given in writing by a party hereto):
If to Seller, addressed to:
National Medical Enterprises
2700 Colorado Avenue
Santa Monica, CA 90404
Attn: Treasurer
Facsimile: (310) 998-6507
with a copy to counsel for Seller:
National Medical Enterprises
2700 Colorado Avenue
Santa Monica, CA 90404
Attn: General Counsel
Facsimile: (310) 998-6956
and
Munger, Tolles & Olson
355 South Grand Avenue
35th Floor
Los Angeles, CA 90071
Attn: Robert L. Adler
Facsimile: (213) 687-3702
If to Buyer, addressed to:
Charter Medical Corporation
577 Mulberry St.
Macon, GA 31298
Attn: Executive Vice President - Finance
Facsimile: (912) 751-2832
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with a copy to counsel for Buyer:
King & Spalding
191 Peachtree Street
Atlanta, GA 30303-1763
Attn: Robert W. Miller
Facsimile: (404) 572-5144
Section 12.2 Attorneys' Fees. In any litigation or other
proceeding relating to this Agreement, including litigation with
respect to any Related Agreement (but excluding any proceedings
under Sections 2.6(b), 2.6(c) or 2.14), the prevailing party shall
be entitled to recover its costs and reasonable attorneys' fees.
Section 12.3 Successors and Assigns. The rights under this
Agreement shall not be assignable or transferable nor the duties
delegable by either party without the prior written consent of the
other; and nothing contained in this Agreement, express or
implied, is intended to confer upon any person or entity, other
than the parties hereto and their permitted successors-in-interest
and permitted assignees, any rights or remedies under or by reason
of this Agreement unless so stated to the contrary.
Notwithstanding the foregoing, (a) Buyer may grant to its lenders
a security interest in its rights under this Agreement, and (b)
subject to the terms and provisions of Section 5.7, Buyer may
assign its rights under Section 5.7 to the entities and in the
circumstances described in Section 5.7(d).
Section 12.4 Counterparts. This Agreement may be executed
in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
Section 12.5 Captions and Paragraph Headings. Captions and
paragraph headings used herein are for convenience only and are
not a part of this Agreement and shall not be used in construing
it.
Section 12.6 Entirety of Agreement; Amendments. This
Agreement (including the Schedules and Exhibits hereto) and the
other documents and instruments specifically provided for in this
Agreement contain the entire understanding between the parties
concerning the subject matter of this Agreement and such other
documents and instruments and, except as expressly provided for
herein, supersede all prior understandings and agreements, whether
oral or written, between them with respect to the subject matter
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hereof and thereof. There are no representations, warranties,
agreements, arrangements or understandings, oral or written,
between the parties hereto relating to the subject matter of this
Agreement and such other documents and instruments which are not
fully expressed herein or therein. This Agreement may be amended
or modified only by an agreement in writing signed by each of the
parties hereto. All Exhibits and Schedules attached to or
delivered in connection with this Agreement are integral parts of
this Agreement as if fully set forth herein.
Section 12.7 Construction. This Agreement and any documents
or instruments delivered pursuant hereto shall be construed
without regard to the identity of the person who drafted the
various provisions of the same. Each and every provision of this
Agreement and such other documents and instruments shall be
construed as though the parties participated equally in the
drafting of the same. Consequently, the parties acknowledge and
agree that any rule of construction that a document is to be
construed against the drafting party shall not be applicable
either to this Agreement or such other documents and instruments.
Section 12.8 Waiver. The failure of a party to insist, in
any one or more instances, on performance of any of the terms,
covenants and conditions of this Agreement shall not be construed
as a waiver or relinquishment of any rights granted hereunder or
of the future performance of any such term, covenant or condition,
but the obligations of the parties with respect thereto shall
continue in full force and effect. No waiver of any provision or
condition of this Agreement by a party shall be valid unless in
writing signed by such party or operational by the terms of this
Agreement. A waiver by one party of the performance of any
covenant, condition, representation or warranty of the other party
shall not invalidate this Agreement, nor shall such waiver be
construed as a waiver of any other covenant, condition,
representation or warranty. A waiver by any party of the time for
performing any act shall not constitute a waiver of the time for
performing any other act or the time for performing an identical
act required to be performed at a later time.
Section 12.9 Governing Law. This Agreement shall be
governed in all respects, including validity, interpretation and
effect, by the laws of the State of California, without regard to
the principles of conflicts of law thereof, provided that the
validity, interpretation and effect of any instruments by which
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real property is conveyed at a Scheduled Closing shall be governed
by the laws of the state in which such real property is located.
Any action arising under this Agreement shall be adjudicated (a)
in Los Angeles, California, if brought by Buyer or its Affiliates
against Seller, any Subsidiary or their respective Affiliates, and
(b) in [Atlanta], Georgia, if brought by Seller or its Affiliates
against Buyer, any Buyer Subsidiary or their respective
Affiliates, provided that any cross-claim or counterclaim shall
also be adjudicated in the court in which the underlying action
has been brought in accordance with this Section 12.9.
Section 12.10 Severability. Whenever possible, each
provision of this Agreement shall be interpreted in such manner as
to be valid, binding and enforceable under applicable law, but if
any provision of this Agreement is held to be invalid, void (or
voidable) or unenforceable under applicable law, such provision
shall be ineffective only to the extent held to be invalid, void
(or voidable) or unenforceable, without affecting the remainder of
such provision or the remaining provisions of this Agreement.
Section 12.11 Consents Not Unreasonably Withheld. Wherever
the consent or approval of any party is required under this
Agreement, such consent or approval shall not be unreasonably
withheld, unless such consent or approval is to be given by such
party at the sole or absolute discretion of such party or is
otherwise similarly qualified.
Section 12.12 Time Is of the Essence. Time is hereby
expressly made of the essence with respect to each and every term
and provision of this Agreement. The parties acknowledge that
each will be relying upon the timely performance by the other of
its obligations hereunder as a material inducement to each party's
execution of this Agreement.
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IN WITNESS WHEREOF, the parties have duly executed this
Agreement on the date first above written.
Buyer:
CHARTER MEDICAL CORPORATION
By /s/ Lawrence W. Drinkard
Name Lawrence W. Drinkard
Title E.V.P./CFO
Seller:
NATIONAL MEDICAL ENTERPRISES,
INC.
By /s/ Raymond L. Mathirsen
Name Raymond L. Mathirsen
Title Sr. V.P - CFO
