<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C>
DATE OF REPORT: APRIL 14, 1999
DATE OF EARLIEST EVENT REPORTED: APRIL 9, 1999
</TABLE>
MAGELLAN HEALTH SERVICES, INC.
----------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-6639 58-1076937
- ----------------------------- ----------------------------- -----------------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of Identification No.)
Incorporation or
organization)
</TABLE>
<TABLE>
<S> <C>
3414 PEACHTREE ROAD, N.E., SUITE 1400
ATLANTA, GEORGIA 30326
- --------------------------------------------- ---------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
(404) 841-9200
------------
(Registrant's telephone number, including area code)
------------------------
NOT APPLICABLE
-----------------
(Former name, former address and former fiscal year, if changed since last
report)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FORWARD-LOOKING STATEMENTS
This current report of the Registrant ("Magellan" or the "Company") on Form
8-K includes "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Although the Company believes that its plans,
intentions and expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such plans, intentions or expectations
will be achieved. Important factors that could cause actual results to differ
materially from the Company's forward-looking statements are set forth in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1998. All forward-looking statements attributable to the Company or persons
acting on behalf of the Company are expressly qualified in their entirety by the
cautionary statements set forth in the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1998.
ITEM 2. DISPOSITION OF ASSETS
On April 6, 1999, the Company announced that it had signed definitive
agreements for the sale of its European operations to Investment AB Bure
("Bure"), a Swedish company (the "Europe Sale"). The Company had no material
relationships with Bure prior to the Europe Sale.
The operations being sold are (i) Charter Medical of England Limited, which
is the operator of Charter Nightingale Hospital and Charter Clinic Chelsea in
London, England, and (ii) Societe Anonyme de la Metairie in Nyon, Switzerland
(collectively, the "European Hospitals"). The European Hospitals are engaged in
the business of providing psychiatric health care services to patients in both
inpatient and outpatient settings and constitute substantially all of the
Company's business conducted outside of the United States (including
possessions) and Canada. The Europe Sale was consummated on April 9, 1999 (the
"Closing Date").
The Company will receive approximately $57.0 million of total consideration
(before payment of transaction costs estimated to total approximately $2.5
million) for the Europe Sale, an amount determined through arms-length
negotiations between the Company and Bure, as follows:
- On the Closing Date, Bure paid the Company approximately $49.6 million as
consideration for (i) all of the outstanding shares of stock of the
European Hospitals; (ii) the right to continue using the "CHARTER" name, a
registered trademark of the Company, and certain other marks owned by the
Company for up to ten (10) years and (iii) continued access to certain
outcomes-monitoring systems owned and operated by the Company.
- Additionally, Bure deposited approximately $7.4 million into an
interest-bearing escrow account (the "Property Deposit") on the Closing
Date. The Property Deposit will be used to purchase certain real property
belonging to a wholly owned domestic subsidiary of the Company and used in
the European Hospitals' business. The Property Deposit will be disbursed,
together with all interest accrued thereon, to the Company no later than
May 31, 1999.
The Company will utilize approximately $38.2 million of the net proceeds
from the Europe Sale to make a mandatory unscheduled principal payment on
indebtedness outstanding under the Term Loan Facility (as defined) by April 14,
1999. The remainder of the proceeds will be used to reduce indebtedness
outstanding under the Revolving Facility (as defined) or for general corporate
purposes.
On a pro forma basis at December 31, 1998, the Company would have recorded a
non-recurring gain on the Europe Sale of approximately $28.0 million, before
provision for income taxes.
2
<PAGE>
ITEM 7. PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial information for the
Company is included herein:
1) Unaudited Pro Forma Consolidated Balance Sheet at December 31, 1998;
2) Unaudited Pro Forma Consolidated Statement of Operations for the fiscal year
ended September 30, 1998; and
3) Unaudited Pro Forma Consolidated Statement of Operations for the three
months ended December 31, 1998.
3
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The Unaudited Pro Forma Consolidated Financial Information set forth below
is based on the historical presentation of the consolidated financial statements
of Magellan, and the historical operating results of Human Affairs
International, Incorporated ("HAI"), Allied Health Services, Inc. and certain of
its affiliates ("Allied"), and Merit Behavioral Care Corporation ("Merit").
Certain reclassifications have been made to fiscal 1998 amounts to conform to
fiscal 1999 presentation.
The Unaudited Pro Forma Consolidated Balance Sheet at December 31, 1998,
gives effect to the Europe Sale as if it had occurred on December 31, 1998.
The Unaudited Pro Forma Consolidated Statements of Operations for the fiscal
year ended September 30, 1998, and for the three months ended December 31, 1998,
give effect to the following events as if they had occurred on October 1, 1997:
- the HAI acquisition (as described below);
- the Allied acquisition (as described below);
- the Green Spring minority stockholder conversion (as described below);
- the Merit acquisition (as described below); and
- The Europe Sale
The Unaudited Pro Forma Consolidated Financial Information does not purport
to be indicative of the results that actually would have been obtained if the
operations had been conducted as presented and they are not necessarily
indicative of operating results to be expected in future periods. Additionally,
due to the ongoing integration of the Company's managed healthcare businesses
and other factors, the Unaudited Pro Forma Consolidated Statement of Operations
for the three months ended December 31, 1998, is not necessarily proportional to
nor indicative of the pro forma results expected for a full year.
The Unaudited Pro Forma Consolidated Statement of Operations for the fiscal
year ended September 30, 1998, excludes approximately $35.0 million to $40.0
million of annual cost savings that the Company expects to achieve by September
30, 1999, as a result of the Integration Plan (as defined). The Unaudited Pro
Forma Consolidated Statements of Operations for the fiscal year ended September
30, 1998, and for the three months ended December 31, 1998, also exclude managed
care integration costs of $17.0 million and $1.8 million, respectively, that
were directly attributable to the HAI, Allied and Merit acquisitions.
Additionally, the Unaudited Pro Forma Consolidated Statement of Operations for
the fiscal year ended September 30, 1998, excludes both the extraordinary loss
on early extinguishment of debt that was a direct result of the Merit
acquisition and the non-recurring gain attributable to the Europe Sale.
The Unaudited Pro Forma Consolidated Financial Information and notes thereto
should be read in conjunction with the historical consolidated financial
statements and notes thereto of Magellan, and Management's Discussion and
Analysis of Financial Condition and Results of Operations that appear in the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1998, filed on December 29, 1998, and in the Company's quarterly report on Form
10-Q for the quarterly period ended December 31, 1998, filed on February 16,
1999, which are incorporated herein by reference, the historical consolidated
financial statements and notes thereto of Merit, which appear in the Company's
current report on Form 8-K/A, filed on October 28, 1998, which are incorporated
herein by reference and the historical consolidated financial statements and
notes thereto of HAI, which appear in the Company's current report on Form 8-K,
filed on December 17, 1997, which are incorporated herein by reference.
4
<PAGE>
The following is a description of each of the transactions (other than the
Europe Sale which is described elsewhere herein) that are reflected in the pro
forma presentation:
HAI ACQUISITION. On December 4, 1997, the Company consummated the purchase
of HAI, formerly a unit of Aetna US Healthcare, Inc. ("Aetna"), for
approximately $122.1 million. At the time of the HAI acquisition, HAI managed
the care of approximately 16.3 million covered lives, primarily through employee
assistance programs and other managed behavioral healthcare plans. The Company
funded the acquisition of HAI with cash on hand and accounted for the
acquisition of HAI using the purchase method of accounting. The Company may be
required to make additional contingent payments of up to $60.0 million annually
to Aetna over the five-year period subsequent to closing. The maximum aggregate
amount of contingent payments is $300.0 million. The amount and timing of the
payments will be contingent upon net increases in the number of HAI's covered
lives in specified products. The Company is obligated to make contingent
payments under two separate calculations. Under the first calculation, the
amount and timing of the contingent payments will be based on growth in the
number of lives covered by certain HAI products during the next five years. The
Company may be required to make contingent payments of up to $25.0 million per
year for each of the five years following the HAI acquisition depending on the
net annual growth in the number of lives covered by such products. The amount to
be paid per incremental covered life decreases during the five-year term of the
Company's contingent payment obligation. Under the second calculation, the
Company may be required to make contingent payments of up to $35.0 million per
year for each of five years based on the net cumulative growth in the number of
lives covered by certain other HAI products. Aetna will receive a specified
amount per net incremental life covered by such products. The amount to be paid
per incremental covered life increases with the number of incremental covered
lives. The Company would record additional consideration paid or payable to
Aetna under the above calculations as goodwill and identifiable intangible
assets.
On March 26, 1999, the Company paid Aetna $60.0 million of additional
consideration for the purchase of HAI under the above calculations. The amount
was funded through a combination of cash on hand ($10.0 million) and borrowings
under the Revolving Facility (as defined) ($50.0 million) and was accounted for
as a purchase of goodwill and identifiable intangible assets.
ALLIED ACQUISITION. On December 5, 1997, the Company purchased Allied for
approximately $70.0 million, excluding transaction costs, and accounted for the
Allied acquisition using the purchase method of accounting. The purchase price
the Company originally paid for Allied was funded from cash on hand and
consisted of a $50.0 million payment to the former owners of Allied and a $20.0
million deposit into an interest-bearing escrow account (the "Allied Escrow
Deposit"). The Company was required to pay up to $60.0 million, including the
Allied Escrow Deposit, during the three years following the closing of the
Allied acquisition if Allied's performance exceeded certain earnings targets.
During the quarter ended December 31, 1998, the Company and the former
owners of Allied amended the Allied purchase agreement (the "Allied
Amendments"). The Allied Amendments resulted in the following changes to the
original terms of the Allied purchase agreement:
- The Allied Escrow Deposit and all interest accrued thereon was returned
to the Company;
- The Company paid the former owners of Allied $4.5 million of additional
consideration for the purchase of Allied. This additional consideration
was accounted for as a purchase of goodwill; and
- The Company capped future obligations with respect to additional
contingent payments for the purchase of Allied at $3.0 million. The
earnings targets which must be met by Allied for this amount to be paid
were revised upwards as well.
5
<PAGE>
Allied provides specialty risk-based products and administrative services to
a variety of insurance companies and other customers. At the time of the Allied
acquisition, Allied's services covered approximately 3.8 million aggregate lives
through more than 80 physician networks across the eastern United States.
Allied's networks include physicians specializing in cardiology, oncology and
diabetes.
GREEN SPRING MINORITY STOCKHOLDER CONVERSION. The minority stockholders of
Green Spring Health Services, Inc. ("Green Spring") converted their interests in
Green Spring into an aggregate of 2,831,516 shares of the Company's common stock
during January 1998. As a result of the Green Spring minority stockholder
conversion, the Company owns 100% of Green Spring. The Company accounted for the
Green Spring minority stockholder conversion as a purchase of minority interest
at the fair value of the consideration paid.
MERIT ACQUISITION. On February 12, 1998, the Company acquired all of the
outstanding stock of Merit for approximately $448.9 million in cash plus the
repayment of Merit's debt. The Company accounted for the Merit acquisition using
the purchase method of accounting. At the time of the Merit acquisition, Merit
managed behavioral healthcare programs for approximately 21.6 million covered
lives across all segments of the healthcare industry, including HMO's, Blue
Cross/Blue Shield organizations and other insurance companies, employers and
labor unions, federal, state and local government agencies, and various state
Medicaid programs. In connection with the consummation of the Merit acquisition,
the Company consummated certain related transactions as follows: (i) the Company
terminated its existing credit agreement (the "Magellan Existing Credit
Agreement"); (ii) the Company repaid all loans outstanding pursuant to and
terminated Merit's existing credit agreement (the "Merit Existing Credit
Agreement"); (iii) the Company completed a tender offer for its 11 1/4% Series A
Senior Subordinated Notes due 2004 (the "Magellan Outstanding Notes"); (iv)
Merit completed a tender offer for its 11 1/2% Senior Subordinated Notes due
2005 (the "Merit Oustanding Notes"); (v) the Company entered into a new senior
secured bank credit agreement (the "Credit Agreement") with The Chase Manhattan
Bank and a syndicate of financial institutions, providing for credit facilities
of $700.0 million; and (vi) the Company issued its 9% Series A Senior
Subordinated Notes due 2008 (the "Notes") pursuant to an indenture, dated
February 12, 1998, between the Company and Marine Midland Bank, as Trustee (the
"Indenture"). The Credit Agreement provides for (a) a term loan facility in an
aggregate principal amount of $550.0 million (the "Term Loan Facility"),
consisting of three separately maturing $183.3 million tranches with different
interest rates (London inter-bank offered rate ("LIBOR") plus 2.25%, 2.50% or
2.75%) and (b) a revolving credit facility providing for revolving loans to the
Company and the "Subsidiary Borrowers" (as defined therein) and the issuance of
letters of credit for the account of the Company and the Subsidiary Borrowers in
an aggregate principal amount (including the aggregate stated amount of letters
of credit) of $150.0 million (the "Revolving Facility").
6
<PAGE>
The following table sets forth the sources and uses of funds for the Merit
acquisition (in thousands):
<TABLE>
<S> <C>
Sources:
Cash and cash equivalents........................................................................... $ 59,290
Credit Agreement:
Revolving Facility (1)............................................................................ 20,000
Term Loan Facility................................................................................ 550,000
The Notes........................................................................................... 625,000
------------
Total sources..................................................................................... $ 1,254,290
------------
------------
Uses:
Cash paid to Merit Shareholders..................................................................... $ 448,867
Repayment of Merit Existing Credit Agreement (2).................................................... 196,357
Purchase of the Magellan Outstanding Notes (3)...................................................... 432,102
Purchase of Merit Outstanding Notes (4)............................................................. 121,651
Transaction costs (5)............................................................................... 55,313
------------
Total uses........................................................................................ $ 1,254,290
------------
------------
</TABLE>
- ------------------------
(1) The Revolving Facility provides for borrowings of up to $150.0 million. At
February 12, 1998, the Company had approximately $112.5 million available
for borrowing pursuant to the Revolving Facility, excluding approximately
$17.5 million of availability reserved for certain letters of credit.
(2) Includes principal amount of $193.6 million and accrued interest of $2.7
million.
(3) Includes principal amount of $375.0 million, tender premium of $43.4 million
and accrued interest of $13.7 million.
(4) Includes principal amount of $100.0 million, tender premium of $18.9 million
and accrued interest of $2.8 million.
(5) Transaction costs include, among other things, expenses associated with the
tender offers for the Magellan Outstanding Notes and the Merit Outstanding
Notes, the Notes offering, the Merit acquisition and the Credit Agreement
By virtue of acquiring Merit, the Company may be required to make certain
contingent payments in fiscal 1999 to the former shareholders of CMG Health,
Inc. ("CMG"), based on the performance of three CMG customer contracts. CMG was
acquired by Merit in September, 1997. Such contingent payments are subject to an
aggregate maximum of $23.5 million.
The historical financial information for the European Hospitals is presented
under the caption entitled "Divested Operations" in the Unaudited Pro Forma
Consolidated Financial Statements.
7
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
MAGELLAN DIVESTED PRO FORMA
AS REPORTED OPERATIONS ADJUSTMENTS
----------- ---------- -----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents................................ $ 49,358 $ (3,590) $ 57,000(1)
(2,500)(3)
(38,213)(4)
Accounts receivable, net................................. 172,990 (5,006) --
Restricted cash and investments.......................... 132,099 -- --
Other current assets..................................... 33,916 (661) --
----------- ---------- -----------
Total current assets................................. 388,363 (9,257) 16,287
Assets restricted for settlement of unpaid claims and
other liabilities...................................... 33,978 -- --
Property and equipment, net.............................. 156,436 (20,940) --
Deferred income taxes.................................... 94,069 106 (11,213)(5)
Investments in unconsolidated subsidiaries............... 31,814 -- --
Other long-term assets................................... 18,751 -- --
Goodwill, net............................................ 1,067,085 -- --
Other intangible assets, net............................. 160,447 -- --
----------- ---------- -----------
Total assets......................................... $ 1,950,943 $ (30,091) $ 5,074
----------- ---------- -----------
----------- ---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable......................................... $ 33,593 $ (1,253) $ --
Accrued liabilities...................................... 242,199 (1,126) --
Medical claims payable................................... 191,384 -- --
Income taxes payable..................................... 681 (258) --
Current maturities of long-term debt and capital lease
obligations............................................ 29,428 (1) (1,834)(4)
----------- ---------- -----------
Total current liabilities............................ 497,285 (2,638) (1,834)
Long-term debt and capital lease obligations............. 1,156,020 (985) (36,379)(4)
Reserve for unpaid claims................................ 27,149 -- --
Deferred credits and other long-term liabilities......... 74,633 -- --
Minority interest........................................ 4,683 -- --
Commitments and contingencies
Stockholders' equity:
Common stock........................................... 8,476 -- --
Additional paid-in capital............................. 349,663 (28,639) 28,639(2)
Accumulated deficit.................................... (145,057) -- (28,639)(2)
57,000(1)
(2,500)(3)
(11,213)(5)
Warrants outstanding..................................... 25,050 -- --
Common stock in treasury................................. (44,309) -- --
Cumulative foreign currency adjustments.................. (2,650) 2,171 --
----------- ---------- -----------
191,173 (26,468) 43,287
----------- ---------- -----------
Total liabilities and stockholders' equity........... $ 1,950,943 $ (30,091) $ 5,074
----------- ---------- -----------
----------- ---------- -----------
<CAPTION>
PRO FORMA
CONSOLIDATED
------------
<S> <C>
ASSETS
Cash and cash equivalents................................
$ 62,055
Accounts receivable, net................................. 167,984
Restricted cash and investments.......................... 132,099
Other current assets..................................... 33,255
------------
Total current assets................................. 395,393
Assets restricted for settlement of unpaid claims and
other liabilities...................................... 33,978
Property and equipment, net.............................. 135,496
Deferred income taxes.................................... 82,962
Investments in unconsolidated subsidiaries............... 31,814
Other long-term assets................................... 18,751
Goodwill, net............................................ 1,067,085
Other intangible assets, net............................. 160,447
------------
Total assets......................................... $1,925,926
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable......................................... $ 32,340
Accrued liabilities...................................... 241,073
Medical claims payable................................... 191,384
Income taxes payable..................................... 423
Current maturities of long-term debt and capital lease
obligations............................................ 27,593
------------
Total current liabilities............................ 492,813
Long-term debt and capital lease obligations............. 1,118,656
Reserve for unpaid claims................................ 27,149
Deferred credits and other long-term liabilities......... 74,633
Minority interest........................................ 4,683
Commitments and contingencies
Stockholders' equity:
Common stock........................................... 8,476
Additional paid-in capital............................. 349,663
Accumulated deficit....................................
(130,409)
Warrants outstanding..................................... 25,050
Common stock in treasury................................. (44,309)
Cumulative foreign currency adjustments.................. (479)
------------
207,992
------------
Total liabilities and stockholders' equity........... $1,925,926
------------
------------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements
8
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MAGELLAN PRO FORMA PRO FORMA
AS REPORTED HAI ALLIED MERIT ADJUSTMENTS COMBINED
------------ --------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue......................... $ 1,499,659 $ 19,528 $ 21,299 $ 262,630 $ (2,143) (6) $ 1,800,973
------------ --------- --------- ---------- ----------- ------------
Salaries, cost of care and other
operating expenses................ 1,299,458 15,031 21,422 241,084 (3,285) (7) 1,573,710
Equity in loss of unconsolidated
subsidiaries...................... 19,083 -- -- -- -- 19,083
Depreciation and amortization....... 54,885 34 100 16,159 (2,347) (8) 68,831
Interest, net....................... 75,375 (256) (92) 8,870 16,128 100,025
Stock option expense................ (5,623) -- -- -- -- (5,623)
Managed care integration costs...... 16,962 -- -- -- (16,962) (10) --
Unusual items....................... 458 -- -- 1,318 1,682 (11) 3,458
------------ --------- --------- ---------- ----------- ------------
1,460,598 14,809 21,430 267,431 (4,784) 1,759,484
------------ --------- --------- ---------- ----------- ------------
Income (loss) before income taxes
and minority interest............. 39,061 4,719 (131) (4,801) 2,641 41,489
Provision for (benefit from) income
taxes............................. 20,033 1,879 -- (786) 2,732 (12) 23,858
------------ --------- --------- ---------- ----------- ------------
Income (loss) before minority
interest.......................... 19,028 2,840 (131) (4,015) (91) 17,631
Minority interest................... 5,296 -- -- -- (2,606) (13) 2,690
------------ --------- --------- ---------- ----------- ------------
Net income.......................... $ 13,732 $ 2,840 $ (131) $ (4,015) $ 2,515 $ 14,941
------------ --------- --------- ---------- ----------- ------------
------------ --------- --------- ---------- ----------- ------------
Average number of common shares
outstanding--basic................ 30,784 815 (13) 31,599
------------ ----------- ------------
------------ ----------- ------------
Average number of common shares
outstanding--diluted.............. 31,198 815 (13) 32,013
------------ ----------- ------------
------------ ----------- ------------
Net income per share--basic......... $ 0.45 $ 0.47
------------ ------------
------------ ------------
Net income per share--diluted....... $ 0.44 $ 0.47
------------ ------------
------------ ------------
<CAPTION>
DIVESTED PRO FORMA PRO FORMA
OPERATIONS ADJUSTMENTS CONSOLIDATED
----------- ----------- ------------
<S> <C> <C> <C> <C>
Net revenue......................... $ (29,922) $ -- $1,771,051
----------- ----------- ------------
Salaries, cost of care and other
operating expenses................ (21,577) -- 1,552,133
Equity in loss of unconsolidated
subsidiaries...................... -- -- 19,083
Depreciation and amortization....... (1,332) -- 67,499
Interest, net....................... -- (4,396) (14) 95,629
Stock option expense................ -- -- (5,623)
Managed care integration costs...... -- -- --
Unusual items....................... -- -- 3,458
----------- ----------- ------------
(22,909) (4,396) 1,732,179
----------- ----------- ------------
Income (loss) before income taxes
and minority interest............. (7,013) 4,396 38,872
Provision for (benefit from) income
taxes............................. (2,805) 1,758 (15) 22,811
----------- ----------- ------------
Income (loss) before minority
interest.......................... (4,208) 2,638 16,061
Minority interest................... -- -- 2,690
----------- ----------- ------------
Net income.......................... $ (4,208) $ 2,638 $ 13,371
----------- ----------- ------------
----------- ----------- ------------
Average number of common shares
outstanding--basic................ 31,599
------------
------------
Average number of common shares
outstanding--diluted.............. 32,013
------------
------------
Net income per share--basic......... $ 0.42
------------
------------
Net income per share--diluted....... $ 0.42
------------
------------
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Financial Statements
9
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MAGELLAN PRO FORMA PRO FORMA DIVESTED
AS REPORTED ADJUSTMENTS COMBINED OPERATIONS
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue................................................ $ 463,143 $ -- $ 463,143 $ (7,918)
----------- ------------- ----------- -----------
Salaries, cost of care and other operating expenses........ 413,216 -- 413,216 (5,842)
Equity in earnings of unconsolidated subsidiaries.......... (4,982) -- (4,982) --
Depreciation and amortization.............................. 18,391 -- 18,391 (366)
Interest, net.............................................. 24,109 -- 24,109 --
Stock option expense....................................... 12 -- 12 --
Managed care integration costs............................. 1,750 (1,750) (10) -- --
Unusual items.............................................. 22 (22) (11) -- --
----------- ------------- ----------- -----------
452,518 (1,772) 450,746 (6,208)
----------- ------------- ----------- -----------
Income (loss) before income taxes
and minority interest.................................... 10,625 1,772 12,397 (1,710)
Provision for (benefit from) income taxes.................. 6,037 709 (12) 6,746 (684)
----------- ------------- ----------- -----------
Income (loss) before minority interest..................... 4,588 1,063 5,651 (1,026)
Minority interest.......................................... 407 -- 407 --
----------- ------------- ----------- -----------
Net income................................................. $ 4,181 $ 1,063 $ 5,244 $ (1,026)
----------- ------------- ----------- -----------
----------- ------------- ----------- -----------
Average number of common shares outstanding--basic......... 31,613 31,613
----------- -----------
----------- -----------
Average number of common shares outstanding--diluted....... 31,660 31,660
----------- -----------
----------- -----------
Net income per share--basic................................ $ 0.13 $ 0.17
----------- -----------
----------- -----------
Net income per share--diluted.............................. $ 0.13 $ 0.17
----------- -----------
----------- -----------
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS CONSOLIDATED
------------- ------------
<S> <C> <C> <C>
Net revenue................................................ $ -- $ 455,225
------------- ------------
Salaries, cost of care and other operating expenses........ -- 407,374
Equity in earnings of unconsolidated subsidiaries.......... -- (4,982)
Depreciation and amortization.............................. -- 18,025
Interest, net.............................................. (1,060) (14) 23,049
Stock option expense....................................... -- 12
Managed care integration costs............................. -- --
Unusual items.............................................. -- --
------------- ------------
(1,060) 443,478
------------- ------------
Income (loss) before income taxes
and minority interest.................................... 1,060 11,747
Provision for (benefit from) income taxes.................. 424 (15) 6,486
------------- ------------
Income (loss) before minority interest..................... 636 5,261
Minority interest.......................................... -- 407
------------- ------------
Net income................................................. $ 636 $ 4,854
------------- ------------
------------- ------------
Average number of common shares outstanding--basic......... 31,613
------------
------------
Average number of common shares outstanding--diluted....... 31,660
------------
------------
Net income per share--basic................................ $ 0.15
------------
------------
Net income per share--diluted.............................. $ 0.15
------------
------------
</TABLE>
SEE NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
10
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(1) Adjustments to cash and cash equivalents and accumulated deficit represent
the receipt of consideration for the Europe Sale. The pro forma presentation
presumes that all consideration, including the Property Deposit, was
received at closing.
(2) Adjustments to additional paid-in capital and accumulated deficit represent
elimination of the division equity of the European Hospitals.
(3) Adjustments to cash and cash equivalents and accumulated deficit represent
estimated transaction costs (primarily commissions, legal fees and
accounting fees) directly related to the Europe Sale.
(4) Adjustments to cash and cash equivalents, current maturities of long-term
debt and capital lease obligations and long-term debt and capital lease
obligations represent the use of proceeds from the Europe Sale (net of
estimated transaction costs and income taxes related to the gain on the
Europe Sale of approximately $16.3 million which will be payable in future
periods) to reduce the Company's indebtedness under the Term Loan Facility
as required by the Credit Agreement.
(5) Adjustments to deferred income taxes and accumulated deficit represent
income taxes on the gain on the Europe Sale provided for at the Company's
historical average statutory income tax rate of 40%.
(6) Adjustment to net revenue for the fiscal year ended September 30, 1998,
represents a decrease in HAI revenue resulting from renegotiated contractual
rates with Aetna as a direct result of the acquisition of HAI by the
Company.
(7) Adjustments to salaries, cost of care and other operating expenses for the
fiscal year ended September 30, 1998, represent the following (in
thousands):
<TABLE>
<CAPTION>
TRANSACTION DESCRIPTION AMOUNT
- ----------- ------------------------------------------------------------------------------------ ---------
<S> <C> <C>
HAI Elimination of Aetna overhead allocations........................................... $ (2,044)
HAI Bonus expense previously reflected in Aetna's financial statements.................. 200
HAI Costs absorbed by HAI previously incurred by Aetna including information technology,
human resources and legal........................................................... 852
Allied Reduction of shareholders'/executives' compensation to revised contractual level
pursuant to the Allied purchase agreement........................................... (197)
Allied Reduction of certain consulting agreement costs to revised contractual level
pursuant to the Allied purchase agreement........................................... (203)
Merit Presentation of Merit's capitalized start-up costs as other operating expenses to
conform to the Company's accounting policies........................................ 514
Merit Salaries, benefits and other costs for duplicative CMG personnel and facilities that
were eliminated as a direct result of Merit's acquisition of CMG.................... (2,224)
Merit Elimination of fees paid by Merit to its former owner............................... (183)
---------
$ (3,285)
---------
---------
</TABLE>
11
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(8) Adjustments to depreciation and amortization for the fiscal year ended
September 30, 1998, represent the following (in thousands):
<TABLE>
<CAPTION>
TRANSACTION DESCRIPTION AMOUNT
- ----------- ------------------------------------------------------------------------------------ ---------
<S> <C> <C>
HAI Purchase price allocation (i)....................................................... $ 633
Allied Purchase price allocation (ii)...................................................... 291
Merit Purchase price allocation (iii)..................................................... (3,519)
GS Additional amortization expense as a result of the Green Spring Minority Stockholder
Conversion (iv)..................................................................... 248
---------
$ (2,347)
---------
---------
</TABLE>
- ------------------------
(i) Represents $4.0 million fair value of property and equipment depreciated
over an estimated useful life of 5 years, $80.6 million of goodwill
amortized over an estimated useful life of 40 years and $24.2 million
estimated fair value of other intangible assets (primarily client lists)
amortized over a weighted average estimated useful life of 21 years less
historical depreciation and amortization.
(ii) Represents $43.9 million of goodwill amortized over an estimated useful
life of 40 years and $9.8 million estimated fair value of other
intangible assets (primarily client lists and treatment protocols)
amortized over an estimated useful life of 15 years.
(iii) Represents $36.7 million fair value of property and equipment
depreciated over an estimated useful life of 4 years, $696.5 million of
goodwill amortized over an estimated useful life of 40 years and $65.8
million estimated fair value of other intangible assets (primarily
client lists) amortized over a weighted average estimated useful life
of 10 years less historical depreciation and amortization.
(iv) Represents $6.9 million of goodwill amortized over an estimated
remaining useful life of 39 years and $13.6 million estimated fair
value of client lists amortized over an estimated remaining useful life
of 24 years.
The Company may be required to make additional contingent payments to Aetna
of up to $60.0 million annually during the five years following the
consummation of the HAI acquisition for aggregate potential contingent
payments of $300.0 million. These contingent payments would be recorded as
goodwill and identifiable intangible assets, which would result in estimated
additional annual amortization of $11.0 million to $13.0 million in future
periods if all the contingent payments are made. The Company made the first
such payment of $60.0 million to Aetna on March 26, 1999.
The Company paid $4.5 million of additional consideration to the former
owners of Allied during the three months ended December 31, 1998, and may
also be required to make additional contingent payments to the former owners
of Allied of up to $3.0 million under certain circumstances. The $4.5
million payment was recorded as goodwill, and the $3.0 million, if paid,
would be recorded as goodwill as well. If both payments were made, estimated
annual amortization would increase by approximately $0.2 million.
12
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(9) Adjustments to interest, net, represent the following (in thousands):
<TABLE>
<S> <C>
Elimination of Merit historical interest expense.................. $ (10,536)
Elimination of historical interest expense for the Magellan
Outstanding Notes............................................... (15,820)
Elimination of the Company's historical deferred financing cost
amortization.................................................... (914)
Term Loan Facility interest expense (i)........................... 17,016
Revolving Facility interest expense (i)........................... 600
Foregone interest income--cash utilized to fund the HAI, Allied
and Merit acquisitions at 5.5% per annum........................ 3,039
The Notes at 9.0% per annum....................................... 21,094
Amortization of deferred financing costs of $35.6 million over a
weighted average life of 8.1 years.............................. 1,649
---------
$ 16,128
---------
---------
</TABLE>
- ------------------------
(i) Assumes borrowings are one-month LIBOR-based, which is consistent with
the Company's past borrowing practices. Average one-month LIBOR was
approximately 5.64%, resulting in pro forma rates of 8.14% (average for
tranche A (LIBOR plus 2.25%), tranche B (LIBOR plus 2.50%), and tranche C
(LIBOR plus 2.75%)) for the Term Loan Facility and 7.89% (LIBOR plus
2.25%) for the Revolving Facility.
(10) Adjustments to managed care integration costs represent the elimination of
the expenses incurred by the Company as a direct result of the Merit
acquisition and the Allied acquisition. The Company's management has
committed to a plan (the "Integration Plan") to combine and integrate the
operations of its behavioral managed healthcare ("Behavioral") business
segment, which was formed through acquisitions consummated in fiscal 1996
(Green Spring) and fiscal 1998 (HAI and Merit), and its specialty managed
healthcare ("Specialty") business segment, which was formed through
acquisitions consummated in fiscal 1997 (Care Management Resources, Inc.)
and fiscal 1998 (Allied). The Integration Plan was implemented to
eliminate duplicative functions and to standardize business practices and
information technology platforms. The Company expects to achieve
approximately $60.0 million of cost savings on an annual basis by
September 30, 1999, in its Behavioral segment and approximately $3.0
million of cost savings on an annual basis in its Specialty segment as a
result of the Integration Plan.
The Integration Plan will result in the elimination of approximately 1,000
positions during fiscal 1998 and fiscal 1999. Approximately 425 employees
had been involuntarily terminated pursuant to the Integration Plan as of
December 31, 1998. The Company estimates that approximately 100 additional
employees will be involuntarily terminated as part of the Integration Plan.
The remaining positions have been or will be eliminated through normal
attrition.
The employee groups of the Behavioral segment that are primarily affected
include executive management, finance, human resources, information systems
and legal personnel at the various corporate headquarters and regional
offices and credentialing, claims processing, contracting and marketing
personnel at various operating locations. The Company expects to complete
its involuntary terminations by the end of fiscal 1999.
13
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Integration Plan has resulted in the closure and identified closure of
approximately 20 leased facilities during fiscal 1998 and fiscal 1999. The
Company expects the remaining office closures, if any, to be insignificant.
The Company recorded approximately $21.3 million of liabilities related to
the Integration Plan, of which $12.4 million was recorded as part of the
Merit purchase price allocation and $8.9 million was recorded in the
statement of operations under "Managed care integration costs" in fiscal
1998. The Company may record adjustments to such liabilities in fiscal 1999
depending upon the Company's ability to sublease closed offices and upon
determination of the final amount of the Company's severance obligations.
The Integration Plan will result in additional incremental costs that must
be expensed as incurred in accordance with Emerging Issues Task Force
Consensus 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (Including Certain Costs
Incurred in a Restructuring)" that are not described above and certain
other charges. Other integration costs include, but are not limited to,
outside consultants, costs to relocate closed office contents and
long-lived asset impairments. Other integration costs are reflected in the
statement of operations under "Managed care integration costs."
During the fiscal year ended September 30, 1998, and the quarter ended
December 31, 1998, the Company incurred approximately $8.1 million and $1.8
million of other integration costs, respectively. These costs included
long-lived asset impairments of approximately $2.4 million in fiscal 1998
and outside consulting costs of approximately $4.1 million and $0.8 million
in fiscal 1998 and the quarter ended December 31, 1998, respectively. The
asset impairments relate primarily to identifiable intangible assets that
no longer have value and have been written off as a result of the
Integration Plan.
(11) Adjustment to unusual items for the fiscal year ended September 30, 1998,
represents the elimination of non-recurring gains of $3.0 million on the
sale of assets formerly used in the Company's psychiatric hospital
provider business, offset primarily by the elimination of Merit's
transaction costs related to the Merit acquisition of $1.3 million.
Adjustment to unusual items for the three months ended December 31, 1998,
represents the elimination of non-recurring losses on the sale of assets
formerly used in the Company's psychiatric hospital provider business.
(12) Adjustments to provision for income taxes represent the tax expense
related to the pro forma adjustments at the Company's historical average
statutory income tax rate of 40% and the imputed income tax expense on the
operating results of Allied, which was an S-corporation for income tax
purposes and historically did not provide for income taxes prior to its
acquisition by the Company.
(13) Adjustments to minority interest and average number of common shares
outstanding (basic and diluted) represent the effect of the Green Spring
minority stockholder conversion.
14
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(14) Adjustments to interest, net, represent reductions of interest expense
related to the use of proceeds from the Europe Sale to reduce average pro
forma long-term debt outstanding as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1998
------------------------ ------------------------
PRO FORMA PRO FORMA
AVERAGE INTEREST AVERAGE INTEREST
AMOUNT RATE REDUCTION RATE REDUCTION
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Term Loan Facility (i)............................ $ 38,213 8.14% $ 3,111 7.85% $ 750
Revolving Facility (ii)........................... 16,287 7.89% 1,285 7.62% 310
--------- ----------- -----------
$ 54,500 $ 4,396 $ 1,060
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
- ------------------------
(i) Amount represents the net amount of proceeds from the Europe Sale used
to reduce the Company's indebtedness under the Term Loan Facility as
required by the Credit Agreement. The pro forma presentation presumes
that the payment is applied ratably across each tranche; however, the
holders of tranches B and C have the option of refusing prepayment. If
the tranche B and C lenders exercise this right, the entire payment
would be applied to tranche A. There would be no material impact to the
pro forma presentation.
(ii) Amount represents the net amount of proceeds from the Europe Sale
remaining after the reduction of the Company's indebtedness under the
Term Loan Facility. The pro forma presentation presumes this amount
would have been used to reduce average amounts outstanding under the
Revolving Facility.
(15) Adjustments to provision for income taxes represent the tax expense
related to the pro forma adjustment at the Company's historical average
statutory income tax rate of 40%
15
<PAGE>
EXHIBITS
<TABLE>
<C> <S>
2(a) Share Purchase Agreement, dated April 2, 1999, by and among the Company, Charter
Medical International, S.A., Inc. (a wholly owned subsidiary of the Company),
Investment AB Bure, and CMEL Holding Limited (a wholly owned subsidiary of
Investment AB Bure).
2(b) Stock Purchase Agreement, dated April 2, 1999, among the Company, Charter Medical
International, S.A., Inc. (a wholly owned subsidiary of the Company), Investment AB
Bure, and Grogrunden 515 AB (a wholly owned subsidiary of Investment AB Bure).
2(c) First Amendment to Share Purchase Agreement, dated April 8, 1999, by and among the
Company, Charter Medical International, S.A., Inc. (a wholly owned subsidiary of
the Company), Investment AB Bure, and CMEL Holding Limited (a wholly owned
subsidiary of Investment AB Bure).
2(d) First Amendment to Stock Purchase Agreement, dated April 8, 1999, among the
Company, Charter Medical International, S.A., Inc. (a wholly owned subsidiary of
the Company), Investment AB Bure, and CMEL Holding AB (a wholly owned subsidiary of
Investment AB Bure).
99 Press release dated April 6, 1999.
</TABLE>
16
<PAGE>
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 hereunto duly authorized.
<TABLE>
<S> <C> <C>
Dated: April 12, 1999 MAGELLAN HEALTH SERVICES, INC.
By: /s/ JEFFREY T. HUDKINS
-----------------------------------------
Jeffrey T. Hudkins
Vice President and Controller
(Principal Accounting Officer)
</TABLE>
<PAGE>
EXHIBIT 2(a)
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT, dated 2 April 1999, is entered into by and among
CHARTER MEDICAL INTERNATIONAL, S.A., INC, a company incorporated in Nevada whose
principal office is at 3414 Peachtree Road, N.E., Suite 1400, Atlanta, Georgia
30326 U.S.A. (the "Seller"), MAGELLAN HEALTH SERVICES, INC., a company
incorporated in Delaware whose principal office is at 3414 Peachtree Road, N.E.,
Suite 1400, Atlanta, Georgia 30326 U.S.A. ("Magellan"), INVESTMENT AB BURE, a
company incorporated in Sweden whose principal office is at PO Box 5419 S-40229,
Goteborg, Sweden ("Bure"), and CMEL HOLDING LIMITED, a company incorporated in
England and Wales (registered no.3743891 )
whose registered office is at 1-5 Radnor Walk, London SW3 4BP (the "Buyer").
WHEREAS, the Seller owns all of the issued share capital of the Company;
WHEREAS, the Seller is a wholly owned subsidiary of Magellan and Magellan has
agreed to be a party to this Agreement for the purposes of guaranteeing the
obligations of the Seller under this Agreement and for certain other purposes
which have induced the Buyer to enter into this Agreement;
WHEREAS, the Charter St. Louis Property is owned by Charter Hospital of St.
Louis, Inc., a wholly owned subsidiary of Magellan, and Magellan has agreed to
procure the sale of the Charter St. Louis Property in accordance with the terms
of this Agreement;
WHEREAS, the Buyer is a wholly owned subsidiary of Bure and Bure has agreed to
be a party to this Agreement for the purpose of guaranteeing the obligations of
the Buyer under this Agreement;
WHEREAS, the Seller desires to sell and the Buyer desires to purchase all of the
Shares on the terms and conditions provided in this Agreement;
NOW THEREFORE in consideration of the mutual covenants contained herein, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Parties hereto hereby agree as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement and the Schedules, the following words and
expressions have the following meanings unless otherwise stated:
"AFFILIATE" in relation to any body corporate any Holding Company or
Subsidiary of such body corporate or any Subsidiary of a Holding
Company of such body corporate.
"AGREEMENT" this Share Purchase Agreement.
"AUDITED ACCOUNTS" the audited balance sheet, as at the Last Accounts
Date, and audited profit and loss account for the financial year ended
on the Last Accounts Date, for the Company, including directors'
report, auditors report and notes.
<PAGE>
"AUDITORS" Arthur Andersen of 1 Surrey Street, London WC2.
"BUSINESS DAY" a weekday (other than a Saturday) when clearing banks
are open for a full range of banking transactions in London and
Stockholm.
"BUYER'S GROUP" means the Buyer and each of its Affiliates.
"BUYER'S SOLICITORS" White & Case, 7-11 Moorgate, London EC2R 6HH
"CA" Companies Act 1985.
"CHARTER ST. LOUIS" means Charter Hospital of St. Louis, Inc., a
company incorporated in Missouri whose principal office is at 3414
Peachtree Road, N.E., Suite 1400, Atlanta, Georgia 30326, USA.
"CHARTER ST. LOUIS PROPERTY" means those freehold properties which are
owned by Charter St. Louis as identified by reference to Schedule 6,
Part II.
"CLOSING" closing of the sale and purchase of the Shares pursuant to
clauses 4.1 to 4.5 of this Agreement.
"CLOSING ACCOUNTS" means the accounts referred to in paragraph 2.2 of
Schedule 5.
"CLOSING DATE" means the date when Closing takes place in accordance
with clauses 4.1 to 4.5 .
"COMPANY" Charter Medical of England Limited (registered No. 1431836),
a company incorporated in England and Wales whose registered office is
at 1-5 Radnor Walk, London SW3 4BP.
"COMPETENT AUTHORITY" any person or legal entity (including any
government or government agency) having regulatory authority and/or any
court of law or tribunal, or any local or national agency, authority,
department, inspectorate, minister, ministry, official or public or
statutory person (whether autonomous or not) of, or the government of,
the United Kingdom or the European Community.
"COMPETITIVE BUSINESS" has the meaning set forth in clause 8.1.
"CONFIDENTIAL INFORMATION" has the meaning set forth in clause 8.3.
"CONNECTED PERSONS" shall have the meaning given to it by section 839
Income and Corporation Taxes Act 1988.
"CONTRACT" any agreement or commitment, whether conditional or
unconditional and whether by deed or under hand.
2
<PAGE>
"DISCLOSURE LETTER" the disclosure letter, of the same date as this
Agreement, from the Seller to the Buyer qualifying the Warranties,
including all documents both referred to in the disclosure letter and
annexed to it.
"ENCUMBRANCE" any mortgage, charge, lien or pledge or other form of
security whatsoever.
"ENVIRONMENT" any and all organisms, ecological systems, property and
the following media: air (including, without limitation, the air within
buildings and the air within other natural or man-made structures made
whether above or below ground), water (including, without limitation,
water under or within land or in drains or sewers and coastal and
inland waters) and land (including, without limitation, land under
water).
"ENVIRONMENTAL AUTHORISATIONS" all or any permits, consents, licences,
approvals, certificates and other authorisations required under
Environmental Laws and all terms and conditions thereof required under
any Environmental Laws for the operation of the business of the Company
or the occupation or use of any land or premises in relation to the
business of the Company.
"ENVIRONMENTAL LAWS" any and all laws (whether criminal, civil or
administrative) including European Community or European Union
regulations, directives and decisions, statutes and subordinate
legislation, regulations, orders, ordinances, Environmental
Authorisations, guidance notes, codes of practice, governmental
circulars and the like, local laws and by-laws, treaty, common law,
court orders, judgments, notices, orders, directions, instructions,
decisions or awards of any Competent Authority applicable to the
Company and/or the Property and/or the operation of the business of the
Company and which have as a purpose or effect the protection of the
Environment and/or prevention of Harm or Damage and/or the provision of
remedies in respect of Harm or Damage and are in force at the Closing
Date.
"ENVIRONMENTAL LIABILITY" civil or criminal liability (including,
without limitation, the liability in respect of Remedial Action) on the
part of the Company and/or any of their directors or officers or
shareholders under Environmental Laws.
"ERA" the Employment Rights Act 1996.
"FREEHOLD PROPERTY" the freehold property shortly described in Schedule
6 Part II.
"FSA" means the Financial Services Act 1986.
"HARDWARE" all computer hardware-related peripherals or equipment and
all telecommunication systems networks equipment and apparatus.
"HARM OR DAMAGE" harm or damage to or other interference with man or
any other living organism or harm or damage to or interference with the
Environment or public health or welfare.
3
<PAGE>
"HAZARDOUS MATTER" any and all matter (whether alone or in combination
with other matter) which may or is liable to cause or is capable of
causing Harm or Damage or which is nuisance to any person or persons or
which may make use or ownership of any part of the Property more
costly.
"HOLDING COMPANY" a holding company within the meaning ascribed to such
expressions by CA sections 736 and 736A.
"ICTA" Income and Corporation Taxes Act 1988.
"INTELLECTUAL PROPERTY RIGHTS" any and all computer programmes in both
source and object code form, including all databases for outcomes data
and other similar information for the professional application,
monitoring and developing of case methods and systems, all modules, all
source and other preparatory materials, specifications, charts,
diagrams, manuals or other documentation relating thereto and computer
generated works, all patents, rights in designs, trade and service
marks (whether registered or unregistered), trade and business names
(including rights in any get-up or trade dress), copyright, moral
rights, know-how, confidential information and all other similar
intellectual or industrial property rights (including rights under
licences and consents in relation to any such thing) including any
registration of any such rights to make applications for any of the
foregoing and any similar or analogous rights to any of the foregoing,
whether subsisting in the United Kingdom or any other part of the
world, and all documents, records, tapes, disc and other material
containing copyright works, Know-How or computer generated works,
together with all or any goodwill relating or attached thereto.
"INTRA-GROUP GUARANTEES" the guarantees, indemnities, cross-indemnities
and letters of comfort given to any third party by Magellan and any of
its Affiliates in respect of the liability of the Company which are in
force at the date of this Agreement including (without prejudice to the
generality of the foregoing) any guarantees given by Magellan and any
of its Affiliates in respect of the liabilities of the Company under
any of the Leases other than in respect of the lease referred to in
clause 9.1.
"KNOW-HOW" all commercial information whether or not in the public
domain including (but not limited to) that information concerned with
the marketing of any products or services, trade secrets and
confidential business information (including customer and supplier
lists, sales statistics, survey reports and market share data).
"LAST ACCOUNTS DATE" September 30, 1998.
"LEASES" the leases shortly described in Schedule 6 Part III.
"LEASEHOLD PROPERTY" the leasehold property shortly described in
Schedule 6 Part I and held under the terms of the Leases.
"LICENSE AGREEMENT" means the License Agreement between Charter System
LLC and the Company in the agreed form.
4
<PAGE>
"LOSSES" actions, proceedings, losses, damages, liabilities, claims and
reasonable costs and expenses, including, without limitation, fines,
penalties, legal and other professional fees.
"PARTIES" the parties to this Agreement.
"PENSION SCHEME" the Charter Medical of England Pension Plan dated 1
December 1982.
"PROPERTIES" the Freehold Property and the Leasehold Property.
"PROPERTY SALE AGREEMENT" means the sale and purchase agreement in the
agreed form as set out in Schedule 6 Part IV relating to the Charter
St. Louis Property.
"RELEVANT CLAIM" means a claim for breach of any of the Warranties or
for breach of any other covenant set out in this Agreement which is
expressly stated to be a Relevant Claim and for the purposes of Clauses
5.8.1, 5.8.2 and 5.8.3 a reference to a Relevant Claim shall include a
reference to a breach of any of the warranties set out in the Swiss
Sale Agreement and a breach of any Warranty assigned to the purchaser
of the Charter St. Louis Property.
"REMEDIAL ACTION" (i) preventing, limiting, removing, remedying,
cleaning-up, abating, containing or ameliorating the presence or effect
of any Hazardous Matter in the Environment (including, without
limitation, the Environment at the Property) or (ii) carrying out
investigative work and obtaining legal and other professional advice as
is reasonably required in relation to (i).
"RESTRICTED TERRITORY" means Norway, Denmark, Sweden, Finland, Germany,
Poland, , Switzerland and the United Kingdom.
"SELLER'S SOLICITORS" Edwin Coe, 2 Stone Buildings, Lincoln's Inn,
London WC2A 3TH.
"SERVICES AGREEMENT" means the Services Agreement between the Company
and Magellan Behavioral Health, Inc., in the agreed form.
"SHARES" the 1,510,000 issued ordinary shares of (pound)1 each in the
capital of the Company being the entire issued share capital of the
Company.
"SOFTWARE" a computer programme whether in object or source code form
and its associated documentation algorithms and preparatory materials.
"SWISS COMPANY" Societe Anonyme de la Metairie, a company incorporated
in Switzerland.
"SWISS SALE AGREEMENT" the agreement of even date herewith between the
Seller, Magellan and CMEL Holding AB with regard to the sale of the
Swiss Stock
"SWISS STOCK" the 300 registered shares of CHF1,000 being the entire
issued share capital of the Swiss Company.
5
<PAGE>
"SUBSIDIARY" a subsidiary as defined in CA sections 736 and S736A;
provided that Charter Behavioral Health Systems, LLC ("CBHS") shall not
be deemed a subsidiary of Magellan or any Magellan Affiliates provided,
further that if at any time Magellan or a Magellan Affilliate owns more
than 50 percent of the outstanding voting equity interest of CBHS, or
has a right to designate a majority of the governing board of CBHS,
then CBHS shall be deemed a subsidiary of Magellan.
"TAX COVENANT" the tax covenant set out in Schedule 4.
"TAX OR TAXATION" (i) all forms of taxation, including and without any
limitation any charge, tax, duty, levy, impost, withholding or
liability wherever chargeable imposed for support of national, state,
federal, municipal or local government or any other person and whether
of the United Kingdom or any other jurisdiction; and (ii) any penalty,
fine, surcharge, interest, charges or costs payable in connection with
any taxation within (i) above or in connection with any account, record
form, return or computation in respect thereof.
"TAX AUTHORITY" "ICTA", "TCGA", "TMA", "VAT" and "VAT GROUP" shall have
the meanings given to them in the Tax Covenant.
"VATA" Value Added Tax Act 1994.
"WARRANTIES" the warranties set out in Schedule 3 and Part II of
Schedule 4.
1.2 All references in this Agreement to a statutory provision shall be
construed as including references to each of the following, as in
effect prior to the date hereof:
1.2.1 any statutory modification, consolidation or
re-enactment for the time being in force;
1.2.2 all statutory instruments, regulations, directives or
orders made pursuant to a statutory provision; and
1.2.3 any statutory provisions of which a statutory provision
is a consolidation, re-enactment or modification.
1.3 Any reference in this Agreement to either Party includes their
respective successors and assigns.
1.4 Unless the context otherwise requires, words denoting the singular
shall include the plural and vice versa, references to any gender shall
include all other genders and references to persons shall include
bodies corporate, unincorporated associations and partnerships, in each
case whether or not having a separate legal personality.
1.5 A reference in this Agreement to a SSAP and FRS respectively shall be a
reference to a Statement of Standard Accounting Practice as published
by the Institute of Chartered Accountants of England and Wales or a
Financial Reporting Standard published by the Accounting Standards
Board, in each case, as published prior to the date hereof.
1.6 Clause headings in this Agreement are for ease of reference only and do
not affect the construction of any provision.
6
<PAGE>
1.7 Any reference to a Clause or Schedule is to a Clause or Schedule (as
the case may be) of or to this Agreement.
1.8 References to documents in the "agreed form" shall mean documents in a
form agreed between the parties and initialled for the purposes of
identification by or on behalf of the Seller and the Buyer.
2. SALE OF SHARES
2.1 The Seller shall sell with full title guarantee and the Buyer shall
purchase all of the Shares for the consideration set forth in clause 3
below.
2.2 Each of the Shares will be sold and bought free from any claim, charge,
lien, encumbrance, equity or third party right and with all rights
attached to them, including all rights to any dividends or other
distributions declared after the date of the execution of this
Agreement.
3. CONSIDERATION
3.1 The aggregate consideration for the sale of the Shares, the Swiss Stock
and the Charter St Louis Property shall be US$56,904,000 which shall be
apportioned in the following manner:
3.1.1 US$26,200,000 together with an extension payment equal to
interest on US$26,200,000 calculated at the rate of 2% per
annum above the base rate from time to time of the Royal Bank
of Scotland plc from and including 1 April 1999 to the Closing
Date, payable for the shares pursuant to this Agreement.
3.1.2 US$23,364,000 payable for the Swiss Stock pursuant to the
Swiss Sale Agreement, together with an extension payment equal
to interest on US$23,364,000 calculated in the manner
described in Section 1.2 of the Swiss Sale Agreement; and
3.1.3 US$7,340,000 payable for the Charter St. Louis Property
pursuant to the Property Sale Agreement together with an
extension payment equal to interest on US$7,340,000 calculated
at the rate of 2% per annum above the base rate from time to
time of Royal Bank of Scotland plc from and including 1 April
1999 to the Closing Date .
3.2 The consideration for the Shares shall be increased by the amount by
which uniform business rates paid by the Company in respect of the
Property and refunded to the Company after 31 March 1999 in respect of
any period up to and including 31 March 1999.
3.3 The consideration for the Shares shall be decreased by the amount of
uniform business rate rebates previously obtained by the Company on or
before 31 March 1999 as the Company may be required to repay after 31
March 1999 to the relevant rating authority in respect of any period up
to and including 31 March 1999.
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3.4 The Buyer shall procure that, as soon as practicable after the
determination of proceedings relating to the uniform business rates
referred to in clauses 3.2 and 3.3, it delivers a written notice to the
Seller informing the Seller of the nature of such determination and of
the amount due from the Seller to the Buyer or the Buyer to the Seller
(as the case may be).
3.5 Any payments to be made pursuant to clauses 3.2 and 3.3 shall be made:-
3.5.1 in the case of a payment due pursuant to clause 3.2 within 10
days of the date on which the Company receives payment of the
relevant refund from the relevant local authority;
3.5.2 in the case of a payment due pursuant to clause 3.3, within 10
days of the receipt by the Seller of the notice referred to in
clause 3.4.
3.6 The following definitions shall apply for the purposes of this clause
3.6:-
3.6.1 "Charter St. Louis Deposit" - the sum of $7,340,000.00 (being
part of the Price, (as defined in the Property Sale
Agreement)).
3.6.2 " Charter St. Louis Deposit Account" - a specially designated
"Project Marigold" client deposit account of the Seller's
Solicitors.
3.6.3 " Management Period" - the period from the date of Closing to
either the date of receipt by the Seller's Solicitors of the
Transfer Notice or 31 May 1999 (whichever is the earlier).
3.6.4 "Transfer Notice" - notice in writing from the Buyer's
Solicitors to the Seller's Solicitors to complete the Land
Registry Transfer of the Charter St. Louis Property in favour
of the party named in the notice.
3.6.5 " Land Registry Transfer" - the transfer of the Charter St.
Louis Property to be executed by Charter St. Louis in the
agreed form.
3.6.6 " Retained Deeds" - the title deeds and documents relating to
the Charter St. Louis Property retained by the Seller's
Solicitors during the Management Period.
3.7 On Closing the Charter St. Louis Deposit shall be paid into the Charter
St. Louis Deposit Account and the deed and documents relating to the
Charter St. Louis Property shall be delivered to the Seller's
Solicitors.
3.8 The Transfer Notice may be served at any time during the Management
Period.
3.9 Upon receipt of the Transfer Notice the Seller's Solicitors are
irrevocably instructed by the Seller (as directed by Charter St. Louis)
forthwith to:-
3.9.1 Complete the Land Registry Transfer and deliver the same to
the Buyer's Solicitors together with the Retained Deeds; and
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3.9.2 Pay the Charter St. Louis Deposit (together with interest
accrued on such amount under the Charter St. Louis Deposit
Account) to the Seller or as it shall direct.
3.10 If no Transfer Notice has been served by the expiry of the Management
Period the Seller's Solicitors are irrevocably instructed by the Seller
(as directed by Charter St. Louis) following the expiry of the
Management Period forthwith to:-
3.10.1 Complete the Land Registry Transfer to the Buyer and to
deliver the same to the Buyer's Solicitors together with the
Retained Deeds; and
3.10.2 Pay the Charter St. Louis Deposit (together with interest
accrued on such amount under the Charter St. Louis Deposit
Account) to the Seller or as it shall direct.
3.11 The Buyer shall during the Management Period indemnify the Seller and
Charter St. Louis from and against all reasonable and proper expenses,
liabilities, costs, proceedings and demands howsoever arising and,
without prejudice to the generality of the foregoing, repay to the
Seller and/or Charter St. Louis all reasonable and proper expenses,
liabilities, costs and demands relating to the Charter St. Louis
Property.
3.12 (i) The Buyer may assign the benefit of the Warranties (subject to the
Disclosure Letter) to (a) the party nominated in the Transfer Notice or
(b) to its transferee in the event that the Land Registry Transfer is
completed in accordance with clause 3.10.1 PROVIDED THAT (1) immediate
notice in writing is given by the Buyer to the Seller specifying which
Warranties have been assigned (2) all liability of the Seller to the
Buyer under the terms of this Agreement howsoever arising shall cease
in respect of any Warranties assigned and (3) no further assignment or
assignments of whatever nature shall be permitted except where such
further assignment or assignments are to the Buyer or a company being a
member of the same group of companies within the meaning of Section 42
of the Landlord and Tenant Act 1954 and upon the company ceasing to be
a member of the same group of companies as the Buyer all liability of
the Seller under the Warranties so assigned shall cease.
(ii) It is acknowledged by the Seller that any Warranties assigned in
accordance with Clause 3.12(i) shall be enforceable against the Seller
on the same terms (including limitations in this Agreement) as are
contained in this Agreement
4 CLOSING
4.1 Closing shall take place at the offices of the Seller's Solicitors on
such date as is mutually agreed and in any event before 26 April 1999.
The parties shall have a pre-closing the day before the Closing Date to
examine Closing deliveries.
4.2 At Closing, the Seller shall deliver to the Buyer's Solicitors:
4.2.1 a written resolution of the directors of the Seller
authorising the sale of the Company and the execution by the
Seller of this Agreement (such written resolution being
certified as correct by the secretary of the Seller);
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4.2.2 a letter in the agreed form from the Seller confirming that
all debts and accounts between the Company (of the one part)
and the Seller or any Affiliate of the Seller (of the other
part) have been fully paid and settled;
4.2.3 evidence, reasonably satisfactory to the Buyer that all long
term debt of the Company has been discharged;
4.2.4 all outstanding charges, mortgages and debentures to which the
Company is a party, together with duly executed discharges
completed in respect of them;
4.2.5 transfers of the Shares duly executed by the Seller in favour
of the Buyer or its nominee, together with the relevant share
certificates;
4.2.6 irrevocable powers of attorney in the agreed form executed by
the Seller in favour of the Buyer to enable the Buyer (pending
registration of the transfers of the Shares) to exercise all
voting and other rights attaching to the Shares and to appoint
proxies for this purpose;
4.2.7 the resignations in the agreed form of the directors of the
Company from their respective offices with a written
acknowledgement from each of them executed as a Deed
confirming that he has no claim against the Company on any
grounds whatsoever;
4.2.8 the resignation of the Auditors to take effect from Closing
containing a statement under CA section 394(1) that there are
no such circumstances as are mentioned in that section;
4.2.9 the certificate of incorporation of the Company;
4.2.10 the statutory books and registers, including minute books,
books of account and documents of record of the Company,
complete and up-to-date;
4.2.11 the appropriate forms to amend the mandates given by the
Company to its bankers;
4.2.12 all deeds and documents as listed in the schedule to File 4D
of the Property Disclosure Bundle to the Disclosure Letter
relating to the title of the Properties excluding the deeds
and documents relating to the Charter St. Louis Property;
4.2.13 the Property Sale Agreement duly executed by Charter St. Louis
in the agreed form as set out in Schedule 6 Part IV (which
will be exchanged with the Buyer on Closing);
4.2.14 the License Agreement in the agreed form duly executed by
Charter Advantage, LLC and Charter System LLC;
4.2.15 the Services Agreement in the agreed form duly executed by
Magellan Behavioral Health Systems, Inc.;
4.2.16 the opinion of Dow, Lohnes & Albertson, PLLC in the agreed
form;
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4.2.17 the opinion of Edwin Coe in the agreed form;
4.2.18 termination of the licence agreement between Charter St. Louis
and the Company relating to the Charter St. Louis Property in
the agreed form; and
4.2.19 evidence, satisfactory to the Buyer, of the discharge of any
long term debt of the Swiss Company outstanding on the date of
this Agreement.
4.3 At Closing, the Seller will procure that a duly convened meeting of the
Company's directors is held at which:
4.3.1 the transfers referred to in clause 4.2.5 are approved
(subject to stamping) for registration in the books of the
Company;
4.3.2 the resignations of all the directors are accepted with effect
from the closure of the meeting and persons nominated by the
Buyer are appointed as additional directors of the Company;
4.3.3 all existing instructions to the bankers of the Company are
revoked and new instructions are given to such bankers as the
Buyer may nominate in such form as the Buyer directs;
4.3.4 the License Agreement, and the Service Agreement are approved
and any of the directors of the Company are authorised to sign
such agreements on behalf of the Company; and
4.3.5 the resignation of Arthur Andersen as auditor of the Company
is accepted and Ernst & Young are appointed in their place.
4.4 At Closing the Buyer shall pay and deliver or cause to be paid and
delivered to the Seller the consideration for the Shares in immediately
available funds to the bank account details of which are set out in
Schedule 8 4.5 At Closing, the Buyer shall deliver to the Seller's
Solicitors:
4.5.1 an extract, certified as true by the secretary of the Buyer,
from the minutes of a meeting of the directors of the Buyer,
resolving that the Buyer should enter into this Agreement and
the Company shall enter into the License Agreement and the
Services Agreement and authorising execution of this Agreement
by each person signing on behalf of the Buyer;
4.5.2 the License Agreement duly executed by the Company; and.
4.5.3 the Services Agreement duly executed by the Company.
4.5.4 the Property Sale Agreement in the agreed form as set out in
Schedule 6 Part IV signed by the Buyer which will be exchanged
with Charter St. Louis (at the direction of the Seller) on
Closing.
4.6 The Buyer shall for a period of 8 years after Closing give to the
Seller reasonable access to the Company's books and records in relation
to matters prior to the date of
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Closing for the purpose of dealing with any queries raised by any Tax
Authority in respect of such matters.
4.7 The Buyer shall not be obliged to close the sale and purchase of the
Shares unless the sale and purchase of all the Shares and the sale and
purchase of the Swiss Stock pursuant to the Swiss Sale Agreement is
completed simultaneously and all the other requirements of clauses 4.2
and 4.3 are complied with.
4.8 If the obligations of the Seller under clauses 4.2 and 4.3 are not
complied with in all material respects on the Closing Date, the Buyer
may (a) defer Closing to another date being not more than 21 days after
the date of the deferred Closing or (b) without prejudice to any other
rights it may have under this Agreement, proceed to Closing so far as
is practicable (provided nothing in this clause 4.8.(b) shall relieve
Buyer from delivering the Consideration referred to in clause 3.1 on
the date on which Closing takes place) or (c) treat this Agreement as
terminated and/or may bring an action under clause 22.
4.9 If the obligations of the Buyer under Section 4.4 are not complied with
on the Closing Date, the Seller may treat this Agreement as terminated
and/or bring an action under Clause 22.
4.10 Time shall be of the essence in relation to clauses 4.8 and 4.9 in this
Agreement.
5. WARRANTIES OF SELLER
5.1.1 The Seller warrants to the Buyer that each of the Warranties
is accurate in all respects at the date of this Agreement.
5.1.2 The Seller shall be deemed to have repeated each of the
Warranties on the Closing Date as if all express or implied
references to the date of this Agreement were references to
the Closing Date.
5.1.3 Each of the Warranties shall be construed as a separate and
independent warranty and shall not be limited or restricted by
reference to or inference from any other Warranty.
5.1.4 Where any of the Warranties are made or given "so far as the
Seller is aware," such Warranty shall be deemed to be given to
the best of the knowledge, information and belief of the
Seller as the Seller would have obtained after making
reasonable enquiries of Patricia Hodgkinson and Trevor Mills
(and Philip Angell only with respect to the IT System, as
defined in the Warranties) into the subject matter of that
Warranty.
5.1.5 In the event that prior to the Closing Date
(i) there occurs any act or omission which would
constitute a breach of any of the Warranties (whether
or not such breach is material) or which would make
any of the Warranties inaccurate or misleading and
such act or omission becomes known to the Buyer; or
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(ii) it becomes apparent that the Seller is in breach of
any of the Warranties (whether or not such breach is
material),
the Buyer shall not be entitled to rescind this Agreement and
shall proceed to Closing but without prejudice to its right to
claim for breach of the Warranties.
5.2 QUALIFICATIONS
The Warranties are given subject to the information fairly and
adequately disclosed in the Disclosure Letter. Any disclosure which is
fairly and adequately made in the Disclosure Letter is to be treated as
a disclosure in respect of each and every Warranty and not solely in
respect of any particular Warranty.
5.3 DISCLOSURE OF BREACHES
The Seller undertakes to disclose in writing to the Buyer anything
which is or is reasonably likely to constitute a breach of any of the
Warranties immediately after it comes to the Seller's notice both
before and after Closing.
5.4 CLAIMS AGAINST EMPLOYEES
Each of the Seller and Magellan undertakes (if any claim is brought
against it in connection with the sale of the Shares to the Buyer) not
to make any claim against the Company or any director or employee of
the Company on whom it may have relied before agreeing to any terms of
this Agreement or authorising any statement in the Disclosure Letter.
5.5 TAXATION ON PAYMENTS
If in respect of or in connection with any breach of any of the
Warranties or any facts or matters warranted not being true any amount
payable to the Buyer by the Seller (or by Magellan under the guarantee
set out in clause 6) is subject to taxation, such amounts shall be
increased to such extent as may be necessary to procure that the net
amount received by the Buyer is equal to the full amount payable to the
Buyer under this Agreement.
5.6 INDEMNITY FOR COSTS AND EXPENSES BY THE SELLER
The Seller undertakes to indemnify the Buyer against all costs,
expenses or other liabilities which the Buyer may reasonably incur
either before or after the commencement of any action in connection
with:
5.6.1 any legal proceedings in which the Buyer claims that any of
the Warranties are untrue or have been breached and in which
judgment is given for the Buyer; and
5.6.2 the enforcement of any such settlement or judgment against
either the Seller or Magellan.
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5.7 INDEMNITY FOR COSTS AND EXPENSES BY THE BUYER
The Buyer undertakes to indemnify the Seller against all costs,
expenses or other liabilities which the Seller may reasonably incur
either before or after the commencement of any action in connection
with:
5.7.1 any legal proceedings in which the Seller claims that any of
the Warranties are untrue or have been breached and in which
judgment is given for the Seller; and
5.7.2 the enforcement of any such settlement of judgment against
either the Buyer or Bure.
5.8 LIMITATION OF LIABILITY
5.8.1 The aggregate liability of the Seller in respect of all
Relevant Claims relating to a breach of the warranties set out
in Schedule 3 shall not exceed the aggregate amount of the
consideration payable in respect of the Shares, the Swiss
Stock and the Charter. St. Louis Property referred to in
clause 3.
5.8.2 The Seller will be under no liability to make any payment in
respect of any liability pursuant to a Relevant Claim unless
and to the extent the aggregate amount of its liability in
respect of any such Relevant Claim is, when aggregated with
the Seller's liability in respect of any other such Relevant
Claim(s) or which would have been made but for the provisions
of this clause 5.8.2, in excess of US$500,000.
5.8.3 The Seller will be under no liability in respect of any
Relevant Claim, where the aggregate of the amounts for which
the Seller would be liable under such Relevant Claim is less
than U.S.$45,000 and the aggregate amount of such Relevant
Claim shall be disregarded for the purposes of aggregation of
Relevant Claims pursuant to clause 5.8.2; provided that, for
the purposes of this clause, any Relevant Claims arising out
of the same event, act, default or omission or any sequence of
related events, acts, defaults or omissions shall be
aggregated together.
5.8.4 The Buyer agrees with the Seller that it shall not be entitled
to recover damages or obtain payment, reimbursement,
restitution or indemnity more than once in respect of any one
shortfall, damage, deficiency, breach or other set of
circumstances which gives rise to one or more Relevant Claim..
5.8.5 The Seller shall not be liable in respect of a Relevant Claim
unless written notice containing, so far as reasonably
practicable, details of the Relevant Claim is served on the
Seller:
(i) in respect of any Relevant Claim relating to a breach
of the warranties set out in Schedule 3 other than
Sub-clauses (ii) and (iii) of this clause on or
before the date which is 2 years after Closing; or
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(ii) in respect of any Relevant Claim relating to a breach
of the warranties set out in Schedule 3 Paragraph 16
(Environmental Matters) on or before the tenth
anniversary of the Closing Date; or
(iii) in respect of a claim under the Tax Covenant or the
warranties in Schedule 4 Part II, on or before the
date being seven years and one month from the Last
Accounting Date.
5.8.6 A Relevant Claim shall not be enforceable against the Seller
unless legal proceedings in connection with it are commenced
by both being issued and served within twelve months after
written notice of that Relevant Claim is served on the Seller.
5.8.7 The Seller shall not be liable in respect of a Relevant Claim:
5.8.7 (i) which would not have arisen but for an act, omission
or transaction outside the ordinary course of
business carried out after Closing by the Buyer or
the Company, their respective directors, employees or
agents or successors in title;
(ii) to the extent that it relates to any loss which is
recovered under any policy of insurance effected by
or for the Company. The Buyer agrees that it will,
and will cause the Company to, use best efforts to
successfully claim under such policy, provided always
that the Buyer shall not be prejudiced or prohibited
from bringing any claim against the Seller under the
terms of the Warranties if recovery has not been
successfully made or is still being pursued within 30
days prior to the expiration of the relevant periods
provided for within clause 5.8.5. In the event that
the claim is successfully made against the Seller,
then the Buyer shall or shall cause the Company to
continue to seek recovery as aforesaid and in the
event of any subsequent recovery under any such
policy of insurance, the Buyer shall reimburse the
Seller with the amounts recovered under such policy
(after deduction of all proper costs and expenses
incurred by the Buyer or the Company in relation to
such recovery and not previously reimbursed) up to
the amount previously received from the Seller;
(iii) to the extent that allowance, provision or reserve
has been made for such fact, matter, event or
circumstance in the Audited Accounts or the Closing
Accounts or to the extent that payment or discharge
of the relevant matter has been taken into account
therein or to the extent that such matter was
specifically referred to in the notes to such Audited
Accounts; or
(iv) to the extent that such Relevant Claim is
attributable to, or such Relevant Claim is increased
as a result of, any legislation not in force at the
date hereof or to any change of law, regulation,
directive, requirement or administrative practice or
any change in rates of tax, which in each case is not
in force at the date hereof.
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5.8.8 If the Seller pays to the Buyer or the Company an amount in
respect of any Relevant Claim and the Buyer or the Company
subsequently recovers a sum or credit which is referable to
that Relevant Claim, the Buyer shall (or, as the case may be,
shall procure that the Company shall) promptly repay to the
Seller an amount equal to the lesser of (i) the amount or
value of such benefit recovered less any reasonable costs,
fees and expenses incurred by the Company or the Buyer in
connection with the recovery and not reimbursed or (ii) the
total amount paid by the Seller in respect of that Relevant
Claim.
5.8.9 Any payment made by the Seller in respect of any Relevant
Claim shall be deemed a reduction in the consideration paid by
Buyer hereunder.
5.9 Upon any Relevant Claim being made, or notification from the Buyer to
the Seller pursuant to clauses 5.8.5 and 5.10 of any third party claim,
potential claim, matter or event which might lead to a Relevant Claim
being made, the Buyer shall, and shall co-operate to cause the Company
to:
5.9.1 make available to accountants and other professional advisers
appointed by the Seller such access to the personnel of the
Company and to any relevant records and information as the
Seller reasonably requests in connection with such Relevant
Claim or third party claim, potential claim, matter or event;
and
5.9.2 use best efforts to cause the auditors (both past and then
current) of the Company to make available their audit working
papers in respect of audits of the Company's accounts for any
relevant accounting period in connection with such Relevant
Claim, matter or event. Such access shall be required only at
reasonable times and on reasonable notice.
5.10 If the Buyer becomes aware of any third party claim, potential claim,
matter or event (a "third party claim") which might lead to a Relevant
Claim being made, the Buyer-
5.10.1 shall cause notice of such third party claim to be given
promptly to the Seller;
5.10.2 shall not make (or, as appropriate, shall co-operate to ensure
that the Company shall not make) any admission of liability,
agreement or compromise with any person, body or authority in
relation to any such third party claim until the expiration of
ten Business Days ("Notice Period") from the date of service
on the Seller of the notice referred to in clause 5.10.1. The
Buyer shall not take any action specified in the prior
sentence if so instructed by the Seller in writing during the
Notice Period (subject to it being indemnified to its
reasonable satisfaction against all reasonable out of pocket
expenses incurred by it or the Company;
5.10.3 shall take (or, as appropriate, shall co-operate to cause the
Company to take) such action as the Seller may reasonably
request in writing to avoid, dispute, resist, appeal,
compromise or defend such third party claim or any
adjudication in respect of that third party claim (subject to
being fully indemnified to its reasonable satisfaction by the
Seller against all reasonable out of pocket expenses incurred
by the Buyer or the Company); and
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5.10.4 if so required by the Seller in writing, and subject to being
fully indemnified to its reasonable satisfaction by the Seller
against all reasonable out of pocket expenses incurred by the
Buyer or the Company shall ensure (or, as appropriate, shall
co-operate to cause the Company to ensure), that the Seller is
placed in a position to take on or take over the conduct of
all proceedings and/or negotiations of whatsoever nature
arising in connection with the third party claim in question
and provide (or, as appropriate, co-operate to cause the
Company to provide) such information and assistance as the
Seller may reasonably require in connection with the
preparation for and conduct of such proceedings and/or
negotiations; provided that, where the Seller takes over the
conduct of proceedings or negotiations pursuant to this
clause, the Seller shall not settle any such proceedings or
agree on any final outcome of such negotiations without the
prior written consent of the Buyer (which shall not be
unreasonably withheld or delayed), unless in connection with
such settlement, the Buyer is fully released from any
liability.
5.11 A breach of Warranty which is capable of remedy shall not entitle the
Buyer to compensation except to the extent that:
5.11.1 the Seller is given written notice of such breach; and
5.11.2 such breach is not remedied within 30 days after the date on
which such notice is served on the Seller.
5.12 The Seller shall not be liable to satisfy any Relevant Claim relating
to a breach of the Warranties which shall be made after the Company
shall cease to be a Subsidiary of the Buyer or of its Affiliates.
5.13 Where the Company or the Buyer is entitled to recover from some other
person any sum in respect of any liability, loss or damage which is the
subject of a Relevant Claim against the Seller or for which such a
Relevant Claim could be made (and whether before or after the Seller
has made payment hereunder), the Buyer shall (or, ensure that the
Company shall)
5.13.1 promptly notify the Seller and provide such information as the
Seller may reasonably require relating to such liability or
dispute and the steps taken or to be taken by the Buyer or the
Company in connection with it;
5.13.2 if so required by the Seller (subject to the Buyer being fully
indemnified to its reasonable satisfaction by the Seller
against all reasonable out of pocket costs and expenses
incurred by the Buyer or the Company) and before seeking to
recover any amount from the Seller under this Agreement, first
take all steps (whether by way of a claim against its insurers
or otherwise, including, but without limitation, proceedings)
as the Seller may reasonably require to enforce such recovery;
and
5.13.3 keep the Seller informed of the progress of any action taken,
and thereafter any claim against the Seller shall be limited
(in addition to the limitations on the liability of the Seller
referred to in this Agreement) to the
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amount by which the loss or damage suffered by the Buyer as a
result of such breach shall exceed the amount so recovered.
5.14 Without limiting the rights of the Buyer (or the purchaser (the
"Purchaser") of the Charter St. Louis Property, for any of the
Warranties referred to below which were assigned to the Purchaser) or
its ability to claim damages on any other basis under this Agreement,
if any of the Warranties set out in Paragraph 16 of Schedule 3 is
untrue by reason of the Company having committed a breach or
non-observance of any Environmental Laws, the Seller shall pay to the
Buyer (or the Purchaser, as the case may be) an amount equal to all
liabilities incurred by the Company as a consequence of the breach of
such Environmental Laws, including, without limitation, the cost of all
reasonable and appropriate remedial works required to be carried out at
the relevant property to procure compliance with such Environmental
Laws; provided any damage claim provided in this clause 5.14 shall be
deemed a Relevant Claim for all purposes including for purposes of
clause 5.8; provided further, that in no event shall the Seller be
liable for the same claim to both the Buyer and the Purchaser.
5.15 Seller's Indemnities
5.15.1 The Seller covenants with the Buyer that it will pay to the Buyer an
amount equal to the amount necessary to indemnify the Buyer and the
Company from and against all actions, proceedings, claims, demands and
reasonable costs and expenses which may be suffered or incurred by the
Buyer or the Company arising out of or in respect of:-
(a) the claims disclosed in paragraphs 8.1(d)(i) and (ii) and (e)
of the Disclosure Letter headed "Litigation and Defences" and
documents numbers 5.3, 5.4, 5.7, 5.8, 5.11 and 5.12 of file 3B
referred to in such paragraph 8.1(d)(iii) of the Disclosure
Letter;
(b) the guarantee given by the Company in favour of the
subordinated notes issued by Charter Medical Corporation
pursuant to an indenture dated May, 1994 and the guarantee
given by the Company in favour of the Lenders under a credit
agreement with Magellan dated 12 February, 1998;
(c) the agreement dated 10th April 1997 relating to the provision
of care for overseas patients made between the Company and
Riverside Mental Health Trust;
(d) any liability relating to the Charter Medical of England
Limited (1987) Pension Plan which is referred to in a letter
dated 24th February 1995 from London and Manchester (Pensions)
Limited to William M Mercer Limited
(e) any liability incurred by the Company arising as a consequence
of its employment of Mrs Illa Chandarana prior to closing; and
(f) any liability of the Company to the Seller of any Affiliate of
the Seller, including, without limitation, any amount due to
Charter St. Louis in respect of the Company's occupation of
the Charter St. Louis Property.
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5.16 The Seller undertakes to the Buyer that between the date of this
Agreement and Closing (save with the previous written consent of the
Buyer):-
5.16.1 the business of the Company shall be carried on in the
ordinary course
5.16.2 the Company shall take no action of an unusual or non-routine
nature which is calculated solely or principally to increase
or decrease the amount of cash in hand of the Company;
5.16.3 the Company shall take all reasonable steps to preserve and
protect its business and assets;
5.16.4 all existing insurance policies relating to the Company shall
be maintained in full force and effect and shall not be
allowed to lapse, expire or be forfeited or otherwise
terminated;
5.16.5 no encumbrance (other than liens arising in the ordinary
course of business) shall be created or extended over any of
the Company's assets;
5.16.6 no capital commitment with an individual contract value in
excess of (pound)10,000 shall be entered into by the Company
except in the ordinary course of business;
5.16.7 the Company shall not dispose of or grant or agree to dispose
of or grant any option in respect of any assets valued in
excess of (pound)10,000 except in the ordinary course of
business
5.16.8 the Company shall not enter into, amend or terminate any
individual contract or commitment which involves payments in
excess of (pound)10,000 or which is materially unusual or
abnormal;
5.16.9 the Company shall not increase the compensation or benefits
paid or to become payable to any of its officers or employees
or agree to do the same;
5.16.10 the Company shall not appoint or terminate the employment of
or make any material variation to the terms of employment of
any director or senior employee;
5.16.11 the Company shall not make or propose a material change to any
benefit of any kind which is payable on a person's retirement,
death or disability to or in respect of any of the directors
or employees or to any pension scheme (other than a change
required by law) or, without limiting the foregoing, carry out
any action in relation to any scheme other than in the
ordinary course of operating such scheme;
5.16.12 no amendment shall be made to the Company's articles of
association and no resolutions which are inconsistent with the
Company's articles of association shall be made or proposed;
5.16.13 no change shall be made in the Company's accounting reference
date;
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<PAGE>
5.16.14 the Company shall not initiate, compromise or settle any
litigation, arbitration or mediation proceedings other than
debt collection conducted in the ordinary course of business;
5.16.15 no increase or reduction shall be made in the authorised,
allotted or issued share capital of the Company;
5.16.16 no option, right of conversion or right of pre-emption shall
be allotted or granted by the Company over the whole or any
part of its share capital, whether issued or unissued;
5.16.17 no dividends or other distributions shall be declared, made or
paid by the Company; and
5.16.18 the Company shall not create any new debt other than trade
debt incurred in the ordinary course of business; and
5.16.19 the Company shall not make any commitment to do any of the
foregoing
provided that the Seller shall not be in breach of any provisions
contained in this clause 5.16 where the intention of the Company to
carry out any action which would otherwise place the Seller in breach
of this clause 5.16 has already been disclosed to the Buyer in writing
on the date of this Agreement.
6. GUARANTEE AND INDEMNITY BY MAGELLAN
6.1 Magellan hereby unconditionally and irrevocably guarantees to the Buyer
the due and punctual performance and observance by the Seller of all
its obligations ("Seller Obligations") under or pursuant to this
Agreement arising after Closing (the "Magellan Guaranteed Obligations")
and agrees to indemnify the Buyer against all loss, damage, costs and
expenses which the Buyer may suffer through or arising from any breach
by the Seller of its obligations under or pursuant to this Agreement.
The liability of Magellan under this Agreement shall not be released or
diminished by any variation of the terms of this Agreement (if agreed
to by Magellan), any forbearance, neglect or delay in seeking
performance of the obligations imposed under this Agreement or any
granting of time for such performance.
6.2 If and whenever the Seller defaults for any reason whatsoever in the
performance of any of the Magellan Guaranteed Obligations, Magellan
shall upon demand unconditionally perform (or procure performance of)
and satisfy (or procure the satisfaction of) the obligation or
liability in regard to which such default has been made in the manner
prescribed by this Agreement and so that the same benefits shall be
conferred on the Buyer as it would have received if such obligation or
liability had been duly performed and satisfied by the Seller.
6.3 The guarantee set out in this clause 6 is to be a continuing guarantee
and accordingly is to remain in force until all of the Magellan
Guaranteed Obligations shall have been performed or satisfied. This
guarantee is in addition to and without prejudice to and not in
substitution for any rights or security which the Buyer may now or
hereafter have or hold for the performance and observance of the
obligations, commitments,
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<PAGE>
undertakings and warranties of the Seller under or in connection with
this Agreement or any other agreement entered into pursuant to this
Agreement.
6.4 As a separate and independent stipulation, Magellan agrees that any of
the Magellan Guaranteed Obligations (including, without limitation, any
moneys expressed to be payable under this Agreement) which may not be
enforceable against or recoverable from the Seller by reason of any
legal limitation, disability or incapacity of the Seller or any other
fact or circumstance (other than any limitation imposed by this
Agreement) shall nevertheless be enforceable against and recoverable
from Magellan as though the same had been incurred by Magellan and Bure
were the sole or principal obligor in respect thereof.
7. GUARANTEE AND INDEMNITY BY BURE
7.1 Bure hereby unconditionally and irrevocably guarantees to the Seller
the due and punctual performance and observance by the Buyer of all its
obligations (the "Buyer's Obligations") under or pursuant to clauses
2.1 (sale of shares), 4.4 (payment of Consideration) and 9 (Buyer's
Warranties) 3.7 (payment of Charter St. Louis Deposit) (such provisions
being referred to in this clause as the "Guaranteed Obligations") and
agrees to indemnify the Seller against all loss, damage, costs and
expenses which the Seller may suffer through or arising from any breach
by the Buyer of its obligations under or pursuant to the Guaranteed
Obligations. The liability of Bure under this Agreement shall not be
released or diminished by any variation of the terms of this Agreement
(if agreed to by Bure), any forbearance, neglect or delay in seeking
performance of the obligations imposed under this Agreement or any
granting of time for such performance.
7.2 If and whenever the Buyer defaults for any reason whatsoever in the
performance of any of the Guaranteed Obligations, Bure shall upon
demand unconditionally perform (or procure performance of) and satisfy
(or procure the satisfaction of) the obligation or liability in regard
to which such default has been made in the manner prescribed by this
Agreement and so that the same benefits shall be conferred on the
Seller as it would have received if such obligation or liability had
been duly performed and satisfied by the Buyer.
7.3 The guarantee set out in this clause 7 is to be a continuing guarantee
and accordingly is to remain in force until all of the Guaranteed
Obligations shall have been performed or satisfied. This guarantee is
in addition to and without prejudice to and not in substitution for any
rights or security which the Seller may now or hereafter have or hold
for the performance and observance of the obligations, commitments,
undertakings and warranties of the Buyer under or in connection with
this Agreement or any other agreement entered into pursuant to this
Agreement.
7.4 As a separate and independent stipulation, Bure agrees that any of the
Guaranteed Obligations (including, without limitation, any moneys
expressed to be payable under this Agreement) which may not be
enforceable against or recoverable from the Buyer by reason of any
legal limitation, disability or incapacity of the Buyer or any other
fact or circumstance (other than any limitation imposed by this
Agreement) shall nevertheless be enforceable against and recoverable
from Bure as though the same had been incurred by Bure and Bure were
the sole or principal obligor in respect thereof.
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<PAGE>
8. RESTRICTIVE COVENANT
8.1 For the purpose of assuring to the Buyer the full benefit of the
Company and in consideration for the Buyer agreeing to buy the Shares
on the terms of this Agreement, each of the Seller and Magellan,
(referred to together in this Clause as the "Covenantors") undertake to
the Buyer that, except as provided below, they will not, and will
procure that no Subsidiary of the Seller or Magellan will, without the
prior written consent of the Buyer, whether directly or indirectly, at
any time within three years following Closing within the Restricted
Territory, whether alone or in conjunction with, or on behalf of, any
other person and whether as principal, shareholder (other than solely
as an investor with no management function or controlling influence of
the company in question), agent, consultant, partner or otherwise,
construct, own, lease, operate or manage, any of: (i) an acute care
psychiatric hospital, (ii) an acute care psychiatric unit as part of an
acute care general hospital, (iii) a psychiatric residential treatment
center, (iv) a part of a facility operating a psychiatric residential
treatment center, (v) any facility providing 24-hour psychiatric
healthcare, (vi) a psychiatric daycare facility or (vii) any facility
providing psychiatric outpatient services (a "Competitive Business");
provided, however, that Magellan and the Seller, and the Subsidiaries
of Magellan and the Seller, may provide psychiatric outpatient services
required by or in connection with a contract to provide utilisation
management, network management, care management and employee assistance
programme services not involving the transfer of intellectual property
or know-how to any of the Company's competitors in the United Kingdom
or Switzerland (collectively, "Managed Contract Services") for and on
behalf of a healthcare plan or entity (including self-assured plans)
provided that if any outpatient services are to be provided within the
United Kingdom, Magellan or any of the subsidiaries shall use its
reasonable endeavours to offer the Buyer the opportunity to provide
such outpatient services on substantially the same terms that Magellan
or its relevant subsidiary would be providing such services; PROVIDED
FURTHER, that if the Buyer declined to provide such services pursuant
to any offer, then Magellan would be permitted to provide such
services. Magellan agrees that neither it nor its subsidiaries shall
contribute capital to CBHS for the purpose of operating or owning a
Competitive Business in the Restricted Territory.
8.2 Each of the Covenantors undertakes to the Buyer that it will not, and
it will procure that no Subsidiary of the Covenantors will, for a
period of three years immediately following Closing, solicit or
endeavour to solicit away from the Company any person employed by, or
who is a consultant to, the Company at Closing.
8.3 The Covenantors acknowledge that each of them has information in
respect of the business and financing of the Company and its dealings,
transactions, affairs, plans and proposals, all of which information
is, or may be, secret or confidential and important to the Company. In
this clause 8, "Confidential Information" means information, other than
information referred to in clause 8.5, relating to the Company's
finances, prices, business plans, marketing plans, development plans,
manpower plans, sales targets, sales statistics, customers lists,
customer relationships, suppliers lists, sales statistics, survey
reports and market share data. The Covenantors further acknowledge that
the disclosure of Confidential Information (whether directly or
indirectly) to actual or potential competitors of the Company would
place the
22
<PAGE>
Company at a competitive disadvantage and would do damage (whether
financial or otherwise) to its business. Each of the Covenantors
accordingly agrees to enter into the restrictions contained in clause
8.5.
8.4
8.4.1 Each of the Buyer and Bure undertakes that it will not and
will procure that no Subsidiary of Bure will without the prior
written consent of the Seller whether directly or indirectly
for a period of three years outside whether alone or in
conjunction with or on behalf of any other person and whether
as principal shareholder (other than solely as an investor
with no management function or controlling influence of the
company in question), agent, consultant, partner or otherwise
use the Company's operating system (the "Company's System")
related to treatment methods, therapies or protocols for any
illness, addiction or condition at any facility or location
within the United States.
8.4.2 For the avoidance of doubt nothing contained in this Agreement
shall prevent Magellan or any of its Subsidiaries from
licensing to third parties for use in jurisdictions other than
the United Kingdom and Switzerland an operating system
referred to as the "Charter System", which is presently
licensed by a Magellan Subsidiary to third parties and which
is similar to the Company's System.
8.5 Each of the Covenantors undertakes that it will not, and will procure
that none of its Affiliates will, at any time during the said
three-year period after Closing:
8.5.1 disclose Confidential Information to any person except (i) to
its professional advisors or officers or employees and, in
each case, whose province it is to know the same, (ii) to
those authorised by the Company to know; or (iii) insofar as
it is compelled by law or competent authority so to do;
8.5.2 use Confidential Information for its own purposes or for any
purpose other than those of the Company; or
8.5.3 through any failure to exercise all due care and diligence,
cause or permit any unauthorised disclosure of any
Confidential Information of the Company;
provided that these restrictions on the Covenantors will cease to apply
to information which (otherwise than through the default of the Seller
or Magellan) becomes available to the public generally.
8.6 The parties agree that each of the undertakings set out in this clause
8 is separate, severable and enforceable. Accordingly, if any one or
more of such undertakings or part of any undertaking is held to be
against the public interest or unlawful or in any way an unreasonable
restraint of trade, the remaining undertakings or remaining part of the
undertakings will continue in full force and effect and will bind the
Covenantors.
8.7 No restrictions contained in this Agreement, or in any agreement or
arrangement of which this Agreement forms part, which causes this
Agreement or that agreement or arrangement to be subject to
registration under the Restrictive Trade Practices Act
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1976 will take effect until the day after particulars of this Agreement
or of that agreement or arrangement, as the case may be, have been
furnished to the Director General of Fair Trading pursuant to that Act.
8.8 Nothing in this clause 8 shall prevent Magellan or its Affiliates from
acquiring the whole or any part of a body corporate or business or any
direct or indirect interest in the whole or any part of a body
corporate or business, the acquisition, holding or carrying on of which
would otherwise amount to a breach of this clause 8, except where more
than 10% of the turnover of the business of the body corporate or
business directly or indirectly acquired in the 12 months prior to such
acquisition consists of any of the business referred to in clause 8.1,
in which case Magellan or its Affiliates shall use reasonable efforts
to dispose of that part of the business which, but for this provision,
would cause it to be a breach of this clause 8 as soon as reasonably
practicable.
9 RELEASE OF LEASE GUARANTEE
9.1 Bure shall at its cost:-
9.1.1 For the nine months following Closing use its reasonable
endeavours to procure as soon as possible the release of
Magellan from the guarantee given by Magellan to the landlord
of the lease (as varied) identified as item 1 Schedule 6 Part
1 ("The Lease") and shall keep Magellan informed as to
progress of negotiations for the release.
9.1.2 provide all reasonable assistance and information to the
Landlord to enable Magellan to be released by the landlord
from Magellan's obligations under the Lease including Bure
standing as guarantor on the same terms as Magellan is bound
as guarantor if required by the landlord, but shall not
include the payment of any money to the landlord as
consideration for the release.
9.2 Unless and until such release has been obtained Bure shall indemnify
and keep Magellan indemnified at all times after Closing against all
proper demands liabilities claims and proceedings of whatsoever nature
howsoever arising suffered or incurred (including legal costs and other
professional fees) reasonably and properly incurred by Magellan in
consequence of the guarantee being enforced against Magellan.
9.3 Bure shall at all times keep Magellan informed as to its address for
service of any claim under this clause (a "Notice of Proceedings") and
the last known address notified to Magellan shall be deemed to be the
address for service of any Notice of Proceedings on Bure. Magellan
shall at all times keep Bure informed as to its address for service of
any notice to be delivered for the purpose of this clause and the last
address notified to Bure shall be deemed to be Magellan's address for
service of any such notice.
9.4 Magellan shall notify Bure promptly of the receipt of any Notice of
Proceedings and at all times Magellan shall keep Bure informed as to
progress relating to any Notice of Proceedings.
9.5 Magellan shall give Bure notice of its intention to settle pay or
otherwise dispose of
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<PAGE>
any proceedings and/or demands relating to any Notice of Proceedings
and Bure shall promptly notify Magellan of its consent (such consent
not to be unreasonably withheld). The provisions of clauses 5.10 and
5.13 of this Agreement shall apply so far as the same are not
inconsistent with the provisions of this clause 9 to the claim to which
any Notice of Proceedings relates as if:
9.5.1 references to the "Buyer" were to Magellan;
9.5.2 references to a "Relevant Claim" were to any claims to which a
Notice of Proceedings relates;
9.5.3 references to the "Seller" were to Bure;
9.5.4 references to the "Company" were deleted; and
9.5.5 references to the Buyer being indemnified were deleted; and
9.5.6 the words "and thereafter any claim..... the amount so
recovered" at the end of clause 13 were deleted and replaced
by:-
"Provided always that notwithstanding any other provision of
this Agreement any claims to which a Notice of Proceedings
relates shall not be construed as a Relevant Claim so as to
limit in any way the liability of Bure in respect of the
indemnity given by it pursuant to clause 9..2 above."
10. WARRANTIES OF BUYER
10.1 In consideration of the Seller entering into this Agreement, the Buyer
warrants to the Seller that:-
10.1.1 it is entitled to purchase the Shares on the terms of this
Agreement without the consent of any third party;
10.1.2 it has full power to enter into and perform this Agreement and
any other agreement which will need to be executed pursuant to
this Agreement without the consent or approval of another
person, and such documents will, when executed, constitute
binding obligations of the Buyer in accordance with their
terms subject to the operation of law as regards the
availability of equitable remedies and matters of public
policy and the application of the relevant statutory
provisions, including those regarding limitation periods,
insolvency and competition matters;
10.1.3 the execution and delivery of the documents referred to in
clause 10.1.2 by the Buyer and the performance of and
compliance with their terms and provisions will not:
(i) conflict with or result in a breach of or constitute
a default under, any agreement or instrument to which
it is a party or by which it is bound or of the
constitutional documents of the Buyer; or
25
<PAGE>
(ii) conflict with or result in a breach of any order,
writ, injunction, judgment or decree of any court or
governmental agency.
11. COSTS
Each of the Parties shall pay its own legal and accountancy costs,
charges and expenses connected with the negotiation, preparation and
implementation of this Agreement. The Buyer shall be responsible for
all stamp duty on the transfer of the Shares.
12. GENERAL
12.1 Failure or delay by any Party in exercising any right or remedy under
this Agreement will not in any circumstances operate as a waiver of it,
nor will any single or partial exercise of any right or remedy in any
circumstances preclude any other or further exercise of it or the
exercise of any such right or remedy.
12.2 Any waiver of any breach of or any default under any of the terms of
this Agreement will not be deemed a waiver of any subsequent breach or
default and will in no way affect the terms of this Agreement.
12.3 The Buyer may release or compromise the liability of or grant time or
any other indulgence to, any person who is a Party to this Agreement
without in any way prejudicing or affecting the liability of any person
in respect of any other liability or obligation hereunder.
12.4 No variation of this Agreement or any other documents to be entered
into pursuant to this Agreement shall be effective unless it is in
writing and signed by or on behalf of each of the Parties.
13. ASSIGNMENT
No Party may assign all or any of its rights, obligations or causes of
action arising under or pursuant to this Agreement without the prior
written consent of the other Party; provided that nothing herein shall
prevent the Buyer from (i) charging or assigning all of such rights,
obligations or causes of action to an Affiliate of the Buyer provided
and for so long as it remains an Affiliate and provided further that
the Buyer shall cause its Affiliates to comply fully and timeously with
all the Buyer's duties and obligations under this Agreement, (ii)
charging or assigning such rights, obligations or causes of action
pursuant to the Tax Covenant or the warranties in Schedule 4 part II,
(iii) charging or assigning the benefit of the Warranties contained in
clause 2 and 16 of Schedule 3 to the extent that such clauses relate to
the Charter St. Louis Property to any third party to whom the Charter
St. Louis Property is transferred pursuant to the Property Sale
Agreement. In the event any of the Warranties or the Tax Covenant in
clause (ii) or (iii) in the preceding sentence is assigned as
permitted, the Seller, Magellan or Charter St. Louis shall have
absolutely no liability with respect to any of the assigned Warranties
or Tax Covenant, to the Buyer from and after the date of such
assignment except in circumstances where the assigned Warranties or Tax
Covenant are re-assigned to Bure or one of its Affiliates. The Buyer
shall notify the Seller promptly in writing of any such assignment. In
the event that any Affiliate of the
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<PAGE>
Buyer ceases to be such and has had assigned to it all rights under
this Agreement, such Affiliate shall reassign such rights other than
rights pursuant to the Tax Covenant or the warranties in Schedule 4
part II (which for the avoidance of doubt may be so reassigned) to the
Buyer or another Affiliate of the Buyer. This Agreement will be binding
on and will continue for the benefit of the parties and their
respective successors and assigns to the extent permitted in this
clause 13. Accordingly, references in this Agreement (or any document
entered into pursuant to this Agreement) to the relevant party shall,
following any such assignment and unless the context otherwise
requires, mean the assignee or assignees for the time being.
The Seller and Magellan agree further that, upon the request of the
Buyer or its successors in title or assigns, this Agreement may be
novated (in respect of the Tax Covenant or the warranties in Schedule 4
part II) in favour of the beneficial owner for the time being of the
whole or part of the Shares, and the Seller and Magellan shall execute
such a novation agreement in such form as the Buyer may reasonably
require. If the Seller or Magellan fails to execute any such novation
agreement within 20 Business Days of a request by the Buyer to do so,
the Buyer may execute it on behalf of the Seller or Magellan (as the
case may be) or both of them and only for such purpose each of the
Seller and Magellan hereby irrevocably appoints the Buyer as their
attorney for the purpose of executing any such agreement. The Seller
and Magellan agree to ratify and confirm any action taken by the Buyer
by virtue of this power of attorney.
14. POST CLOSING UNDERTAKINGS
14.1 Following Closing, the Buyer undertakes to the Seller and Magellan
that:
14.1.1 it will use all reasonable endeavours to obtain the release of
the Seller and Magellan and any of their Affiliates from any
Intra-Group Guarantees to which any of them are party and,
pending such release, to indemnify Magellan and its Affiliates
against all amounts paid by any of them to any third party
pursuant to any Intra-Group Guarantees in respect of any
liability of the Company (and all costs incurred in connection
with such liability) arising after Closing; and
14.1.2 save with the prior written consent of Magellan, neither the
Buyer nor the Company will use the names "Magellan" or any
similar name or names likely to be confused with them.
15. FURTHER ASSURANCE
At any time, each of the parties hereto shall (at its cost and expense)
do and execute or procure to be done and executed all necessary acts,
documents and things in a form reasonably satisfactory to the other
party reasonably requested of them by the other party to give effect to
this Agreement and the transactions contemplated in or by it securing
to such other party the full benefit of the rights, powers and remedies
conferred upon such other party in this Agreement.
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<PAGE>
16. INVALIDITY
Each of the provisions of the Agreement is severable. If any provision
in this Agreement is held to be illegal, invalid or unenforceable, in
whole or in part, under any enactment or rule of law, such provision or
part shall to that extent be deemed not to form part of this Agreement
but the legality and enforceability of the remainder of this Agreement
shall not be affected.
17. ENTIRE AGREEMENT
17.1 This Agreement sets out the entire agreement and understanding between
the Parties in respect of the sale and purchase of the Shares. It is
agreed that:-
17.1.1 no Party has entered into this Agreement in reliance upon any
representation, warranty or undertaking of any other Party
which is not expressly set out or referred to in this
Agreement;
17.1.2 no Party shall have any remedy in respect of misrepresentation
or untrue statement made by any other Party unless and to the
extent that a claim lies for breach of Warranty under this
Agreement; and
17.1.3 this clause shall not exclude any liability for fraudulent
misrepresentation.
18. COUNTERPARTS
This Agreement may be entered into in any number of counterparts, all
of which taken together shall constitute one and the same instrument.
Any Party may enter into this Agreement by signing any such
counterpart.
19. INTEREST
If any party defaults in the payment when due of any sum payable under
this Agreement (however determined), the liability of such Party shall
be increased to include interest on such sum from the date when such
payment is due until the date of actual payment (as well after as
before judgment) at a rate per annum of 2 per cent above the base rate
from time to time of the Royal Bank of Scotland Plc.
Such interest shall accrue from day to day.
20. NOTICES
20.1 Any notice, claim or demand to be given in connection with or under
this Agreement shall be in writing and signed by or on behalf of the
Party giving it.
20.2 A notice may be served by letter; each letter containing such notice
shall be left or sent by pre-paid recorded delivery or registered post
to the address set out in clause 20.3 and, if so addressed shall be
deemed to have duly given or made as follows:
20.2.1 if delivered personally, upon delivery at the address of the
relevant Party;
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<PAGE>
20.2.2 if sent by first class post, two Business Days after the date
of posting in the case of a recipient with an address within
the United Kingdom and seven Business Days after the date of
posting otherwise; and
20.2.3 if sent by fax, upon receipt by the relevant Party provided
that if, in accordance with the above provisions, any such
communication would otherwise be deemed to be given or made
outside normal business hours 9.30 a.m. to 5.30 a.m. on a
Business Day in the jurisdiction in which the notice is
served), such communication shall be deemed to be given or
made at 9.30 a.m. on the next succeeding Business Day.
20.3 The relevant details of each Party for the purposes of the
giving of notices, subject to Clause 20.4, are:
<TABLE>
<CAPTION>
Party Addressee Address Fax No.
----- --------- ------- -------
<S> <C> <C> <C>
Charter Medical David Hansen 3414 Peachtree Road, 001-404 8695667
International, S.A., Inc (General Counsel) N.E.,
Suite 1400
Atlanta,
Georgia 30326
USA
Magellan Health Services, David Hansen 3141 Peachtree Road, 001-404 8695667
Inc. (General Counsel) N.E.,
Suite 1400
Atlanta,
Georgia 30326
USA
Investment AB Bure Torgny Brenton PO Box 5419 0046-31-778-5859
S-402 29 Goteborg
Sweden
CMEL Holding Limited 1-5 Radnor Walk 0171-724 1016
London
SW3 4BP
</TABLE>
A copy of any notice sent to the Seller or Magellan shall be copied to
the Seller's Solicitors and marked for the attention of Russel Shear. A
copy of any notice sent to the Buyer shall be sent to the Buyer's
Solicitors and marked for the attention of Peter Finlay. A failure to
copy a notice to the Seller's Solicitors or the Buyer's Solicitor as
required in this clause shall not invalidate the relevant notice.
20.4 Each Party may notify the other Parties at any time of a change to its
details for the purposes of clause 20.3 provided that such notification
shall only be effective from
20.4.1 the date specified in the notification as the date on
which the change is to take place; or
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<PAGE>
20.4.2 if no date is specified or the date specified is less
than five Business Days after the date on which notice is
given, the date falling five Business Days after notice of any
such change has been given.
21. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
English law, and the Parties irrevocably submit to the exclusive
jurisdiction of the English courts to settle any disputes which may
arise out of or in connection with this. The Seller and Magellan
appoint Edwin Coe of 2 Stone Buildings, Lincoln's Inn, London WC2A 3TH
as their agent for service of process, and Bure appoints the Buyer as
its agent for service of process. Any party may by notice in writing to
the others appoint an agent for service of process in place of the
existing such agent appointed by it.
22. RIGHT TO SPECIFIC PERFORMANCE
The Seller and the Buyer acknowledge and agree that the subject matter
of this Agreement is unique, and in the case of any breach of the
terms, covenants or conditions to this Agreement by either Party
hereto, the other Party will suffer irreparable injury and harm which
cannot be reasonably or adequately compensated by monetary damages.
Accordingly, in the event of any such breach by a Party hereto, the
other Party shall have, in addition to all other remedies available at
law or equity, the right to obtain a decree of specific performance of
this Agreement and an indemnity from that Party for the legal fees and
expenses incurred by that other Party.
23. ANNOUNCEMENTS
The Parties shall, subject to the requirements of law or any regulatory
body or the rules and regulations of any recognised stock exchange,
consult together as to the terms of, the timetable for and manner of
publication of, any formal announcement or circular to shareholders,
employees, customers, suppliers, distributors and sub-contractors and
to any recognised stock exchange or other authorities and to the media
or otherwise which either of them may desire or be obliged to make
regarding this Agreement. Any other communication which the Parties may
make concerning such matters shall, subject to the requirements of law
or any regulatory body or the rules and regulations of any recognised
stock exchange, be consistent with any such formal announcement or
circular as referred to above; provided that, subject to the preceding
provisions of this clause, no Party shall, prior to Closing, make or
authorise or issue any formal announcement or circular concerning the
subject matter of this Agreement or any other document or transaction
referred to in or contemplated by this Agreement.
24. OBLIGATIONS SURVIVING CLOSING
Except insofar as the same have been fully performed at Closing, each
of the agreements, covenants, obligations, warranties, indemnities and
undertakings contained in this Agreement will continue in full force
and effect notwithstanding Closing.
25. CURRENCY CONVERSION
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For the purposes of this Agreement, where any sum, or in particular but
without limitation, any liability under the Warranties, is expressed to
be in any currency other than US Dollars, such sum shall be converted
into US Dollars at the Market Rate. "Market Rate" means the mid market
rate for the relevant currency at 4:00pm on the weekday (other than a
Saturday) when banks are open for a full range of banking transactions
in London ("Business Day") preceding the date upon which such sum is
due and payable, or where such sum relates to a claim under this
Agreement, the Business Day preceding the date upon which notice of
such claim is served by the Buyer upon the Seller in accordance with
the provisions of clause 5.8, as evidenced by a list of currencies
provided by Royal Bank of Scotland Plc.
31
<PAGE>
This Agreement was executed and delivered as a deed by the Parties or their duly
authorised representatives on the date set out at the beginning of this
Agreement.
EXECUTED as a DEED by CHARTER
MEDICAL INTERNATIONAL,
S.A., INC.
Acting by:
- ---------------------------------------------
EXECUTED as a DEED by MAGELLAN
HEALTH SERVICES, INC.
Acting by:
- ---------------------------------------------
EXECUTED as a DEED by
INVESTMENT AB BURE
acting by:
- ---------------------------------------------
EXECUTED as a DEED by CMEL HOLDING LIMITED
acting by two directors or by one director and its
Company Secretary:
Director:
Director/Secretary:
32
<PAGE>
EXHIBIT 2(b)
STOCK PURCHASE AGREEMENT dated 2 April 1999
among
CHARTER MEDICAL INTERNATIONAL, S.A., INC., a company incorporated in Nevada
whose principal office is at 3414 Peachtree Road, NE Suite 1400, Atlanta,
Georgia 30326, USA (the "Seller"),
MAGELLAN HEALTH SERVICES, INC. a company incorporated in Delaware whose
principal office is at 3414 Peachtree Road, NE Suite 1400, Atlanta, Georgia
30326, USA ("Magellan"),
GROGRUNDEN 515 AB a company incorporated in Sweden with registered number
[556561-0390] whose principal office is at c/o Investment AB Bure, Box 541440229
Gothenburg, Sweden (the "Buyer"),
and
INVESTMENT AB BURE a company incorporated in Sweden whose principal office is at
PO Box 5419, 5-402 29, Goteborg, Sweden ("Bure")
concerning
SOCIETE ANONYME DE LA METAIRIE ("the Company").
RECITALS
This is the Swiss Sale Agreement referred to in the share purchase agreement of
the same date (the "Charter Medical Agreement") made among Charter Medical
International S.A., Inc., Magellan Health Services, Inc., Investment AB Bure and
CMEL Holding Limited.
The Company, whose seat is at Avenue de Bois-Bougy 18, 1260 Nyon, Switzerland,
is a Swiss company incorporated as a limited company with a fully paid-up share
capital of CHF 300'000.- (three hundred thousand Swiss Francs) divided into 300
(three hundred) registered shares having a par value of CHF 1'000.- (one
thousand) each.
The Seller is the beneficial owner of the entire share capital of the Company.
The Seller is willing to sell to the Buyer and the Buyer is willing to purchase
from the Seller the entire share capital of the Company on the terms and
conditions of this Agreement.
THE PARTIES AGREE AS FOLLOWS :
1. Purchase and Sale of Shares
1.1. Purchase and Sale
1
<PAGE>
Upon the terms and subject to the conditions of this Agreement (the
"Agreement"), the Seller agrees to sell to the Buyer and the Buyer
agrees to purchase from the Seller the entire share capital of the
Company of 300 (three hundred) registered shares having a par value of
CHF 1'000.- each (one thousand Swiss Francs) (the "Sale Shares") free
and clear of all liens, charges, pledges, security interests,
encumbrances, restrictions and claims of any kind whatsoever including
all rights to dividends or other distributions declared after the date
of execution of this Agreement.
1.2. Purchase Price
The purchase price (the "Purchase Price") for the Sale Shares shall be
US$23,364,000 together with an extension payment equal to interest on
US$23,364,000 calculated at the rate of 2% per annum above the base
rate from time to time of the Royal Bank of Scotland from 31 March 1999
to the Closing Date and subject to such increase or decrease (if any)
as may be required pursuant to Schedule 1 of this Agreement.
2. Conditions and Closing
2.1 The completion of the transaction contemplated herein (the "Closing")
is conditional upon the simultaneous closing of the Charter Medical
Agreement. In the event of any termination of the Charter Medical
Agreement prior to Closing, this Agreement shall automatically
terminate.
2.2. Place and date
Closing shall take place on the date and at the time and place at which
the Closing occurs under the Charter Medical Agreement.
2.3. Closing Documents
(a) Upon Closing, the Seller shall deliver to the Buyer :
(i) the certificates representing the Sale Shares duly endorsed in
blank;
(ii) a resolution of the Company's Board of Directors authorising
the Buyer's registration in the Company's share register;
(iii) the Company's share register, evidencing the registration of
the Buyer as shareholder for the Sale Shares;
(iv) unconditional and irrevocable resignation letters from the
Company's board of directors, with effect as of the date of
Closing, each containing a statement of the resigning director
that he has been fully compensated for his services rendered
to the Company and that he has no claim of whatever nature
against the Company; and
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<PAGE>
(v) a written confirmation as of the Closing of the accuracy of
the Pension Fund Certificate attached as Exhibit A.
(vi) a legal opinion of Bourgeois, Muller Pidoux & Associes in
a form reasonably acceptable to the Buyer as to the non
applicability of the statutes referred to in Clause 3.1.11.
(vii) evidence, reasonably satisfactory to the Buyer, of the
discharge of the two mortgages on the property owned by the
Company registered in the extract of the Land Registry of
Nyon.
(b) Upon Closing, the Buyer shall deliver to the Seller the Purchase Price
in immediately available funds to a dollar account with a UK bank in
London designated by the Seller not less than three days prior to the
Closing Date.
2.4 The Buyer shall not be obliged to close the sale and purchase of the
Sale Shares unless all requirements of clauses 2.1 and 2.3 are complied
with.
3. Representations and Warranties
3.1. The Buyer is entering into this Agreement in reliance upon the
representations and warranties contained in this Clause 3. The Buyer
confirms that it has no actual knowledge as of the date hereof of any
matter which constitutes a breach of any representation or warranty of
the Seller.
The Seller makes the following representations and warranties to the
Buyer as of the date of signature of this Agreement and the Seller
warrants that the following representations and warranties shall be
accurate on the date of Closing as if restated on such date.
The Seller undertakes to disclose in writing to the Buyer anything
which is a breach of any warranty immediately after it comes to the
Seller's notice after Closing.
3.1.1 Organisation of the Seller and Magellan
The Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Nevada. Magellan is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware.
3.1.2 Authority
Each of Magellan and the Seller has the requisite power and
authority to sign this Agreement and to consummate the
transactions contemplated herein. This Agreement has been duly
authorised, executed and delivered by each of Magellan and the
Seller and constitutes a valid and binding obligation of each
of Magellan and the Seller, enforceable in accordance with its
terms.
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<PAGE>
No consent is required to authorise the execution and
performance of this Agreement or the consummation of any of
the transactions contemplated thereby.
3.1.3 Organisation of the Company
The Company is a Swiss company duly incorporated, validly
existing and in good standing under the laws of Switzerland.
The extract from the Commercial Registry and the Articles of
Association of the Company which are attached hereto as
Exhibits B and C are true, correct and complete as of the date
hereof.
3.1.4 Consequences of Sale
The execution, delivery and performance of this Agreement will
not (i) conflict with or violate any provision of the Articles
of Association of the Company, or (ii) violate, conflict with
or result in a breach of any provision of, or constitute a
default under, or accelerate the performance of any agreement
to which the Company is a party , or (iii) result in the
creation of any lien, security interest, charge, claim or
encumbrance upon any of the properties or assets of the
Company, or (iv) conflict with, violate or result in a breach
of any law, regulation, order, decree or writ applicable to
the Company or to the Seller, or (v) violate any judgement,
order, or award of any court, arbitrator or any governmental
administrative or regulatory authority, or (vi) result in any
present indebtedness of the Company becoming due and payable
or capable of being declared due and payable prior to its
stated maturity, or (vii) entitle any person to receive from
the Company any finder's fee brokerage or other commission.
3.1.5 Capitalisation
(i) The issued share capital of the Company consists of
300 registered shares having a par value of CHF
1'000.- each;
(ii) All the Sale Shares and all the share certificates
relating to the Sale Shares are duly and validly
authorised and issued on 2 July 1985 and the Sale
Shares are fully paid;
(iii) There are not any options, warrants, calls, rights of
conversion, or other rights, commitments, agreements
of any character to which the Seller or the Company
is a party or by which any of them is bound,
obligating the Seller or the Company to issue,
deliver, sell or cause to be issued, delivered or
sold, additional shares of the Company to extend or
enter into any such option, warrant, call, right,
commitment or agreement;
(iv) The Seller has good, legal, beneficial and valid
title to the Sale Shares, free and clear of all
liens, charges, security interests, claims and other
encumbrances; and
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<PAGE>
(v) Since 30 September 1998, the Company has not declared
any distributions to shareholders.
3.1.6 Financial Statements
The Seller has previously delivered to the Buyer true and
complete copies of the Company's audited financial statements
(balance sheets and profit and loss statements, including the
explanatory notes related thereto) as at 30 September, 1998,
1997, and 1996, which are attached hereto as Exhibit D (the
"Financial Statements"). The Financial Statements have been
prepared according to Swiss accounting principles.
The Financial Statements:
(i) gave a fair view of the assets, liabilities and state
of affairs of the Company as at 30 September, 1998,
1997 and 1996 and of the profits and losses for the
financial periods ended on these dates;
(ii) were prepared in accordance with all applicable
accounting principles and practices generally
accepted at the date of this Agreement in Switzerland
and are true and accurate in all material aspects;
(iii) complied with the requirements of Swiss law; and
(iv) include appropriate provision for bad and doubtful
debts and for taxation on profits (whether of an
income or capital nature) relating to any period on
or before the date to which they relate.
As of 30 September, 1998, the Company had no liabilities or
obligations of any nature which were required by Swiss
generally accepted accounting principles to be disclosed in
the Financial Statements other than those reflected in the
1998 Financial Statements (as defined in clause 3.1.9).
The accounts receivable shown on the balance sheet for the
year ended 30 September, 1998 have been collected or are
collectable in amounts which are consistent with the provision
for bad debts made in such balance sheet. Each of such
accounts receivable exists without setoff and is not subject
of a pledge or assignment to secure debt.
3.1.7 Absence of Change
Since 30 September, 1998, the Company has conducted its
business in the ordinary course, consistent with prior
practice, and since such date, there has not been any material
adverse change in the business, assets, liabilities, financial
condition or results of operations of the Company.
3.1.8 Records and books
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<PAGE>
The Company is in possession of all documents and records
required for the conduct of its activities.
All accounts, books, ledgers, and other financial records of
the Company:
(i) have been properly maintained and contain accurate
records of all material matters required to be
entered in them by applicable law; and
(ii) correctly state, in all material respects, the
matters which ought to appear in them consistently
with past accounting practices of the Company.
The Company does not carry on businesses under names other
than its corporate name.
3.1.9 Assets
The Company has good, legal, beneficial and valid title to all
assets reflected in the Financial Statements as at 30
September, 1998 (the "1998 Financial Statements") and all
assets acquired since that date are free and clear of any
lien, security interest and encumbrance not reflected in the
1998 Financial Statements. These assets allow the Company to
conduct its business as currently conducted. All such assets
which are capable of possession are in the possession of the
Company.
The Company has not agreed to acquire any asset on terms that
title in it does not pass until full payment is made.
3.1.10 Intellectual property rights
The Company has no registered trademarks or trade names. The
Company has used TRIMS software provided by arrangement with
Magellan. The Company uses software pursuant to licences with
third party licensors and the Company is not in default under
any such licence which is material to the business of the
Company. So far as the Seller is aware, the Company is not in
breach of any intellectual property rights of any third party.
The Seller has disclosed to the Buyer its plans (the "Plans")
designed to address the operational issues of the computers
and computer systems used in connection with the Company's
business (including software and hardware, referred to in this
case as the "IT System") which are expected to arise in
connection with the change in year from 1999 to 2000,
including any related change in the field configuration
containing date information within the IT System ("Y2K
Matters").. The Seller has no reason to believe that if the
Company continues to implement the Plans in the same manner as
it has done prior to the date of this Agreement (and assuming
no material change is made in the present IT System), there
will be any material adverse effect on the Company's business
resulting from Y2K Matters.
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<PAGE>
The Company has complied with all data protection laws in
Switzerland in all material respects.
3.1.11 Real estate
The Company legally and beneficially owns and has good title
to a parcel of land registered with the Land Registry of Nyon
under N(degree) 1174. This parcel of land has a surface of
81'640 sqm. The relevant extract from the Land Registry of
Nyon, which is attached hereto as Exhibit E, is a true,
correct and complete copy thereof.
Such real estate is free and clear of any lien, security
interest and encumbrance not mentioned in such extract. There
are no material agreements, instruments, rights or obligations
relating to such real estate, including but not limited to,
agreements to sell or lease such real estate, or rights of
first refusal or occupation rights. The Seller is not aware of
any encumbrances which would have any material adverse impact
on the value or use of such real estate other than any which
are disclosed in Exhibit E. There are no restrictions under
any Swiss laws governing a transfer of land in Switzerland
which would prevent the lawful transfer of such real estate
and, in particular, the sale of the Sale Shares and the
transfer of such real estate resulting therefrom, will not in
any way be affected by the "LOI FEDERALE SUR L'ACQUISITION
D'IMMEUBLES PAR DES PERSONNES A L'ETRANGER" or the "LOI
FEDERALE SUR LE DROIT FONCIER RURAL". The Seller does not own
any other real property other than that details of which are
attached hereto as Exhibit E.
There has been no material breach of any regulations relating
to the use of the real estate.
3.1.12 No undisclosed liabilities
, Since30 September 1998, the Company has not incurred any
material liability or obligation of any nature (absolute,
accrued, contingent or otherwise) other than trade creditors
payable in the ordinary course of business and has not entered
into any material financial commitment, conditional or
unconditional or actual which is material to the condition of
the Company.
3.1.13 Subsidiary and branch
The Company does not have any subsidiary or any branch in or
outside Switzerland.
3.1.14 Contracts
All contracts to which the Company is a party have been duly
performed in all material respects.
Exhibit F contains a list of all material contracts entered
into by the Company.
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The Company is not a party to any contract which can be
terminated or which would be breached in the event of any
change in the ownership or control of the Company.
There has been disclosed to the Buyer full details of all
discounts, overrides, rebates, allowances and other special
terms or similar arrangements which are material to the
business of the Company as a whole and offered or granted to
the Company or by the Company in respect of hospitals,
insurers or any other person obtained within the period of 12
months preceding the date of this Agreement.
So far as the Seller is aware not having made enquiry of
suppliers or customers, no material supplier or customer of
the Company has during the period of 12 months preceding the
date of this Agreement indicated an intention to cease trading
with or materially alter the terms, on which it trades with
the Company.
3.1.15 Related Party Contracts
Except for the purchase of shares of Magellan by the Company
the particulars of which are set out in the Notes to the
Financial Statements for the period ended 30 September 1997
and for the TRIMS Software referred to in Clause 3.1.10, the
Company has not entered into any contract, arrangement or
agreement through which the Seller derives any direct or
indirect benefit.
Except as set out in the preceding paragraph, there will not
be outstanding at Closing:
(i) any indebtedness or other liability (actual or
contingent) owing by the Company to the Seller, any
affiliate of the Seller, or any director or related
person of the Seller, or owing to the Company by the
Seller, any affiliate of the Seller, or by any
director or any related person of the Seller; or
(ii) any guarantee or security for any such indebtedness
or liability as aforesaid.
3.1.16 Taxes
(i) All material tax returns or reports of the Company
that are required to be filed by or with respect to
the Company [ have been filed punctually;
(ii) So far as the Seller is aware, there is no dispute,
or any facts or circumstances likely to give rise to
any dispute, with any tax authority as regards either
the liability to tax (whether actual or contingent
and including the amount of any fine, penalty or
interest) of the Company or the availability of any
relief or right to repayment of tax to the Company.
(iii) The taxation affairs of the Company have not during
the period of seven years prior to the date of this
Agreement been the subject of any
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<PAGE>
investigation or enquiry by any tax authority (other
than routine questions), the Company has not received
notice from any tax authority that it intends to
investigate the taxation affairs of the Company and
so far as the Seller is aware there are no
circumstances which are likely to give rise to any
such investigation.
(iv) no taxing authority is now asserting any deficiency
or claim for additional taxes (or interest thereon or
penalties in connection therewith); and
(v) to the extent taxes relate to any period prior to
Closing such taxes have either been paid or full
provision has been made for them in the 1998
Financial Statements.
For the purposes of this Agreement, the term "taxes"
shall mean all income, profits, capital gains,
withholding taxes, stamp duties and other taxes
relating to the Company levied by any national,
cantonal, municipal or foreign taxing authority,
together with any interest and any penalty imposed by
any such taxing authority with respect thereto.
To the knowledge of the Seller, there are no facts or
circumstances existing or having arisen prior to to
the date of this Agreement which have or may lead to
a reassessment of taxes by any taxing authority.
3.1.17 Employment matters
(i) There is no collective bargaining agreement to which
the Company is a party or by which it is bound, or
which is currently negotiated.
(ii) Exhibit G contains an exhaustive list as of 30 March,
1999 of all employment contracts and details thereof
entered into by the Company which are still in
effect. There have been no material changes to such
contracts or any additional contracts with employees
other than as set out in Exhibit G.
(iii) Since 30 September, 1998, no material change has been
made in the rate of remuneration or pension benefits
of any officer or executive of the Company.
(iv) There are no outstanding pay negotiations in
connection with any of the Company's employees and
the Company is not obliged to increase the amount
payable to its directors and employees by more than
5% since 30 September 1998.
(v) There are no amounts owing to present or former
directors or employees other than for one months
arrears of remuneration accrued or due or for
reimbursement of business expenses incurred within
three months of the date hereof.
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(vi) To the knowledge of the Seller, no employee of the
Company nor the Company is in breach of any material
terms of an employee's employment agreement.
(vii) All employee vacation entitlement (other than one
months entitlement accruing to Ms Sylvie Francey) has
been or will have been taken as of Closing or will be
provided for in the Closing balance sheet.
3.1.18 Swiss Social Security
(i) Any and all returns and reports related to Social
Security Contributions that are required to be filed
by or with respect to the Company prior to the
Closing have been punctually and properly filed;
(ii) the Company has paid in full any and all Social
Security Contributions as and when due;
(iii) no competent Swiss social security authority is now
asserting any deficiency or claim for additional
Social Security Contributions (or interests thereon
or penalties in connection therewith); and
(iv) any and all Social Security Contributions which
(although not due) have accrued on the basis of the
salaries to be paid until the Closing, have been or
will be fully provided for in the Closing Accounts.
For the purpose of this Agreement, the term "Social
Security Contributions" shall mean the mandatory
contributions to the old-age pension insurance scheme
(AVS), invalidity insurance (AI), loss of salary
insurance (allocations pour perte de gain) and
unemployment insurance (assurance-chomage), together
with any interest or any penalty imposed by any
Social Security Authority with respect thereto.
(v) The agreement concerning the employee pension fund of
the Company and the regulations relating thereto are
attached as Exhibit H (the "Pension Fund"). The
Company has complied with all its obligations under
the Pension Fund and specifically has paid or will
pay (or made or will make provision for) all
contributions required prior to Closing as stipulated
by the regulations of the Pension Fund.
Performance of these obligations is reflected in the
Pension Fund Certificate attached hereto as Exhibit
A. Upon Closing, the Seller shall deliver to the
Buyer a confirmation of the Pension Fund that the
statement contained in such Pension Fund Certificate
is still accurate and truthful as of the Closing. To
the knowledge of the Seller, all payments required by
Winterthur - Columna Foundation LPP to be made to
fund the Pension Fund have been made. The Company is
not required to contribute to any pension fund other
than the Pension Fund.
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3.1.19 Insurance
The Company currently has in effect the insurance policies
listed on Exhibit I, copies of which have previously been
provided to the Buyer (the "Policies"). The Company is not in
any respect in material breach of the terms of any Policies.
Except in connection with claims made by Mr Buss, Mr Dubuis,
Mrs Rime and Mrs Sharifi (as disclosed in Exhibit J), there
are no claims currently outstanding under such Policies.
The Seller has maintained adequate insurance cover against
risks normally insured against by companies carrying on a
similar business and has maintained all insurance required by
law.
The Company has not done or omitted to do anything which might
result in an increase in the premium payable under any
insurance policy of the Company.
3.1.20 Compliance with applicable law
The Company holds all licenses and authorisations (referred to
in this warranty as "Authorisations") necessary for the
conduct of its business and all conditions applicable to any
Authorisations have been and are being complied with in all
material aspects. There are no facts or circumstances known to
the Seller indicating that the Company is not conducting its
business in material compliance with all applicable laws and
regulations. The Company is registered with the appropriate
health authorities in accordance with the provisions of all
applicable laws and regulations.
Each Authorisation is in force and subject only to
requirements that have been satisfied (and nothing more
remains to be done under these requirements). There is no
indication that any Authorisation might be revoked, suspended,
cancelled, varied or not renewed. No Authorisation and no
condition to which any Authorisation is subject is personal to
the Seller.
Each action required for the renewal or extension of each
Authorisation has been taken.
No Authorisation will be revoked, suspended, cancelled, varied
or not renewed as a result of the execution or performance of
this Agreement.
The Licence pursuant to which the Company is authorised to
manage a hospital in Nyon is set out in Exhibit K.
3.1.21 Consent
No consent, waiver, approval, authorisation, exemption,
registration, license or declaration is required to be made or
obtained by the Seller in connection with (i)
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the execution, delivery or performance of this Agreement or
(ii) the consummation of any of the transactions provided for
hereby.
3.1.22 Environmental matters
The Company complies and has at all times complied with all
applicable environmental laws and regulations in all material
respects and has obtained and is in compliance in all material
respects with all permits, licenses and other authorisations
required under any such environmental laws and regulations in
the conduct of its business. So far as the Seller is aware,
there are no damages, fines or other liabilities threatened,
due or owing by the Company as a result of past or present
failure to comply with such environmental laws and
regulations.
So far as the Seller is aware, there are no facts or
circumstances existing or having arisen prior to Closing which
constitute a material breach of any applicable environmental
laws and regulations.
3.1.23 Legal proceedings
Except for the litigation described in Exhibit J, there is no
dispute, claim, action, arbitration, proceedings or
investigations by any person or by or before any governmental
authority or regulatory agency, court, or arbitral body, by or
against the Company pending or, to the knowledge of the Seller
threatened against the Company or any of the Company's
employees for whose actions it is responsible which would
result in a liability of the Company in excess of CHF10,000 or
would have a material adverse effect on the liabilities,
operations or financial condition of the Company.
As of the date hereof, no order has been made, petition
presented, resolution passed or meeting convened for the
winding-up of the Company, nor has any distress, execution or
other process been levied against the Company or action taken
to repossess goods in the Company's possession. The Company is
not subject to enforcement proceedings under the LOI
FEDERALE SUR LA POURSUITE POUR DETTES ET LA
FAILLITE.
As of the date hereof, no receiver (including an
administrative receiver or receiver and/or manager), or
administrator has been appointed of the whole or any part of
the assets or undertakings of the Company, and the Seller is
not aware of any circumstances likely to give rise to the
appointment of any such receiver or administrator. No petition
has been presented for an administration order in respect of
the Company.
3.1.24 Equipment
All supplies, machinery and equipment of the Company are in
reasonable operating condition (fair wear and tear excepted
and having regard to its age) and
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conform in all material respects with all applicable laws,
ordinances and regulations.
3.1.25 Minutes of general meetings of shareholders and board of
directors meetings
True, correct and complete copies of the minutes of all
general meetings of shareholders of the Company for the period
commencing January 1984 to the Closing are available at the
seat of the Company.
3.2. Representations and warranties of the Buyer
The Buyer represents and warrants to the Seller as follows:
a) it is entitled to purchase the Sale Shares on the terms of
this Agreement without the consent of any third party;
b) it has full power to enter into and perform this Agreement,
and such documents will, when executed, constitute binding
obligations of the Buyer in accordance with its terms subject
to the operation of law as regards the availability of
equitable remedies and matters of public policy and the
application of the relevant statutory provisions, including
those regarding limitation periods, insolvency and competition
matters.
3.3. Definition of Knowledge
Where any representation or warranty is qualified by reference to the
knowledge of the Seller or the Company, such representation or warranty
shall be deemed to be given to the best of the knowledge, information
and belief of the Seller or the Company as the Seller or the Company
would have obtained after making reasonable inquiries of Olivier
Bourgeois and Sylvie Francey.
3.4 In the event that prior to the Closing Date
(i) there occurs any act or omission which would constitute a
breach of any of the Warranties (whether or not such breach is
material) or which would make any of the Warranties inaccurate
or misleading and such act or omission becomes known to the
Buyer, or
(ii) it becomes apparent that the Seller is in breach of any of the
Warranties (whether or not such breach is material.
the Buyer shall not be entitled to rescind this Agreement and shall
proceed to Closing but without prejudice to its rights to claim for
breach of the Warranties.
4. Covenants
4.1 Conduct of the business prior to Closing
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4.1.1 The Seller undertakes to the Buyer that between the date of
this Agreement and Closing:-
a) no increase shall be made in the authorised, allotted
or issued share capital of the Company;
b) no option, right of conversion, or right of
pre-emption shall be offered or granted by the
Company over the whole or any part of its share
capital whether issued or unissued; and
c) no dividends or other distributions shall be
declared, made or paid by the Company.
4.1.2 The Seller further undertakes to the Buyer that between the
date of this Agreement and Closing (save with the previous
written consent of the Buyer):-
a) the business of the Company shall be carried on in
the ordinary course;
b) the Company shall take all reasonable steps to
preserve and protect its business and assets; and
c) all existing insurance policies relating to the
Company shall be maintained in full force and effect
and shall not be allowed to lapse, expire or be
forfeited or otherwise terminated.
d) no encumbrance (other than liens arising in the
ordinary course of business) shall be created or
extended over any of the Company's assets;
e) no capital commitment with an individual contract
value in excess of CHF 24,000 shall be entered into
by the Company except in the ordinary course of
business;
f) the Company shall not dispose of or grant or agree to
dispose of or grant any option in respect of any
assets valued in excess of CHF 24,000 except in the
ordinary course of business;
g) the Company shall not enter into, amend or terminate
any individual contract or commitment which involves
payments in excess of CHF 24,000 except in the
ordinary course of business;
h) the Company shall not increase the compensation or
benefits paid or to become payable to any of its
officers or employees or agreed to do the same;
i) the Company shall not appoint or terminate the
employment of or make any material variation to the
terms of employment of any director or senior
employee;
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j) the Company shall not make or propose a material
change to any benefit of any kind which is payable on
a person's retirement, death or disability to or in
respect of any of the directors or employees or to
any pension scheme (other than a change required by
law) or, without limiting the foregoing, carry out
any action in relation to any scheme other than in
the ordinary course of operating such scheme;
k) no amendment shall be made to the Company's articles
of association and no resolutions which are
inconsistent with the Company's articles of
association shall be made or proposed;
l) no change shall be made in the date to which the
Company's audited financial statements are prepared;
m) the Company shall not initiate, compromise or settle
any litigation, arbitration or mediation proceedings
other than debt collection conducted in the ordinary
course of business;
n) the Company shall not make any commitment to do any
of the foregoing
provided that the Seller shall not be in breach of any
provisions contained in this clause 4.12 where the intention
of the Company to carry out any action which would otherwise
place the Seller in breach of this clause 4.12 has already
been disclosed to the Buyer in writing on the date of this
Agreement.
4.1.3 The Seller shall procure the Company to cancel the Company
Stock Certificate No. 3 for one share and reissue a new and
valid Share Certificate for one share prior to Closing.
4.2 Restrictive Covenant
4.2.1 For the purpose of assuring to the Buyer the full benefit of
the Company and in consideration for the Buyer agreeing to buy
the Sale Shares on the terms of this Agreement, each of the
Seller and Magellan, (referred to together in this Clause as
the "Covenantors") undertake to the Buyer that, except as
provided below, they will not, and will procure that no
subsidiary of the Seller or Magellan will, without the prior
written consent of the Buyer, whether directly or indirectly,
at any time within three years following Closing within
Denmark, Finland, Germany, Norway, Poland, Sweden, Switzerland
and the United Kingdom ("Restricted Territory"), whether alone
or in conjunction with, or on behalf of, any other person and
whether as principal, shareholder (other than solely as an
investor with no management function or controlling influence
of the Company in question), agent, consultant, partner or
otherwise, construct, own, lease, operate or manage, any of:
(i) an acute care psychiatric hospital, (ii) an acute care
psychiatric unit as part of an acute care general hospital,
(iii) a psychiatric residential
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treatment center, (iv) a part of a facility operating a
psychiatric residential treatment center, (v) any facility
providing 24-hour psychiatric healthcare (vi) a psychiatric
daycare facility or (vii) any facility providing psychiatric
outpatient services (a "Competitive Business") provided,
however, that Magellan and the Seller, and the Subsidiaries of
Magellan and the Seller, may provide psychiatric outpatient
services required by or in connection with a contract to
provide utilisation management, network management, care
management and employee assistance programme services not
involving the transfer of intellectual property or know how to
any of the Company's competitors in the United Kingdom or
Switzerland provided that if any outpatient services are to be
provided within Switzerland, Magellan or any of the
subsidiaries shall use its reasonable endeavours to offer the
Buyer the opportunity to provide such outpatient services
substantially the same terms that Magellan or its relevant
subsidiary would be providing such services PROVIDED FURTHER,
that if the Buyer declined to provide such services pursuant
to any offer, then Magellan would be permitted to provide such
services (collectively "Managed Contract Services") for and on
behalf of a healthcare plan or entity (including self-assured
plans). Magellan agrees that neither it nor its subsidiaries
shall contribute capital to CBHS for the purpose of operating
or owning a Competitive Business in the Restricted Territory.
4.2.2 Each of the Covenantors undertake to the Buyer that they will
not, and they will procure that no Subsidiary of the
Covenantors will, for a period of three years immediately
following Closing, solicit or endeavour to solicit away from
the Company any person employed by, or who is a consultant to,
the Company at Closing.
4.2.3 The Covenantors acknowledge that each of them has information
in respect of the business and financing of the Company and
its dealings, transactions, affairs, plans and proposals, all
of which information is, or may be, secret or confidential and
important to the Company. In this Clause 4, "Confidential
Information" means information, other than information
referred to in Clause 4.2.4, relating to the Company's
finances, prices, business plans, marketing plans, development
plans, manpower plans, sales targets, sales statistics,
customers lists, customer relationships, suppliers lists,
sales statistics, survey reports and market share data. The
Covenantors further acknowledge that the disclosure of
Confidential Information (whether directly or indirectly) to
actual or potential competitors of the Company would place the
Company at a competitive disadvantage and would do damage
(whether financial or otherwise) to its business. Each of the
Covenantors accordingly agrees to enter into the restrictions
contained in Clause 4.2.5.
4.2.4 For the avoidance of doubt nothing contained in this Agreement
shall prevent Magellan or any of its Subsidiaries from
licensing to third parties for use in jurisdictions other than
Switzerland and the United Kingdom an operating system
referred to as the "Charter System", which is presently
licensed by a Magellan Subsidiary to third parties.
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<PAGE>
4.2.5 Each of the Covenantors undertakes that they will not, and
will procure that none of their Affiliates (as used herein
"affiliate" or "Affiliate" shall have the meaning ascribed to
"Affiliate" in the Charter Medical Agreement) will, at any
time during the said three year period after Closing:
4.2.5.1 disclose Confidential Information to any person
except (i) to their professional advisors or officers
or employees and, in each case, whose province it is
to know the same, (ii) to those authorised by the
Company to know; or (iii) insofar as they are
compelled by law or competent authority so to do;
4.2.5.2 use Confidential Information for their own purposes
or for any purpose other than those of the Company;
or
4.2.5.3 through any failure to exercise all due care and
diligence, cause or permit any unauthorised
disclosure of any Confidential Information of the
Company;
provided that these restrictions on the Covenantors will cease
to apply to information which (otherwise than through the
default of the Seller or Magellan) becomes available to the
public generally.
4.2.6 The parties agree that each of the undertakings set out in
this Clause 4 is separate, severable and enforceable.
Accordingly, if any one or more of such undertakings or part
of any undertaking is held to be against the public interest
or unlawful or in any way an unreasonable restraint of trade,
the remaining undertakings or remaining part of the
undertakings will continue in full force and effect and will
bind the Covenantors.
4.2.7 Nothing in this Clause 4 shall prevent Magellan or its
affiliates from acquiring the whole or any part of a body
corporate or business or any direct or indirect interest in
the whole or any part of a body corporate or business, the
acquisition, holding or carrying on of which would otherwise
amount to a breach of this Clause 4, except where more than
10% of the turnover of the business of the body corporate or
business directly or indirectly acquired in the 12 months
prior to such acquisition consists of any of the Competitive
Business referred to in Clause 4.2.1, in which case Magellan
or its affiliates shall use reasonable efforts to dispose of
that part of the business which, but for this provision, would
cause it to be a breach of this Clause 4 as soon as reasonably
practicable.
4.3 Tax
The following provisions shall govern the allocation of responsibility
between the Buyer and the Seller for certain tax matters following the
Closing Date:
(a) The Seller shall prepare or cause to be prepared and file or
cause to be filed all tax returns for the Company for all
periods ending on or prior to the Closing Date,
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including tax returns which are required to be filed after the
Closing Date. Such tax returns shall be prepared in accordance
with the Company's past custom and practice. In preparing the
Company's tax returns, the Seller shall consult with the Buyer
in good faith and shall provide the Buyer with drafts of such
tax returns (together with the relevant back-up information)
for review at least ten days prior to filing. After the
Closing, the Buyer shall not prepare or cause to be prepared
to file or cause to be filed any tax return for the Company
for any period ending on or prior to the Closing Date without
the prior written consent of the Seller.
(b) The Buyer shall prepare or cause to be prepared and file or
cause to be filed any tax returns of the Company for the tax
periods which end after the Closing Date, including tax
returns for the tax periods that begin before the Closing
Date. Such tax returns shall be prepared in accordance with
the Company's past custom and practice. In preparing such tax
returns, the Buyer shall consult with the Seller in good faith
and shall provide the Seller with drafts of such tax returns
(together with the relevant back-up information) for review at
least ten days prior to filing.
(c) The Buyer and the Seller shall co-operate fully, as and to the
extent reasonably requested by the other party, in connection
with the filing of tax returns pursuant to this Clause 4.3 and
any audit, litigation, or other proceeding with respect to
taxes. Such co-operation shall include the retention and (upon
the other party's request) the provision of records and
information which are reasonably relevant to any such audit,
litigation, or other proceeding and making employees available
on a mutually convenient basis to provide additional
information and explanation of any material provided
hereunder. The Buyer and the Seller agree (A) to retain all
books and records with respect to tax matters pertinent to the
Company relating to any taxable period beginning before the
Closing Date until the expiration of the statute of
limitations (and, to the extent notified by the Buyer or the
Seller, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the
other party reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if
the other party so requests, the Buyer or the Seller, as the
case may be, shall allow the other party to take possession of
such books and records to the extent they would otherwise be
destroyed or discarded.
(d) the Buyer and the Seller further agree, upon request to use
commercially reasonable efforts to obtain any certificate or
other document from any governmental authority or any other
such person as may be necessary to mitigate, reduce or
eliminate any tax that could be imposed (including taxes with
respect to the transactions contemplated hereby).
(e) All tax sharing agreements or similar agreements with respect
to or involving the Company shall be terminated as of the
Closing Date and, after the Closing Date, the Company shall
not be bound thereby or have any liability thereunder.
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<PAGE>
(f) All taxes relating to any period prior to 31 March 1999shall
be paid by the Seller. With respect to any such taxes which
have not been paid prior to31 March 1999, the Company has made
a full accrual in respect of them in the Closing Accounts. The
Seller undertakes to hold the Buyer harmless and indemnify it
from and against any taxes payable with respect to any period
prior to 30 September, 1998 to the extent to which such taxes
have not been paid or full provision has not been made for
them in the 1998 Financial Statements.
(g) If in respect of or in connection with any breach of any of
the warranties or any facts or matters warranted not being
true any amount payable to the Buyer by the Seller (or by
Magellan under the guarantee set out in Clause 6 is subject to
taxation, such amounts shall be increased to such extent as
may be necessary to procure that the net amount received by
the Buyer is equal to the full amount payable to the Buyer
under this Agreement.
5. Indemnification
5.1 Indemnification of the Buyer
5.1.1 Subject to the limitations set forth in this Agreement, the
Seller hereby agrees to indemnify and hold harmless the Buyer
from and against any losses, damages, liabilities,
obligations, claims, judgements, costs and expenses including,
without limitation, reasonable attorneys' fees properly
incurred by the Buyer by reason, or resulting from a breach of
the Seller's representations and warranties or covenants
hereof.
5.1.2 In addition, the Seller covenants with the Buyer that it will
pay to the Buyer an amount equal to the amount necessary to
indemnify the Buyer and the Company from and against all
actions, proceedings, claims, demands and reasonable costs and
expenses which may be suffered or incurred by the Buyer or the
Company arising out of or in respect of any claims, legal
action, proceedings, suit, litigation, prosecution,
investigation, enquiry or arbitration involving the Company
and relating to claims made by Mr Buss, Mr Dubuis, Mrs Rime
and Mrs Sharifi (Exhibit J).
5.2 Limitations on Liability of Seller
The parties agree that Article 201 of the Swiss Code of Obligations is
not applicable to any claim arising out of or in connection with this
Agreement.
(i) The aggregate liability of the Seller in respect of all claims
("Relevant Claims") for damages, for breach of the
representations and warranties in this Agreement other than
those set out in Clause 4.3(f) and 5.1.2 together with all
Relevant Claims (as defined in the Charter Medical Agreement)
shall not exceed the aggregate amount of the consideration
payable in respect of the sale of the Shares pursuant to this
Agreement, the sale of the Shares (as defined in the Charter
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Medical Agreement) pursuant to the Charter Medical Agreement
and the Sale of the Charter St Louis Property (as defined in
the Charter Medical Agreement) as set forth in Clause 3.1 of
the Charter Medical Agreement.
(ii) The Seller will be under no liability to make any payment in
respect of any liability pursuant to a Relevant Claim unless
and to the extent the amount of its liability in respect of
any such Relevant Claim is, when aggregated with the Seller's
liability in respect of any other Relevant Claim, Relevant
Claims (as defined in the Charter Medical Agreement) and
claims in respect of the breach of any warranty in the Charter
Medical Agreement assigned to the purchaser of the Charter St
Louis Property or which would have been made but for the
provisions of this Clause 5.2(ii), in excess of US$500,000.
(iii) The Seller will be under no liability in respect of any
Relevant Claim, where the amounts for which the Seller would
be liable under such Relevant Claim is less than US$45,000 and
the amount of such Relevant Claim shall be disregarded for the
purposes of aggregation of Relevant Claims pursuant to Clause
5.2(ii) provided that, for the purposes of this Clause
5.2(iii), any Relevant Claims arising out of the same event,
act, default or omission or any sequence of related events,
acts, defaults or omissions shall be aggregated together.
(iv) The limitations contained in this Clause 5.2 shall not apply
in case of fraud or gross negligence by the Seller.
(v) The Buyer agrees with the Seller that it shall not be entitled
to recover damages or obtain payment, reimbursement,
restitution or indemnity more than once in respect of any one
shortfall, damage, deficiency, breach or other set of
circumstances which give rise to one or more Relevant Claim.
(vi) The Seller shall not be liable in respect of a Relevant Claim
unless written notice containing, so far as reasonably
practicable, details of the Relevant Claim is served on the
Seller:
(a) in respect of any Relevant Claim relating to a breach
of the warranties set out in Clause 3 other than
those referred to in Sub-clauses (ii) and (iii) of
this Clause on or before the date which is 2 years
after Closing; or
(b) in respect of any Relevant Claim relating to a breach
of the warranties set out in Clause 3.1.22
(Environmental matters) on or before the tenth
anniversary of the Closing Date; or
(c) in respect of a claim under Clause 4.3(f), on or
before the date being five years and one month from
30 September 1998;
(vii) The Seller shall not be liable in respect of a Relevant Claim:
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(a) which would not have arisen but for an act, omission
or transaction carried out after the date of the
Agreement by the Buyer or the Company, their
respective directors, employees or agents or
successors in title;
(b) to the extent that it relates to any loss which is
recovered under any policy of insurance effected by
or for the Company, the Buyer agrees that it will,
and will cause the Company to, use its best efforts
to successfully claim under such policy; provided
always that the Buyer shall not be prejudiced or
prohibited from bringing any claim against the Seller
under the terms of Clause 3 if recovery has not been
successfully made or is still being pursued within 30
days prior to the expiration of the relevant periods
provided for within Clause 5.2. In the event that the
claim is successfully made against the Seller, then
the Buyer shall or shall cause the Company to
continue to seek recovery as aforesaid and in the
event of any subsequent recovery under any such
policy of insurance, the Buyer shall reimburse the
Seller with the amounts recovered under such policy
(after deduction of all proper costs and expenses
(not otherwise reimbursed) incurred by the Buyer or
the Company in relation to such recovery), up to the
amount previously received from the Seller,;
(c) to the extent that allowance, provision or reserve
has been made for such fact, matter, event or
circumstance in the 1998 Financial Statements or the
Closing Accounts or to the extent that payment or
discharge of the relevant matter has been taken into
account therein or to the extent that such matter was
specifically referred to in the notes to the 1998
Financial Statements or the Closing Accounts; or
(d) to the extent that such Relevant Claim is
attributable to, or such Relevant Claim is increased
as a result of, any legislation not in force at the
date hereof or to any change of law, regulation,
directive, requirement or administrative practice or
any change in rates of tax, which in each case is not
in force at the date hereof.
(viii) If the Seller pays to the Buyer or the Company an amount in
respect of any Relevant Claim or a claim under Clause 4.3(f)
or 5.1.2 and the Buyer or the Company subsequently recovers a
sum or credit which is referable to that Relevant Claim or
claims under Clause 4.3(f) or 5.1.2 the Buyer shall (or, as
the case may be, shall procure that the Company shall)
promptly repay to the Seller an amount equal to the lesser of
(i) the amount or value of such benefit recovered less any
reasonable costs, fees and expenses incurred by the Company or
the Buyer in connection with the recovery (and not otherwise
reimbursed) or (ii) the total amount paid by the Seller in
respect of that Relevant Claim.
(ix) Any payment made by the Seller in respect of any Relevant
Claim or a claim under Clause 4.3(f) or 5.1.2 shall be deemed
a reduction in the consideration paid by Buyer hereunder.
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(x) Upon any Relevant Claim being made, or notification from the
Buyer to the Seller pursuant to this article of any third
party claim, potential claim, matter or event which might lead
to a Relevant Claim being made, the Buyer shall, and shall
co-operate to cause the Company to:
(a) make available to accountants and other professional
advisers appointed by the Seller such access to the
personnel of the Company and to any relevant records
and information as the Seller reasonably requests in
connection with such Relevant Claim or third party
claim, potential claim, matter or event; and
(b) use best efforts to cause the auditors (both past and
then current) of the Company to make available their
audit working papers in respect of audits of the
Company's accounts for any relevant accounting period
in connection with such Relevant Claim, matter or
event. Such access shall be required only at
reasonable times and on reasonable notice.
(xi) If the Buyer becomes aware of any third party claim, potential
claim, matter or event hereafter (a "third party claim") which
might lead to a Relevant Claim or a claim under 4.3(f) or
5.1.2 being made, the Buyer:
(a) shall cause notice of such third party claim to be
given promptly to the Seller;
(b) shall not make (or, as appropriate, shall co-operate
to ensure that the Company shall not make) any
admission of liability, agreement or compromise with
any person, body or authority in relation to any such
third party claim UNTIL THE EXPIRATION OF TEN
BUSINESS DAYS ("NOTICE PERIOD") FROM THE DATE OF
SERVICE ON THE SELLER OF THE NOTICE REFERRED TO IN
CLAUSE 5.2(XI)(A). The Buyer shall not take any
action specified in the prior sentence if so
instructed by the Seller in writing during the Notice
Period (subject to it being indemnified to its
reasonable satisfaction against all reasonable out of
pocket expenses incurred by it or the Company;
(c) (subject to it being fully indemnified to its
reasonable satisfaction by the Seller against all
reasonable out of pocket expenses incurred by it or
the Company) shall take (or, as appropriate, shall
co-operate to cause the Company to take) such action
as the Seller may reasonably request in writing to
avoid, dispute, resist, appeal, compromise or defend
such third party claim or any adjudication in respect
of that third party claim; and
(d) (subject to it being indemnified to its reasonable
satisfaction against all reasonable out of pocket
expenses incurred by it or the Company) if so
required by the Seller in writing, shall ensure (or,
as appropriate, shall co-operate to cause the Company
to ensure), at the request in writing of
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the Seller, that the Seller is placed in a position
to take on or take over the conduct of all
proceedings and/or negotiations of whatsoever nature
arising in connection with the third party claim in
question and provide (or, as appropriate, co-operate
to cause the Company to provide) such information and
assistance as the Seller may reasonably require in
connection with the preparation for and conduct of
such proceedings and/or negotiations.
(xii) A breach of any representation or warranty contained in Clause
3 which is capable of remedy shall not entitle the Buyer to
compensation except to the extent that:
(a) the Seller is given written notice of such breach;
and
(b) such breach is not remedied within 30 days after the
date on which such notice is served on the Seller.
(xiii) The Seller shall not be liable to satisfy any Relevant Claim
which shall be made after the Company shall cease to be a
subsidiary company of the Buyer or any holding company or
subsidiary of the Buyer or any subsidiary of a holding company
of the Buyer ("Buyer Affiliate").
(xiv) Where the Company or the Buyer is entitled to recover from
some other person any sum in respect of any liability, loss or
damage which is the subject of a Relevant Claim against the
Seller or for which such a Relevant Claim could be made (and
whether before or after the Seller has made payment
hereunder), the Buyer shall (or, shall ensure that the Company
shall):
(a) promptly notify the Seller and provide such
information as the Seller may reasonably require
relating to such liability or dispute and the steps
taken or to be taken by the Buyer or the Company in
connection with it;
(b) if so required by the Seller (subject to the Buyer
being fully indemnified to its reasonable
satisfaction by the Seller against all reasonable out
of pocket costs and expenses incurred by the Buyer or
the Company) and before seeking to recover any amount
from the Seller under this Agreement, first take all
steps (whether by way of a claim against its insurers
or otherwise, including but without limitation
proceedings) as the Seller may reasonably require to
enforce such recovery; and
(c) keep the Seller informed of the progress of any
action taken and thereafter any claim against the
Seller shall be limited (in addition to the
limitations on the liability of the Seller referred
to in this Agreement) to the amount by which the loss
or damage suffered by the Buyer as a result of such
breach shall exceed the amount so recovered.
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<PAGE>
(xv) Without limiting the rights of the Buyer or its ability to
claim damages on any other basis under this Agreement, if any
of the warranties set out in Clause 3.1.22 is untrue by reason
of the Company having committed a breach or non-observance of
any environmental laws, the Seller shall pay to the Buyer an
amount equal to all liabilities incurred by the Company as a
consequence of the breach of such environmental laws
including, without limitation, the cost of all reasonable and
appropriate remedial works required to be carried out at the
relevant property to procure compliance with such
environmental laws; provided any damage claim provided in this
Clause (xv) shall be deemed a Relevant Claim for all purposes
including for purposes of Clause 5.2.
5.4 Currency Conversion
For the purposes of this Agreement, where any sum, or in particular but
without limitation, any liability under the representations and
warranties, is expressed to be in any currency other than US dollars,
such sum shall be converted into US dollars at the Market Rate. "Market
Rate" means the mid market rate for the relevant currency at 4.00 pm on
the weekday (other than a Saturday) when banks are open for a full
range of banking transactions in Switzerland ("Business Day") preceding
the date upon which either such sum is due and payable, or where such
sum relates to a claim under this Agreement, the Business Day preceding
the date upon which notice of such claim is served by the Buyer upon
the Seller in accordance with the provisions of Clause 5.2., as
evidenced by a list of currencies provided by the Union Bank of
Switzerland.
5.5 Indemnification of the Seller
The Buyer hereby agrees to indemnify and hold harmless the Seller from
and against any losses, damages, liabilities, obligations, claims,
judgments, costs and expenses, including without limitation, reasonable
attorneys' fees incurred by Seller by reason or resulting from a breach
of the Buyer's representations and warranties or covenants herein.
6. Guarantee and Indemnity by Magellan
6.1 Magellan hereby unconditionally and irrevocably guarantees to the Buyer
the due and punctual performance and observance by the Seller of all
its obligations under or pursuant to this Agreement arising after
Closing (the "Magellan Guaranteed Obligations") and agrees to indemnify
the Buyer against all loss, damage, costs and expenses which the Buyer
may suffer through or arising from any breach by the Seller of its
obligations under or pursuant to this Agreement. The liability of
Magellan under this Agreement shall not be released or diminished by
any variation of the terms of this Agreement (agreed by Magellan), any
forbearance, neglect or delay in seeking performance of the obligations
imposed under this Agreement or any granting of time for such
performance.
6.2 If and whenever the Seller defaults for any reason whatsoever in the
performance of any of the Magellan Guaranteed Obligations, Magellan
shall upon demand unconditionally perform (or procure performance of)
and satisfy (or procure the satisfaction of) the
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obligation or liability in relation to which such default has been made
in the manner prescribed by this Agreement and so that the same
benefits shall be conferred on the Buyer as it would have received if
such obligation or liability had been duly performed and satisfied by
the Seller.
6.3 The guarantee set out in this Clause 6 is to be a continuing guarantee
and accordingly is to remain in force until all or any of the
obligations of the Seller arising after Closing, shall have been
performed or satisfied. This guarantee is in addition to and without
prejudice to and not in substitution for any rights or security which
the Buyer may now or hereafter have or hold for the performance and
observance of the obligations, commitments, undertakings and warranties
of the Seller under or in connection with this Agreement or any other
agreement pursuant to this Agreement.
6.4 As a separate and independent stipulation Magellan agrees that any of
the Magellan Guaranteed Obligations (including, without limitation, any
moneys expressed to be payable under this Agreement which may not be
enforceable against or recoverable from the Seller by reason of any
legal limitation, disability or incapacity on the Seller or any other
fact or circumstance (other than any limitation imposed by this
Agreement) shall nevertheless be enforceable against and recoverable
from Magellan as though the same had been incurred by Magellan and
Magellan was the sole or principal obligor in respect thereof.
7. Guarantee and Indemnity by Bure
7.1 Bure hereby unconditionally and irrevocably guarantees to the Seller
the due and punctual performance and observance by the Buyer of all its
obligations under or pursuant to clauses 1.1 (sale of shares), 2.3(b)
(payment of Consideration) and 3.2 (Buyer's warranties) (such
provisions being referred to in this clause as the "Guaranteed
Obligations") and agrees to indemnify the Seller against all loss,
damage, costs and expenses which the Seller may suffer through or
arising from any breach by the Buyer of its obligations under or
pursuant to the Guaranteed Obligations. The liability of Bure under
this Agreement shall not be released or diminished by any variation of
the terms of this Agreement (if agreed to by Bure), any forbearance,
neglect or delay in seeking performance of the obligations imposed
under this Agreement or any granting of time for such performance.
7.2 If and whenever the Buyer defaults for any reason whatsoever in the
performance of any of the Guaranteed Obligations, Bure shall upon
demand unconditionally perform (or procure performance of) and satisfy
(or procure the satisfaction of) the obligation or liability in regard
to which such default has been made in the manner prescribed by this
Agreement and so that the same benefits shall be conferred on the
Seller as it would have received if such obligation or liability had
been duly performed and satisfied by the Buyer.
7.3 The guarantee set out in this Clause 7 is to be a continuing guarantee
and accordingly is to remain in force until all of the Guaranteed
Obligations shall have been performed or
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<PAGE>
satisfied. This guarantee is in addition to and without prejudice to
and not in substitution for any rights or security which the Seller may
now or hereafter have or hold for the performance and observance of the
obligations, commitments, undertakings and warranties of the Buyer
under or in connection with this Agreement or any other agreement
entered into pursuant to this Agreement.
7.4 As a separate and independent stipulation, Bure agrees that any of the
Guaranteed Obligations (including, without limitation, any moneys
expressed to be payable under this Agreement which may not be
enforceable against or recoverable from the Buyer by reason of any
legal limitation, disability or incapacity of the Buyer or any other
fact or circumstance (other than any limitation imposed by this
Agreement) shall nevertheless be enforceable against and recoverable
from Bure as though the same had been incurred by Bure and Bure were
the sole or principal obligor in respect thereof.
8. Assignment
No party may assign all or any of its rights, obligations or causes of
action arising under or pursuant to this Agreement without the prior
written consent of the other party; provided that nothing herein shall
prevent the Buyer from (i) charging or assigning all of such rights,
obligations or causes of action to an affiliate of the Buyer provided
and for so long as it remains an affiliate and provided further that
the Buyer shall cause its affiliates to comply fully and timeously with
all the Buyer's duties and obligations under this Agreement, (ii)
charging or assigning such rights obligations or causes of action
pursuant to the tax covenant or warranties. In the event that any
affiliate of the Buyer ceases to be such and has had assigned to it all
rights under this Agreement, such affiliate shall reassign such rights
other than rights pursuant to the tax covenant or warranties (which for
the avoidance of doubt may be so reassigned) to the Buyer or another
affiliate of the Buyer. This Agreement will be binding on and will
continue for the benefit of the parties and their respective successors
and assigns. Accordingly references in this Agreement (or any document
entered into pursuant to this Agreement) to the relevant party shall,
following any such assignment and unless the context otherwise
requires, mean the assignee or assignees for the time being.
The Seller and Magellan agree further that, upon the request of the
Buyer or its successors in title or assigns, this Agreement may be
novated (in respect of the tax covenant or warranties) in favour of the
beneficial owner for the time being of the whole or part of the Shares
and the Seller and Magellan shall execute such a novation agreement in
such form as the Buyer may reasonably require. If the Seller or
Magellan fails to execute any such novation agreement within 20
business days of a request by the Buyer to do so, the Buyer may execute
it on behalf of the Seller or Magellan (as the case may be) or both of
them and for such purpose each of the Seller and Magellan hereby
irrevocably appoints the Buyer as their attorney for the purpose of
executing any such Agreement. The Seller and Magellan agree to ratify
and confirm any action taken by the Buyer by virtue of this power of
attorney.
9. Miscellaneous
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<PAGE>
9.1. Announcement; confidentiality
(a) Information of the employees
The transactions contemplated by this Agreement shall be
announced by the Company to its employees prior to or
simultaneously with any press release or public announcement
in a form to be agreed upon by the parties.
(b) Press release
No press release or public announcement of the transactions
contemplated by this Agreement shall be made by or on behalf
of one party without the prior approval of the other party.
(c) Confidentiality
The parties agree to keep the terms of this Agreement and any
information acquired during the course of the negotiations
having led to this Agreement strictly confidential until
Closing.
9.2. Costs
Each of the parties shall pay its own legal and accountancy costs,
charges and expenses connected with the negotiation, preparation and
implementation of this Agreement.
9.3. Amendment; waiver
Any amendment to this Agreement shall be made in writing. No waiver by
any party of any of the provision hereof shall be effective unless
explicitly set forth in writing and executed by the party so waiving.
Except as provided in the preceding sentence, no action taken pursuant
to this Agreement shall be deemed to constitute a waiver. The waiver,
by any party hereto, of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any other or
subsequent breach or a waiver of any other provision of this Agreement.
9.4. General
9.4.1 Failure or delay by any party in exercising any right or
remedy under this Agreement will not in any circumstances
operate as a waiver of it, nor will any single or partial
exercise of any right or remedy in any circumstances preclude
any other or further exercise of it or the exercise of any
such right or remedy.
9.4.2 The Buyer may release or compromise the liability of or grant
time or any other indulgence to, any person who is a party to
this Agreement without in any way prejudicing or affecting the
liability of any person in respect of any other liability or
obligation hereunder.
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<PAGE>
9.4.3 Except insofar as the same have been fully performed at
Closing, each of the agreements, covenants, obligations,
warranties, indemnities and undertakings contained in the
Agreement will continue in full force and effect
notwithstanding Closing.
9.4.4 No variation of the Agreement or any other documents to be
entered into pursuant to the Agreement shall be effective
unless it is in writing and signed by or on behalf of each of
the parties.
9.5. Post Closing Undertakings
9.5.1 Following Closing, the Buyer undertakes to the Seller and
Magellan that:
(a) it will use all reasonable endeavours to obtain the
release of the Seller, Magellan, any holding company
or subsidiary of the Seller or any subsidiary of a
holding company of the Seller and any Magellan
Affiliate from any guarantees, indemnities, cross
indemnities and letters of comfort given to any third
party by Magellan and any Magellan Affiliate in
respect of the liabilities of the Company which are
in force at the date of this Agreement ("Intra-Group
Guarantees") to which any of them are party and,
pending such release, to indemnify Magellan and any
Magellan Affiliates against all amounts paid by any
of them to any third party pursuant to any
Intra-Group Guarantees in respect of any liability of
the Company (and all costs incurred in connection
with such liability) whether arising before or after
Closing; and
(b) save with the prior written consent of Magellan,
neither the Buyer nor the Company will use the name
"Magellan" or any similar name or names likely to be
confused with them.
9.6 Further Assurance
At any time, each of the parties hereto shall (at its own cost and
expense) do and execute or procure to be done and executed all
necessary acts, documents and things in a form reasonably satisfactory
to the other party reasonably requested of them by the other party to
give effect to this Agreement and the transactions contemplated in or
by it securing to such other party the full benefit of the rights,
powers and remedies conferred upon such other party in this Agreement.
9.7 Invalidity
Each of the provisions of this Agreement is severable. If any provision
in this Agreement is held to be illegal, invalid or unenforceable, in
whole or in part under any enactment or rule of law, such provision or
part shall to that extent be deemed not to form part of this Agreement,
but the legality and enforceability of the remainder of this Agreement
shall not be affected.
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<PAGE>
9.8 Entire Agreement
9.8.1 This Agreement sets out the entire agreement and understanding
between the parties in respect of the sale and purchase of the
Sale Shares. It is agreed that:-
(a) no party has entered into this Agreement in reliance
upon any representation, warranty or undertaking of
any other party which is not expressly set out or
referred to in this Agreement;
(b) no party shall have any remedy in respect of
misrepresentation or untrue statement made by any
other party unless and to the extent that a claim
lies for breach of warranty under this Agreement; and
(c) this Clause shall not exclude any liability for
fraudulent misrepresentation.
9.9. Counterparts
The Agreement may be entered into in any number of counterparts, all of
which taken together shall constitute one and the same instrument. Any
party may enter into this Agreement by signing any such counterpart.
9.10 Interest
If any party defaults in the payment when due of any sum payable under
this Agreement (however determined), the liability of such party shall
be increased to include interest on such sum from the date when such
payment is due until the date of actual payment (as well after as
before judgment) at a rate per annum of 2 percent above the base rate
from time to time of Royal Bank of Scotland Plc.
Such interest shall accrue from day to day.
9.11 Notices
9.11.1 Any notice, claim or demand to be given in connection with or
under this Agreement shall be in writing and signed by or on
behalf of the party giving it.
9.11.2 A notice may be served by letter; each letter containing such
notice shall be left or sent by pre-paid recorded delivery or
registered post to:
(a) in the case of the Seller, the Seller's solicitors
Bourgeois Muller Pidoux & Associes, Montbenon 2, 1003
Lausanne, Switzerland ( the "Seller's Solicitors"),
marked for the attention of Oliver Bourgeois and
copied to Magellan, marked for the attention of
Magellan's General Counsel, sent to the addresses
indicated for the Seller and the Seller's Solicitors
above; and
(b) in the case of the Buyer, at the address stated at
the beginning of this Agreement or at such address as
may from time to time be notified in writing in
accordance with this Clause.
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<PAGE>
9.11.3 A notice shall be deemed to have been served in accordance
with the provisions contained in Clause 9.11.2.
9.11.4 Any demand, notice or other communication and any service of
process relating to any proceeding, suit or action arising out
of or in connection with this Agreement, will be validly given
or made to the Seller if given or made to Bourgeois Muller
Pidoux & Associes, Attention Oliver Bourgeois Montbenon 2.
1003 Lausanne, Switzerland and copied to Magellan as referred
to in Clause 9.11.2. Notice shall be deemed to have been
served:
(a) if sent by post (unless the contrary is proved)
forty-eight hours from the time of posting;
(b) if delivered by hand at the address referred to in
Clause 9.11.2, at the time of delivery; and
(c) in proving such service it shall be sufficient to
prove that the notice was properly addressed and was
posted in accordance with Clause 9.11.2 or show
delivery was made by hand.
If a notice would have been delivered outside of normal
business hours (being 9:30 a.m to 5:30 p.m. on a Business Day
under the preceding provisions of this Clause, it shall be
deemed to have been delivered or given at 9:30 a.m. on the
next Business Day.
9.12 Remedy, Applicable Law and Jurisdiction
9.12.1 The Seller and Buyer acknowledge and agree in relation to clause 2.2
time is of the essence. The Seller and Buyer also agree that in the
event of either party failing to fulfil its obligations to effect all
necessary steps to close the transaction on the date and in the manner
provided in this Agreement the appropriate remedy in addition to all
other remedies available (at law or equity) will be for the other party
to apply for a decree of specific performance of this Agreement and in
view of the integral relationship between this Agreement and the
Charter Medical Agreement such application will be made in the
exclusive jurisdiction of the English Courts and such applications will
be governed by English law and this Agreement will be construed for all
purposes on an application for specific performance as governed by and
interpreted in accordance with English law
9.12.2 Restricted Remedy
Subject to clause 9.12.1 above - The sole and exclusive remedy of any
party for any misrepresentation or any breach of a warranty or covenant
set forth in or made pursuant to this Agreement shall be a claim for
indemnification under and pursuant to this article 5, provided however
that the Buyer may in addition to any remedy hereunder rescind this
Agreement in case of a breach of any of the warranties set forth in
CLAUSE 3.1.11.
9.12.3 Application Law - Arbitration
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<PAGE>
Subject to clause 9.12.1 above - This Agreement shall be governed by
and interpreted in accordance with Swiss law. Subject to Clause 9.12.1 above,
any dispute concerning this Agreement, will be finally settled by arbitration,
under the Rules of Arbitration of the International Chamber of Commerce by one
or more arbitrators appointed in accordance with the said Rules. The seat of
arbitration will be in Geneva, Switzerland, and the language of the arbitration
proceedings, including arguments and briefs, shall be English.
-31-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in ...
originals as of the date first above written.
CHARTER MEDICAL
INTERNATIONAL, S.A., INC.
By :
------------------
MAGELLAN HEALTH SERVICES, INC.,
By:
------------------
CMEL HOLDING AB
By:
------------------
INVESTMENT AB BURE
By:
------------------
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<PAGE>
EXHIBIT 2(c)
FIRST AMENDMENT TO SHARE PURCHASE AGREEMENT
THIS FIRST AMENDMENT (this "Amendment") is dated as of April ___, 1999,
by and among Charter Medical International, S.A., Inc., a Nevada corporation
("Seller"), Magellan Health Services, Inc., a Delaware corporation ("Magellan"),
CMEL Holding Limited, a company incorporated in England and Wales ("Buyer"), and
Investment AB Bure, a company incorporated in Sweden ("Bure").
WHEREAS, Seller, Magellan, Buyer and Bure have entered into a Share
Purchase Agreement dated April 2, 1999 (the "Share Purchase Agreement"); and
WHEREAS, each of the parties wishes to amend the Share Purchase
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties agree as follows:
I. AMENDMENTS.
1. A new Clause 3.13 shall be added to the Share Purchase Agreement to
read in its entirety as follows: "3.13 The consideration referred to in clause
3.1.1 of this Agreement shall be adjusted after closing in accordance with the
procedures set forth in Schedule 5 to this Agreement."
2. The first sentence of Clause 7.1 of the Share Purchase Agreement is
hereby amended by deleting the words "3.7 (payment of Charter St. Louis
Deposit)" and replacing them with the words "3.11 (Management Period
liabilities)".
II. MISCELLANEOUS.
1. Except as expressly amended by this Amendment, all of the terms and
provisions of the Share Purchase Agreement shall remain unchanged and continue
in full force and effect, and the parties hereto shall be entitled to all of the
applicable benefits thereof and shall be responsible for all of their respective
obligations thereunder.
2. This Amendment may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement. This Amendment shall
become effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that the parties
need not sign the same counterpart.
3. All of the terms and provisions hereof and the rights and
obligations of the parties hereto shall be interpreted and enforced in
accordance with English law.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed and delivered by its respective duly authorized
officers, all as of the date first above written.
<PAGE>
SELLER:
CHARTER MEDICAL INTERNATIONAL,
S.A., INC.
By:
-------------------------------------------
Name:
---------------------------------
Title:
-------------------------------
MAGELLAN:
MAGELLAN HEALTH SERVICES, INC.
By:
-------------------------------------------
Name:
---------------------------------
Title:
-------------------------------
BUYER:
CMEL HOLDING LIMITED
By:
-------------------------------------------
Name:
---------------------------------
Title:
-------------------------------
BURE:
INVESTMENT AB BURE
By:
-------------------------------------------
Name:
---------------------------------
Title:
-------------------------------
<PAGE>
EXHIBIT 2(d)
FIRST AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT (this "Amendment") is dated as of April ___, 1999,
by and among Charter Medical International, S.A., Inc., a Nevada corporation
("Seller"), Magellan Health Services, Inc., a Delaware corporation ("Magellan"),
CMEL Holding AB, a company incorporated in Sweden ("Buyer"), and Investment AB
Bure, a company incorporated in Sweden ("Bure").
WHEREAS, Seller, Magellan, Buyer and Bure have entered into a Stock
Purchase Agreement dated April 2, 1999 (the "Stock Purchase Agreement"); and
WHEREAS, each of the parties wishes to amend the Stock Purchase
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties agree as follows:
I. AMENDMENTS.
1. The words "GROGRUNDEN 515AB" in the introductory paragraphs listing
the parties to the Stock Purchase Agreement is deleted and replaced by the words
"CMEL HOLDING AB."
2. Clause 1.2 of the Stock Purchase Agreement is hereby amended by
deleting the words "from 31 March 1999" and replacing them with the words "from
and including 1 April 1999."
3. Clause 2.3(b) is hereby amended by deleting the words "not less than
three days prior to the Closing Date" and replacing them with the words "in
Schedule 8 to the Charter Medical Agreement."
4. Clause 9.1(b) of the Stock Purchase Agreement is deleted and
replaced in its entirety with the following:
Announcements
The parties shall, subject to the requirements of law or any regulatory
body or the rules and regulations of any recognised stock exchange,
consult together as to the terms of, the timetable for and manner of
publication of, any formal announcement or circular to shareholders,
employees, customers, suppliers, distributors and subcontractors and to
any recognised stock exchange or other authorities and to the media or
otherwise which either of them may desire or be obliged to make
regarding this Agreement. Any other communication which the Parties may
make concerning such matters shall, subject to the requirements of law
or any regulatory body or the rules and regulations of any recognised
stock exchange, be consistent with any such formal announcement or
circular as referred to above; provided that, subject to the preceding
provisions of this clause, no Party shall,
<PAGE>
prior to Closing, make or authorise or issue any formal announcement or
circular concerning the subject matter of this Agreement or any other
document or transaction referred to in or contemplated by this
Agreement.
II. MISCELLANEOUS.
1. Except as expressly amended by this Amendment, all of the terms and
provisions of the Stock Purchase Agreement shall remain unchanged and continue
in full force and effect, and the parties hereto shall be entitled to all of the
applicable benefits thereof and shall be responsible for all of their respective
obligations thereunder.
2. This Amendment may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement. This Amendment shall
become effective when one or more counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that the parties
need not sign the same counterpart.
3. All of the terms and provisions hereof and the rights and
obligations of the parties hereto shall be interpreted and enforced in
accordance with Swiss law.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed and delivered by its respective duly authorized
officers, all as of the date first above written.
SELLER:
CHARTER MEDICAL INTERNATIONAL,
S.A., INC.
By:
---------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------
<PAGE>
MAGELLAN:
MAGELLAN HEALTH SERVICES, INC.
By:
---------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------
BUYER:
CMEL HOLDING AB
By:
---------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------
BURE:
INVESTMENT AB BURE
By:
---------------------------------------------
Name:
-----------------------------------
Title:
---------------------------------
<PAGE>
EXHIBIT 99
MAGELLAN SIGNS DEFINITIVE AGREEMENT FOR SALE OF EUROPEAN HOSPITALS
ATLANTA--(BUSINESS WIRE)--April 6, 1999--Magellan Health Services Inc.,
(NYSE:MGL), today announced that the company has signed definitive agreements
for the sale of its European operations to Investment AB Bure (Bure), a
Swedish company.
Magellan's European operations include Charter Chelsea and Charter
Nightingale, both in London, and La Metairie Clinic in Switzerland. The
transaction is scheduled to be completed no later than April 26, 1999. The
price to be received by Magellan is within the range that was previously
disclosed in Magellan's 1998 Annual Report.
Investment AB Bure is an industrial investment firm focusing on the advanced
service sector. Bure operates five business divisions in addition to its
asset management performed by the parent company. These divisions include
health care, information technology, infomedia, education and investments.
"We are pleased to complete this significant asset sale which improves our
balance sheet and represents another important step in Magellan becoming a
pure specialty managed care operation," said Henry Harbin, president and CEO
of Magellan Health Services. "The bulk of the sale proceeds will be used to
reduce Magellan's outstanding term loans with a lesser amount going towards
our revolving line of credit and overall liquidity."
Harbin continued, "The sale to Bure represents a tremendous opportunity for
the employees of these three facilities. There is a significant commitment on
Bure's part to the European health care marketplace and these assets will
represent an excellent addition to their portfolio while allowing the
facilities to continue to provide high quality care with new opportunities
for service expansion."
Per Batelson, president and CEO of Bure Health Care, said, "We have taken a
strong position in the rapidly expanding privately produced health care
market in Sweden and Norway. Now we will become a major and attractive
operator in a European perspective. The hospitals which we have acquired will
continue to expand and, at the same time, they will be contributing to the
establishment of psychiatric operations in other high priority markets."
Magellan Health Services Inc., (NYSE:MGL) is one of the country's largest
specialty care managers and human service providers. The Company manages the
behavioral care of approximately 65 million lives with an additional 4.0
million members covered under non-behavioral/specialty care contracts. The
Company also provides a wide range of human services to nearly 6,300
individuals through the MENTOR Network.
Certain of the statements in this press release including, without
limitation, statements regarding transaction completion and collection of
proceeds constitute forward-looking statements contemplated under the Private
Securities Litigation Reform Act of 1995.
Risk factors such as satisfactory delivery of closing documents and purchase
price could prevent the Company from completing the sale discussed.
For a more complete discussion of risk factors affecting the business, please
see "Cautionary Statements - The Company" and "Cautionary Statements - CBHS"
in Magellan's Annual Report on Form 10-K for the fiscal year ended Sept. 30,
1998 filed with the Securities and Exchange Commission on Dec. 29, 1998 and
also the Company's Quarterly Report on Form 10-Q for the quarter ended Dec.
31, 1998 filed with the Securities and Exchange Commission on Feb. 16, 1999.
CONTACT: Magellan Health Services Inc., Columbia, Md.
Kevin Helmintoller, 410/953-1218
Erin Somers, 410/953-2405
