<PAGE>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
February 28, 1994.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ........ to .......... .
Commission file number I-7293
NATIONAL MEDICAL ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Nevada 95-2557091
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 Colorado Avenue
Santa Monica, CA 90404
(Address of principal executive offices)
(310) 998-8000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
As of March 31, 1994 there were 165,952,065 shares of $0.075 par value
common stock outstanding.
<PAGE>
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
<S> <C>
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets - February 28, 1994
and May 31, 1993. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Consolidated Condensed Statements of Operations - Three Months and
Nine Months Ended February 28, 1994 and 1993. . . . . . . . . . . . . . . 4
Consolidated Condensed Statements of Cash Flows - Nine Months
Ended February 28, 1994 and 1993. . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Condensed Financial Statements. . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . 20
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
Note: Items 3, 4, and 5 of Part II are omitted because they are not
applicable.
Page 1<PAGE>
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
February 28, 1994 and May 31, 1993
<TABLE>
<CAPTION>
February 28, May 31,
1994 1993
(unaudited)
(in thousands)
<S> <C> <C>
A S S E T S
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . $ 350,859 $ 140,919
Short-term investments. . . . . . . . . . . . . . . . . . . . . . . 66,435 97,567
Accounts and notes receivable, less allowance for doubtful
accounts ($88,319 at February 28 and $115,103 at May 31) . . . . . 396,602 501,878
Inventories of supplies, at cost. . . . . . . . . . . . . . . . . . 55,194 62,028
Deferred income taxes (Note 7). . . . . . . . . . . . . . . . . . . 302,076 120,185
Net assets of discontinued business, at net realizable
value (Note 3) . . . . . . . . . . . . . . . . . . . . . . . . . . 229,248 -
Other property, plant and equipment held for sale, at cost,
net (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,416 56,510
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . 54,754 44,493
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . 61,058 45,055
Total current assets . . . . . . . . . . . . . . . . . . . . 1,536,642 1,068,635
Long-term receivables . . . . . . . . . . . . . . . . . . . . . . . 36,512 189,779
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236,008 168,241
Other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,168 36,775
Property, plant and equipment, at cost. . . . . . . . . . . . . . . 2,421,710 3,313,597
Less accumulated depreciation and amortization. . . . . . . . . . 677,645 821,505
Net property, plant and equipment. . . . . . . . . . . . . . 1,744,065 2,492,092
Intangible assets, at cost. . . . . . . . . . . . . . . . . . . . . 173,455 394,178
Less accumulated amortization . . . . . . . . . . . . . . . . . . 65,862 176,336
Net intangible assets. . . . . . . . . . . . . . . . . . . . 107,593 217,842
$ 3,718,988 $ 4,173,364
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Page 2<PAGE>
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
February 28, 1994 and May 31, 1993
<TABLE>
<CAPTION>
February 28, May 31,
1994 1993
(unaudited)
(in thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt (Note 8). . . . . . . . . . . . . $ 115,829 $ 121,385
Short-term borrowings and notes . . . . . . . . . . . . . . . . . . 71,512 163,285
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . 152,784 139,761
Current portion of reserves for discontinued operations,
facility divestitures, realignment and unusual
litigation costs (Notes 2 and 3). . . . . . . . . . . . . . . . . 533,694 100,691
Other current liabilities . . . . . . . . . . . . . . . . . . . . . 351,022 387,609
Total current liabilities. . . . . . . . . . . . . . . . . . 1,224,841 912,731
Notes and debentures, net of current portion . . . . . . . . . . . 502,285 672,437
Convertible debentures. . . . . . . . . . . . . . . . . . . . . . . 220,305 219,945
Total long-term debt, net of current portion (Note 8). . . . 722,590 892,382
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . 117,639 317,473
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . 340,209 298,708
Stockholders' equity:
Common stock, $0.075 par value; authorized 450,000,000
shares; 185,612,524 shares issued at February 28, 1994 and
185,698,524 issued at May 31, 1993 . . . . . . . . . . . . . . . 13,921 13,927
Other stockholders' equity. . . . . . . . . . . . . . . . . . . . 1,585,255 2,024,583
Less treasury stock, at cost, 19,732,868 shares
at February 28, 1994 and 19,800,103 shares at
May 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . (285,467) (286,440)
Total stockholders' equity . . . . . . . . . . . . . . . . . 1,313,709 1,752,070
$ 3,718,988 $ 4,173,364
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Page 3<PAGE>
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months And Nine Months Ended February 28, 1994 and 1993
(unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
1994 1993 1994 1993
(dollars in thousands, except per share amounts)
(1993 restated, see Note 3)
<S> <C> <C> <C> <C>
Net operating revenues (Notes 4 and 5). . . . . $ 720,254 $ 794,689 $ 2,265,230 $ 2,370,442
Operating and administrative expenses
(Note 6) . . . . . . . . . . . . . . . . . . . 584,428 659,778 1,856,399 1,957,302
Depreciation and amortization . . . . . . . . . 39,007 40,750 123,467 120,888
Interest, net of capitalized portion. . . . . . 15,536 18,875 53,295 58,386
Total costs and expenses . . . . . . . . . . 638,971 719,403 2,033,161 2,136,576
Investment earnings . . . . . . . . . . . . . . 6,055 4,598 20,202 14,704
Net gain on disposals of facilities and
long-term investments. . . . . . . . . . . . . 60,379 27,169 89,354 69,899
Income from continuing operations
before income taxes and cumulative
effect of a change in accounting. . . . . . . 147,717 107,053 341,625 318,469
Taxes on income . . . . . . . . . . . . . . . . (57,000) (42,000) (137,000) (125,000)
Income from continuing operations before
cumulative effect of a change in accounting . 90,717 65,053 204,625 193,469
Discontinued operations (Note 3):
Loss from operations, net of income
tax benefit. . . . . . . . . . . . . . . . . - (10,902) (154,800) (36,313)
Estimated loss on disposal, including
operating losses during phase out
period, net of income tax benefit (Note 2) . (255,000) - (541,200) -
Cumulative effect of a change in accounting
for income taxes (Note 7) . . . . . . . . . . - - 60,121 -
Net income (loss) . . . . . . . . . . . . . . $ (164,283) $ 54,151 $ (431,254) $ 157,156
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Page 4<PAGE>
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (continued)
Three Months And Nine Months Ended February 28, 1994 and 1993
(unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
1994 1993 1994 1993
(dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Earnings (loss) per share:
Primary:
Continuing operations. . . . . . . . . . . . $ 0.55 $ 0.39 $ 1.23 $ 1.16
Discontinued operations. . . . . . . . . . . (1.54) (0.06) (4.19) (0.21)
Change in accounting . . . . . . . . . . . . - - 0.36 -
Net . . . . . . . . . . . . . . . . . . . $ (0.99) $ 0.33 $ (2.60) $ 0.95
Fully diluted:
Continuing operations. . . . . . . . . . . . $ 0.51 $ 0.37 $ 1.16 $ 1.09
Discontinued operations. . . . . . . . . . . (1.50) (0.06) (4.09) (0.20)
Change in accounting . . . . . . . . . . . . - - 0.33 -
Net . . . . . . . . . . . . . . . . . . . $ (0.99) $ 0.31 $ (2.60) $ 0.89
Cash dividends per common share (Note 8). . . . $ - $ 0.12 $ 0.12 $ 0.36
Weighted average shares and share equivalents
outstanding -- primary . . . . . . . . . . . 165,872,000 166,000,000 165,887,000 166,143,000
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Page 5<PAGE>
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Nine Months Ended February 28, 1994 and 1993
(unaudited)
<TABLE>
<CAPTION> 1994 1993
(in thousands)
<S> <C> <C>
Net cash provided by operating activities, before
net expenditures for divestitures,
realignment and unusual litigation costs. . . . . . . . . . . . . $ 276,198 $ 292,967
Net expenditures for divestitures, realignment
and unusual litigation costs. . . . . . . . . . . . . . . . . . . (222,091) (56,380)
Net cash provided by operating activities . . . . . . . . . . . . 54,107 236,587
Cash flows from investing activities:
Purchases of property, plant and equipment. . . . . . . . . . . . (93,788) (232,484)
Proceeds from sales of property, plant and equipment. . . . . . . 483,326 73,820
Proceeds from sales (purchases) of investments. . . . . . . . . . 46,786 (11,114)
Collections on notes . . . . . . . . . . . . . . . . . . . . . . 97,815 25,433
Purchase of Hillhaven preferred stock . . . . . . . . . . . . . . (63,415) -
Increase in intangible and other assets . . . . . . . . . . . . . (13,943) (20,737)
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,742) (23,973)
Net cash provided by (used in) investing activities . . . . . . 449,039 (189,055)
Cash flows from financing activities:
Net payments of unsecured lines of credit . . . . . . . . . . . . (117,820) (45,994)
Net payments of reverse purchase agreements . . . . . . . . . . . (31,422) -
Proceeds from the sale of 7-3/8% notes. . . . . . . . . . . . . . - 57,900
Proceeds from other borrowings . . . . . . . . . . . . . . . . . 18,162 56,879
Other payments on borrowings . . . . . . . . . . . . . . . . . . (122,788) (24,798)
Cash dividends paid to shareholders . . . . . . . . . . . . . . . (39,584) (58,273)
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . - (18,857)
Other items . . . . . . . . . . . . . . . . . . . . . . . . . . . 246 (3,657)
Net cash used in financing activities . . . . . . . . . . . . . (293,206) (36,800)
Net increase in cash and cash equivalents . . . . . . . . . . . 209,940 10,732
Cash and cash equivalents at beginning of year. . . . . . . . . 140,919 113,957
Cash and cash equivalents at end of period. . . . . . . . . . . $ 350,859 $ 124,689
Supplemental disclosures:
Interest paid, net of amounts capitalized . . . . . . . . . . . . $ 49,257 $ 60,977
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . 30,456 98,238
Notes received in connection with sales of facilities . . . . . . - 52,677
</TABLE>
See accompanying Notes to Consolidated Condensed Financial Statements and
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Page 6<PAGE>
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. The unaudited financial information furnished herein, in the opinion of
management, reflects all determinable adjustments which are necessary to
fairly state the Company's financial position, its cash flows and the
results of its operations for the periods indicated. All the adjustments
are of a normal recurring nature except for those relating to the legal
proceedings discussed in Note 2, the discontinued operations discussed in
Note 3 and the accounting change discussed in Note 7. Operating results
have been adversely affected by factors discussed in the accompanying
Management's Discussion and Analysis of Financial Condition and Results
of Operations, including legal proceedings and investigations and certain
claims and lawsuits of an unusual nature. These factors are related
principally to the Company's discontinued psychiatric business, but they
also have had an impact on other lines of business.
The Company presumes that users of this interim financial information
have read or have access to the Company's audited financial statements
and Management's Discussion and Analysis of Financial Condition and
Results of Operations for the preceding fiscal year and that the adequacy
of additional disclosure needed for a fair presentation may be determined
in that context. Accordingly, footnote and other disclosure which would
substantially duplicate the disclosure contained in the Company's most
recent annual report to security holders has been omitted. The interim
financial information herein is not necessarily representative of
operations for a full year for various reasons, including levels of
occupancy, interest rates, facility acquisitions and disposals, revenue
allowance and discount fluctuations, the timing of price changes,
fluctuations in quarterly tax rates and the recording of unusual reserves
mentioned in Notes 2 and 3 herein. These same considerations apply to all
year-to-year comparisons.
2. As previously reported, the Company is and has been involved in
significant legal proceedings and investigations of an unusual nature
related principally to its psychiatric business. During the fourth
quarter of fiscal 1993, the Company recorded a $65,000,000 charge for
unusual legal fees and expenses, including an estimate for future costs
and expenses expected to be incurred in responding to these matters
through the trial stage. As of August 31, 1993, the Company recorded
additional reserves of $250,000,000 to estimate the cost of the ultimate
disposition of the insurance companies' lawsuits discussed below,
shareholder litigation and psychiatric malpractice cases involving fraud
and conspiracy allegations, including settlements which may be reached
with respect to these matters.
In November 1993 the Company signed agreements to settle two of its
lawsuits with certain insurance companies and in February 1994 the
Company signed an agreement to settle the remaining lawsuit. Under the
settlements, the Company agreed to pay up to $125,000,000 and
$89,900,000, respectively, as complete and final resolution of the
disputed claims. The final installment of these settlements of
approximately $45,000,000 was paid in March 1994. In return, the
insurers agreed on an individual basis to strengthen standard business
relations with the Company, including, for example, allowing the Company
to compete for managed-care contracts and participate in provider
networks. The settlements also addressed the processing by the insurance
companies of pending claims from psychiatric facilities owned by the
Company's subsidiaries.
In November 1993 the Company announced it had settled or reached
agreements in principle to settle 66 patient care lawsuits against
certain of its psychiatric hospitals in Texas. The Company paid the
plaintiffs approximately $15,000,000. In March 1994 the Company announced
it had reached agreement to settle 23 more patient care lawsuits for
approximately $2,500,000. These cases represent approximately two-thirds
of the psychiatric patient care cases which contain allegations of
conspiracy or fraud. Prior to these settlements, the Company had
successfully tried three psychiatric malpractice cases with similar
allegations, two in Texas and one in California. Another case was
dismissed.
Page 7<PAGE>
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
The remaining reserves for unusual litigation costs which relate to the
above matters that have not been settled as of February 28, 1994
represent management's estimate of the net costs of the ultimate
disposition of these matters. However, there can be no assurance that
the ultimate liability will not exceed such estimates.
Government agencies are investigating whether the Company and certain of
its subsidiaries engaged in improper practices. As a result of the
negotiations that have been on-going between the Company and the Civil
Division and Criminal Division of the Department of Justice, and the
Department of Health and Human Services, the Company has reached an
agreement in principle which upon execution will bring to a close all
open investigations by the federal government and its agencies of the
Company, its subsidiaries and its facilities. Accordingly the Company
now believes it has a reasonable basis on which to estimate the costs of
the ultimate disposition of all federal and state government
investigations and has recorded an additional reserve of $375,000,000 as
of February 28, 1994. However, there can be no assurance that the
ultimate liability will not exceed such estimates. Income tax benefits
relating to these reserves are estimated to be approximately $120,000,000
and also have been recorded as of February 28, 1994. Terms for payment
of the liability to the federal government have not been finalized. The
Company believes it now also has a reasonable basis on which to estimate
the cost of an ultimate resolution with state government agencies,
however, no agreement in principle has been reached. However, management
believes that any such resolution will not have a material adverse effect
on the financial condition of the Company.
All of the costs associated with these legal proceedings and
investigations are classified in discontinued operations in the
accompanying Consolidated Condensed Financial Statements.
3. On November 30, 1993, the Company decided to discontinue its psychiatric
hospital business and adopted a plan to dispose of substantially all of
its psychiatric hospitals and substance abuse facilities within one year.
Provisions, totaling $286,200,000 (net of $146,800,000 in tax benefits),
were made for estimated losses during the phase-out period and for the
write-down of assets to estimated net realizable value. The estimated
net realizable value is reported on the Consolidated Condensed Balance
Sheet as a current asset. The Consolidated Condensed Statements of
Operations reflect the operating results of the discontinued business
separately from continuing operations. Accordingly, prior periods have
been restated.
Operating results for periods subsequent to November 30, 1993 are charged
to the provision for estimated losses during the phase-out period.
Operating results for the discontinued business, excluding the
$286,200,000 discussed above, were (in thousands):
<TABLE>
<CAPTION>
Three Months
Ended Nine Months Ended
February 28, February 28,
1993 1994 1993
<S> <C> <C> <C>
Net operating revenues. . . . . . . . . . . . . $ 138,588 $ 237,839 $ 434,928
Loss before income taxes. . . . . . . . . . . . $ (16,902) $ (266,400) $ (55,313)
Income tax benefit. . . . . . . . . . . . . . . 6,000 111,600 19,000
Loss from operations. . . . . . . . . . . . . . $ (10,902) $ (154,800) $ (36,313)
</TABLE>
On March 30, 1994 the Company signed an agreement to sell 47 psychiatric
facilities to Charter Medical Corporation for approximately $200 million,
including the net book values of certain inventory, receivables and other
items of working capital, subject to certain adjustments. After payments of
certain expenses and liabilities not assumed by Charter, the Company expects
to receive net cash proceeds of approximately $186 million before tax
benefits. The terms of the sale are consistent with the estimates used in
the November 30, 1993 provision described above.
Page 8<PAGE>
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
4. In January 1994, the Company sold 28 inpatient rehabilitation hospitals
and 45 related satellite outpatient clinics for approximately
$350,000,000 in cash, including the net book values of certain inventory,
receivables and other items of working capital, subject to certain
adjustments. After payment of expenses related to the transaction,
associated long-term debt and other liabilities, the net proceeds before
taxes were approximately $260,000,000. The sale resulted in a gain of
$66,208,000. The Company retained six rehabilitation hospitals on or
near acute care hospital campuses and in March 1994 sold its other
remaining rehabilitation hospital for approximately $14,000,000.
For the three and nine months ended February 28, 1994, net operating
revenues of the sold facilities were $38,944,000 and $265,834,000,
respectively. Pretax income, before general corporate overhead costs,
was $4,100,000 and $22,228,000, respectively.
5. The Company's net operating revenues from continuing operations consist
primarily of net patient service revenues, which are based on established
billing rates less applicable allowances and discounts. These allowances
and discounts, primarily for patients covered by Medicare, Medicaid and
other contractual programs, amounted to $676,992,000 and $645,183,000 for
the three-month periods ended February 28, 1994 and 1993 and were
$2,022,542,000 and $1,882,972,000 for the nine-month periods.
6. The provision for doubtful accounts and notes receivable is included in
operating and administrative expenses net of any recoveries of previously
written-off accounts or notes. The net provisions related to continuing
operations for the three-month periods ended February 28, 1994 and 1993
were $25,812,000 and $28,228,000, respectively, and for the nine-month
periods then ended were $84,284,000 and $85,647,000.
7. Effective June 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Among other
provisions, this standard requires deferred tax balances to be determined
using enacted income tax rates for the years in which the taxes actually
are paid or refunds actually are received instead of when the deferrals
were initiated. The Company recognized $60,121,000 as income in the
quarter ended August 31, 1993, for the cumulative effect on prior years
of adopting this standard based on tax rates in effect at June 1, 1993.
Deferred tax assets and liabilities as of June 1, 1993, relate to the
following:
<TABLE>
<CAPTION>
Deferred Tax
Assets Liabilities
(dollars in thousands)
<S> <C> <C>
Depreciation and fixed asset
basis differences $ - $ 271,900
Divestiture and realignment costs 86,900 -
Receivables - adjustments
and allowances 85,200 -
Cash basis accounting change - 54,400
Accruals for insurance risks 39,300 -
Intangible assets - 35,000
Other long-term liabilities 27,200 -
Benefit plans 21,200 -
Other accrued liabilities 13,100 -
Investments 11,100 -
Other 3,500 -
$ 287,500 $ 361,300
</TABLE>
Page 9<PAGE>
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
At February 28, 1994, deferred income taxes in the accompanying
Consolidated Condensed Balance Sheets had changed significantly from May
31, 1993. Such changes resulted primarily from the tax effects of
temporary differences relating to a) reserves for discontinued
operations, facility divestitures, realignment and unusual litigation
costs, b) the adoption of FAS 109 and c) other losses for the period and
the classification of discontinued and other assets held for sale as
current. Management believes that the net deferred tax asset at
February 28, 1994 will be realized from tax provisions against future
income and tax loss carrybacks.
8. On September 10, 1993, the Company canceled its $120,000,000 short-term
revolving credit agreement entered into in December 1992. No loans were
outstanding under this agreement.
On September 30, 1993 the Company repaid $50,000,000 of outstanding
revolving bank borrowings under its $300,000,000 unsecured bank revolving
credit and term loan agreement and refinanced the $246,200,000 balance of
such loans with term loans maturing on April 1, 1995. At February 28,
1994, the term loans had a balance of $223,400,000 and provided for
quarterly installments of $11,400,000 on May 31, 1994 and $15,000,000 on
August 31, 1994, November 30, 1994, and February 28, 1995. These loans
were repaid on April 13, 1994, with long-term debt, as described below,
and thus these quarterly installments are excluded from current
liabilities as of February 28, 1994.
On April 13, 1994, the Company entered into a new $464,700,000 revolving
credit and letter of credit agreement with Bank of America NT&SA, The
Bank of New York, Bankers Trust Company and Morgan Guaranty Trust Company
of New York. The new agreement was entered into to refinance existing
bank debt and to obtain continuing waivers of covenants from banks that
issued existing letters of credit in connection with the Company's
commercial paper and remarketable bond programs. The covenant waivers
were necessary as a result of the reserve recorded as of February 28,
1994, related to certain federal and state governmental investigations.
See Note 2 herein.
The new agreement provides for revolving loans of up to $222,000,000 and
for letters of credit in an aggregate amount of $242,700,000 to support
certain of the Company's obligations relating to its commercial paper and
remarketable bond programs. Loans under the new agreement of
$222,000,000 were used to repay all of the Company's obligations under,
and to effect termination of, its then existing unsecured bank term loan
agreement. The letters of credit were issued on April 13, 1994 to
support the Company's obligations related to existing letters of credit
and were provided in exchange for covenant waivers by the issuing banks.
All outstanding revolving loans under the new agreement mature on
April 12, 1995, and there are no earlier installments of principal due or
required reductions of availability thereunder. The letters of credit
have an expiry date of April 5, 1995, and are subject to drawing in full
prior to expiry if the obligations supported thereby continue to be
outstanding. If the letters of credit are drawn on April 5, 1995, or at
any time prior thereto, the Company's reimbursement obligations to Morgan
Guaranty Trust Company of New York, the issuing bank of the letters of
credit under the new agreement, will be due and payable on the date of
drawing.
Revolving loans under the new agreement bear interest at a base rate
which is equal to the prime rate announced by Morgan Guaranty Trust
Company of New York or, if higher, the federal funds rate plus 0.50% or,
at the option of the Company, a London interbank offered rate ("LIBOR")
plus 1.00% per annum, for interest periods of 1-, 2-, 3-, or 6-months.
Revolving loans under the former agreement bore interest at LIBOR plus
1.75% through March 31,1994, LIBOR plus 2.00% from April 1, 1994 through
September 30, 1994 and LIBOR plus 2.25% thereafter. The Company has
agreed to pay to the lenders under the new agreement a letter of credit
fee at the rate of 1.00% per annum on the amount available on any day for
drawing under the letters of credit. The Company also has agreed
Page 10<PAGE>
<PAGE>
NATIONAL MEDICAL ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Continued)
to pay to Morgan Guaranty Trust Company of New York, as issuing bank of
the letters of credit under the new agreement, a fee at the rate of 0.25%
per annum on the amount available on any day for drawing under the
letters of credit, in consideration of its agreement to issue the letters
of credit.
The new agreement has, among other requirements, limitations on
borrowings, liens, contingent obligations, investments, capital
expenditures and mergers and disposition of assets, and covenants
regarding maintenance of net worth and fixed charge coverage. These
financial covenants are generally less restrictive than similar covenants
under the former agreement. The new agreement also provides that the
Company may declare or pay dividends only if doing so will not otherwise
result in a default under the agreement and, for any fiscal quarter, that
dividends do not exceed the lesser of (a) $0.12 per share (up to an
aggregate total of $21,200,000) and (b) the amount by which 40% of
consolidated net earnings for the period from February 28, 1994 through
the relevant date of determination exceeds the aggregate amount of
dividends declared or paid from February 28, 1994 through such date.
Furthermore, the aggregate amount of dividends for the fiscal year ending
May 31, 1994 may not exceed 40% of consolidated net earnings (determined
without giving effect to a $250,000,000 accrual for certain litigation
costs in the second quarter of fiscal 1994, a $375,000,000 accrual for
certain other litigation costs in the third quarter of fiscal 1994, and
the $60,121,000 income attributable to the cumulative effect of a change
in accounting for income taxes for such fiscal year).
Page 11<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Company's cash and cash equivalents at February 28, 1994 were
$350,859,000, an increase of $209,940,000 over May 31, 1993. The ratio of
long-term debt to equity was 0.55:1. It was 0.51:1 and 0.64:1, respectively,
at the end of the last two fiscal years. Working capital at February 28,
1994 was $311,801,000 compared to $155,904,000 at May 31, 1993. The ratio
of current assets to current liabilities was 1.25:1 at February 28, 1994 and
1.17:1 at May 31, 1993.
Cash provided by operating activities was $276,198,000 for the nine
months ended February 28, 1994 compared to $292,967,000 for the same period
last year before expenditures of $222,091,000 and $56,380,000, respectively,
for divestiture, realignment and unusual litigation costs.
In September 1993, the Company completed a series of transactions with
The Hillhaven Corporation, which resulted in the Company receiving
approximately $135,000,000 in cash. In January 1994 the Company sold 28
inpatient rehabilitation hospitals and 45 related satellite outpatient
clinics, for which the Company received net cash proceeds of approximately
$260,000,000 before taxes and after payments of expenses related to the
transaction, associated long-term debt and other liabilities. In March, the
Company sold an additional rehabilitation hospital for which the Company
received approximately $14,000,000.
On March 30, 1994, the Company signed an agreement to sell 47 psychiatric
facilities for approximately $200 million. After payments of certain
expenses and liabilities not assumed by the buyer, the Company expects to
receive net cash proceeds of approximately $186 million before tax benefits.
The transaction is expected to close in phases through September 1994 with
the majority of the facilities scheduled to transfer May 31, 1994.
Cash payments for property and equipment were $93,788,000 for the nine
months ended February 28, 1994 and $232,484,000 for the same period last
year. The estimated cost to complete major approved construction projects at
wholly-owned subsidiaries is approximately $99,291,000, all of which is
related to expansion, improvement and equipping of existing domestic
hospital facilities, and the significant portion of which will be spent over
the next three years.
On April 13, 1994, the Company replaced its existing unsecured bank term
loan agreement which, among other things, required quarterly installments
aggregating $56,400,000 through February 28, 1995, with a new $464,700,000
revolving credit and letter of credit agreement with Bank of America NT&SA,
The Bank of New York, Bankers Trust Company and Morgan Guaranty Trust
Company of New York. See Note 8 herein. Loans under the new agreement of
$222,000,000 were used to repay all of the Company's obligations under, and
to effect termination of, its then existing unsecured bank term loan
agreement. All outstanding loans under the new agreement mature on
April 12, 1995 and the letters of credit expire on April 5, 1995. Under
the new agreement the interest rate applicable to revolving loans is
significantly lower than the interest rate applicable to the loans repaid
under the terminated credit agreement. The Company has no unused revolving
credit availability under the new agreement and has no other unused
committed credit facilities.
In June 1993 Moody's Investors Service, Inc. lowered its rating on the
Company's senior debt from Baa-1 to Baa-3 and in August placed the Baa-3
rating under review for possible further downgrading. In September 1993
Standard and Poor's Corporation lowered its rating on the Company's senior
debt from BBB- to BB. On December 15, however, Standard and Poor's placed
this rating on "CreditWatch" with positive implications, indicating the
possibility that the rating may be raised.
Page 12<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company's liquidity including cash to be provided by: 1) future
operating activities; 2) the proceeds from anticipated disposals of assets;
3) and other sources is believed by management to be adequate to finance
planned capital expenditures and known operating needs, including scheduled
current maturities of its debt and the costs of the ultimate disposition of
the federal and state government investigations referred to in Note 2.
Management believes that patient volumes, cash flows and operating
results at the Company's principal health care businesses have been
adversely affected by the legal proceedings and investigations described
elsewhere in this Form 10-Q.
Page 13<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Results of Operations
The most significant transaction affecting results of continuing
operations for the quarter ended February 28, 1994 was the sale of the
rehabilitation hospitals and clinics. See Note 4 herein. The revenues and
expenses of these facilities are included in the Company's results of
operations through December 31, 1993.
During the quarter ended February 28, 1994, the Company recorded a
$375,000,000 addition to its previously established reserve for discontinued
psychiatric division operations as a result of an agreement-in-principle
with certain federal government agencies. Income tax benefits relating to
this additional reserve are estimated to be $120,000,000 and were also
recorded as of February 28, 1994. See Note 2 herein.
Income from continuing operations before income taxes and cumulative
effect of a change in accounting was $147,717,000 for the quarter ended
February 28, 1994, compared with $107,053,000 for the prior year quarter.
These results include pretax net gains on sales of facilities and long-term
investments of $60,379,000 and $27,169,000, respectively.
Net operating revenues and operating profits from continuing operations
before interest for the three months and nine months ended February 28, 1994
and 1993 are shown below:
<TABLE>
<CAPTION>
Three Months Ended February 28,
(in thousands)
Increase %
1994 1993 (Decrease) Change
<S> <C> <C> <C> <C>
Net Operating Revenues:
Hospitals. . . . . . . . . . . . . . . . . $ 682,716 $ 739,610 $ (56,894) (8)%
Other Businesses . . . . . . . . . . . . . 37,538 55,079 (17,541) (32)%
Total. . . . . . . . . . . . . . . . $ 720,254 $ 794,689 $ (74,435) (9)%
Operating Profits*:
Hospitals. . . . . . . . . . . . . . . . . $ 90,245 $ 83,099 $ 7,146 9 %
Other Businesses . . . . . . . . . . . . . 7,872 12,936 (5,064) (39)%
Total. . . . . . . . . . . . . . . . $ 98,117 $ 96,035 $ 2,082 2%
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended February 28,
(in thousands)
Increase %
1994 1993 (Decrease) Change
<S> <C> <C> <C> <C>
Net Operating Revenues:
Hospitals. . . . . . . . . . . . . . . . . $2,143,328 $2,202,787 $ (59,459) (3)%
Other Businesses . . . . . . . . . . . . . 121,902 167,655 (45,753) (27)%
Total. . . . . . . . . . . . . . . . $2,265,230 $2,370,442 $ (105,212) (4)%
Operating Profits*:
Hospitals. . . . . . . . . . . . . . . . . $ 260,214 $ 257,868 $ 2,346 1 %
Other Businesses . . . . . . . . . . . . . 31,490 41,767 (10,277) (25)%
Total. . . . . . . . . . . . . . . . $ 291,704 $ 299,635 $ (7,931) (3)%
</TABLE>
* Before interest expense, investment earnings, minority interests, net
gain on disposals of facilities and long-term investments.
Page 14<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
The Hospitals line of business includes the operations of domestic and
international general hospitals, rehabilitation hospitals and the management
services business. Net operating revenues for the quarter decreased by
$56,894,000 (or 8%) over the prior year quarter and by $59,459,000 (or 3%)
for the current nine-month period. The reason for these decreases was the
sale of the Rehabilitation facilities in January 1994. Operating profits
increased by $7,146,000 (or 9%) over the prior year quarter primarily due to
the reasons discussed below and by $2,346,000 (or 1%) for the nine months
ended February 1994 over the comparable prior year period. The operating
profit margin increased for both the current quarter and for the current
nine-month period, from 11.2% to 13.2% and from 11.7% to 12.1%,
respectively, primarily due to effective cost control programs and the sale
of the rehabilitation hospitals, which as a whole, had lower margins than
the general hospitals.
Selected statistics for domestic general hospital operations are shown
below:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 28,
Increase Increase
1994 1993 (Decrease) 1994 1993 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Facilities owned or operated. . . 34 35 (1) 34 35 (1)
Quarter-end licensed beds . . . . 6,749 6,829 (1.2)% 6,749 6,829 (1.2)%
Average licensed beds in period . 6,749 6,842 (1.4)% 6,739 6,808 (1.0)%
Average occupancy . . . . . . . . 50.7% 49.7% 1.0%* 46.8% 47.5% (0.7)%
Patient days. . . . . . . . . . . 307,870 306,054 0.6% 861,561 882,326 (2.4)%
Net inpatient revenue
per patient day. . . . . . . . .$ 1,328 $ 1,286 3.3% $ 1,346 $ 1,281 5.1%
Admissions. . . . . . . . . . . . 54,304 53,233 2.0% 155,415 156,446 (0.7)%
Average length of stay (days) . . 5.7 5.7 - 5.5 5.6 (1.8)%
Net inpatient
revenues (in thousands). . . . .$408,759 $ 393,507 3.9% $1,160,047 $1,130,163 2.6%
Net outpatient
revenues (in thousands). . . . .$133,267 $ 126,837 5.1% $ 406,375 $ 386,134 5.2%
Outpatient visits . . . . . . . . 366,729 365,058 0.5% 1,090,353 1,090,773 -
% of net patient revenues from
Medicare and Medicaid. . . . . . 47.1% 42.2% 4.9%* 43.8% 40.3% 3.5%*
</TABLE>
* These percentage changes are the differences between the 1994 and 1993
percentages (%'s) shown.
Domestic general hospital inpatient admissions increased by 2.0% over the
year earlier quarter while decreasing 0.7% for the nine month period. The
same 34 facilities owned or operated for both years reflect increases of
3.1% in inpatient admissions, 2.0% in patient days and 1.9% in outpatient
visits over the prior year quarter. There continue to be increases in
inpatient acuity and intensity of services and higher inpatient revenue per
patient day as less intensive services shift from an inpatient to an
outpatient basis or to alternative health care delivery services because of
technology improvements and as cost controls by payors become greater.
Allowances and discounts are expected to continue to rise because of
increasing cost controls including utilization review by government and
group health payors and because the percentage of business from managed care
programs (and related discounts) continue to grow.
The general hospital industry in the United States and the Company's general
hospitals continue to have significant unused capacity and thus there is
substantial competition for patients. Inpatient utilization continues to be
negatively affected by payor-required pre-admission authorization and by
payor pressure to maximize outpatient and alternative health care delivery
services for less acutely ill patients. Increased competition, admission
constraints and payor pressures are expected to continue. The Company
offers discounts to private payor groups, enters into capitation contracts
in some service areas, upgrades facilities and equipment where appropriate,
and offers new programs and services. The Company has been implementing
various cost control programs focused on reducing operating costs. The
Company's general hospitals have been successful in increasing operating
profits in a very competitive environment due in large part to enhanced cost
control and efficiencies being achieved throughout the Company, but it will
continue to be difficult for existing facilities to sustain the growth rate
experienced in recent years.
Page 15<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Psychiatric hospitals statistics and commentary have not been included
herein because of the Company's decision on November 30, 1993 to discontinue
its psychiatric hospital business by disposing of substantially all of its
psychiatric hospitals and substance abuse facilities within twelve months.
The Company's announced sale in March 1994 of 47 psychiatric facilities will
result in the transfer to the buyer of these hospitals over approximately
six months. See Note 3 herein. Even though the Company will continue to
operate its psychiatric hospital business until completion of the
divestiture program, the results of its operations will be reported as
discontinued operations in the Company's financial statements.
This action to discontinue its psychiatric hospital business and the sale of
the psychiatric and rehabilitation hospitals described above comprise
significant elements of the Company's previously announced decision to focus
on its core general hospital business.
Other businesses currently include the operating results of the Company's
dialysis centers, seven domestic long-term care facilities, the Company's
equity interest in the net income of The Hillhaven Corporation, loan and
lease guarantee fees from Hillhaven, the leasing of long-term care
facilities and retirement centers to Hillhaven, the Company's equity
interest in Westminster Health Care Holdings, PLC (Westminster), and other
smaller businesses.
Until Westminster's April 1993 public offering of stock which reduced the
Company's ownership from approximately 90% to approximately 42%, the
revenues and expenses of Westminster were consolidated. Since that date,
the Company has been accounting for its investment in Westminster on the
equity method. Most of the declines in net operating revenues of other
businesses for the three months and nine months ended February 28, 1994
compared to the year-earlier periods are due to this change in the Company's
ownership of Westminster and the restructuring of its relationship with
Hillhaven described below. Operating profits have been affected for the
same reason.
In September 1993 the Company and Hillhaven substantially completed a series
of transactions which resulted in the Company no longer being a lessor or
lender to Hillhaven, but remaining a significant holder of Hillhaven common
and preferred stock. After reflecting these transactions, including the
sale of long term care facilities to Hillhaven, the Company's lease income
for the three and nine months ended February 28, 1994 was $4,303,000 and
$12,860,000 lower than in the year-earlier periods and the Company's equity
in Hillhaven's net earnings was $338,000 and $6,903,000 higher than the
comparable periods.
BUSINESS OUTLOOK
In addition to the specific items mentioned in the sections above that
continue to have an impact on the Company's liquidity, capital resources and
results of operations, there are a number of other factors affecting our
domestic business. Because of national, state and private industry efforts
to reform the system of health care delivery in this country, the Company
and the health care industry as a whole face increased uncertainty. While
the Company is unable to predict which proposals for health care reform will
be adopted, it continues to analyze them and formulate its future business
strategies accordingly.
Page 16<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Material Developments in Previously Reported Legal Proceedings:
Travelers Insurance Co., et al. vs. National Medical Enterprises, Inc.
and NME Psychiatric Properties, Inc. vs. Travelers Insurance Co., et
al.
This lawsuit was previously reported in the Company's Form 10-K
for the fiscal year ended May 31, 1993, and Form 10-Q for the quarter
ended November 30, 1993. On February 18, 1994, the Company signed a
definitive settlement agreement in these lawsuits on terms
substantially similar to the agreement-in-principle discussed in the
Company's quarterly report on Form 10-Q for the quarter ended November
30, 1993.
In re: National Medical Enterprises, Inc. Securities Litigation
This lawsuit was previously reported in the Company's Form 10-K
for the fiscal year ended May 31, 1993. The matter is currently in
the discovery stage, and no trial date has been set. In February 1994
the parties and the Company's insurance carriers commenced a voluntary
mediation. The mediation process is continuing and the Company is
unable to predict the likelihood of settlement at this time.
In re: National Medical Enterprises, Inc. Securities Litigation II
This lawsuit was previously reported in the Company's Forms 10-Q
for the quarters ended August 31, 1993 and November 30, 1993. The
plaintiffs have until April 25, 1994, to file an amended and
consolidated class action complaint, which will supersede all prior
complaints. Defendants will have until June 9, 1994, to file an
answer or a motion to dismiss the amended and consolidated complaint.
The Company believes it has meritorious defenses to this action and
will defend this litigation vigorously.
Nita P. Heckendorn vs. National Medical Enterprises, Inc., Jeffrey C.
Barbakow, Raymond A. Hay, Maurice J. DeWald and Peter de Wetter
This lawsuit was previously reported in the Company's Form 10-K
for the fiscal year ended May 31, 1993, and Forms 10-Q for the
quarters ended August 31, 1993 and November 30, 1993. Following a
January 6, 1994, hearing, the court granted in part NME's challenge to
the Heckendorn suit and dismissed certain claims made against certain
individuals as well as certain claims made against NME. The remaining
claims are pending and the parties are engaged in discovery.
Page 17<PAGE>
<PAGE>
PART II. OTHER INFORMATION (Continued)
John C. Bedrosian vs. National Medical Enterprises, Inc., Jeffrey C.
Barbakow, Michael H. Focht, Sr., Bernice B. Bratter, Maurice J.
DeWald, Peter de Wetter and Lester B. Korn
This lawsuit was previously reported in the Company's Forms 10-Q
for the quarters ended August 31, 1993, and November 30, 1993. Mr.
Bedrosian's employment-related claims in the lawsuit are scheduled to
go to trial before a Referee in June 1994.
United States of America vs. P.I.A. San Antonio, Inc.
On November 16, 1993, the United States District Court for the
Western District of Texas, San Antonio Division, accepted a plea by
PIA San Antonio, Inc., dba Colonial Hills Hospital, an NME subsidiary,
to a two-count information charging a violation of 18 USC ss1001 and
1002 (making a false statement) and a violation of 18 USC s287
(presenting a false claim). More specifically, the hospital was
charged with presenting a false claim in December 1989 regarding a
physician not having a Civilian Health and Medical Program for the
Uniform Services ("CHAMPUS") provider number and to making a false
statement in an Emergency Admission Letter submitted to CHAMPUS in
December 1990. The hospital was ordered to pay restitution in the
amount of $1,000,000 and a fine in the amount of $1,000,000. The
hospital was closed in May, 1992.
Psychiatric Malpractice Cases
These cases were previously reported in the Company's Form 10-K
for the fiscal year ended May 31, 1993 and Form 10-Q for the quarter
ended November 30, 1993. On March 8, 1994, the Company announced that
it had reached agreements to settle 23 of the pending psychiatric
patient care cases involving allegations of corporate conspiracy or
fraud for approximately $2.5 million. Including those cases, the
Company now has settled approximately two-thirds of the lawsuits
asserting fraud or corporate conspiracy for approximately $17,500,000.
Government Investigations
Government agencies are investigating whether NME and certain of its
subsidiaries engaged in improper practices as previously reported in
the Company's 10-K for the fiscal year ended May 31, 1993. As a
result of the negotiations between the Company and the Civil Division
and Criminal Division of the U.S. Department of Justice, and the U.S.
Department of Health and Human Services, the Company has reached an
agreement in principle which, upon execution of a definitive
agreement, will bring to a close all open investigations by the
federal government and its agencies of NME, its subsidiaries and its
facilities. Accordingly, the Company has increased its previously
reported reserve for discontinued operations as set forth in Note 2
herein. The reserve also includes an estimate for the costs of an
ultimate resolution with state government agencies. Although
discussions with state government agencies are taking place, no
agreements in principle have been reached.
Page 18<PAGE>
<PAGE>
PART II. OTHER INFORMATION (Continued)
Item 2. Changes in Securities
On April 13, 1994, the Company entered into a new $464,700,000
revolving credit and letter of credit agreement (the "New Agreement")
with Bank of America NT&SA, The Bank of New York, Bankers Trust
Company and Morgan Guaranty Trust Company of New York. Indebtedness
of the Company under the New Agreement is secured by a pledge of all
of the outstanding capital stock of NME Hospitals, Inc., a
wholly-owned subsidiary of the Company, and is supported by a guaranty
of payment made by NME Hospitals, Inc. in favor of the lenders. The
New Agreement provides for revolving loans up to $222,000,000 and for
letters of credit in an aggregate amount of $242,700,000 to support
certain of the Company's obligations relating to its commercial paper
and remarketable bond programs. Loans under the New Agreement of
$222,000,000 were applied on April 13, 1994 to repay all of the
Company's obligations under, and to effect termination of, its then
existing unsecured bank term loan agreement (the "Former Agreement").
The letters of credit were issued on April 13, 1994 to support the
Company's obligations in respect of existing letters of credit, and
were provided in exchange for waivers by the issuing banks of the
existing letters of credit of covenants made by the Company for the
benefit of those banks.
The New Agreement contains covenants and other requirements that are
substantially similar to those in the Former Agreement, as modified to
reflect a charge to earnings for a reserve related to certain federal
and state governmental investigations. See Note 2 herein. The New
Agreement has, among other requirements, covenants regarding
maintenance of net worth and fixed charge coverage and restrictions on
the payment of dividends. The financial covenants are generally less
restrictive than corresponding financial covenants in the Former
Agreement.
Among other requirements pursuant to the terms of the New Agreement,
the Company (1) may not permit at any time consolidated net worth to
be less than 90% of consolidated net worth determined as of February
28, 1994 increased by 50% of cumulative consolidated net earnings
after such date, (2) may not permit the ratio, as of the last day of
any fiscal quarter, of (x) consolidated net income (before interest
expense, provision for income tax, depreciation and amortization
expense and charges relating to reserves established in respect of
certain litigation) plus consolidated rental expense to (y)
consolidated interest expense plus consolidated rental expense plus
cash dividends declared by the Company with respect to its outstanding
capital stock, for the four quarter period ending on that date, to be
less than 2.1 to 1, and (3) may declare or pay dividends only if doing
so will not otherwise result in a default under the New Agreement and,
for any fiscal quarter, the dividends do not exceed the lesser of (a)
$0.12 per share (up to an aggregate total of $21,200,000) and (b) the
amount by which 40% of consolidated net earnings for the period from
February 28, 1994 through the relevant date of determination exceeds
the aggregate amount of dividends declared or paid from February 28,
1994 through such date. Furthermore, the aggregate amount of
dividends for the fiscal year ending May 31, 1994 may not exceed 40%
of consolidated net earnings (determined without giving effect to a
$250,000,000 accrual for certain litigation costs in the first quarter
of fiscal 1994, a $375,000,000 accrual for certain other litigation
costs in the third quarter of fiscal 1994, and the $60,121,000 income
attributable to the cumulative effect of a change in accounting for
income taxes) for such fiscal year.
See Note 8 of the Notes to Consolidated Condensed Financial
Statements.
Items 3., 4., and 5. are not applicable.
Page 19<PAGE>
<PAGE>
PART II. OTHER INFORMATION (Continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
(10) Material Contracts
(a) Asset Sale Agreement, dated March 29, 1994, by and between
National Medical Enterprises, Inc., as Seller, and Charter
Medical Corporation, as Buyer.
(b) Credit Agreement, dated as of April 13, 1994, among
National Medical Enterprises, Inc., the Banks parties
thereto, the Issuing Bank and Morgan Guaranty Trust
Company of New York, as Administrative Agent.
(c) Waiver and Amendment No. 2, dated as of April 13, 1994,
between MP Funding Corporation and the Borrowers parties
thereto.
(d) Waiver to Guaranty, dated as of April 13, 1994 between
National Medical Enterprises, Inc. and MP Funding
Corporation.
(e) Amendment No. 2 to Credit Agreement, dated as of April 13,
1994, among MP Funding Corporation, Credit Suisse, as
issuer, the Banks parties thereto and Credit Suisse, as
agent.
(f) Limited Waiver and Consent to First Amended and Restated
Letter of Credit and Reimbursement Agreement, dated as of
April 13, 1994, between National Medical Enterprises, Inc.
and The Sanwa Bank Limited, Dallas Agency.
(g) Second Amendment to Overdraft Financing Facility
Agreement, dated as of April 13, 1994, by and among Bank
of America National Trust and Savings Association,
National Medical Enterprises, Inc., and the corporations
listed on Exhibit A to the Agreement.
(h) First Amendment to Advance Account Agreement, dated as of
April 13, 1994, by and between National Medical
Enterprises, Inc. and Bank of America National Trust and
Savings Association.
(11) Statement Re: Computation of Per Share Earnings for
the three months and nine months ended February 28, 1994 and
1993.
(b) Reports on Form 8-K: None.
Page 20<PAGE>
<PAGE>
PART II. OTHER INFORMATION (Continued)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NATIONAL MEDICAL ENTERPRISES, INC.
(Registrant)
Date: April 14, 1994 /s/ RAYMOND L. MATHIASEN
Raymond L. Mathiasen
Senior Vice President,
Chief Financial Officer
Page 21<PAGE>
<PAGE>
Exhibit 11
NATIONAL MEDICAL ENTERPRISES, INC.
Statement Re: Computation of Per Share Earnings*
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 28,
1994 1993 1994 1993
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
FOR PRIMARY EARNINGS PER SHARE
Shares outstanding at beginning of period . . . 165,899 165,879 165,898 166,963
Shares issued upon exercise of stock options. . 22 5 21 23
Dilutive effect of outstanding stock options. . - 106 - 190
Shares issued as grants of restricted stock,
net of cancellations. . . . . . . . . . . . . (49) 10 (32) (46)
Shares repurchased as treasury stock. . . . . . - - - (987)
Weighted average number of shares
and share equivalents outstanding . . . . . . 165,872 166,000 165,887 166,143
Income from continuing operations before
cumulative effect of a change in accounting . $ 90,717 $ 65,053 $ 204,625 $ 193,469
Loss from discontinued operations . . . . . . . (255,000) $ (10,902) $ (696,000) $ (36,313)
Cumulative effect of a change in accounting . . - - $ 60,121 -
Net income (loss) . . . . . . . . . . . . . . . $ (164,283) $ 54,151 $ (431,254) $ 157,156
Earnings per share from continuing operations . $ 0.55 $ 0.39 $ 1.23 $ 1.16
Loss per share from discontinued operations . . (1.54) $ (0.06) $ (4.19) $ (0.21)
Earnings per share from a change in accounting. - - $ 0.36 -
Net . . . . . . . . . . . . . . . . . . . . . $ (0.99) $ 0.33 $ (2.60) $ 0.95
</TABLE>
<PAGE>
<PAGE>
Exhibit 11
NATIONAL MEDICAL ENTERPRISES, INC.
Statement Re: Computation of Per Share Earnings* (continued)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 28, February 28,
1994 1993 1994 1993
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
FOR FULLY DILUTED EARNINGS PER SHARE
Weighted average number of shares used in
primary calculation . . . . . . . . . . . . . 165,872 166,000 165,887 166,143
Effect of stock options . . . . . . . . . . . . - - - 16
Assumed conversion of dilutive convertible
notes and debentures . . . . . . . . . . . . 13,978 14,111 13,978 14,460
Fully diluted weighted average number of shares 179,850 180,111 179,865 180,619
Income from continuing operations
used in primary calculation . . . . . . . . . $ 90,717 $ 65,053 $ 204,625 $ 193,469
Adjustments for interest expense,
contractual allowances and income taxes . . . 1,648 1,118 4,139 3,571
Adjusted income from continuing operations
used in fully dilutive calculation. . . . . . $ 92,365 $ 66,171 $ 208,764 $ 197,040
Loss from discontinued operations used in
primary calculation . . . . . . . . . . . . . (255,000) $ (10,902) $ (696,000) $ (36,313)
Cumulative effect of a change in accounting
used in primary calculation . . . . . . . . . - - $ 60,121 -
Adjusted income (loss) used in fully dilutive
calculation . . . . . . . . . . . . . . . . . $ (162,635) $ 55,269 $ (427,115) $ 160,727
Earnings per share from continuing operations . $ 0.51 $ 0.37 $ 1.16 $ 1.09
Loss per share from discontinued operations** . (1.41) $ (0.06) $ (3.86) $ (0.20)
Earnings per share from a change in accounting. - - $ 0.33 -
Net** . . . . . . . . . . . . . . . . . . . . $ (0.90) $ 0.31 $ (2.37) $ 0.89
</TABLE>
* All shares in these tables are weighted on the basis of the number of
days the shares were outstanding or assumed to be outstanding during
each period.
** These calculations are submitted in accordance with Regulation S-K item
601(b)(11) although for the 1994 periods it is contrary to paragraph 40
of APB opinion No. 15 because it produces an anti-dilutive result.
<PAGE>
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EXECUTION COPY
ASSET SALE AGREEMENT
******
NATIONAL MEDICAL ENTERPRISES, INC.
As Seller
AND
CHARTER MEDICAL CORPORATION
As Buyer
Dated: March 29, 1994
<PAGE>
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ASSET SALE AGREEMENT
Table of Contents
PREAMBLE . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1. . . . . . . . . . . . 1
DEFINITIONS
Section 1.1 Certain Defined Terms . . . . . . . . . . . . 1
Section 1.2 Index of Other Defined Terms. . . . . . . . . 3
ARTICLE 2. . . . . . . . . . . . 7
BASIC TRANSACTIONS
Section 2.1 Purchased Assets. . . . . . . . . . . . . . . 7
Section 2.2 Excluded Assets . . . . . . . . . . . . . . . 12
Section 2.3 Assumed Liabilities . . . . . . . . . . . . . 14
Section 2.4 Excluded Liabilities. . . . . . . . . . . . . 16
Section 2.5 Purchase Price. . . . . . . . . . . . . . . . 18
Section 2.6 Payment of Purchase Price . . . . . . . . . . 19
(a) Payment of Tentative Purchase Price . . . . . 19
(b) Determination of Interim Net Book Values. . . 20
(c) Determination of Final Net Book Values. . . . 21
(d) Seller as Agent of Subsidiaries . . . . . . . 22
Section 2.7 Allocation of Purchase Price. . . . . . . . . 23
Section 2.8 Contingent Lease Obligations. . . . . . . . . 23
Section 2.9 Remittances and Receivables . . . . . . . . . 24
(a) In General. . . . . . . . . . . . . . . . . . 24
(b) Receivables . . . . . . . . . . . . . . . . . 25
(c) Straddle Patient Receivables. . . . . . . . . 27
(i) Cut-Off Billings . . . . . . . . . . . . 27
(ii) Cut-Off Billings Not Accepted. . . . . . 27
(d) Cooperation in Collecting Receivables
and Excluded Assets . . . . . . . . . . . . . 28
(e) Non-Assignable Receivables. . . . . . . . . . 28
(f) Collection Fee. . . . . . . . . . . . . . . . 29
Section 2.10 Employee Matters. . . . . . . . . . . . . . . 30
(a) Pension Plans . . . . . . . . . . . . . . . . 30
(i)
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(b) Retained Employees. . . . . . . . . . . . . . 30
(c) Hiring of Retained Employees. . . . . . . . . 32
(d) Health Benefits . . . . . . . . . . . . . . . 32
(e) Acknowledgement of Responsibility . . . . . . 33
Section 2.11 Use of Names. . . . . . . . . . . . . . . . . 34
Section 2.12 No Assignment If Breach; Seller's
Discharge of Assumed Liabilities. . . . . . . 35
Section 2.13 Closings. . . . . . . . . . . . . . . . . . . 38
(a) The First Closing . . . . . . . . . . . . . . 38
(b) The Second Closing. . . . . . . . . . . . . . 38
(c) The Final Closing . . . . . . . . . . . . . . 39
(d) Deliveries by Seller. . . . . . . . . . . . . 39
(e) Deliveries by Buyer . . . . . . . . . . . . . 40
(f) Escrow. . . . . . . . . . . . . . . . . . . . 41
Section 2.14 Purchase Price Adjustment . . . . . . . . . . 42
Section 2.15 Transfer of Assets in Corporate Form. . . . . 43
Section 2.16 Assignment of Rights and Obligations
to Buyer Subsidiaries . . . . . . . . . . . . 44
Section 2.17 Certain Other Assets and Liabilities. . . . . 45
Section 2.18 Rejection of Certain Contracts. . . . . . . . 46
Section 2.19 Remaining Schedules . . . . . . . . . . . . . 48
ARTICLE 3. . . . . . . . . . . . 48
REPRESENTATIONS AND WARRANTIES OF SELLER
Section 3.1 Organization and Corporate Power. . . . . . . 48
Section 3.2 Subsidiaries. . . . . . . . . . . . . . . . . 48
Section 3.3 Authority Relative to this Agreement. . . . . 50
Section 3.4 Absence of Breach . . . . . . . . . . . . . . 50
Section 3.5 Private Party Consents. . . . . . . . . . . . 51
Section 3.6 Governmental Consents . . . . . . . . . . . . 51
Section 3.7 Brokers . . . . . . . . . . . . . . . . . . . 52
Section 3.8 Title to Property . . . . . . . . . . . . . . 52
Section 3.9 Assumed Contracts . . . . . . . . . . . . . . 53
Section 3.10 Licenses. . . . . . . . . . . . . . . . . . . 54
Section 3.11 U.S. Person; Resident of Georgia. . . . . . . 54
Section 3.12 Employee Relations. . . . . . . . . . . . . . 55
Section 3.13 Employee Plans. . . . . . . . . . . . . . . . 55
Section 3.14 Litigation. . . . . . . . . . . . . . . . . . 56
Section 3.15 Inventory . . . . . . . . . . . . . . . . . . 56
(ii)
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Section 3.16 Hazardous Substances . . . . . . . . . . . . 57
Section 3.17 Financial Information . . . . . . . . . . . . 58
Section 3.18 Changes Since Balance Sheet . . . . . . . . . 60
Section 3.19 Transferred Business Names. . . . . . . . . . 61
Section 3.20 Compliance with Laws and Accreditation. . . . 62
Section 3.21 Cost Reports, Third Party Receivables and
Conditions of Participation . . . . . . . . . 63
Section 3.22 Medical Staff . . . . . . . . . . . . . . . . 63
Section 3.23 Hill-Burton Care. . . . . . . . . . . . . . . 64
Section 3.24 Assets Used in the Operation of the
Facilities. . . . . . . . . . . . . . . . . . 64
Section 3.25 Taxes . . . . . . . . . . . . . . . . . . . . 64
Section 3.26 Lists of Other Data . . . . . . . . . . . . . 64
Section 3.27 Certain Transactions. . . . . . . . . . . . . 65
ARTICLE 4. . . . . . . . . . . . 66
REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.1 Organization and Corporate Power. . . . . . . 66
Section 4.2 Buyer Subsidiaries. . . . . . . . . . . . . . 66
Section 4.3 Authority Relative to this Agreement. . . . . 67
Section 4.4 Absence of Breach . . . . . . . . . . . . . . 68
Section 4.5 Private Party Consents. . . . . . . . . . . . 68
Section 4.6 Governmental Consents . . . . . . . . . . . . 68
Section 4.7 Brokers . . . . . . . . . . . . . . . . . . . 69
Section 4.8 Qualified for Licenses. . . . . . . . . . . . 69
Section 4.9 Financial Ability to Perform. . . . . . . . . 69
Section 4.10 No Knowledge of Seller's Breach . . . . . . . 69
Section 4.11 No Assurance. . . . . . . . . . . . . . . . . 69
ARTICLE 5. . . . . . . . . . . . 70
COVENANTS OF EACH PARTY
Section 5.1 Efforts to Consummate Transactions. . . . . . 70
Section 5.2 Cooperation; Regulatory Filings . . . . . . . 71
Section 5.3 Further Assistance. . . . . . . . . . . . . . 72
Section 5.4 Cooperation Respecting Proceedings. . . . . . 72
Section 5.5 Expenses. . . . . . . . . . . . . . . . . . . 72
Section 5.6 Announcements; Confidentiality. . . . . . . . 74
(iii)
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Section 5.7 Preservation of and Access to Certain Records 76
ARTICLE 6. . . . . . . . . . . . 78
ADDITIONAL COVENANTS OF SELLER
Section 6.1 Conduct Pending Closing . . . . . . . . . . . 78
Section 6.2 Access and Information; Environmental
Survey; Remediation or Adjustment . . . . . . 80
Section 6.3 Updating. . . . . . . . . . . . . . . . . . . 83
Section 6.4 No Solicitation . . . . . . . . . . . . . . . 84
Section 6.5 Name Changes. . . . . . . . . . . . . . . . . 84
Section 6.6 Filing of Cost Reports. . . . . . . . . . . . 85
Section 6.7 Purchase of Supplies. . . . . . . . . . . . . 85
Section 6.8 Covenant Not to Compete . . . . . . . . . . . 85
(a) Covenant. . . . . . . . . . . . . . . . . . . 85
(b) Exceptions. . . . . . . . . . . . . . . . . . 86
(i) Psychiatric Facilities and Contracts Not
Acquired By Buyer . . . . . . . . . . . 86
(ii) Facilities Outside Geographic Area . . . 86
(iii) Acute Hospitals. . . . . . . . . . . . . 87
(iv) Divestiture of Acquired Psychiatric
Facilities . . . . . . . . . . . . . . . 87
(v) Acquired Entities . . . . . . . . . . . 87
(c) Acute Hospital Affiliations . . . . . . . . . 88
(d) Covenant Period . . . . . . . . . . . . . . . 89
(e) Severability. . . . . . . . . . . . . . . . . 89
(f) Injunctive Relief . . . . . . . . . . . . . . 90
(g) Value . . . . . . . . . . . . . . . . . . . . 90
Section 6.9 Audited Statements. . . . . . . . . . . . . . 90
Section 6.10 Post-Closing Insurance. . . . . . . . . . . . 91
Section 6.11 Use of Controlled Substance Licenses. . . . . 91
Section 6.12 Non-Disturbance Agreements. . . . . . . . . . 91
ARTICLE 7. . . . . . . . . . . . 92
ADDITIONAL COVENANTS OF BUYER
Section 7.1 Waiver of Bulk Sales Law Compliance . . . . . 92
Section 7.2 Resale Certificate. . . . . . . . . . . . . . 92
Section 7.3 Cost Reports and Audit Contests . . . . . . . 92
Section 7.4 Tax Matters . . . . . . . . . . . . . . . . . 92
(iv)
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Section 7.5 Letters of Credit 94
Section 7.6 Conduct Pending Closing . . . . . . . . . . . 94
Section 7.7 Securities Offerings. . . . . . . . . . . . . 94
ARTICLE 8. . . . . . . . . . . . 95
BUYER'S CONDITIONS TO CLOSING
Section 8.1 Performance of Agreement. . . . . . . . . . . 95
Section 8.2 Accuracy of Representations and Warranties. . 95
Section 8.3 Officers' Certificate . . . . . . . . . . . . 95
Section 8.4 Consents. . . . . . . . . . . . . . . . . . . 95
Section 8.5 Absence of Injunctions. . . . . . . . . . . . 96
Section 8.6 Opinion of Counsel. . . . . . . . . . . . . . 97
Section 8.7 Title to Real Property. . . . . . . . . . . . 97
Section 8.8 Receipt of Other Documents. . . . . . . . . . 99
Section 8.9 Licenses and Permits. . . . . . . . . . . . . 99
Section 8.10 Casualty; Condemnation. . . . . . . . . . . . 100
Section 8.11 Reasonable Assurances . . . . . . . . . . . . 101
Section 8.12 Certain Events. . . . . . . . . . . . . . . . 101
ARTICLE 9. . . . . . . . . . . . 102
SELLER'S CONDITIONS TO CLOSING
Section 9.1 Performance of Agreement. . . . . . . . . . . 102
Section 9.2 Accuracy of Representations and Warranties. . 102
Section 9.3 Officers' Certificate . . . . . . . . . . . . 102
Section 9.4 Consents. . . . . . . . . . . . . . . . . . . 102
Section 9.5 Absence of Injunctions. . . . . . . . . . . . 103
Section 9.6 Opinion of Counsel. . . . . . . . . . . . . . 104
Section 9.7 Receipt of Other Documents. . . . . . . . . . 104
ARTICLE 10. . . . . . . . . . . . 105
TERMINATION
Section 10.1 Termination . . . . . . . . . . . . . . . . . 105
Section 10.2 Effect of Termination . . . . . . . . . . . . 105
(v)
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ARTICLE 11. . . . . . . . . . . . 106
SURVIVAL AND REMEDIES; INDEMNIFICATION
Section 11.1 Survival. . . . . . . . . . . . . . . . . . . 106
Section 11.2 Exclusive Remedy. . . . . . . . . . . . . . . 106
Section 11.3 Indemnity by Seller . . . . . . . . . . . . . 107
Section 11.4 Indemnity by Buyer. . . . . . . . . . . . . . 110
Section 11.5 Further Qualifications Respecting
Indemnification . . . . . . . . . . . . . . . 112
Section 11.6 Procedures Respecting Third Party Claims. . . 112
ARTICLE 12. . . . . . . . . . . . 113
GENERAL PROVISIONS
Section 12.1 Notices . . . . . . . . . . . . . . . . . . . 113
Section 12.2 Attorneys' Fees . . . . . . . . . . . . . . . 115
Section 12.3 Successors and Assigns. . . . . . . . . . . . 115
Section 12.4 Counterparts. . . . . . . . . . . . . . . . . 115
Section 12.5 Captions and Paragraph Headings . . . . . . . 115
Section 12.6 Entirety of Agreement; Amendments . . . . . . 115
Section 12.7 Construction. . . . . . . . . . . . . . . . . 116
Section 12.8 Waiver. . . . . . . . . . . . . . . . . . . . 116
Section 12.9 Governing Law . . . . . . . . . . . . . . . . 116
Section 12.10 Severability. . . . . . . . . . . . . . . . . 117
Section 12.11 Consents Not Unreasonably Withheld. . . . . . 117
Section 12.12 Time Is of the Essence. . . . . . . . . . . . 117
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 118
(vi)
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EXHIBITS
A. Forms of Bill of Sale and Assignment
B. Form of Assignments with Respect to
Real Property Leases
C. Forms of Assumption Agreement
D. Form of Purchasing Contract
E. Remaining Schedules
LIST OF SCHEDULES
A-1 Subsidiaries and Their
Respective States of Incorporation;
Ownership of Subsidiary Stock
A-2 Facilities
2.1(a) Real property owned in fee by Subsidiaries
2.1(b) Real Property Leases
2.1(c) Venture Agreements
2.1(f) Other Assigned Contracts
2.1(h) Transferred Business Names
2.1(k) Prepayments
2.2(j) Other Excluded Assets
2.3(a) Capitalized Leases and Capitalized Lease
Liabilities
2.3(f) Other Assumed Liabilities
(viii)
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2.4(i) Indebtedness
2.4(j) Other Excluded Liabilities
2.7 Allocation Schedule
2.10(a) Pension Plans
2.12(c) Schedule of Required Consents
2.13A Core Facilities
2.13B Assigned EBITDA
2.17 PHIS System Assets, Liabilities and Rates
3.5 Private Party Consents
3.7 Seller's Brokers
3.8(a) Liens
3.8(b)(i) Other Real Property
and
3.8(b)(ii)
3.9 Assumed Contracts
3.10 Licenses
3.12 Certain Employee Relations Matters
3.14 Litigation
3.16 Environmental Matters
3.17(a) EBITDA Statements
3.17(b) Balance Sheet
3.18 Changes Since Balance Sheet
(ix)
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3.19 Conflicts With Transferred Business Names
3.20 Compliance With Laws and Accreditations
3.21 Cost Reports, Third Party Receivables and Conditions
of Participation
3.22 Medical Staff
3.23 Hill-Burton Care
3.24 Assets Used in the Operation of the Facilities
3.26(a) Depreciation Schedules
3.26(b) Insurance
3.26(c) Employee Benefit Arrangements
3.26(d) Paid Time Off
3.26(e) Certain Contracts
3.26(f) Certain Indebtedness
3.26(g) Certain Financing Arrangements
3.26(h) Certain Contracts Related to Liens
3.27 Certain Transactions
4.5 Private Party Consents
4.7 Buyer's Brokers
4.11 Certain Scheduled Meetings
6.1 Exceptions to Conduct
6.7 National Purchasing Contracts
(x)
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7.5 Letters of Credit
6.8(c) Specified Acute Hospitals
8.7(b) Disapproved Title Exceptions
(xi)
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ASSET SALE AGREEMENT
This ASSET SALE AGREEMENT (the "Agreement") is made and entered into as
of the 29th day of March 1994 by and among NATIONAL MEDICAL ENTERPRISES, INC.,
a Nevada corporation ("Seller"), the Subsidiaries (as defined) and CHARTER
MEDICAL CORPORATION, a Delaware corporation ("Buyer"), with reference to the
following facts:
A. Through wholly-owned subsidiary corporations identified on Schedule
A-1 hereto (the "Subsidiaries"), Seller engages in the business of delivering
psychiatric health care services to the public through the inpatient,
outpatient and substance abuse recovery facilities, residential treatment
centers and medical office buildings identified in Schedule A-2 (the "Facili-
ties").
B. Buyer desires to purchase from the Subsidiaries, through wholly-
owned subsidiaries of the Buyer (each, a "Buyer Subsidiary" and collectively,
the "Buyer Subsidiaries"), and Seller desires to cause the Subsidiaries to sell
to the applicable Buyer Subsidiaries, such Facilities together with related
assets (the "Transactions").
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, do hereby agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1 Certain Defined Terms. For purposes of this Agreement, the
following terms shall have the following meanings:
"Affiliate" of a specified person shall mean any corporation,
partnership, sole proprietorship or other person or entity which directly or
indirectly through one or more intermediaries controls, is controlled by or is
under common control with the person specified. The term "control" means the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a person or entity. The term "Affiliate"
shall include, without limitation, (i) with respect to Seller, each Subsidiary,
and (ii) with respect to Buyer, each Buyer Subsidiary.
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"Cost Report" means the cost report required to be filed, as of the
end of a provider cost year or for any other required period, with cost-based
Payors with respect to cost reimbursement.
"Environmental Law" shall mean any Law regulating or otherwise
relating to Hazardous Materials, the environment, natural resources, pollution,
environmental protection, waste management, industrial hygiene, health, or
safety.
"Hazardous Materials" means any chemicals, materials, substances,
or items in any form, whether solid, liquid, gaseous, semisolid, or any
combination thereof, whether waste materials, raw materials, chemicals,
finished products, by-products, or any other materials or articles, which are
regulated by or form the basis of liability under any Environmental Laws,
including, without limitation, any hazardous waste, medical waste, biohazardous
waste, industrial waste, special waste, solid waste, hazardous substance,
pollutant, hazardous air pollutant, contaminant, asbestos, polychlorinated
biphenyls ("PCBs"), petroleum (including, but not limited to, petroleum-derived
substances, waste or breakdown or decomposition products thereof, or any
fraction thereof), coal (including, but not limited to, coal-derived
substances, waste or breakdown or decomposition products thereof, or any
fraction thereof), natural gas (including, but not limited to, natural gas-
derived substances, waste or breakdown or decomposition products thereof, or
any fraction thereof), formaldehyde, industrial solvents, flammables,
explosives, and radioactive substances.
"knowledge" of a party shall mean the best of the knowledge of any
person who serves as of the date of this Agreement as a duly elected officer
of such party.
"Laws" shall mean all statutes, rules, regulations, ordinances,
orders, codes, permits, licenses and agreements with or of federal, state,
local and foreign governmental and regulatory authorities and any order, writ,
injunction, settlement agreement or decree issued or approved by any court,
arbitrator or governmental agency or in connection with any judicial,
administrative or other non-judicial proceeding (including, without limitation,
arbitration or reference).
- 2 -
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"Licenses" shall mean certificates of need, accreditations,
registrations, licenses, permits and other consents or approvals of govern-
mental agencies or accreditation organizations.
"Payor" shall mean Medicare, Medicaid, CHAMPUS and Medically
Indigent Assistance programs, Blue Cross, Blue Shield or any other third party
payor (including an insurance company and self-insured employer), or any health
care provider (such as a health maintenance organization, preferred provider
organization, peer review organization, or any other managed care program).
"Release" means any release, spill, emission, leaking, pumping,
emptying, dumping, injection, abandonment, deposit, disposal, discharge,
dispersal, leaching, or migration of Hazardous Materials (including, but not
limited to, the abandonment or discarding of Hazardous Materials in barrels,
drums, or other containers) into or within the environment, including, without
limitation, the migration of Hazardous Materials into, under, on, through, or
in the air, soil, subsurface strata, surface water, groundwater, drinking water
supply, any sediments associated with any water bodies, or any other
environmental medium, regardless of where such migration originates.
"Taxes" shall mean (i) all federal, state, county and local sales,
use, property, recordation and transfer taxes, (ii) all state, county and local
taxes, levies, fees, assessments or surcharges (however designated, including
privilege taxes, room or bed taxes and user fees) which are based on the gross
receipts, net operating revenues or patient days of a Facility for a period
ending on, before or including the relevant Closing Date (as defined in Section
2.13) or a formula taking any one of the foregoing into account, and (iii) any
interest, penalties and additions to tax attributable to any of the foregoing,
but shall not include income and other taxes described in Sections 2.4(a) and
(b).
Section 1.2 Index of Other Defined Terms. In addition to those terms
defined above, the following terms shall have the respective meanings given
thereto in the sections indicated below:
Defined Term Section
Account Parties 2.9(b)
Accrued Operating Assets 2.5(b)
- 3 -
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Accrued Operating Expenses 2.3(g)
Acquired Acute Hospitals 6.8(c)
Acquisition Date 6.8(c)
Acute Hospitals 6.8(b)(iii)
Adjustment Sections 2.14
Agreement Preamble
Allocation Schedule 2.7
Assumed Contracts 2.3(a)
Assumed Guaranties 2.3(a)
Assumed Liabilities 2.3
Balance Sheet 3.17(b)
Buyer Preamble
Buyer Subsidiary Preamble
Charter Documents 3.4
Claim Notice 11.6
Closing Date 2.13
COBRA 2.10(d)
Code 3.11
Competing Business 6.8(a)
Consents 8.5
Consultant 6.2(b)
Contingent Contract 2.18
Cost Report Settlements 2.2(i)
Covenant Period 6.8(d)
Covered Facilities 6.8(b)(ii)
Covered Parties 6.8(a)
Deductible Amount 11.3(b)(i)(B)
Document Retention Period 5.7(b)
EBITDA 3.17(a)
EBITDA Statements 3.17(a)
Eligible Receivables 2.9(b)(ii)
Employee Benefit Arrangements 3.26(c)
Environmental Survey 6.2(b)
Equipment 2.1(d)
ERISA 2.10(a)
Escrow Agent 2.13(f)
Estimated Net Book Values 2.6(a)
Excluded Assets 2.2
Excluded Liabilities 2.4
Exempted Competing Business 6.8(c)
Facilities Recitals
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Final Closing 2.13
Final Closing Date 2.13
Final Net Book Values 2.6(c)
Financial Schedule 3.17(b)
First Closing 2.13
Hired Employees 2.10(c)
Hospital Records 5.7(a)
HSR Act 3.4
Indemnitee 11.5
Indemnitor 11.5(a)
Insurance Program 6.10
Intercompany Transactions 2.1(f)(y)
Interim Net Book Values 2.6(b)
Inventory 2.1(e)
JCAHO 3.20
Leased Real Property 2.1(b)
Loan Commitment Agreements 2.1(f)
Loan Commitment Notes 2.1(f)
Losses 11.3(a)
Manuals 2.11(b)
Material Adverse Effect 3.4
Multiemployer Plans 2.10(a)
Net Book Values 2.5(b)
1993 EBITDA 2.13(b)
Other Assigned Contracts 2.1(f)
Original Closing Date 2.14
Owned Real Property 2.1(a)
Paid Time Off 2.3(c)
Panel 2.14
Patient Records 5.7(a)
Pension Plans 2.10(a)
Permitted Encumbrances 3.8(a)
Permitted Expansions 6.8(b)(iv)
PHIS System 2.17
Prepayments 2.1(k)
Purchase Price 2.5
Real Property Leases 2.1(b)
Receivables 2.1(l)
Related Agreements 3.4
Reorganization 6.8(b)(v)
Retained Employees 2.10(b)(iii)
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Schedule of Required Consents 2.12(c)
Scheduled Closing 2.13
Second Closing 2.13
Seller Preamble
Specified Acute Hospital 6.8(c)
Specified Capacity 6.8(a)
Straddle Patients 2.9(c)
Straddle Patient Payments 2.9(c)(ii)
Subject Transferred Assets 2.13
Subsidiaries Recitals
TEFRA 2.9(c)(ii)
Tentative Purchase Price 2.6(a)
Termination Date 10.1(b)
Third Party Claims 11.5(a)
Title Insurer 8.7
Title Policies 8.7
Transactions Recitals
Transferred Business Names 2.1(h)
Trigger Amount 11.3(b)(i)(B)
Unusual Proceedings 3.14
Venture Agreements 2.1(c)
Ventures 2.1(c)
WARN Act 2.10(e)
Working Capital Adjustment Date 2.6(c)
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ARTICLE 2
BASIC TRANSACTIONS
Section 2.1 Purchased Assets. On the terms and subject to the
conditions contained in this Agreement, Buyer shall, or shall cause the
applicable Buyer Subsidiary to, purchase from each Subsidiary, and Seller shall
cause each Subsidiary to sell, convey, assign, transfer and deliver to Buyer
or the applicable Buyer Subsidiary, the following assets of each such
Subsidiary that are used in and necessary for the conduct of the operations of
the Facilities (the "Transferred Assets"), but excluding all Excluded Assets
as defined in Section 2.2:
(a) All of the Subsidiary's right, title and interest in and to
the real property owned in fee (the "Owned Real Property") that is identified
in Schedule 2.1(a) on which Facilities are located and all other real property
owned in fee by the Subsidiary and used in and necessary for the conduct of the
operations of the Facilities, together with the Facilities, construction work-
in-progress, and all other buildings, fixtures and improvements thereon, and
all rights, privileges, permits and easements appurtenant thereto.
(b) All of the Subsidiary's right, title and interest, as lessee
or sublessee, in and to the leasehold estates and the related lease or sublease
agreements (the "Real Property Leases") respecting land, Facilities, buildings,
fixtures and real property improvements (whether owned or leased) (the "Leased
Real Property") identified in Schedule 2.1(b), together with all construction
work-in-progress in respect of same and all rights, privileges and easements
appurtenant thereto.
(c) All of the Subsidiary's right, title and interest in and to
the joint ventures or partnerships identified in Schedule 2.1(c) hereto (the
"Ventures") that relate to partnerships or joint ventures that own or lease
Facilities or other Transferred Assets, together with all of the Subsidiary's
right, title and interest in and to the joint venture or partnership agree-
ments, also identified in such Schedule (the "Venture Agreements"), that govern
such partnerships or joint ventures, and, subject to the provisions of Section
7.6, in and to all distributions and allocations which the Subsidiary is
entitled to receive as of the relevant Scheduled Closing (as defined in Section
2.13).
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(d) All of the Subsidiary's right, title and interest in and to
fixed machinery and equipment, other fixtures and fittings, moveable plant,
machinery, equipment and furniture, trucks, tractors, trailers and other
vehicles, tools and other similar items of tangible personal property (collec-
tively "Equipment") (i) that are not consumed, disposed of or held for sale or
as inventory in the ordinary course of business, (ii) that are used, owned,
held or leased by the Subsidiary as of the relevant Scheduled Closing, and
(iii) that are used in and necessary for the conduct of the operations of the
Facilities.
(e) All of the Subsidiary's right, title and interest in and to
inventories of supplies, drugs, food, janitorial and office supplies, mainte-
nance and shop supplies, and other similar items of tangible personal property
intended to be consumed, disposed of or sold in the ordinary course of business
(collectively, the "Inventory") that are used, owned or held by the Subsidiary
as of the relevant Scheduled Closing and that are used by the Subsidiary in and
necessary for the conduct of the operations of the Facilities.
(f) All of the Subsidiary's right, title and interest in and to
all written contracts and agreements (the "Other Assigned Contracts") to which
the Subsidiary is a party at the relevant Scheduled Closing, other than the
Real Property Leases and the Venture Agreements, (i) that are listed on
Schedule 2.1(f), (ii) pursuant to which the Subsidiary paid or received less
than $25,000 during its last fiscal year or pursuant to which it expects to pay
or receive less than $25,000 during its current fiscal year, or (iii) with
respect to Other Assigned Contracts not described in clauses (i) or (ii) above,
for which Buyer has not provided Seller with written notice of its rejection
of such contract or agreement within sixty (60) days following the relevant
Scheduled Closing, provided that the Other Assigned Contracts shall not include
any contract or agreement that relates to or covers healthcare facilities or
operations of Seller other than the Facilities that are being sold, assigned,
transferred or conveyed at such relevant Scheduled Closing except to the extent
the portion of such contract or agreement related to such Facilities may be
assigned together with the sale, assignment, transfer or conveyance of such
Facilities. Schedule 2.1(f) contains a list by Facility of the following
categories of Other Assigned Contracts pursuant to which a Subsidiary paid or
received $25,000 or more during its last fiscal year or expects to pay or
receive $25,000 or more during its current fiscal year: construction contracts
relating to construction work-in-progress at the Facilities; Equipment
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leases (whether operating or capitalized leases) and installment purchase
contracts where the annualized lease or installment payments exceed $25,000;
contracts or arrangements binding on a Facility which contain any covenant not
to compete or otherwise significantly restrict the nature of the business
activities in which the Facility may engage; provider agreements with Payors
other than Medicare and Medicaid (as defined in Section 1.1); bridge and other
loan commitment agreements (the "Loan Commitment Agreements") pursuant to which
a Subsidiary has agreed to provide advances or income guarantees from time to
time to lessors or sublessors under the Real Property Leases or to healthcare
professionals, groups or entities providing services to the Facilities,
together with promissory notes (the "Loan Commitment Notes") evidencing amounts
owed to the Subsidiary as a result of any such advances or guarantees;
agreements with healthcare professionals; leases as lessor or sublessor; and
any other contracts in force pursuant to which the Subsidiary paid or received
over $25,000 during its last fiscal year or expects to pay or receive $25,000
or more during its current fiscal year. Notwithstanding the foregoing, the
Other Assigned Contracts shall not include and Schedule 2.1(f) need not
contain:
(w) Any contract which evidences indebtedness for money
borrowed or the deferred portion of the purchase price for Owned Real
Property and is therefore an Excluded Liability under the provisions of
Section 2.4(i), unless the parties mutually agree, in accordance with the
provisions of such Section 2.4(i), that such indebtedness will be assumed
by Buyer, in which case the contract or contracts evidencing such
indebtedness will be Transferred Assets, provided that if the
indebtedness evidenced by any such contract is secured by a lien on any
Transferred Asset, Seller shall cause such lien to be released at or
prior to the relevant Scheduled Closing unless Buyer agrees to assume
such indebtedness pursuant to Section 2.4(i);
(x) Any contract respecting an intercompany transaction
between the Subsidiary, on the one hand, and Seller or an Affiliate (as
defined in Section 1.1) of Seller, on the other, whether or not such
transaction relates to the provision of goods and services, tax sharing
arrangements, payment arrangements, intercompany charges or balances, or
the like ("Intercompany Transactions"), except that transactions arising
in connection with open purchase orders where the Seller has acted as an
intermediary for
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a Subsidiary and transactions between Seller or an Affiliate of Seller,
on the one hand, and the ventures and partnerships described in Section
2.1(c) that are not wholly owned by Seller and its Affiliates, on the
other hand, shall not be regarded as Intercompany Transactions;
(y) Employment contracts, if any, between the Subsidiary
or a Facility and the chief executive or chief financial officer of such
Facility, whether or not such officer is a Hired Employee (as defined in
Section 2.10(c)); and
(z) Collective bargaining agreements in respect of the
employees of a Facility, unless Buyer elects to assume such agreements
(it being understood, however, that nothing herein is intended to affect
Buyer's obligations with respect thereto, if any, under the National
Labor Relations Act).
(g) All of the Subsidiary's right, title and interest in and to
the right to receive mail and other communications addressed to Seller or the
Subsidiary insofar as such mail or other communication relates to the operation
of the Facilities after the relevant Scheduled Closing, or to Receivables,
Inventory, Prepayments or Accrued Operating Expenses (as herein defined).
(h) All of the Subsidiary's right, title and interest in and to
the business names set forth in Schedule 2.1(h) (the "Transferred Business
Names").
(i) All of the Subsidiary's right, title and interest in and to
Licenses (as defined in Section 1.1) in favor of the Subsidiary as of the
relevant Scheduled Closing that are related to, necessary for, or used in
connection with the operation of the Facilities transferred in such Scheduled
Closing as presently operated by the Subsidiary, provided that Licenses in
favor of the Subsidiary shall be included in the Transferred Assets only to the
extent they are lawfully transferable.
(j) All of the Subsidiary's right, title and interest in and to
unexpired warranties as of the relevant Scheduled Closing that are transferable
to Buyer which the Subsidiary has received from third parties with respect to
the Transferred Assets, including, but not limited to, such warranties as are
set forth in any construction agreement, lease agreement,
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equipment purchase agreement, consulting agreement or agreement for
architectural and engineering services.
(k) All of the Subsidiary's right, title and interest in and to
advance payments, prepayments, prepaid expenses, deposits and the like (i) made
by the Subsidiary or Seller on its behalf in the ordinary course of business
with respect to Subject Transferred Assets (as defined in Section 2.13) prior
to the relevant Scheduled Closing, (ii) which exist as of such Scheduled
Closing, (iii) with respect to which Buyer will receive the benefit after the
relevant Scheduled Closing, and (iv) which Buyer agrees to acquire (Buyer
hereby agreeing not to withhold such agreement unreasonably) (collectively,
"Prepayments"), which Prepayments are listed by Facility, category and
approximate amount as of November 30, 1993 (or a later date if mutually agreed
upon), in Schedule 2.1(k).
(l) Subject to the further provisions of Section 2.9, all of the
Subsidiary's right, title and interest as of the Closing in and to accounts
receivable recorded by the Subsidiary as an account receivable from Payors,
patients and other third parties (whether or not billed) arising from or in
connection with the operation of the Facilities, together with rights to
payment for services rendered through the relevant Closing Date to Straddle
Patients referred to in Section 2.9(c) (collectively, "Receivables"), provided
that any account receivable that would, under Sections 2.9(b)(ii)(B) or (C),
qualify as an "Eligible Receivable" as of the end of the month ending prior to
the relevant Scheduled Closing shall, at the option of Buyer, not be a
receivable included in the Scheduled Closing and shall be an Excluded Asset.
(m) All of the Subsidiary's right, title and interest in and to
the goodwill of the businesses evidenced by the Transferred Assets, and, except
for Excluded Assets, any and all other assets of the Subsidiary used in and
necessary for the conduct of the operations of the Facilities as conducted
prior to the relevant Scheduled Closing, whether or not such assets have any
value for accounting purposes, provided that with respect to NME Hospitals,
Inc., NME Properties Corp., NME Psychiatric Properties, Inc., NME Specialty
Hospitals, Inc. and any subsidiary of NME Specialty Hospitals, Inc. (including,
without limitation, NME Psychiatric Hospitals, Inc.), only those assets
described in Section 2.1(a)-(l) above (other than Excluded Assets) shall be
included in the Transferred Assets.
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Section 2.2 Excluded Assets. The following properties and assets (the
"Excluded Assets") are not included in Transferred Assets:
(a) Except for the Inventory, Receivables, Prepayments and current
amounts represented by the Loan Commitment Notes, all assets constituting
working capital, whether cash, cash equivalents, securities, or other current
assets, and all claims, choses in action, rights of recovery, rights of set-
off, rights to refunds, and similar rights.
(b) Except for the Transferred Business Names, Licenses and Other
Assigned Contracts included in the Transferred Assets and except for manuals
relating to equipment and other tangible property included in the Transferred
Assets, all privileged or proprietary (to Seller or a Subsidiary) materials,
documents, information, media, methods and processes owned by Seller or a
Subsidiary, and any and all rights to use same, including, but not limited to,
all intangible assets of an intellectual property nature such as trademarks,
service marks and trade names (whether or not registered), computer software
that is proprietary to Seller or a Subsidiary, all procedures and manuals that
are proprietary to Seller or a Subsidiary, all promotional or marketing
materials (including all marketing computer software), and any and all names
under which the Subsidiaries or the Facilities have done business or offered
programs, other than the Transferred Business Names, and all abbreviations and
variations thereof, provided, however, that Buyer shall have the rights set
forth in Section 2.11.
(c) The rights of Seller or any Subsidiary under any insurance
policy, if any, included in the Transferred Assets which relate to any Excluded
Asset or Excluded Liability (as defined in Section 2.4) (it being understood,
however, that Buyer shall have no obligation to take any action under any such
policy to seek any recovery except at the reasonable request, and at the sole
expense, of Seller or a Subsidiary or to continue any such policies in force).
(d) The rights of Seller or of any Subsidiary to receive mail and
other communications addressed to any of them with respect to Excluded Assets
or Excluded Liabilities.
(e) Subject to the provisions of Section 5.7, any and all business
and patient records of or related to the operation of the Facilities, whether
or not maintained at or by the Facilities.
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(f) All property, plant, equipment and other assets pertaining to
the psychiatric healthcare business of Seller or any subsidiary of Seller that
relate primarily to any general hospital, acute hospital or so-called "campus
facility" of Seller or any subsidiary of Seller and all outpatient facilities
and other assets primarily related thereto.
(g) Any and all contracts and agreements pursuant to which a
Subsidiary provides management services to third parties other than a Facility,
except for such contracts and agreements as are specifically listed on Schedule
2.1(f).
(h) Subject to Sections 2.17 and 6.7, any and all rights
respecting computer and data processing hardware or firmware that is
proprietary to Seller or any Affiliate of Seller, and any computer and data
processing hardware or firmware, whether or not located at a Facility, that is
part of a computer system the central processing unit for which is not located
at a Facility.
(i) All of the right, title and interest of Seller and the
Subsidiaries in assets resulting from any resolution with Payors of amounts due
with respect to Cost Reports ("Cost Report Settlements") to the extent such
Cost Reports cover any period through the relevant Scheduled Closing with
respect to a Facility and other rights of Seller respecting Cost Reports
described in Section 6.6, including any assets or liabilities resulting from
any gain or loss on the sale of the Facilities in connection with the
Transactions.
(j) (i) All amounts due to the Subsidiaries arising from
Intercompany Transactions, and (ii) such other assets, if any, specifically
described in Schedule 2.2(j) and assets which would be Transferred Assets
except for the operation of Sections 2.12, 6.2(c), 8.5, 8.7 or 9.5 or other
provisions of this Agreement.
(k) All "800" telephone lines and related Equipment and contract
rights and all advertising containing any name other than a Transferred
Business Name.
Seller shall remove at any time prior to or within thirty (30) days following
the relevant Closing Date or, with respect to the Hospital Records (as defined
in Section 5.7(a)), Seller may remove from time to time within the relevant
Document Retention Period (as defined in Section 5.7(b))
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(in each case, at Seller's expense, but without charge by Buyer for storage),
any and all of the Excluded Assets from the Facilities, provided that Seller
shall do so in a manner that does not unduly or unnecessarily disrupt Buyer's
normal business activities at the Facilities.
Section 2.3 Assumed Liabilities. Subject to the terms and conditions
set forth in this Agreement, Buyer shall assume and pay, discharge and perform
as and when due only the following obligations and liabilities of Seller and
the Subsidiaries and no others (the "Assumed Liabilities"), as such obligations
and liabilities may exist at the time they are assumed by Buyer in accordance
with the terms hereof:
(a) All liabilities and obligations of the Subsidiaries which
pertain to or are to be performed during the period following the relevant
Closing Date, and which arise under any contract, license, permit, agreement,
arrangement, understanding or undertaking included in the Transferred Assets,
including the Real Property Leases, the Venture Agreements, the Other Assigned
Contracts and the Licenses, and any obligation or liability (the "Assumed
Guarantees") of Seller or any Affiliate of Seller (including letters of credit
and performance bonds) which is in the nature of a guaranty of the foregoing
(together, the "Assumed Contracts"), including without limitation, the
capitalized lease liabilities and obligations listed on Schedule 2.3(a).
(b) Without affecting the provisions of Sections 2.1(k), 2.6(a),
2.6(b) or 2.6(c), all liabilities and obligations under open purchase orders
at a Facility included in the Subject Transferred Assets that were entered into
by Seller or a Subsidiary in the ordinary course of business with respect to
operation of such Facility on or prior to the relevant Closing Date and which
provide for the delivery of goods or services subsequent to the relevant
Closing Date.
(c) All obligations and liabilities to any Hired Employee for paid
time off that is vested and with respect to which the Hired Employee would be
entitled to payment upon termination of his or her employment with Seller or
an Affiliate of Seller (including, for all purposes of this Agreement, "old
paid days leave," "paid time off," sick leave and vacation pay to the extent
that they are vested rights that are subject to payment upon termination of
employment; collectively, "Paid Time Off") through the relevant Closing Date
in accordance with the employment policies of Seller and its Affiliates as they
exist on the date of this Agreement;
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provided that if Seller satisfies any portion of such obligations and
liabilities existing at the relevant Scheduled Closing by payment to a Hired
Employee, then such payment shall be treated as a reduction of Accrued
Operating Expenses (as defined in Section 2.3(g)).
(d) Without limiting Seller's representations and warranties
contained in Article 3 or Buyer's rights under Article 11 for a breach thereof,
all liabilities and obligations respecting any changes or improvements needed
to the Facilities for them to be in material compliance following the relevant
Scheduled Closing with respect to such Facilities with safety, building, fire,
land use, access (including without limitation the Americans With Disabilities
Act) or similar Laws (as defined in Section 1.1) respecting the physical
condition of the Facilities.
(e) All liabilities and obligations respecting employee matters
assumed by Buyer pursuant to the provisions of Section 2.10.
(f) Any liability or obligation which becomes an Assumed Liability
by operation of Section 2.4(i) and such other liabilities and obligations, if
any, specifically described in Schedule 2.3(f).
(g) Any accrued and unpaid liabilities (whether or not due) of the
Subsidiaries in existence on the relevant Scheduled Closing Date which relate
to the Facilities, which were incurred in the ordinary course of the operation
of the Facilities and which represent (i) trade payables incurred to suppliers
of goods or services; (ii) water, gas, electricity and other utility charges;
(iii) license fees; (iv) rent, common area maintenance charges, operating
expenses and other charges arising under the Real Property Leases; (v)
insurance premiums (but only with respect to policies that will be continued
in force by Buyer after the relevant Scheduled Closing); (vi) salaries and
other payroll costs respecting Hired Employees accrued in accordance with the
normal accounting practices of Seller and the Subsidiaries (but not including
bonuses or other incentive compensation or accrued benefits with respect to
benefit plans that are not assumed by Buyer); (vii) Taxes, except for Taxes
referred to in Section 5.5 relating to expenses of the Transactions and payroll
taxes respecting employees who are not Hired Employees; and (viii) similar
liabilities incurred in the ordinary course of the operation of the Facilities
and customarily recorded as a current liability, other than the current portion
of long-term liabilities and obligations (the liabilities referred to in this
Section 2.3(g), together
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with the liabilities and obligations for Paid Time Off assumed under Section
2.3(c), being herein referred to as "Accrued Operating Expenses").
Section 2.4 Excluded Liabilities. The parties agree that liabilities
and obligations of Seller and the Subsidiaries not expressly described in
Section 2.3 as Assumed Liabilities are not part of the Assumed Liabilities, and
Buyer shall not assume or become obligated with respect to any other obligation
or liability of Seller or any Subsidiary or any Affiliate of either of any
nature whatsoever (whether express or implied, fixed or contingent, liquidated
or unliquidated, known or unknown, accrued, due or to become due)
(collectively, "Excluded Liabilities"), including, but not limited to, the
liabilities and obligations described in this Section, all of which shall
remain the sole responsibility of Seller or the pertinent Subsidiary or
Affiliate, as the case may be. Without limiting the generality of the
foregoing, Buyer shall not assume and shall have no liability or obligation of
any kind for or with respect to any of the following liabilities or
obligations:
(a) Subject to Section 5.5 respecting certain expenses incurred
in connection with the Transactions, any of Seller's or any of the Subsidiar-
ies' (or their respective Affiliates') liabilities or obligations (including,
but not limited to, any liabilities or obligations under any tax sharing agree-
ments) with respect to franchise taxes and with respect to foreign, federal,
state or local taxes imposed upon or measured, in whole or in part, by the
income for any period of Seller and/or such Subsidiaries or any member of a
combined or consolidated group of companies of which Seller and/or such
Subsidiaries are, or were at any time, a part, or with respect to interest,
penalties or additions to any of such taxes, and any income, franchise, tax
recapture, transfer tax, sales tax or use tax that may arise upon consummation
of the transactions contemplated by this Agreement and be due or payable by
Seller or any Subsidiary, it being understood that Buyer shall not be deemed
to be Seller's or any Subsidiary's transferee with respect to any such tax
liability.
(b) Any of Seller's or any of its Subsidiaries' or Affiliates'
liabilities or obligations with respect to the recapture of foreign, federal,
state or local tax deductions or credits taken by Seller or such Subsidiary
imposed upon, or any taxable gain recognized by, Seller or such Subsidiary on
account of the Transactions contemplated hereby.
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(c) Liabilities or obligations of Seller, its Affiliates or a
Subsidiary arising from the breach by Seller or such Subsidiary on or prior to
the relevant Closing Date of any term, covenant, or provision of any of the
Assumed Contracts.
(d) Liabilities or obligations of Seller, a Subsidiary or Seller's
Affiliates now existing or which may hereafter exist by reason of any violation
or alleged violation of Law or Laws by Seller or any of its Affiliates or by
a Subsidiary, or by an employee or independent contractor of any of the
foregoing where any of the foregoing is or is alleged to be responsible for the
acts or omissions of any such person, occurring on or prior to the relevant
Scheduled Closing Date.
(e) Liabilities or obligations of Seller or a Subsidiary now
existing or which may hereafter exist by reason of any liability to refund any
payment or reimbursement received by Seller or a Subsidiary from any Payor
which is attributable to any period of time ending on or prior to the relevant
Closing Date respecting such Facilities for which such payment or reimbursement
was received.
(f) Liabilities or obligations of Seller or a Subsidiary under any
Assumed Contract which would be included in the Transferred Assets but for the
provisions of Section 2.12, unless Buyer is provided with the benefits
thereunder as contemplated in Section 2.12.
(g) Liabilities of Seller and the Subsidiaries arising from or in
connection with litigation described in Section 3.14, including, but not
limited to, the Unusual Proceedings described therein, and any and all
liabilities or obligations of Seller and the Subsidiaries for claims for
personal injury (including sickness, trauma, disease, pain and suffering, loss
of future earnings, punitive damages and the like), property damage, and other
damage and injury in existence (i.e., all elements of the claim are complete)
at or prior to the relevant Scheduled Closing, whether or not any claim has
been made or litigation has been instituted with respect thereto and whether
or not any claim is covered partially or fully by insurance.
(h) Subject to Section 2.12, liabilities of Seller and the
Subsidiaries incurred in connection with their obtaining any consent,
authorization or approval necessary for them to sell, convey, assign, transfer
or deliver any Transferred Asset to Buyer hereunder.
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(i) Any liability of Seller or a Subsidiary representing
indebtedness for money borrowed or the deferred portion of the purchase price
for any Owned Real Property or Equipment (and any refinancing thereof),
including without limitation the indebtedness identified on Schedule 2.4(i);
provided that if, prior to the relevant Scheduled Closing, the parties mutually
agree that any such indebtedness or obligation will be assumed by Buyer and
further agree upon an equitable reduction in the cash portion of the Purchase
Price (as defined in Section 2.5) to reflect Buyer's assumption of such
indebtedness or obligation, then any such indebtedness or obligation will be
deemed to constitute an Assumed Liability for all purposes of this Agreement;
and provided further that with respect to any such indebtedness or obligation
not so assumed by Buyer that constitutes a lien or encumbrance upon any
Transferred Asset, Seller agrees that on or prior to the relevant Scheduled
Closing it will either pay or discharge such indebtedness or liability in full
or otherwise cause such lien or encumbrance to be removed from such Transferred
Asset, so that such Transferred Asset is sold, conveyed, assigned, transferred
and delivered to Buyer at such Scheduled Closing free and clear of such lien
or encumbrance.
(j) Such other liabilities and obligations, if any, specifically
described in Schedule 2.4(j) and liabilities which would be Assumed Liabilities
but for the provisions of Sections 2.12, 8.5, 8.7 or 9.5.
(k) Amounts due from the Subsidiaries arising from Intercompany
Transactions.
(l) Liabilities and obligations respecting Cost Report Settlements
to the extent such Cost Reports cover any period through the relevant Closing
Date and other obligations of Seller respecting Cost Reports described in
Section 6.6.
(m) Subject to Section 2.10(f), liabilities and obligations for
bonuses, other incentive compensation and benefits under benefit plans to the
extent not specifically included in Accrued Operating Expenses.
Section 2.5 Purchase Price. The purchase price (the "Purchase Price")
in the aggregate for all of the Transferred Assets shall be equal to the sum
of (a) One Hundred Forty-Eight Million Eight Hundred Seventy Thousand Dollars
($148,870,000), subject to such adjustments, if any, as may occur pursuant to
Sections 2.12, 2.14, 6.2(c), 8.5, 8.7, or 9.5 or other
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provisions of this Agreement, including the book value as of the relevant
Scheduled Closing of capitalized lease liabilities assumed and the value of any
assumption of debt pursuant to Section 2.4(i), plus (b) an amount equal to the
net book values as of the relevant Scheduled Closing of the Loan Commitment
Notes, Inventory, Receivables and Prepayments (collectively, "Accrued Operating
Assets") included in the Transferred Assets less Accrued Operating Expenses,
plus (c) an amount (determined on the basis of the Venture's balance sheet)
equal to the net book value as of the relevant Scheduled Closing of (i) the sum
of each Venture's current assets and distributions payable to partners or
venturers, less (ii) the sum of each such Venture's current liabilities,
indebtedness for money borrowed and capitalized lease liabilities, pro-rated
in each case to the equity percentage in such Venture held by Seller and the
Subsidiaries (the amounts in clauses (b) and (c) being referred to as the ("Net
Book Values"). In addition, at the First Closing, Buyer shall pay to Seller
the sum of Three Million Dollars ($3,000,000) for the covenant not to compete
described in Section 6.8.
Section 2.6 Payment of Purchase Price. That portion of the Purchase
Price due and payable for the Transferred Assets actually sold, assigned,
transferred and conveyed to Buyer and the applicable Buyer Subsidiaries
hereunder shall be paid as follows:
(a) Payment of Tentative Purchase Price. No less than five (5)
business days prior to each Scheduled Closing, Seller shall deliver to Buyer
a certificate executed on the Seller's behalf by a responsible officer setting
forth the Seller's estimate of what the Net Book Values will be as of such
Scheduled Closing for the Subject Transferred Assets (as defined in Section
2.13) (the "Estimated Net Book Values"), and additionally setting forth (i) the
Net Book Values for the Subject Transferred Assets recorded by Seller as of the
most recent month-end prior to the delivery of such certificate for which data
is available, and (ii) the methodology used by Seller for updating changes in
Net Book Values since such month-end data to arrive at such estimate. All
determinations made with respect to the Net Book Values shall be based upon the
internal records of, and the valuation methods customarily used by, Seller and
the Subsidiaries, absent error, and consistent with generally accepted
accounting principles with respect to the recording and accruing of the types
of assets and liabilities included in Net Book Values. On the terms and
subject to the conditions contained in this Agreement, at each Scheduled
Closing Buyer shall pay to Seller, in the manner set forth herein, an amount
equal to (iii) the portion of the Purchase
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Price arising under Section 2.5(a) (including any debt assumptions pursuant to
Section 2.4(i)) due at such Scheduled Closing as calculated on the basis of the
values assigned to the pertinent Subject Transferred Assets in the Allocation
Schedule (as defined in Section 2.7) plus (iv) an amount equal to one hundred
percent (100%) of the Estimated Net Book Values related to the Subject
Transferred Assets,(the sum of clauses (iii) and (iv) being referred to as the
"Tentative Purchase Price"), less (v) the book value of any capitalized leases
assumed at such Scheduled Closing, less (vi) the value of any debt assumed
pursuant to Section 2.4(i) at such Scheduled Closing.
(b) Determination of Interim Net Book Values. As soon as
practicable, but in no event later than sixty (60) days after each Scheduled
Closing, Seller shall cause a schedule to be prepared and delivered to Buyer
showing an interim calculation of the Net Book Values with respect to the
Subject Transferred Assets (the "Interim Net Book Values") as of the relevant
Closing Date derived by Seller from the internal books and records of Seller
and the Subsidiaries and otherwise in accordance with the second sentence of
Section 2.6(a) with respect to the Facilities included in such Subject
Transferred Assets, as well as from a physical inventory, taken after the date
hereof and prior to or as of such relevant Closing Date, of property which
would constitute Inventory if the relevant Scheduled Closing had occurred on
the date of such physical inventory. If such schedule as submitted by Seller
is not challenged in writing by Buyer within thirty (30) days of its receipt
of same, then it shall be deemed accepted by Buyer. If it is so challenged,
then, unless otherwise resolved by agreement of the parties within thirty (30)
days from the date of Buyer's challenge or such later date as the parties may
mutually agree upon, such disagreement shall be mutually submitted by the
parties to their respective independent certified public accountants for
resolution. If such accountants cannot resolve the disagreement within thirty
(30) days of such submission, then they shall submit the matter to a third
accounting firm of national standing selected by them, whose determination
shall be final and binding, and shall be rendered within thirty (30) days of
the date on which the matter is submitted to such firm. Any such third
accounting firm shall determine the issues in dispute following such
procedures, consistent with the language of this Agreement, as it deems
appropriate to the circumstances and with reference to the amounts in issue.
No particular procedures are intended to be imposed upon such third accounting
firm, it being the desire of the parties that any
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such dispute shall be resolved as expeditiously and inexpensively as reasonably
practicable. In the event that the Interim Net Book Values differ from the
Estimated Net Book Values, whether determined on the basis of the schedule
prepared by Seller, or agreement of the parties, or decision by independent
public accountants, as the case may be, then and in such event, within five (5)
business days following such determination of the Interim Net Book Values,
either Buyer shall pay to Seller, or Seller shall pay to Buyer, as the case may
be, in immediately available funds, the amount by which the Interim Net Book
Values differs from the Estimated Net Book Values. The pendency of a dispute
shall not affect the payment obligation hereunder of either Buyer or Seller to
the extent such payment is not disputed.
(c) Determination of Final Net Book Values. Within ten (10)
business days following expiration of six (6) months from each Scheduled
Closing, Buyer shall provide a certificate to Seller, executed on Buyer's
behalf by a responsible officer, setting forth a proposed calculation of final
Net Book Values with respect to the Subject Transferred Assets (the "Final Net
Book Values") as of the end of such six (6) month period (a "Working Capital
Adjustment Date") which shall contain a reconciliation as of the relevant
Closing Date of the Interim Net Book Values, adjusted only for (i) errors
claimed by Buyer to exist in Seller's accruals for Accrued Operating Assets and
Accrued Operating Expenses and the Ventures' calculations of partners' equity,
partners' distributions payable and the net book value of Venture fixed assets,
(ii) Buyer's ability to collect Receivables and the Ventures' ability to
collect their accounts receivable in existence as of the relevant Closing Date,
on or before the Working Capital Adjustment Date, in excess of the carrying
value therefor as of the relevant Closing Date net of reserves, (iii) Buyer's
inability to collect Receivables and the Ventures' inability to collect their
accounts receivable in existence as of the relevant Closing Date, on or before
the Working Capital Adjustment Date, in accordance with their net carrying
values as of the relevant Closing Date, and (iv) Buyer's ability to pay Accrued
Operating Expenses and the Ventures' ability to pay similar expenses of the
Venture at less than their book value as of the relevant Closing Date or
Buyer's or the Ventures' payment of the same at more than their book value as
of the relevant Closing Date to the extent legally required to do so. For
purposes of any such calculation, (v) the accuracy of Seller's or the Ventures'
accrual for real and personal property taxes shall be based upon the last
notice of tax assessment respecting such property prior to the relevant
Scheduled Closing that does not reflect the Transactions contemplated to occur
at the relevant
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Scheduled Closing, (vi) variable or undetermined charges arising under Real
Property Leases shall be accrued as of the relevant Scheduled Closing on an
historical basis, (vii) payments received on account of Receivables shall be
applied in accordance with Sections 2.9(b) and (c), and (viii) expenses for
such items as real and personal property taxes, utility charges, charges
arising under leases, insurance premiums and the like shall be pro-rated as of
the relevant Scheduled Closing. In the event that Buyer elects to reassign to
Seller any Loan Commitment Notes on or prior to the relevant Working Capital
Adjustment Date, then the Final Net Book Values shall be deemed to be further
reduced by an amount equal to the uncollected portion thereof, in which case
Buyer shall execute such documents of re-assignment as are reasonably
satisfactory to Seller and such Loan Commitment Notes as are reassigned shall
thereafter to be deemed to be Excluded Assets. Any dispute concerning Buyer's
calculation of the Final Net Book Values that is unresolved for thirty (30)
days shall be submitted for resolution by the parties' independent certified
public accountants in accordance with the procedures contained in Section
2.6(b). Within five (5) business days following determination of the Final Net
Book Values for a Scheduled Closing, either Buyer shall pay to Seller, or
Seller shall pay to Buyer, as the case may be, in immediately available funds,
the amount by which the Final Net Book Values differ from the Estimated Net
Book Values, as adjusted for payments, if any, on account of the Interim Net
Book Values. The pendency of a dispute shall not affect the payment obligation
hereunder of either Buyer or Seller to the extent such payment is not disputed.
(d) Seller as Agent of Subsidiaries. Seller shall, at or prior
to the relevant Scheduled Closing, cause each Subsidiary transferring Subject
Transferred Assets thereat to irrevocably designate (with an original copy
being provided to Buyer) Seller as its agent to receive on its behalf delivery
of that portion of all payments made by Buyer hereunder to which such
Subsidiary may be entitled as a result of its participation in such Scheduled
Closing, including without limitation that portion of the Purchase Price
attributable to the Subject Transferred Assets sold to Buyer by it, and to
acknowledge that delivery of such payments, including the Purchase Price, to
Seller in accordance with the terms of this Agreement shall be conclusive and
binding evidence against such Subsidiary that any payments or consideration due
to such Subsidiary in respect of the Subject Transferred Assets sold to Buyer
by it, or in respect of other payments due to it from Buyer under the terms of
this Agreement, have been delivered.
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Section 2.7 Allocation of Purchase Price. The Purchase Price shall be
allocated to the Transferred Assets on a Facility by Facility basis in
accordance with Schedule 2.7 (the "Allocation Schedule"), except that the
portion of the Purchase Price attributable to the Net Book Values shall be
allocated in accordance with the amounts actually paid therefor in accordance
with the provisions of Sections 2.5(b) and (c). Seller and Buyer shall, and
Seller shall cause the Subsidiaries to, allocate the Purchase Price in
accordance with the Allocation Schedule and allocate the Net Book Values
portion thereof in accordance with the amounts paid therefor, to be bound by
such allocations for all purposes, to account for and report the purchases and
sales contemplated hereby for all purposes (including, without limitation,
financial, accounting, Medicare reimbursement and federal and state tax
purposes) in accordance with such allocations, and not to take any position
(whether in financial statements, Cost Reports, tax returns, Cost Report or tax
audits, or otherwise), including without limitation any claim to an adjustment
in the basis of such assets by Buyer or its successors and assigns for Medicare
purposes which is inconsistent with such allocations without the prior written
consent of the other party, except to the extent, if any, required by
applicable Law or generally accepted accounting principles.
Section 2.8 Contingent Lease Obligations. With respect to each Real
Property Lease for which Seller or a Subsidiary remains or will remain
contingently liable after the relevant Scheduled Closing as lessee, sublessee,
guarantor or assignor, Buyer hereby agrees to exercise its best efforts:
(a) To cause the contingent liability of Seller or such
Subsidiary, as the case may be, to be removed on or prior to any extension,
renewal or modification of such Real Property Lease by Buyer or a Buyer
Subsidiary;
(b) To procure for Seller and the applicable Subsidiaries a
security interest, in form reasonably satisfactory to Seller, in all of the
right, title and interest of Buyer and the applicable Buyer Subsidiaries in
such Real Property Lease, junior only to the security interest of Buyer's most
senior secured lenders, in order to secure the due and punctual performance by
Buyer and the applicable Buyer Subsidiaries of the Assumed Liabilities
represented by such Real Property Lease; and
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(c) To procure for Seller and the applicable Subsidiaries the
right to acquire such right, title and interest in such Real Property Lease,
at fair market value, in the event that Buyer and the applicable Buyer
Subsidiaries fail to pay, perform and discharge when due the Assumed
Liabilities represented by such Real Property Lease and such failure results
in Seller or any Subsidiary being required to pay, perform or discharge any of
such Assumed Liabilities.
Section 2.9 Remittances and Receivables.
(a) In General.
(i) All remittances, mail and other communications relating
to the Excluded Assets or Excluded Liabilities received by Buyer or a Buyer
Subsidiary at any time after a relevant Scheduled Closing shall be promptly
turned over by Buyer to the addressee thereof, or if the addressee is no longer
affiliated with Seller, to Seller, and pending such delivery, Buyer shall have
no interest in the same and shall hold such remittances, mail and other
communications in trust for the benefit of Seller and the Subsidiaries. All
remittances, mail and other communications relating to the Transferred Assets
or the Assumed Liabilities received by Seller or any Subsidiary at any time
after the relevant Scheduled Closing at which such Transferred Assets are
transferred and such Assumed Liabilities are assumed by Buyer shall be promptly
turned over by Seller or such Subsidiary to the addressee thereof, or if the
addressee is no longer affiliated with Buyer, to Buyer, and pending such
delivery, Seller or such Subsidiary shall have no interest in the same and
shall hold such remittances, mail and other communications in trust for the
benefit of Buyer.
(ii) With regard to the Medicare, Medicaid and CHAMPUS
programs, and any Blue Cross program that requires a Cost Report or retains the
right of offset, Buyer and Seller mutually covenant and agree as follows.
Seller acknowledges that, from time to time, Buyer or Buyer Subsidiaries, after
a relevant Scheduled Closing, may receive a demand for payment in connection
with overpayments or alleged overpayments from one or more of such programs,
or both, which demand relates to the operation of a Facility prior to the
relevant Scheduled Closing at which such Facility was included in the Subject
Transferred Assets. Buyer shall provide notice to Seller of such demand within
ten (10) days of Buyer's receipt of same. Seller covenants and agrees with
Buyer that Seller shall,
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within thirty (30) days of its receipt of written notice from Buyer of such
request for any such payment, which notice shall state the basis thereof in
reasonable detail, pay in cash to Buyer an amount equal to any and all such
overpayments claimed or (by an election made in writing, within twenty (20)
days after receiving notice of any such demand) diligently pursue a contest of
such claim of overpayment and indemnify and hold Buyer harmless from any
liability resulting therefrom, but the right to contest without first paying
shall not be available to Seller if the programs collect the alleged
overpayment by means of a setoff against Buyer, unless Seller first reimburses
Buyer in an amount equal to the amount so setoff, provided that in all events
Buyer shall provide notice to Seller of such demand within ten (10) days of
Buyer's receipt of same. Subject to the foregoing, if any such program, with
or without notice, collects an alleged overpayment or other amount allegedly
owed by Seller or a Subsidiary by offset against Buyer or Buyer Subsidiary,
Seller shall promptly pay to Buyer an amount equal to such offset amount
provided that Buyer shall have provided Seller with any notice related to such
offset within ten (10) days of Buyer's receipt of same, or, if no such notice
was received by Buyer, Buyer shall have provided notice to Seller of such
offset within ten (10) days of Buyer's obtaining notice of such offset being
taken. Nothing in this Section 2.9(a)(ii) shall limit Buyer's obligations
under Section 7.3.
(b) Receivables.
(i) Buyer shall exercise commercially reasonable efforts to
collect Receivables. Any payments received by Buyer or its successors
and assigns after a Scheduled Closing Date, from patients, Payors,
clients, customers or others who are the obligors on Receivables
transferred as of such Scheduled Closing Date (collectively, "Account
Parties"), shall be applied to the oldest remaining Receivables
transferred as of such Scheduled Closing Date from such Account Party in
the order in which they arose unless, in the case of an Account Party who
is a patient, otherwise indicated by the patient's Payor.
(ii) On the tenth day of the first month that begins at least
thirty (30) days after a Scheduled Closing, on the tenth day of each
month thereafter until the Working Capital Adjustment Date with respect
to such Scheduled Closing, and on the tenth day following such Working
Capital Adjustment Date, Buyer shall
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execute appropriate instruments of assignment to re-assign back to
Seller, and shall turn over to Seller all evidences of and documents
pertaining to, any Receivable which, as of the end of the immediately
preceding month and/or such Working Capital Adjustment Date, as the case
may be, was uncollected and which either (A) is a Receivable in respect
of a non-Medicare patient as to which Buyer has decided to cease
collection activity, or (B) is a Receivable in respect of a non-Medicare
patient which, as of such month end or such Working Capital Adjustment
Date, has remained unpaid for a period of at least one hundred eighty
(180) days following the date of such patient's discharge from a
Facility, (C) is a Receivable in respect of a Medicare patient which
relates to amounts that represent such patient's deductible or co-
insurance obligations, and which, as of such month end or Working Capital
Adjustment Date, has remained unpaid for a period of at least one hundred
eighty (180) days following the date after which the patient is first
billed, or (D) is a Receivable from Medicare in respect of a Medicare
patient for which payment has been denied by Medicare provided that Buyer
has filed a request for reconsideration within the period required. Such
Receivables which are eligible to be turned over to Seller are herein
referred to as "Eligible Receivables." Any Eligible Receivable that is
assigned back to Seller within thirty (30) days following the first
opportunity to do so under the provisions of this clause (ii) shall, for
purposes of the adjustments contemplated by Section 2.6(c), be deemed to
have not been collected by Buyer, and any Eligible Receivable that is not
so assigned back to Seller within thirty (30) days following the first
opportunity to do so under the provisions of this clause (ii) shall, for
purposes of the adjustments contemplated by Section 2.6(c), be deemed to
have been collected by Buyer. With respect to any such Eligible
Receivable re-assigned back to Seller, Seller and the Subsidiaries shall
be free to institute such collection efforts, including, without
limitation, initiating such legal proceedings, with respect thereto as
they shall, in their sole discretion determine.
(iii) In the event of any adjustment in the Net Book Values
arising under Section 2.6(c)(iii), then upon such determination, Buyer
shall execute instruments of assignment, effective as of the relevant
Working Capital Adjustment Date, respecting any unpaid Receivables which
are not collected or deemed collected as of such date (it being agreed
that any unpaid Receivables not so
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assigned shall be deemed collected as of or prior to such Working Capital
Adjustment Date).
(c) Straddle Patient Receivables. To compensate Seller and the
Subsidiaries for services rendered and medicine, drugs and supplies provided
through a Scheduled Closing Date with respect to patients ("Straddle Patients")
who were admitted to a Facility on or before the date of the Scheduled Closing
in which such Facility was transferred and were discharged by the Facility
after such Scheduled Closing Date, the following shall apply:
(i) Cut-Off Billings. Seller shall, or shall cause the
Subsidiaries to, prepare cut-off billings for all Straddle Patients as
of the close of business on the relevant Closing Date. All payments
which are received by Buyer (or its successors in interest or assigns)
after the relevant Closing Date with respect to Straddle Patients and
which relate to such cut-off billings shall constitute Receivables for
purposes of calculating the Tentative Purchase Price and the Interim Net
Book Values for such Scheduled Closing.
(ii) Cut-Off Billings Not Accepted. If the Payor of any
Straddle Patient cannot or does not for any reason accept cut-off bill-
ings, then Buyer shall notify Seller of same, and Seller shall, or shall
cause the Subsidiaries to, deliver to Buyer a statement calculating the
total charges made by Seller and the Subsidiaries for services rendered
and medicine, drugs and supplies provided through the relevant Closing
Date with respect to such Straddle Patient. Within ten (10) days
following the discharge of each such Straddle Patient, Buyer shall
deliver to Seller a statement reflecting the total charges for the
services rendered and medicine, drugs and supplies billed to such Strad-
dle Patient after the relevant Closing Date and the patient receivable
(the "Straddle Patient Payments") of Buyer with respect to such Straddle
Patient (including any cost per discharge limit imposed by the Tax Equity
and Fiscal Responsibility Act of 1982, as amended ("TEFRA") and all
deductibles and co-insurance payments). For purposes of calculating the
Final Net Book Values for any Scheduled Closing, the pro rata share of
the Straddle Patient Payments which shall be treated as a Receivable
shall be equal to the amount obtained by multiplying the Straddle Patient
Payments by a fraction, the numerator of which is the total charges of
Seller and the Subsidiaries with respect to such Straddle Patient through
the relevant Closing Date and the denominator of which is the total
charges of Buyer, Seller and the Subsidiaries with respect to such
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Straddle Patient. Seller or Buyer, as may be applicable, may have such
statements as submitted by Buyer or Seller verified by their respective
independent public accountants within thirty (30) days from delivery.
If such statements, as submitted by Buyer or Seller, are acceptable, then
such statements shall fix the value of the services, medicine, drugs and
supplies provided by Seller and the Subsidiaries, on the one hand, and
by Buyer, on the other, to each such Straddle Patient. If any such
statement is challenged by Seller or Buyer, then unless otherwise
resolved by agreement of the parties within thirty (30) days of any such
challenge, such statement shall be deemed in dispute, which dispute shall
be resolved by the parties' independent certified public accountants.
If such accountants cannot resolve the matter within thirty (30) days,
then it shall be submitted by them to a third accounting firm in
accordance with the procedures contained in Section 2.6(b). If Seller
or Buyer does not give written notice to the party preparing the
statement of its challenge of such statement within the first said thirty
(30) day period, the receiving party shall be deemed to have accepted the
same.
(d) Cooperation in Collecting Receivables and Excluded Assets.
Buyer agrees to cooperate with Seller and the Subsidiaries and to provide
access to records (both medical and financial) to assist in the collection,
rebilling and auditing (by Seller or its representatives, including its
independent public accountants) of the Receivables and the Excluded Assets
(including, but not limited to, any and all Receivables from Account Parties
or amounts due to or from any Payor). Without limiting the generality of the
foregoing agreements of Buyer to cooperate with Seller, until six (6) months
after the relevant Closing Date, (i) Seller may locate one or more of its or
its subsidiaries' employees at any or all of the Facilities transferred at such
Closing Date, without charge, in order to facilitate such collection, rebilling
and auditing, (ii) Buyer shall provide such employees, without charge, adequate
and proper space to facilitate the performance of such duties, and (iii) Buyer
shall provide reasonable assistance of the employees of Buyer, without charge.
(e) Non-Assignable Receivables. Notwithstanding anything in this
Agreement that might be construed to the contrary, this Agreement shall not
constitute an agreement to assign any Receivable (including any
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Receivable respecting a Straddle Patient) the assignment of which is either
prohibited by Law or by the terms of any contract with a Payor. However,
without limiting the generality of the foregoing, the Net Book Value of such
non-assignable Receivables shall be included in the Net Book Values for all
purposes of this Agreement, including, but not limited to, Sections 2.5 through
2.7 and this Section 2.9, as modified by the provisions of this Section 2.9(e).
That portion of the Purchase Price which, but for the provisions of this
Section 2.9(e), would otherwise be attributable to the Net Book Value of such
non-assignable Receivables shall be deemed to be a loan from Buyer to Seller
and to the pertinent Subsidiary that will be repaid from the proceeds of such
Receivables collected and held by Buyer and from the adjustments to Estimated
Net Book Values contemplated by Sections 2.6, 2.9(b), and 2.9(c). All
procedures and requirements specified herein (including, without limitation,
Buyer's obligations under Section 2.9(b)) for the collection of Receivables
(including any Receivables in respect of a Straddle Patient) shall be fully
applicable to such non-assignable Receivables, except that (i) Buyer shall be
deemed to collect and hold the proceeds of such non-assignable Receivables as
agent for the Seller and the Subsidiaries and shall apply such proceeds to the
repayment of such loan, and (ii) any provision herein that would otherwise
require or provide for Buyer's "reassignment" of a Receivable (including an
Eligible Receivable) that is non-assignable to Buyer in the first instance
shall be construed to require or provide that Buyer, as agent for Seller and
the Subsidiaries, return pertinent documentation respecting such Receivable to
Seller and the Subsidiaries to permit collection of such Receivable by them (in
accordance with such collection efforts and procedures as they, in their sole
discretion, shall determine).
(f) Collection Fee. Buyer shall be entitled to a collection fee
from Seller equal to fifteen (15%) of the amount of Receivables collected, or
deemed, under the provisions of this Agreement, to be collected by Buyer. On
the tenth day of the first month that begins at least sixty (60) days after a
Scheduled Closing, on the tenth day of every other month thereafter until the
Working Capital Adjustment Date, and on the tenth day following the Working
Capital Adjustment Date, Buyer shall submit a report to Seller as of the
nearest month-end in reasonable detail, specifying those Receivables included
in the Net Book Values which have been, or are deemed to have been, collected
by Buyer during the period covered by such report, and the amounts so
collected. Within five (5) business days following receipt of each such
report, Seller shall pay to Buyer, by wire
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transfer of immediately available funds, the collection fee due with respect
to the Receivables covered by such report. Any Receivable for which a
collection fee is so paid shall, to the extent of such Receivable on which such
a fee is paid, no longer qualify as an Eligible Receivable.
Section 2.10 Employee Matters.
(a) Pension Plans. Schedule 2.10(a) lists all "employee pension
benefit plans" ("Pension Plans") within the meaning of Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") in which
Retained Employees (as defined in Subsection (b) below) directly employed to
work at the Facilities participate. Seller shall, or shall cause the
Subsidiaries to, (i) terminate as of the relevant Closing Date the active
participation of all such employees in the Pension Plans who constitute Hired
Employees, (ii) cause the Pension Plans to make timely appropriate
distributions following the relevant Closing Date, to the extent required, to
such employees in accordance with, and to the extent permitted by, the terms
and conditions of such Pension Plans, and (iii) in connection with the
termination of the active participation of all such employees in such Pension
Plans, comply, and cause each Pension Plan to comply, with all applicable Laws.
Prior to the relevant Closing Date, Seller shall have delivered to Buyer, for
information purposes only, forms of any letters or other written communications
which Seller or the Subsidiaries shall distribute generally to such employees
notifying them of their rights in respect of their cessation of active
participation in the Pension Plans. There are no "multiemployer plans" within
the meaning of Section 3(37) of ERISA ("Multiemployer Plans") in which Retained
Employees directly employed to work at the Facilities participate.
(b) Retained Employees.
(i) Buyer shall have the right to offer to hire at each
Scheduled Closing each of the direct employees of Seller or an Affiliate
of Seller, who is not a Facility's chief executive or chief financial
officer and who, as of such Scheduled Closing, works at the Facilities
(including any such direct employees who are on medical disability or
leaves of absence and who worked at the Facilities immediately prior to
such disability or leave) included in the Subject Transferred Assets, and
shall additionally have the right to offer to hire at the First Closing
each employee of Seller or an
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Affiliate of Seller who is primarily employed in connection with Seller's
PHIS System described in Section 2.17 whether direct or indirect
employees with respect to the PHIS System, provided that Buyer may not
offer to hire those employees covered by this clause (i), if any, who are
designated by Seller at least five (5) days prior to the relevant
Scheduled Closing and provided further that Buyer shall extend offers of
employment to a sufficient number of employees at each Facility so as to
avoid any liability on the part of Seller and the Subsidiaries under the
WARN Act (as defined in Section 2.10(e)) with respect to the Transactions
contemplated hereby. Seller will advise Buyer of the number of employees
terminated at each Facility during the ninety (90) day period preceding
the relevant Scheduled Closing.
(ii) Buyer shall additionally have the right to offer to hire
at each Scheduled Closing such other employees of Seller and its
Affiliates who are mutually agreed upon by Buyer and Seller and who are
either (A) indirect employees with respect to the operation of the
Facilities included in the Subject Transferred Assets, or (B) a chief
executive or chief financial officer of a Facility included in the
Subject Transferred Assets, provided that in the event that Buyer wishes
to hire a chief executive or chief financial officer and Seller does not
agree to such hiring, Seller shall not employ such chief executive or
chief financial officer in such capacity at a healthcare facility
operated or managed by Seller or its subsidiaries for a period of at
least one (1) year following such Scheduled Closing.
(iii) All such direct and indirect employees to whom Buyer
has the right to make offers of employment pursuant to clauses (i) or
(ii) above are herein referred to as the "Retained Employees."
(iv) Any such offer of employment to a Retained Employee by
Buyer shall be to perform comparable services, in such position and for
such compensation as is comparable to the position such Retained Employee
held with, and the compensation paid to such Retained Employee by, Seller
or any of its subsidiaries as of the Scheduled Closing. Seller or its
Affiliates shall have the right (but not the obligation) to employ or
offer to employ any Retained Employee (including, but not limited to, the
chief
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executive officer and the chief financial officer of each Facility
without regard to the provisions of Section 2.10(b)(ii)(B)) who declines
Buyer's offer of employment.
(c) Hiring of Retained Employees. Buyer shall hire at each
Scheduled Closing each Retained Employee who elects to accept employment with
Buyer (the "Hired Employees") and shall continue to employ each such Hired
Employee for a period of no less than ninety (90) days following the relevant
Closing Date, unless the employment of such Hired Employee is terminated for
cause or as a result of the Hired Employee's resignation. Subject to the
proviso to Section 2.3(c), Buyer agrees to give the Hired Employees full credit
for the Paid Time Off earned or accrued by them during, and to which they are
entitled as a result of, their employment by Seller and/or its subsidiaries,
by allowing such Hired Employees such Paid Time Off as to which such Hired
Employees would have been entitled as of the relevant Closing Date under the
policies of Seller and/or its subsidiaries if such Hired Employees had remained
employees of Seller and/or its subsidiaries and, upon termination of
employment, by making full payment to such Hired Employees of the Paid Time Off
that such employees would have received had they taken such Paid Time Off.
(d) Health Benefits. Buyer shall provide the Hired Employees a
program of health care benefits which is comparable in the aggregate to the
program of health care benefits currently provided by Seller or its pertinent
Subsidiaries, as the case may be, provided, however, that such health care
benefits shall be immediately available to the Hired Employees as of the
relevant Closing Date, and the Hired Employees shall become as of the relevant
Closing Date participants thereunder, without regard to any applicable waiting
period or any limitation with respect to preexisting conditions except insofar
as such waiting period or limitation gives full credit to such Hired Employees
for the period of time during which he or she was employed by Seller and its
Affiliates and, provided further, that Buyer may make modifications or changes
in such health care benefits at any time following a Scheduled Closing. Buyer
acknowledges and agrees that, with respect to the Hired Employees, Buyer is a
successor employer for purposes of the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), that the Hired Employees will
not, as a result, be deemed to have had a termination of employment for
purposes of COBRA and that any COBRA notices or coverages required to be given
or made available to any Hired Employee shall be given or
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made by Buyer and not Seller or the Subsidiaries, provided that Buyer does not
assume, and shall not be deemed to have assumed, any COBRA obligations which
Seller or any Subsidiary may have to former employees of Seller or such
Subsidiary whose employment was terminated on or prior to the relevant Closing
Date, or to any Retained Employees who do not accept employment with Buyer, and
provided further that Seller shall be responsible for any COBRA coverages
required to be made available to any Hired Employee who is entitled to COBRA
coverage under existing plans of Seller or any Subsidiary as a result of the
Transactions.
(e) Acknowledgement of Responsibility. Buyer acknowledges and
agrees that as of the date and time a Scheduled Closing is effective, Buyer
shall be considered for purposes of the Worker Adjustment and Retraining
Notification Act (the "WARN Act") the employer of the Retained Employees
related to the Transferred Assets transferred at such Scheduled Closing and
that Buyer (and not Seller or the Subsidiaries) shall thereupon be responsible
for complying with the WARN Act with respect to such Retained Employees and
that prior to such time none of such Retained Employees shall be, nor shall
they be deemed to be, terminated. Buyer shall indemnify and hold Seller and
its Affiliates harmless, in accordance with Sections 11.4, 11.5 and 11.6, from
and against all Losses (i) resulting from any compliance obligation (including,
without limitation, the obligation to give notice or pay money) that Seller and
its Affiliates or Buyer has under the WARN Act arising from the termination of
any Retained Employee or (ii) resulting from any claims of the Hired Employees
(including, without limitation, claims for health care coverage or benefits);
provided, however, Buyer shall neither be responsible for, nor indemnify Seller
and its Affiliates for the consequences of any WARN event which may be caused
by the actions of Seller or its Affiliates with respect to employees whom
Seller and its Affiliates retain pursuant to rights set forth in Section
2.10(b) above.
Notwithstanding the foregoing, nothing in this Section 2.10 shall, or shall be
deemed to, create any rights in favor of any person not a party hereto or to
constitute an employment agreement or condition of employment for any employee
of Seller or any Affiliate of Seller or any Retained Employee.
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Section 2.11 Use of Names.
(a) Although trade names of Seller and the Subsidiaries, other than
the Transferred Business Names, are Excluded Assets, such names appear on
certain of the fixed Transferred Assets, such as certain fixtures and
Equipment, and on supplies, materials, stationery and similar consumable items
which will be on hand at the Facilities at a Scheduled Closing with respect to
such Facilities. Notwithstanding that such names are Excluded Assets, Buyer
shall be entitled to use such consumable items for a period of three (3) months
following the Scheduled Closing in which such items are transferred and shall
have up to six (6) months following such Scheduled Closing to remove such names
from fixed Transferred Assets, provided that Buyer shall not send correspon-
dence or other materials to third parties on any stationery that contains a
trade name (other than a Transferred Business Name) of Seller or any Affiliate
of Seller.
(b) Seller hereby grants to Buyer, for the period from the
relevant Closing Date through the expiration of the ninetieth day thereafter,
the non-exclusive right and license to use, solely in connection with the
operation of the Facilities transferred on such Closing Date, the clinical
policy and procedures manuals of Seller and/or the Subsidiaries (the "Manuals")
presently used at such Facilities. Such license shall be on the following
terms and conditions:
(i) Buyer shall accept the Manuals in their present
condition, "AS IS" and "WITH ALL FAULTS" and without any representation
or warranty of any kind whatsoever, either express or implied, by Seller,
including, but not limited to, any representation or warranty that the
Manuals are adequate for Buyer's operation of the relevant Facilities
after the relevant Scheduled Closing or are in compliance with any Laws;
(ii) Buyer agrees that Seller shall have no obligation
whatsoever to update or otherwise revise the Manuals, even if Seller or
its Affiliates are revising similar manuals at other healthcare
facilities, and that Buyer shall have sole responsibility for updating
and revising such manuals;
(iii) Buyer acknowledges and agrees that the Manuals are
confidential and proprietary information of Seller and its
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Affiliates and Buyer agrees that it will not, directly or indirectly,
reproduce, distribute or disclose the contents of the Manuals except as
may be required in the operation of such Facilities (including, but not
limited to, as may be required by any Laws) and shall exercise due care
to otherwise preserve and protect the proprietary nature thereof,
provided that Seller and the Subsidiaries acknowledge that the Manuals
used by Buyer and the Buyer Subsidiaries more likely than not contain
information that is substantially similar to information contained in the
Manuals;
(iv) Upon the termination of Buyer's use of the Manuals
pursuant to this Section, Buyer shall return to Seller all originals and
copies of the Manuals; and
(v) Buyer shall implement its own policy and procedure
manuals promptly following the relevant Closing Date, and in any event
by the date on which the license hereby granted to Buyer terminates.
(c) Notwithstanding the assignment to Buyer of the Transferred
Business Names, Seller and its Affiliates and their assignees shall have the
nonexclusive right to use such Transferred Business Names, consistent with past
practices, in connection with the operation of previously and currently
operated healthcare facilities of Seller and its Affiliates not included in the
Transferred Assets, and Buyer, on behalf of itself and each Buyer Subsidiary,
hereby grants Seller and its Affiliates and their assignees a fully paid-up,
perpetual right and license to use such Transferred Business Names in such
manner in connection with the operation of such facilities, such license to be
effective as of the relevant Scheduled Closing in which such Transferred
Business Names are assigned to Buyer and the Buyer Subsidiaries.
Section 2.12 No Assignment If Breach; Seller's Discharge of Assumed
Liabilities.
(a) Notwithstanding anything contained in this Agreement to the
contrary, this Agreement shall not constitute an agreement to assign any
Transferred Asset, or assume any Assumed Liability, if the attempted assignment
or assumption of the same, as a result of the absence of the consent or
authorization of a third party or failure of a right of first refusal
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notice period to expire, would constitute a breach or default under any lease,
agreement, encumbrance or commitment, would violate any Law or would in any way
adversely affect the rights, or increase the obligations, of Buyer, Seller or
any Subsidiary with respect thereto; provided that the assignment of any
contract, including without limitation Medicare, Medicaid and similar provider
agreements, which may lawfully be made subject to customary conditions
subsequent (such as needs surveys, evaluations of Buyer or other determinations
by the counterparties to such agreements) shall be deemed not to constitute a
default under, or to in any way adversely affect the rights or increase the
obligations of Buyer with respect to, such lease, agreement, encumbrance or
commitment, whether or not such condition or conditions subsequent are met on
or prior to the relevant Scheduled Closing. Except as provided in Section
2.12(c), if any such consent or authorization is not obtained, or if an
attempted assignment or assumption would be ineffective or would adversely
affect the rights or increase the obligations of Seller, a Subsidiary or Buyer,
with respect to any such lease, agreement, encumbrance or commitment, so that
Buyer would not, in fact, receive all such rights, or assume the obligations,
of Seller or Subsidiary with respect thereto as they exist prior to such
attempted assignment or assumption, then Seller and Buyer shall, and Seller
shall cause each Subsidiary to, enter into such reasonable cooperative arrange-
ments as may be reasonably acceptable to both Buyer and Seller (including
without limitation, sublease, agency, management, indemnity or payment
arrangements and enforcement at the cost and for the benefit of Buyer of any
and all rights of Seller and the Subsidiaries against an involved third party)
to provide for or impose upon Buyer the benefits of such Transferred Asset or
the obligations of such Assumed Liability, as the case may be, and any transfer
or assignment to Buyer by Seller or a Subsidiary of any such Transferred Asset,
or any assumption by Buyer of any such Assumed Liability, which shall require
such consent or authorization of a third party that is not obtained shall be
made subject to such consent or authorization being obtained. Except as
provided in Section 2.12(c), if the parties cannot agree on any such
arrangement, or any such arrangement would not be reasonably practicable, to
provide Buyer with materially all the benefits of such Transferred Asset or
materially all the obligations of such Assumed Liability, then such Transferred
Asset or Assumed Liability, as the case may be, shall be excluded from the
Transactions and shall be deemed to be an Excluded Asset or an Excluded
Liability, as the case may be, and Buyer and Seller shall negotiate in good
faith an equitable adjustment in the Purchase Price, or resolve any
disagreement respecting
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such adjustment, in accordance with the procedures of Section 2.14.
(b) Notwithstanding any other provision of this Agreement, during
the period between the date hereof and the relevant Scheduled Closing, Seller
may, for the purpose of facilitating consummation of the Transactions and with
the consent of Buyer (which will not be unreasonably withheld), cause any
Subsidiary to acquire a fixed asset, or any direct or indirect interest
therein, that results in the simultaneous discharge of all or any part of a
liability that exists as of the date hereof which, but for such acquisition,
would be an Assumed Liability; provided that in each such case it gives prompt
notice of such acquisition to Buyer. In the event of any such acquisition,
Buyer and Seller shall negotiate in good faith an equitable adjustment to the
Purchase Price, or resolve any disagreement respecting such adjustment, in
accordance with the procedures of Section 2.14.
(c) The provisions of Section 2.12(a) notwithstanding, neither
Buyer nor Seller shall be obligated to close with respect to a given Facility
if any private third party consent or authorization in respect of Transferred
Assets and Assumed Liabilities related to such Facility that is enumerated in
Schedule 2.12(c) (the "Schedule of Required Consents") is not obtained, unless
both Buyer and Seller waive in writing their respective conditions precedent
that such consent or authorization be obtained prior to the transfer of such
Facility. With respect to all other private third party consents or
authorizations with respect to such Facility that have not been obtained by the
relevant Scheduled Closing, if the parties have not entered into a cooperative
arrangement in respect of the Transferred Asset or Assumed Liability to which
such consent or authorization relates, then, subject to the provisions of
Section 2.18 regarding Buyer's right to reject certain contracts within sixty
(60) days following the Scheduled Closing at which such contracts are assigned
or purported to be assigned, (i) Buyer hereby agrees to accept the assignment
of any such pertinent Transferred Asset, and to assume any such pertinent
Assumed Liability, as the case may be, whether or not such assignment or
assumption is made subject to such consent or authorization being obtained
after the relevant Scheduled Closing, and (ii) the parties agree to continue
to cooperate with one another, pursuant to the provisions of Sections 5.2 and
5.3, to obtain any such requisite consent
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Section 2.13 Closings. All of Seller's and the Subsidiaries' right,
title and interest in a Facility and all other Transferred Assets and Assumed
Liabilities which relate to, or constitute a part of, a Facility shall be
transferred to Buyer or the applicable Buyer Subsidiaries at a "Scheduled
Closing" (as defined below). Subject to the terms and conditions hereof, the
Transferred Assets shall be transferred to Buyer at one of three Scheduled
Closings: The "First Closing" (as defined below), the "Second Closing" (as
defined below) or the "Final Closing" (as defined below). The First Closing,
Second Closing and Final Closing, collectively, are the "Scheduled Closings"
and each is a "Scheduled Closing." A date on which a Scheduled Closing
actually occurs is a "Closing Date," and the Closing Date of the Final Closing
is the "Final Closing Date." A Scheduled Closing shall be effective for all
purposes as to each Facility which is the subject of such Scheduled Closing
(and the Transferred Assets and Assumed Liabilities related thereto or
constituting a part thereof) (collectively, the "Subject Transferred Assets")
at 11:59 p.m. on the relevant Closing Date, as determined by reference to the
local time zone in which the Facility is located. Notwithstanding the
foregoing, either the First or Second Closing may also be a Final Closing and
if the First Closing is the Final Closing, there shall be no Second Closing.
(a) The First Closing. Provided that no Scheduled Closing shall
occur after the Termination Date set forth in Section 10.1(b), the "First
Closing" shall occur at a mutually agreeable time and place or places within
five (5) business days after the first date on which all of the conditions set
forth in Article 8 and Article 9 hereof are capable of being satisfied as to
(i) at least seven (7) out of nine (9) Facilities identified on Schedule 2.13A
hereto, and (ii) Transferred Assets and Assumed Liabilities related thereto
or constituting a part thereof, together with all other Facilities, Transferred
Assets and Assumed Liabilities to be transferred at such First Closing account
in the aggregate for at least Twenty-Nine Million Dollars ($29,000,000) of the
EBITDA (as defined in Section 3.17(a)) assigned to Facilities for this purpose
as shown on Schedule 2.13B hereto, and all such Facilities, Transferred Assets
and Assumed Liabilities shall be the Subject Transferred Assets with respect
to the First Closing.
(b) The Second Closing. Provided that the First Closing has
occurred and that no Scheduled Closing shall occur after the Termination Date,
the "Second Closing" shall occur at a mutually agreeable time and place or
places, on the date which is within five (5) business days after the
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first date on which all of the conditions set forth in Article 8 and Article
9 hereof are capable of being satisfied as to at least five (5) additional
Facilities and the Transferred Assets and Assumed Liabilities related thereto
or constituting a part thereof, not the subject of the First Closing, and such
Facilities, Transferred Assets and Assumed Liabilities shall be the Subject
Transferred Assets with respect to the Second Closing, provided that the Second
Closing shall be held, in any event, within thirty (30) days of the First
Closing with respect to any Facilities for which the conditions to Closing have
been met as of such date.
(c) The Final Closing. Provided that a First Closing has
occurred, the "Final Closing" shall occur with respect to Facilities that are
not the subject of the First or Second Closings at a mutually agreeable place
or places and at a mutually agreeable time as follows:
(i) If all of the conditions set forth in Articles 8 and 9
hereof are capable of being satisfied on or prior to the Termination Date
as to all Facilities that are not included in the First Closing or the
Second Closing, then the Final Closing shall occur within five (5)
business days after the first date upon which such conditions may be
satisfied, but in no event later than the Termination Date.
(ii) If all of the conditions set forth in Articles 8 and 9
hereof are capable of being satisfied on or prior to the Termination Date
as to some, but not all, of the Facilities that are not included in the
First Closing or the Second Closing, then the Final Closing shall occur
within five (5) business days after the parties have mutually agreed on
the Facilities as to which such conditions will not be satisfied, but in
no event later than the Termination Date.
(d) Deliveries by Seller. At each Scheduled Closing Seller shall
deliver, or cause the Subsidiaries to deliver, to Buyer:
(i) A Bill or Bills of Sale and Assignment in substantially
the form of Exhibit A executed by each Subsidiary with respect to the
Subject Transferred Assets of the Subsidiary covered thereby;
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(ii) Grant deeds (or equivalent special or limited warranty
deeds for Owned Real Properties outside California), properly executed
and acknowledged by each Subsidiary with respect to the Owned Real
Properties of the Subsidiary included in the Subject Transferred Assets;
(iii) Separate assignments and assumptions in substantially
the form of Exhibit B executed by each Subsidiary with respect to each
Real Property Lease of the Subsidiary included in the Subject Transferred
Assets that is designated by either Buyer or Seller;
(iv) Instruments of transfer, sufficient to transfer
personal property interests of each Subsidiary that are included in the
Subject Transferred Assets but not otherwise transferred by the Bills of
Sale and Assignment referred to in clause (i) above, executed by each
Subsidiary in the form customarily used in commercial transactions in the
areas in which such other personal property of such Subsidiary is
located;
(v) Such other instruments of transfer, executed by each
of the pertinent Subsidiaries necessary to transfer to and vest in Buyer
all of Seller's and the Subsidiaries' rights, title and interest in and
to the Subject Transferred Assets or which may be required by the Title
Insurer (as defined in Section 8.7), including owner's and lessee's
affidavits, if any; and
(vi) Possession of the Subject Transferred Assets.
All such documents of transfer shall be in a form and substance reasonably
satisfactory to Buyer.
(e) Deliveries by Buyer. At each Scheduled Closing, Buyer shall
deliver to Seller:
(i) Immediately available funds, by way of wire transfer to
an account or accounts designated by Seller, in an amount equal to the
amounts then due pursuant to Sections 2.5 and 2.6(a) (including, with
respect to the First Closing, the amount due for the covenant not to
compete as specified by the last sentence of
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Section 2.5), as adjusted by the expenses due at such Scheduled Closing
pursuant to Section 5.5;
(ii) Separate assignments and assumptions in substantially
the form of Exhibit C executed by Buyer and the applicable Buyer
Subsidiaries with respect to each Real Property Lease included in the
Subject Transferred Assets that is designated by either Buyer or Seller;
and
(iii) An Assumption Agreement or Assumption Agreements with
respect to the Assumed Liabilities assumed at such Scheduled Closing, in
substantially the form of Exhibit C, executed by Buyer and the applicable
Buyer Subsidiaries in favor of Seller and each of the applicable
Subsidiaries.
All such documents of transfer shall be in a form and substance reasonably
satisfactory to Seller.
(f) Escrow. If either of the parties desires to consummate a
Scheduled Closing through an escrow, an escrow shall be opened with, and the
escrow agent shall be, Chicago Title Company (the "Escrow Agent"), by
depositing a fully executed copy of this Agreement with Escrow Agent to serve
as escrow instructions. This Agreement shall be considered the primary escrow
instructions between the parties, but the parties shall execute such additional
escrow instructions as Escrow Agent shall require and the parties may agree
upon in order to clarify the duties and responsibilities of Escrow Agent. In
the event of any conflict between this Agreement and such additional escrow
instructions, this Agreement shall prevail. If a Scheduled Closing is to be
consummated through the Escrow Agent, then on or prior to the Closing Date,
Buyer shall cause the funds required by Subsection (e)(i) above to be wired to
Escrow Agent, and the parties shall deliver the instruments of sale,
assignment, conveyance and assumption called for by Subsections (d) and (e)
above to be delivered to the Escrow Agent, and on the Closing Date, the Escrow
Agent shall close the escrow with respect to such Scheduled Closing by:
(i) Causing the deeds for the Owned Real Properties, the
assignments of the Real Property Leases, and any other documents which
the parties may mutually designate to be recorded in the official records
of the appropriate counties in which the pertinent Subject Transferred
Assets are located;
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(ii) Delivering to Seller by wire transfer of immediately
available funds, to an account or accounts designated by Seller, the
amounts called for by Subsection (e)(i) above; and
(iii) Delivering to Buyer or Seller, as the case may be, the
other instruments referred to in Subsections (d) and (e) above.
Section 2.14 Purchase Price Adjustment. If circumstances exist that
require the parties to negotiate in good faith equitable adjustments in the
Purchase Price pursuant to the provisions of Section 2.12 (respecting absence
of consents), Sections 8.5 and 9.5 (dealing with certain prohibitions and
restraints), Section 6.2(c) (respecting Seller's obligations with respect to
environmental conditions), Section 8.7 (respecting the condition of title to
interests in real property) or Section 8.10 (respecting casualty losses or
condemnation) (Sections 2.12, 6.2(c), 8.5, 8.7, 8.10, 9.5 and this Section 2.14
being collectively referred to as the "Adjustment Sections"), then and in any
of such events, such negotiations, and the resolution of disagreements arising
therefrom, shall be conducted in accordance with the provisions of this Section
2.14. The parties shall negotiate such equitable adjustments in the Purchase
Price in good faith prior to any relevant Closing Date (as may be extended by
mutual agreement of the parties), provided, that any adjustment in the Purchase
Price shall be consistent with the Allocation Schedule. If the parties are
unable to agree by the day prior to such relevant Closing Date, then such
relevant Closing Date (the "Original Closing Date") (and the Termination Date,
if necessary) shall be extended for up to fifteen (15) business days to provide
for the opportunity to resolve such disagreement pursuant to the provisions of
this Section 2.14. On the day a Scheduled Closing would have occurred but for
the absence of agreement between the parties, each party shall designate an
individual (who may not be a present or former officer, director, partner or
employee of the party or of any present or former investment banker, accounting
firm, law firm or attorney of or for the party) to mediate such disagreement,
and advise the other party in writing of the identity of such individual, which
advice shall be accompanied by a list of up to ten (10) suggested neutral
individuals to serve as a third mediator. The mediators originally designated
by each party shall promptly confer about the selection of a third mediator
from such lists, and within five (5) business days following the Original
Closing Date (or Termination Date, as the case may be), the originally
designated mediators shall agree upon and (subject to availability) select the
third mediator from the lists submitted
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by the parties or otherwise, provided that if the originally designated media-
tors cannot agree upon a third mediator by such date, the third mediator shall
be a retired judge designated by Judicial and Arbitration Mediation Services,
Inc., located in Los Angeles, California. The three mediators so selected are
herein referred to as the "Panel". Within two (2) business days following the
designation of the third mediator, each party shall submit to the Panel in
writing, its proposed equitable adjustments in the Purchase Price. Such
proposals shall be materially in accordance with the last proposals made by
such party to the other party during the course of the aforementioned good
faith negotiations between the parties. The parties shall additionally submit
such memoranda, arguments, briefs and evidence in support of their respective
positions, and in accordance with such procedures, as a majority of the Panel
may determine. Within seven (7) business days following the designation of the
third mediator, as to each adjustment of the Purchase Price about which there
is disagreement, the Panel shall, by majority vote, select the proposed
adjustment of the Purchase Price proposed by one of the parties, it being
agreed that the Panel shall have no authority to alter any such proposal in any
way. Thereafter, the parties shall, subject to the terms and conditions of
this Agreement, consummate the Transactions on the basis of such adjustments
at a mutually agreeable time and place or places, in accordance with and
subject to the provisions of Section 2.13, which shall be no later than the
fifteenth (15th) business day following the Original Closing Date or such later
date as the parties may agree upon. Subject to the foregoing, the Panel may
determine the issues in dispute following such procedures, consistent with the
language of this Agreement, as it deems appropriate to the circumstances and
with reference to the amounts in issue, but in any event consistent with the
Allocation Schedule to the extent applicable. No particular procedures are
intended to be imposed upon the Panel, it being the desire of the parties that
any such disagreement shall be resolved as expeditiously and inexpensively as
reasonably practicable. No member of the Panel shall have any liability to the
parties in connection with service on the Panel, and the parties shall provide
such indemnities to the members of the Panel as they shall request.
Section 2.15 Transfer of Assets in Corporate Form. If Buyer consents
in writing in its sole and absolute discretion, Seller may, prior to any
Scheduled Closing, cause any Transferred Asset or Assumed Liability to be
assigned and transferred by way of an assignment to Buyer of the stock of a
subsidiary of Seller (including the stock of any Subsidiary), in which case all
right, title and interest of Seller and any of its Affiliates in
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such subsidiary (which shall constitute all of the outstanding capital stock
and rights to acquire capital stock in such subsidiary) shall be transferred
to Buyer at the Scheduled Closing as a Subject Transferred Asset. Any such
agreement of the parties shall become an amendment to this Agreement.
Section 2.16 Assignment of Rights and Obligations to Buyer Subsidiaries.
Notwithstanding any contrary provisions contained herein, the parties hereto
agree that, prior to a Scheduled Closing, Buyer, in its sole discretion, may
assign any or all of its rights and obligations with respect to the Subject
Transferred Assets and the Assumed Liabilities to be transferred at such
Scheduled Closing to one or more Buyer Subsidiaries, provided that no such
assignment shall relieve Buyer of any obligation or liability to Seller
hereunder, and provided further that the following shall apply:
(a) Buyer will provide Seller with prompt written notice of any
such assignment.
(b) No such assignment shall be effected if the making of the
assignment will result in Seller's inability to obtain any consent or
authorization reasonably required to consummate the Transactions or to avoid
economic detriment to the Seller arising from the consummation of the
Transactions.
(c) Each such Buyer Subsidiary that is an assignee of Buyer shall
irrevocably appoint Buyer as its sole and exclusive representative and agent
authorized to act for and to receive notices and payments on behalf of the
Buyer Subsidiaries in all matters arising from or related to this Agreement and
the Transactions.
(d) As a condition to Seller's agreement to such assignments,
Buyer hereby agrees that Buyer will at all times be the ultimate parent entity
of the consolidated group of companies of which Buyer is a group member or
that, in the event of any reorganization involving Buyer and its subsidiaries,
the ultimate parent entity of the consolidated group of companies emerging from
such reorganization that includes Buyer and its successors and assigns shall,
prior to any such reorganization, execute such documents as are reasonably
necessary to confirm the assumption by such ultimate parent entity of Buyer's
obligations to Seller hereunder.
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(e) Buyer shall remain jointly and severally liable to Seller and
the Subsidiaries and to third parties with respect to any Assumed Liabilities
transferred to a Buyer Subsidiary, and, without limiting the generality of the
foregoing, hereby absolutely and unconditionally guarantees the full, prompt
and faithful performance by each Buyer Subsidiary of all covenants and
obligations to be performed by such Buyer Subsidiary under this Agreement and
any Related Agreement (as defined in Section 3.4) which are assigned to such
Buyer Subsidiary, including but not limited to, the payment of all sums
stipulated to be paid by such Buyer Subsidiary pursuant to such assignment, it
being understood that each such covenant and obligation constitutes the direct
and primary obligation of Buyer and that a separate action or actions may be
brought and prosecuted against Buyer whether action is brought against the
pertinent Buyer Subsidiary or whether such Buyer Subsidiary is joined in any
such action or actions (Buyer hereby waiving any right to require Seller or a
Subsidiary to proceed against a Buyer Subsidiary). Buyer hereby authorizes
Seller, without notice and without affecting Buyer's liability hereunder, from
time to time to (x) renew, compromise, extend, accelerate, or otherwise change
the terms of any obligation of a Buyer Subsidiary hereunder with the agreement
of such Buyer Subsidiary, (y) take and hold security for the obligations
guaranteed, and exchange, enforce, waive and release any such security, and (z)
apply such security and direct the order or manner of sale thereof as Seller
in its discretion may determine. Buyer hereby further waives:
(i) Any defense that may arise by reason of the incapacity
or lack of authority of any Buyer Subsidiary;
(ii) Any defense based upon a statute or rule of law which
provides that the obligations of a surety must be neither larger in
amount nor in other respects more burdensome than those of the principal;
and
(iii) Any duty on the part of Seller or a Subsidiary to
disclose to Buyer any facts that Seller or a Subsidiary may now or
hereafter know about a Buyer Subsidiary.
Section 2.17 Certain Other Assets and Liabilities. Effective as of, and
subject to the occurrence of, the First Closing, Seller and Buyer shall enter
into sublease and license arrangements respecting Seller's Psychiatric
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Hospital Information System, all as more particularly set forth on Schedule
2.17 hereto (the "PHIS System"). Notwithstanding the provisions of Schedule
2.17 or such sublease and license arrangements, the Seller's database of
business and patient information upon which the PHIS System operates shall
continue to be owned and retained by Seller and shall be an Excluded Asset for
all purposes hereunder, subject to the provisions of Section 5.7. For the
period identified in Schedule 2.17, Buyer shall provide Seller and its
Affiliates, and, pursuant to the contracts identified in Schedule 2.17, to the
third parties identified therein, access to and support and services from the
PHIS System and the employees of Buyer who operate it for the benefit of the
psychiatric healthcare facilities and businesses of Seller and its Affiliates
that are currently owned or operated by Seller and its Affiliates and that are
not or do not become Transferred Assets hereunder and for the benefit of such
third parties pursuant to the terms of such third party contracts. Such
support and services shall be provided in the same manner and to the same
extent that they are currently provided to such facilities, businesses and
third parties. As of such Closing Date, Buyer will grant to Seller and its
Affiliates a fully paid-up and royalty-free right and license for such period
of time to have access to and to utilize the PHIS System for such purposes.
Section 2.18 Rejection of Certain Contracts. The provisions of this
Section 2.18 shall apply to the following categories of Assumed Contracts: (i)
those subject to the provisions of Section 2.1(f)(iii); (ii) those subject to
the provisions of the second sentence of Section 2.12(c); and (iii) those
subject to Section 6.1(f) that are entered into by Seller or a Subsidiary after
the date hereof in violation of Section 6.1(f). With respect to each such
contract (a "Contingent Contract"):
(a) Buyer or the pertinent Buyer Subsidiary shall have the right
to reject such Contingent Contract by giving a written notice of such rejection
to Seller within sixty (60) days following the relevant Scheduled Closing, such
written notice to be accompanied by originals of the contract then in Buyer's
or the Buyer Subsidiary's possession, copies of any written communications
between Buyer or the Buyer Subsidiary and the counterparty to such contract
relating to the subject matter thereof, and instruments evidencing the
reassignment of such contract to Seller or the pertinent Subsidiary in form
reasonably satisfactory to Buyer and Seller, in which case such contract shall
be treated as an Excluded Asset, and the liabilities related thereto shall be
treated as an Excluded Liability, for all
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purposes of this Agreement, subject to the further provisions of this
Section 2.18.
(b) In the event that Seller or the pertinent Subsidiary incurs
any costs in connection with the termination of any such Contingent Contract
so rejected by Buyer (including payments during any applicable notice period
required to terminate such contract) and Buyer or the pertinent Buyer
Subsidiary continues to do business with the counterparty to such contract
related to the subject matter thereof during any period for which Seller or the
applicable Subsidiary is obligated to make payments to such counterparty, then
Buyer will reimburse Seller for one-half of the payments that Seller or the
applicable Subsidiary is obligated to make to such counterparty in connection
with such termination, but not in excess of one-half of the payments that
Seller or the applicable Subsidiary is obligated to make to such counterparty
under such contract for a period of ninety (90) days.
(c) With respect to any Contingent Contract subject to clause
(ii) of this Section 2.18 that is not also subject to either clause (i) or
clause (iii) of this Section 2.18 and that is not rejected by Buyer pursuant
to Subsection (a) above, Buyer agrees to indemnify and hold harmless Seller and
the Subsidiaries, in accordance with the provisions of Sections 11.3 through
11.6, from and against any and all Losses arising from or related to the lack
of any consent or authorization in connection with the assignment of such
Contingent Contract to Buyer (or the pertinent Buyer Subsidiary) hereunder.
(d) In the event Buyer rejects a Contingent Contract pursuant to
Subsection (a), then, notwithstanding any other provision of this Agreement,
Seller shall have no liability to Buyer and the Buyer Subsidiaries for Losses
under the provisions of Sections 11.3 through 11.6 related to such Contingent
Contract for the period prior to such rejection or for the amounts due Seller
under Subsection (b) above.
(e) With respect to any Contingent Contract subject to clause
(iii) of this Section 2.18 that appears on an updated Schedule 2.1(f) delivered
pursuant to Section 6.3 and that is not rejected by Buyer pursuant to
Subsection (a) above, then, notwithstanding any other provision of this
Agreement, Seller shall have no liability to Buyer and the Buyer Subsidiaries
for Losses under the provisions of Sections 11.3
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through 11.6 for violation of Section 6.1(f) with respect to such Contingent
Contract.
Section 2.19 Remaining Schedules. Notwithstanding anything to the
contrary herein, this Agreement shall be deemed cancelled and of no further
force and effect if the parties shall have failed to agree upon the Schedules
enumerated in Exhibit E, if any, within five (5) business days following the
date hereof, the parties hereby agreeing to cooperate with one another in good
faith and to work expeditiously to agree upon such Schedules within such
period. Such agreement shall be evidenced by a duly executed amendment of this
Agreement that deletes this Section 2.19.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer, as of the date hereof,
as follows, except as set forth in Schedules numbered in relation to the
Sections set forth below:
Section 3.1 Organization and Corporate Power. Seller is a corporation
duly incorporated and validly existing under the laws of, and is authorized to
exercise its corporate powers, rights and privileges and is in good standing
in, the State of Nevada and has full corporate power to carry on its business
as presently conducted and to own or lease and operate its properties and
assets now owned or leased and operated by it and to perform the transactions
on its part contemplated by this Agreement and all other agreements
contemplated hereby.
Section 3.2 Subsidiaries.
(a) Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation
(which, in the case of Subsidiaries existing on the date of this Agreement, is
indicated on Schedule A-1). Each Subsidiary has all requisite power and
authority (corporate and otherwise) to carry on its business as presently
conducted and to own or lease and operate its properties and assets now owned
or leased and operated by it and to perform the transactions on its part
contemplated by this Agreement and all other agreements contemplated hereby.
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(b) All of the outstanding capital stock of each Subsidiary has
been duly authorized and is validly issued, fully paid and nonassessable and,
except as indicated on Schedule A-1, is owned beneficially and of record by
Seller or another subsidiary of Seller as indicated on Schedule A-1. Except
as provided in Schedule A-1, there are no (i) rights, subscriptions, warrants,
options, conversion rights or agreements of any kind outstanding to purchase
or otherwise acquire any shares of capital stock of any Subsidiary, or (ii)
securities or obligations of any kind convertible into or exchangeable for any
shares of capital stock of any Subsidiary, or (iii) obligations of any kind
obligating Seller to sell or dispose of all or any part of Seller's ownership
interest therein. The Subsidiaries listed on Schedule A-1 are, on the date
hereof, the only subsidiaries of Seller that have any right or interest in, or
title to the Facilities.
(c) The board of directors of each Subsidiary and, if required,
its shareholders, have duly and effectively authorized (i) the sale of the
Transferred Assets to be sold by such Subsidiary and (ii) the execution,
delivery and performance of the Related Agreements (as defined in Section 3.4)
and all other agreements contemplated hereby and thereby to which such
Subsidiary is a party. No other corporate act or proceeding on the part of any
Subsidiary, its board of directors or its shareholders is necessary to
authorize any Related Agreement or other agreement contemplated hereby and
thereby or the transactions contemplated hereby and thereby.
(d) The Related Agreements and all other agreements contemplated
hereby and thereby to which any Subsidiary is a party will, as of each
Scheduled Closing, have been duly executed and delivered by each such
Subsidiary, and each such agreement, when executed and delivered, will
constitute a valid and binding obligation of such Subsidiary, enforceable
against such Subsidiary in accordance with its terms, except as it may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
Laws now or hereafter in effect relating to creditors' rights generally and
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding may be brought.
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Section 3.3 Authority Relative to this Agreement. The execution,
delivery and performance of this Agreement and all other agreements contemplat-
ed hereby and the consummation of the transactions contemplated hereby and
thereby have been duly and effectively authorized by the board of directors of
Seller; no other corporate act or proceeding on the part of Seller, its board
of directors or its shareholders is necessary to authorize this Agreement, any
such other agreement or the transactions contemplated hereby and thereby. This
Agreement has been, and each of the other agreements contemplated hereby will,
as of each Scheduled Closing, have been, duly executed and delivered by Seller,
and this Agreement constitutes, and each such other agreement when executed and
delivered will constitute, a valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except as it may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
Laws now or hereafter in effect relating to creditors' rights generally and
that the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding may be brought.
Section 3.4 Absence of Breach. Subject to the provisions of Sections
3.5 and 3.6 below regarding private party and governmental consents, and except
for compliance with the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and any regulatory or
licensing Laws applicable to the businesses and assets represented by the
Transferred Assets, the execution, delivery and performance by Seller of this
Agreement and all other agreements contemplated hereby or executed in
connection herewith (the "Related Agreements"), and the execution and delivery
by any Subsidiary of the Related Agreements to which it is a party, and the
performance by the Subsidiaries of the transactions contemplated by this Agree-
ment and the Related Agreements entered into by the Subsidiaries, do not, (a)
conflict with or result in a breach of any of the provisions of the Articles
or Certificates of Incorporation or Bylaws or similar charter documents (the
"Charter Documents") of Seller or of any of the Subsidiaries, (b) contravene
any Law or cause the suspension or revocation of any License presently in
effect, which affects or binds Seller or any of the Subsidiaries, or any of
their properties, except where such contravention, suspension or revocation
will not have a Material Adverse Effect (as defined below) on the Transferred
Assets and will not affect the validity or enforceability of this Agreement and
the Related Agreements or the validity of the
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Transactions contemplated hereby and thereby, or (c) conflict with or result
in a breach of or default (with or without notice or lapse of time or both)
under any indenture or loan or credit agreement or any other agreement or
instrument to which Seller or any of the Subsidiaries is a party or by which
it or they or any of their properties may be affected or bound, the effect of
which conflict, breach, or default, either individually or in the aggregate,
would be a Material Adverse Effect on the Transferred Assets. As used herein,
a "Material Adverse Effect": (x) when used with respect to the Transferred
Assets, means a material adverse effect on the Transferred Assets and on the
businesses operated therefrom, including their condition (financial or
otherwise) and results of operations, taken as a whole; (y) when used with
respect to any portion of the Transferred Assets (including, without
limitation, a Facility), means a material adverse effect on such portion of the
Transferred Assets and on the businesses operated therefrom, including their
condition (financial or otherwise) and results of operations, taken as a whole;
and (z) when used with respect to an entity, such as Seller, a Subsidiary or
Buyer, means a material adverse effect on the business, condition (financial
or otherwise) and results of operations of such entity taken as a whole
(including any subsidiaries of such entity).
Section 3.5 Private Party Consents. Except as set forth in Schedule
3.5, the execution, delivery and performance by Seller of this Agreement and
the Related Agreements, and the execution and delivery by any Subsidiary of the
Related Agreements to which it is a party, and the performance by the
Subsidiaries of the transactions contemplated by this Agreement and the Related
Agreements to be performed by the Subsidiaries, do not require the authoriza-
tion, consent or approval of any non-governmental third party of such a nature
that the failure to obtain the same would have a Material Adverse Effect on the
Transferred Assets or a Facility.
Section 3.6 Governmental Consents. The execution, delivery and
performance by Seller of this Agreement and the Related Agreements, and the
execution and delivery by any Subsidiary of the Related Agreements to which it
is a party, and the performance by the Subsidiaries of the transactions
contemplated by this Agreement and the Related Agreements to be performed by
the Subsidiaries, do not require the authorization, consent, approval,
certification, license or order of, or any filing with, any court or governmen-
tal agency of such a nature that the failure to obtain the same would have a
Material Adverse Effect on the Transferred Assets
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or a Facility, except for compliance with the HSR Act and except for such
governmental authorizations, consents, approvals, certifications, licenses and
orders that customarily accompany the transfer of health care facilities such
as the Facilities.
Section 3.7 Brokers. Except as shown on Schedule 3.7, no broker,
finder, or investment banker is entitled to any brokerage, finder's or other
fee or commission in connection with this Agreement or the Transactions
contemplated hereby based upon any agreements or arrangements or commitments,
written or oral, made by or on behalf of Seller or any of its Affiliates.
Seller shall be solely responsible for the payment of any such fee or
commission to any person or entity listed on Schedule 3.7 as an exception to
the foregoing.
Section 3.8 Title to Property.
(a) Each Subsidiary has good and defensible title, or valid and
effective leasehold rights in the case of leased property, to all tangible
personal property included in the Transferred Assets to be sold, conveyed,
assigned, transferred and delivered to Buyer by such Subsidiary, free and clear
of all liens, charges, claims, pledges, security interests, equities and
encumbrances of any nature whatsoever, except for those created or allowed to
be suffered by Buyer and except for the following (individually and
collectively, the "Permitted Encumbrances"): (i) the lien of current taxes not
delinquent, (ii) liens listed on Schedules 3.8(a) and 3.8(b), (iii) the Assumed
Liabilities, (iv) such consents, authorizations, approvals and licenses
referred to in Sections 3.5 and 3.6, and (v) liens, charges, claims, pledges,
security interests, equities and encumbrances which will be discharged or
released either prior to, or substantially simultaneously with, the Scheduled
Closing at which such property is sold, conveyed, assigned and transferred to
Buyer and other possible minor matters that in the aggregate are not
substantial in amount and do not materially detract from or interfere with the
present or intended use of such property. All such tangible personal property
is in good operating condition and repair, subject to ordinary wear and tear
and ordinary and routine maintenance, and is reasonably adequate for the
operation of the Facilities as they are presently operated.
(b) Except as set forth on Schedule 3.8(b), and except for the
Owned Real Property and the Leased Real Property, no Subsidiary owns any fee
or leasehold or other interests in any real property used in
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and necessary for the conduct of the operations of any Facility as presently
conducted. Each Subsidiary has good and marketable title to all Owned Real
Property, or valid and effective leasehold rights in the case of the Leased
Real Property, included in the Transferred Assets to be sold, conveyed,
transferred and delivered to Buyer by such Subsidiary, free and clear of all
liens except for those created or allowed to be suffered by Buyer and except
for the following: (i) Permitted Encumbrances, (ii) liens (not including liens
for borrowed money or the deferred purchase price of property) that do not
materially impair the use of the Owned Real Property subject thereto, as such
Owned Real Property is being used on the date hereof, (iii) easements and
similar encumbrances disclosed by current standard ALTA Preliminary Title
Reports, delivered to and approved by Buyer prior to the date hereof (except
for such easements or similar encumbrances shown on Schedule 8.7(b)), and (iv)
zoning, set back, building and other similar restrictions including, without
limitation, restrictions and requirements affecting the Owned Real Property and
the Leased Real Property imposed by deeds, leases, development agreements,
declarations, and redevelopment authorities, which are not being violated in
any manner that would cause a Material Adverse Effect on any Facility as
currently used and operated. The condition of the Owned and Leased Real
Property is such that it will not materially adversely affect the operations
of the Transferred Assets on or from such Owned and Leased Real Property. All
of the improvements on land included in the Transferred Assets are in good
condition and repair, subject to those matters disclosed in Section 3.16 or
Schedule 3.16, ordinary wear and tear and ordinary and routine maintenance, and
in view of the purpose for which such improvements are being used, free of any
material structural or engineering defects.
Section 3.9 Assumed Contracts. Except for such matters that, when
viewed in the aggregate, do not have a Material Adverse Effect on a Facility,
(a) there is no liability to any person by reason of the default by Seller or
a Subsidiary under any Assumed Contract, (b) neither Seller nor any Subsidiary
has received written or other notice that any person intends to cancel or
terminate any Assumed Contract, (c) all of the Assumed Contracts are in full
force and effect and without any material default by any party or to the
knowledge of Seller and the Subsidiaries, any event which, with the passage of
time or the giving of notice or both would be such a material default, (d)
subject to the provisions of Sections 3.5 and 3.6, the consummation of the
transactions contemplated by this Agreement will not constitute and, to the
best of Seller's current actual
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knowledge, no event has occurred which, with or without the passage of time or
the giving of notice or both, would constitute a material breach or default by
Seller or a Subsidiary of such Assumed Contract, or would cause the
acceleration of any obligation of Seller or any Subsidiary or the creation of
any lien (except for Permitted Encumbrances) upon any Transferred Asset, and
(e) neither Seller nor any Subsidiary has waived any right under any Assumed
Contract; provided that Seller makes no separate representation or warranty
under this Section 3.9 respecting compliance with the provisions of any Assumed
Contract related to title to or condition of property, licenses, environmental
conditions, hazardous substances or environmental laws, taxes, or compliance
with laws generally, it being the intent of the parties that warranties
respecting such matters shall be made exclusively under the provisions of
Sections 3.8, 3.10, 3.16, 3.20, and 3.25. Seller has previously delivered to
Buyer true and complete copies of all written Assumed Contracts except where
the failure to so deliver a copy thereof will not have a Material Adverse
Effect on a Facility.
Section 3.10 Licenses. Except as set forth on Schedule 3.10, (a) the
Subsidiaries possess all Licenses necessary for their operation of the
Facilities at the locations and in the manner presently operated (other than
such Licenses the absence of which would not have a Material Adverse Effect on
a Facility), (b) if required, such Facilities are accredited by applicable
accrediting agencies as necessary for their operations in the manner presently
operated, and (c) such Facilities are certified for participation in the
Medicare program and have current and valid provider contracts with such
program. Schedule 3.10 lists each License held by a Subsidiary and related to
the ownership or operation of a Facility and a true and correct copy of each
has previously been delivered to Buyer by Seller (other than such Licenses the
absence of which would not have a Material Adverse Effect on a Facility). All
such Licenses are in full force and effect.
Section 3.11 U.S. Person; Resident of Georgia. Neither Seller nor any
Subsidiary is a "foreign person" for purposes of Section 1445 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any other Laws requiring
withholding of amounts paid to foreign persons. For purposes of the
withholding tax imposed by Section 48-7-128 of the Official Code of Georgia
Annotated, each Subsidiary that owns Transferred Assets constituting Owned Real
Property located in Georgia and related tangible personal property is a
corporation the principal place of
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business of which is located in the State of Georgia. The Seller shall, or
shall cause the relevant Subsidiaries to, provide an appropriate affidavit of
each such Subsidiary's residence. Seller acknowledges that jurisdictions other
than Georgia may impose withholding obligations similar to those imposed by
Georgia and that it is Seller's obligation to provide evidence of exemptions
from such withholding taxes.
Section 3.12 Employee Relations. With respect to the Retained
Employees, except as set forth on Schedule 3.12:
(a) Neither Seller, nor any Subsidiary nor any Facility is a party
to any agreement with any union, trade association or other similar employee
organization, no written demand has been made for recognition by a labor
organization, and to Seller's knowledge it has received no notice of any union
organizing activities by or with respect to any such employees;
(b) There are no controversies (including, without limitation, any
unfair labor practice complaints, labor strikes, arbitrations, disputes, work
slowdowns or work stoppages) pending, or to the best of Seller's current actual
knowledge, threatened, which could have a Material Adverse Effect on any
Facility; and
(c) Each Subsidiary has been and is in material compliance with
all federal and state laws respecting employment and employment practices,
terms and conditions of employment, and wages and hours (including, but not
limited to, the Fair Labor Standards Act, Title VII of the Civil Rights Act of
1964, as amended, the Occupational Safety and Health Act, the Age
Discrimination in Employment Act of 1967, the Americans with Disabilities Act
of 1990 and the Family and Medical Leave Act).
Section 3.13 Employee Plans.
(a) With respect to each Multiemployer Plan, there has occurred
no "complete withdrawal" or "partial withdrawal," as each is defined in
Sections 4203 and 4205, respectively, of ERISA, and all payments required to
be made to such Multiemployer Plans by a Subsidiary under any collective
bargaining agreement have been made.
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(b) Neither Buyer nor any Buyer Subsidiary shall have any
obligation or liability to Seller, any Subsidiary or any present or former
employee of any of them for or with respect to any benefit plan, employee
benefit plan or employee health or welfare program or other Employee Benefit
Arrangements (as defined in Section 3.26(c)), except for specifically listed
Assumed Liabilities and other express obligations of Buyer and the Buyer
Subsidiaries under this Agreement.
Section 3.14 Litigation. Except for (a) matters associated with or
within the scope of the significant legal proceedings and investigations of an
unusual nature referred to in Seller's filings with the Securities and Exchange
Commission (the "Unusual Proceedings"), (b) ordinary routine claims and
litigation incidental to the businesses represented by the Facilities
(including, but not limited to, actions for negligence, professional
malpractice, workers' compensation claims, so-called "slip-and-fall" claims and
the like), (c) governmental inspections and reviews customarily made of
businesses such as those operated from the Facilities, and (d) as set forth on
Schedule 3.14, there are no actions, suits, claims or proceedings pending, or
to the knowledge of Seller or any Subsidiary, threatened against or affecting
the Transferred Assets or relating to the operations of the Facilities, at law
or in equity, or before or by any federal, state, municipal or other govern-
mental department, commission, agency or instrumentality. The claims and
litigation referred to in clause (b) above are covered by insurance currently
maintained by Seller except where the failure to be so covered (i) would not
have a Material Adverse Effect on any Facility or (ii) is of a nature that is
not ordinarily subject to insurance coverage (e.g., demands for punitive
damages). Neither Seller nor any Subsidiary is in default under any judgment,
order or decree of any governmental agency or authority applicable to the
conduct of the business conducted at the Facilities. Except as disclosed on
Schedule 3.14, there is no condemnation proceeding pending or, to the knowledge
of Seller or any Subsidiary, threatened against any of the Owned or Leased Real
Property. Schedule 3.14 includes an accurate and complete list of each
malpractice claim or lawsuit pending or to Seller's or any Subsidiary's knowl-
edge, threatened against any Facility or Subsidiary.
Section 3.15 Inventory. All Inventory included in the Transferred
Assets and included in the Net Book Values will consist of a quality and
quantity usable and salable in the ordinary course of business, except for
items of obsolete materials and materials of below-standard quality at any
given Facility, all of which in the aggregate are immaterial to the financial
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condition or results of operations of the businesses operated from such
Facility taken as a whole, or have been, or prior to the relevant Scheduled
Closing will be, written down to realizable market value.
Section 3.16 Hazardous Substances. To Seller's and the Subsidiaries'
knowledge, except as disclosed by the Environmental Survey (as defined in
Section 6.2(b)) or otherwise on Schedule 3.16:
(a) There has not been a Release of Hazardous Material on or
otherwise affecting the Owned Real Properties or the Leased Real Properties,
(other than Releases involving de minimis quantities of Hazardous Materials)
that would: (i) constitute a violation of any Environmental Law by Seller or
the Subsidiaries, or by any third party if the effect of such violation by such
third party imposes a remediation obligation on the part of Seller or any
Subsidiary; (ii) trigger any release-reporting obligations of Seller or the
Subsidiaries under any Environmental Law; or (iii) trigger any clean-up or
remediation obligations or Seller or the Subsidiaries under any Environmental
Law;
(b) Seller and the Subsidiaries have complied with and currently
are in compliance in all material respects with all Environmental Laws that
govern the Owned Real Properties, the Leased Real Properties, and the
businesses operated from any such properties;
(c) Seller and the Subsidiaries have obtained all material
Licenses required under the Environmental Laws for operation of their
businesses related to the Owned Real Properties and the Leased Real Properties,
have complied with and currently are in compliance in all material respects
with all such Licenses, and have not received any notice that: (i) any such
existing License will be revoked; or (ii) any pending application for any new
such License will be denied;
(d) Seller and the Subsidiaries have not received any currently
outstanding notice of any proceedings, action, or other claim or liability
arising under any Environmental Laws (including, without limitation, notice of
potentially responsible party status under the Comprehensive Environmental
Response, Compensation, and Liability Act, 42 U.S.C. secs. 9601 et seq. or any
state counterpart) from any person or governmental agency regarding the Owned
Real Properties, the Leased Real Properties, or the businesses operated from
such properties;
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(e) Neither Seller nor any Subsidiary has received any currently
outstanding notice, which notice is specifically directed to an Owned or Leased
Real Property (rather than to all property owners or operators in a given
geographic area), that any of the Owned Real Properties or any of the Leased
Real Properties is the subject of a material deed restriction, material title-
transfer restriction, other material land-use restriction, or material lien
arising in each case under any Environmental Law;
(f) Neither the Owned Real Properties, the Leased Real Properties,
nor any of the businesses conducted on any such properties is the subject of
any outstanding order, decree, or agreement with or involving any governmental
agency, court, or other party respecting any material aspect of the operation
of such properties and businesses that relates to or arises under any
Environmental Law (other than orders, decrees or agreements affecting or
directed to the healthcare industry generally, or in the case of Leased Real
Properties, lease agreements requiring compliance with applicable Environmental
Law);
(g) No portion of the Owned Real Properties or Leased Real
Properties contains or has ever contained any underground storage tank, surface
impoundment or similar device used for the management of wastewater, or other
waste management unit dedicated to the disposal, treatment, or long-term
(greater than 90 days) storage of waste materials; and
(h) Neither Seller, any Subsidiary nor any other person has
improperly disturbed or encroached upon any floodplain areas, waters, or
wetlands associated with any of the Owned Real Properties or Leased Real
Properties in violation of any Environmental Law.
Section 3.17 Financial Information.
(a) Attached hereto as Schedule 3.17(a) is an unaudited statement
of combined earnings from the operations of the Transferred Assets and Assumed
Liabilities of the Facilities (as they were comprised on the as of date of such
schedule) before interest, income taxes, depreciation and amortization
("EBITDA") for the fiscal year ended May 31, 1993 and for the fiscal period
ended November 30, 1993 (collectively, the "EBITDA Statements"). The EBITDA
Statements present fairly the combined EBITDA of such operations, taken as a
whole, as of the dates
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and for the periods shown, and were derived from and are in accordance with the
internal books and records of the Subsidiaries and the regularly prepared
unaudited internal financial statements of the Facilities, which are prepared
in accordance with the generally accepted accounting principles utilized in the
preparation of the published financial statements of Seller.
(b) Attached hereto as Schedule 3.17(b) is an internally prepared
unaudited combined statement of certain assets and liabilities of the
Facilities as of November 30, 1993 (the "Balance Sheet"; collectively, the
Balance Sheet and the EBITDA Statements are the "Financial Schedule"). The
Balance Sheet has been prepared from, and is in accordance with, the internal
books and records of the Subsidiaries and presents fairly the financial
condition of the Facilities with respect to the Transferred Assets and Assumed
Liabilities, taken as a whole, as of the date shown. The Balance Sheet was
prepared in accordance with Seller's practices for the preparation of internal
financial statements, consistently applied, and is in accordance with the
generally accepted accounting principles utilized in the preparation of the
published financial statements of Seller.
(c) Notwithstanding the foregoing, (i) the Financial Schedule does
not (A) reflect all intercompany eliminations, adjustments and accruals that
are reflected in financial statements of Seller, (B) reflect any reserves for
the Unusual Proceedings, (C) reflect any anticipation of the divestiture of the
Transferred Assets and any adjustments to the carrying values of the
Transferred Assets occasioned thereby, (D) contain footnotes or other
explanatory material associated with financial statements prepared in
accordance with generally accepted accounting principles, or (E) contain normal
year-end adjustments with respect to interim periods, (ii) the EBITDA
Statements do not reflect allocations of indirect costs and non-hospital
overhead or the corresponding cost reimbursement impact of claiming such costs
in a Facility Cost Report, and (iii) certain earnings, assets and liabilities
have been excluded from the EBITDA Statements or the Balance Sheets, as
applicable, as noted in the footnotes or other explanatory material associated
with the Financial Statements. In addition, the Financial Schedule is to be
read in conjunction with, and is subject to, all notes and other explanatory
material set forth therein.
(d) The Balance Sheet reflects the amount of Receivables (which
for this purpose may include Eligible Receivables) as of the date thereof, net
of allowances customarily recorded by the Subsidiaries for
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uncollectible and doubtful accounts, and contractual allowances pursuant to
agreements with Payors, all in conformity with Seller's practices for the
preparation of internal financial statements and in accordance with the
generally accepted accounting principles utilized in the preparation of the
published financial statements of the Seller. To the knowledge of Seller and
each Subsidiary, all such Receivables included in the Balance Sheet represent
amounts validly owed to the applicable Subsidiary by reason of the provision
of goods, services and other consideration by such Subsidiary, and, to the
knowledge of Seller and each Subsidiary, are not valued in excess of the
amounts expected to be collected with respect thereto. Each Subsidiary
maintains its accounting records in sufficient detail to substantiate the
Receivables reflected on the Balance Sheet. Since the date of Seller's most
recent audited financial statements, neither Seller nor any Subsidiary has
changed any principle or practice with respect to the recordation of accounts
receivable or the calculation of reserves therefor, or any material collection,
discount or write-off policy or procedure.
Section 3.18 Changes Since Balance Sheet. Since the date of the Balance
Sheet and up to and including the date of this Agreement, other than as
contemplated or permitted by this Agreement, the Subsidiaries have conducted
the businesses represented by the Transferred Assets only in the ordinary and
normal course, except for (i) matters associated with the Unusual Proceedings,
(ii) as shown on Schedule 3.18, (iii) the institution or completion of
compliance programs, or (iv) events in anticipation of the divestiture of the
Transferred Assets, and there has not been:
(a) Any entry into or termination by Seller or a Subsidiary of any
material commitment, contract, agreement or transaction (including, without
limitation, any borrowing or lending transaction or capital expenditure)
related to the Transferred Assets except for transactions in the ordinary
course of business and renegotiation of credit agreements to which Seller and
certain of its subsidiaries are parties which renegotiations will not have a
Material Adverse Effect on the Transferred Assets or on any Facility;
(b) Any casualty, physical damage, destruction or physical loss
respecting, or change in the physical condition of, any Facility or Equipment
that has had a Material Adverse Effect on a Facility;
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(c) Any transfer of or rights granted under any contract which
would have been an Assumed Contract on the date of the Balance Sheet except for
transactions in the ordinary course of business;
(d) Other than in the ordinary course of business, (i) any sale
or other disposition of any fixed asset included in the Balance Sheet having
a net book value in excess of $100,000, or (ii) any material mortgage, pledge
or imposition of any lien or other encumbrances on any such asset, or (iii)
sales or dispositions of, or the imposition of material encumbrances on, fixed
assets included in such Balance Sheet having a net book value that exceeds
$1,000,000 in the aggregate, or (iv) any sale or other disposition of Inven-
tories included in the Balance Sheet;
(e) Any material amendment (other than general amendments which
the carrier makes for a category of policy) or termination of any material
insurance policy or failure to renew any material insurance policy covering the
Transferred Assets;
(f) Any default or breach by Seller or a Subsidiary under any
contract that would have been an Assumed Contract on the date of the Balance
Sheet which, when viewed individually or in the aggregate of all such breaches
or defaults, has had a Material Adverse Effect on any Facility;
(g) Any material adverse change in the trend of the business,
financial condition or results of operations of any Facility as compared to the
trend of the business, financial condition or results of operations, as
applicable, of such Facility for the two year period ended November 30, 1993;
or
(h) Any increase made in the compensation levels of any chief
executive officer or chief financial officer of any Facility, or any general
increase made in the compensation levels of the other Retained Employees,
except in the ordinary course of business.
Section 3.19 Transferred Business Names. Seller or one of the
Subsidiaries owns or has the right to use the Transferred Business Names, free
of any liens. Schedule 2.1(h) sets forth for each Transferred Business Name,
if any, that is the subject of a trademark registration the date of
registration, the registration number and the expiration date. To the
knowledge of Seller and the Subsidiaries, no aspect of registered
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trademarks included in the Transferred Business Names, if any, has been
adjudged invalid or unenforceable or has been cancelled or revoked. Except as
set forth on Schedule 3.19, to the knowledge of Seller and the Subsidiaries,
the use by the Subsidiaries of the Transferred Business Names in connection
with the Facilities does not conflict with or violate any valid rights of third
parties, including any patents, trademarks, trade names or copyrights of
others, in any way which would have a Material Adverse Effect on the
Transferred Assets or a Facility; neither Seller nor any Subsidiary has
received any notice of a conflict with the asserted rights of others in
connection therewith which, if determined adversely, would have a Material
Adverse Effect on any Facility. Neither Seller nor any of the Subsidiaries is
obligated to pay any amount, whether as a royalty, license fee or other
payment, to any person in order to use any of the Transferred Business Names.
Section 3.20 Compliance with Laws and Accreditation. To Seller's and
each Subsidiary's knowledge, Seller and each Subsidiary has complied in all
material respects with all laws, regulations and orders, and as materially
required for participation in the Medicare, CHAMPUS and Medicaid reimbursement
programs and is in material compliance with the indigent care conditions, if
any, contained in or related to certificates of need obtained by it except (a)
as set forth in Schedule 3.20, (b) as described in Sections 3.10, 3.12, 3.16,
and 3.21 and the Schedules, if any related thereto, and (c) for matters related
to the Unusual Proceedings. With respect to each Facility, Seller has
previously delivered to Buyer true and complete copies of the most recent Joint
Commission on Accreditation of Health Care Organizations ("JCAHO")
accreditation survey report and deficiency list, if any; the most recent
Statement of Deficiencies and Plan of Correction on Form HCFA-2567; the most
recent state licensing report and list of deficiencies, if any; the most recent
fire marshall's survey and deficiency list, if any; and the corresponding plans
of correction or other responses except, in each case, such surveys, reports
or deficiency lists which do not reflect any deficiency which would have a
Material Adverse Effect on any Facility. Seller or the relevant Subsidiary has
taken or is in the process of taking all reasonable steps to correct all
material deficiencies noted therein and a description of any material
uncorrected deficiency is listed in Schedule 3.20. There are no provisions in,
or other agreements to which Seller or a Subsidiary is a party relating to any
Licenses, which would preclude or limit Buyer from operating the Transferred
Assets substantially as they are now operated and using the beds of any
Facility substantially as they are currently classified.
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Section 3.21 Cost Reports, Third Party Receivables and Conditions of
Participation. The Cost Reports of the Facilities for Medicare, Medicaid (if
required) and Blue Cross (if required) reimbursement have been audited through
the periods set forth in Schedule 3.21, and Blue Cross and Medicare Cost
Reports of the Facilities were filed when due. Except for matters related to
the Unusual Proceedings, and as set forth in Schedule 3.21: to the knowledge
of Seller, (a) neither Seller nor any Subsidiary has received notice of any
material dispute between a Facility and Blue Cross, governmental authorities
or the Medicare fiscal intermediary regarding such Cost Reports for periods
subsequent to the period specified in Schedule 3.21 other than with respect to
adjustments thereto made in the ordinary course of business which do not
involve individual amounts in excess of ten thousand dollars ($10,000) per Cost
Report; (b) there are no pending or threatened material claims by any of such
programs against any Facility; (c) each Facility currently meets, without
material exception, the conditions for participation in the Medicare program;
and (d) no Facility has been subject to loss of waiver of liability for
utilization review denials with respect to any such program during the past two
years.
Section 3.22 Medical Staff. Seller has previously delivered to Buyer,
with respect to each Facility, a true and correct copy of the blank forms
generally used with respect to medical staff privilege and membership
application or delineation of privilege; all current medical staff bylaws,
rules and regulations and amendments thereto respecting Facilities; and all
written contracts with physicians, physician groups, or other members of the
medical staffs of the Facilities. With regard to the active medical staffs of
the Facilities, there are no material pending or threatened disciplinary or
corrective actions or appeals therefrom involving physician applicants or
active medical staff members except as set forth in Schedule 3.22. Schedule
3.22 also sets forth a materially complete and accurate list and description
of (a) the name of each member of the medical staff of each Facility as of the
date shown on such Schedule, (b) the approximate age of each active medical
staff member as of such date, (c) the specialty, if any, of each medical staff
member, (d) readily available reports regarding the number of patient
admissions of each medical staff member for the period shown on such Schedule
3.22, and (e) readily available reports regarding the aggregate patient days
of patients admitted by each medical staff member for the period shown on such
Schedule 3.22.
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Section 3.23 Hill-Burton Care. Except as set forth in Schedule 3.23,
no Subsidiary or Facility has an outstanding loan, grant or loan guarantee
pursuant to the Hill-Burton Act (42 U.S.C. sec. 291a, et seq.) and the
transactions contemplated hereby will not result in any obligation on the part
of the Buyer or a Buyer Subsidiary to repay any such loans, grants or loan
guarantees or provide uncompensated care in consideration thereof.
Section 3.24 Assets Used in the Operation of the Facilities. There are
no assets or properties that are used in and necessary for the conduct of the
operations of the Facilities that are owned by Seller and the Subsidiaries, and
which individually or in the aggregate, are necessary for the operation of the
Facilities that are not included in the Transferred Assets except for such
Assumed Contracts which Buyer has elected or will elect to reject pursuant to
Section 2.18. Except as set forth in Schedule 3.24 and subject to Section
2.18, the Transferred Assets include all assets and properties that are
properly recordable on the Balance Sheet, other than assets and properties
disposed of by the Seller or a Subsidiary in the ordinary course of business
since the date of the Balance Sheet and without violation of this Agreement.
Section 3.25 Taxes. All tax returns of every kind (including, without
limitation, returns of all income taxes, franchise taxes, real and personal
property taxes, intangibles taxes, patient revenue or other healthcare taxes,
withholding taxes, employee compensation taxes and all other taxes of any kind
applicable to Seller or any Subsidiary) that are due to have been filed in
accordance with applicable laws have been duly filed, and all taxes shown to
be due and payable on such returns have been paid in full.
Section 3.26 Lists of Other Data. Schedule 2.1(f) contains a list,
materially complete and correct as of the dates shown thereon, of the Other
Assigned Contracts, and Schedules 3.26(a) through (h) contain lists or other
information, materially complete and correct as of the dates shown thereon, of
the following:
(a) The most recent regularly generated depreciation schedules
related to tangible personal property constituting Equipment, together with
copies of such schedules;
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(b) A brief description of all insurance in force covering
(i) fixed assets that would constitute Transferred Assets, or (ii) the
operations of any Facility as of such date;
(c) All compensation, bonus, incentive, deferred payments,
retirement, pension, severance, profit-sharing, stock purchase and stock option
plans, group life, automobile, medical, dental, disability, welfare or other
employee benefit plans or insurance policies, and other similar arrangements
(collectively, "Employee Benefit Arrangements") generally applicable to the
Retained Employees or a substantial part thereof or generally applicable to the
chief executive or chief financial officers, or a substantial part thereof, of
the Facilities as of such date;
(d) The aggregate accrued Paid Time Off for all employees at each
Facility, as of the date shown;
(e) Any contract relating to clean-up, abatement or other actions
in connection with the remediation of any existing environmental liabilities
or relating to the performance of any environmental audit or study with respect
to the Facilities other than with respect to the Environmental Survey and
entered into in the three years preceding the date hereof;
(f) Any indenture, mortgage, loan, credit or other written
contract under which any of the Subsidiaries, directly or indirectly, is
indebted for money borrowed or is the issuer of any note, bond, indenture or
other evidence of indebtedness for money borrowed or guarantor of similar
financial obligations of others, whether or not reflected on the Balance Sheet;
(g) Any contract with any bank, finance company or similar
organization pursuant to which such organization acquires receivables from the
Subsidiaries; and
(h) Any contract granting any person a lien, security interest or
mortgage on any Transferred Asset (other than Permitted Encumbrances),
including, without limitation, any factoring agreement or agreement for the
assignment of accounts receivable or inventory.
Section 3.27 Certain Transactions. Except as set forth in Schedule
3.27, and except for remuneration as employees, since November 30, 1992
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(i) no Facility has been a party to any transaction or series of similar
transactions in which the amount involved exceeds $60,000 and in which the
chief executive officer, chief financial officer or medical director of such
Facility has a direct or indirect material interest, and (ii) no chief
executive officer, chief financial officer or medical director of any Facility
has been indebted to Seller or any Subsidiary in an amount in excess of
$60,000.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller, as of the date hereof,
as follows, except as set forth in Schedules numbered in relation to the
Sections set forth below:
Section 4.1 Organization and Corporate Power. Buyer is a corporation
duly incorporated and validly existing under the laws of, and is authorized to
exercise its corporate powers, rights and privileges and is in good standing
in, the State of Delaware and has full corporate power to carry on its business
as presently conducted and to own or lease and operate its properties and
assets now owned or leased and operated by it and to perform the transactions
on its part contemplated by this Agreement and all other agreements
contemplated hereby.
Section 4.2 Buyer Subsidiaries.
(a) As of each Scheduled Closing, each Buyer Subsidiary will be
a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation. Each Buyer Subsidiary will have, at the
First Closing and at each Scheduled Closing thereafter, all requisite power and
authority (corporate and otherwise) to carry on its business as then conducted
and to own or lease and operate its properties and assets then owned or leased
and operated by it and to perform the transactions on its part contemplated by
this Agreement and all other agreements contemplated hereby.
(b) The board of directors of each Buyer Subsidiary and, if
required, its shareholders, will have, by the date of the First Closing, duly
and effectively authorized (i) the purchase of the Transferred Assets to be
purchased by such Buyer Subsidiary; and (ii) the execution, delivery and
performance of the Related Agreements and all other agreements contem-
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plated hereby and thereby to which such Buyer Subsidiary is a party. No other
corporate act or proceeding on the part of any Buyer Subsidiary, its board of
directors or its shareholders will be necessary to authorize any Related
Agreement or other agreement contemplated hereby and thereby or the
transactions contemplated hereby and thereby.
(c) The Related Agreements and all other agreements contemplated
hereby and thereby to which any Buyer Subsidiary is a party will, as of each
Scheduled Closing, have been duly executed and delivered by each such Buyer
Subsidiary, and each such agreement, when executed and delivered will
constitute, a valid and binding obligation of such Buyer Subsidiary,
enforceable against such Buyer Subsidiary in accordance with its terms, except
as it may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar Laws now or hereafter in effect relating to creditors' rights
generally and that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding may be brought.
Section 4.3 Authority Relative to this Agreement. The execution,
delivery and performance of this Agreement and the Related Agreements and the
consummation of the transactions contemplated hereby and thereby have been duly
and effectively authorized by the board of directors of Buyer; no other
corporate act or proceeding on the part of Buyer, its board of directors or
shareholders is necessary to authorize this Agreement, any such Related
Agreement or the transactions contemplated hereby and thereby. This Agreement
has been, and each of the Related Agreements contemplated hereby will, as of
each Scheduled Closing, have been, duly executed and delivered by Buyer and by
each applicable Buyer Subsidiary, and this Agreement constitutes, and each such
Related Agreement when executed and delivered will constitute, a valid and
binding obligation of Buyer and each Buyer Subsidiary party thereto,
enforceable against Buyer and each Buyer Subsidiary party thereto, in
accordance with its terms, except as it may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar Laws now or hereafter
in effect relating to creditors' rights generally and that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before which
any proceeding may be brought.
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Section 4.4 Absence of Breach. Subject to the provisions of Sections
4.5 and 4.6 below regarding private party and governmental consents, and except
for compliance with the requirements of the HSR Act and any regulatory or
licensing Laws applicable to the businesses and assets represented by the
Transferred Assets, the execution, delivery and performance by Buyer of this
Agreement and the Related Agreements, and the execution and delivery by any
Buyer Subsidiary of the Related Agreements to which it is a party, and the
performance by the Buyer Subsidiaries of the transactions to be performed by
them and contemplated by this Agreement and the Related Agreements entered into
by the Buyer Subsidiaries, do not, (a) conflict with or result in a breach of
any of the provisions of Charter Documents of Buyer or of any of the Buyer
Subsidiaries, (b) contravene any Law or cause the suspension or revocation of
any License presently in effect, which affects or binds Buyer or any of the
Buyer Subsidiaries or any of their material properties, or (c) conflict with
or result in a breach of or default under any indenture or loan or credit
agreement or any other agreement or instrument to which Buyer or any of the
Buyer Subsidiaries is a party or by which it or they or any of their properties
may be affected or bound.
Section 4.5 Private Party Consents. Except as set forth on Schedule
4.5, the execution, delivery and performance by Buyer of this Agreement and the
Related Agreements and the execution and delivery by any Buyer Subsidiary of
the Related Agreements to which it is a party, and the performance by the Buyer
Subsidiaries of the transactions contemplated by this Agreement and the Related
Agreements to be performed by the Buyer Subsidiaries, do not require the
authorization, consent or approval of any non-governmental third party.
Section 4.6 Governmental Consents. The execution, delivery and
performance by Buyer of this Agreement and the Related Agreements, and the
execution and delivery by any Buyer Subsidiary of the Related Agreements to
which it is a party, and the performance by the Buyer Subsidiaries of the
transactions contemplated by this Agreement and the Related Agreements to be
executed, delivered or performed by the Buyer Subsidiaries, do not require the
authorization, consent, approval, certification, license or order of, or any
filing with, any court or governmental agency, except for compliance with the
HSR Act and except for such governmental authorizations, consents, approvals,
certifications, licenses and orders that customarily accompany the transfer of
health care facilities such as the Facilities.
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Section 4.7 Brokers. Except as set forth on Schedule 4.7, no broker,
finder, or investment banker is entitled to any brokerage, finder's or other
fee or commission in connection with this Agreement or the transactions
contemplated hereby based upon any agreements or arrangements or commitments,
written or oral, made by or on behalf of Buyer or any of its Affiliates. Buyer
shall be solely responsible for the payment of any such fee or commission to
any person or entity listed on Schedule 4.7 as an exception to the foregoing.
Section 4.8 Qualified for Licenses. Buyer or a Buyer Subsidiary is
qualified to obtain any Licenses and program participations necessary for the
operation by Buyer or a Buyer Subsidiary of the Transferred Assets as of the
relevant Scheduled Closing in the same manner as the Transferred Assets are
presently operated by Seller and the Subsidiaries.
Section 4.9 Financial Ability to Perform. Buyer has liquid capital or
committed sources therefor sufficient to permit it to perform timely its
obligations hereunder, including, but not limited to, the payment of the
Tentative Purchase Price to Seller at the Scheduled Closings and the other
payments to Seller required hereunder. Promptly after its receipt of letters
of commitment or other documents related to the financing of its obligations
hereunder, Buyer will provide copies of the same to Seller.
Section 4.10 No Knowledge of Seller's Breach. Neither Buyer nor, to the
knowledge of Buyer, any of its Affiliates has knowledge of any breach of any
representation or warranty by Seller or of any other condition or circumstance
that would excuse Buyer from its timely performance of its obligations
hereunder. Buyer shall notify Seller as promptly as practicable if any such
information comes to its attention before any relevant Closing Date.
Section 4.11 No Assurance. Buyer acknowledges and agrees that the rates
or bases used in calculating payments or reimbursements to it or a Buyer
Subsidiary by any Payor (including but not limited to Medicare) may differ from
the rates and bases used in calculating such payments or reimbursements to
Seller and the Subsidiaries. In entering into the transactions contemplated
by this Agreement and the Related Agreements, Buyer is relying solely on the
express representations, warranties and covenants of Seller and the
Subsidiaries contained in this Agreement and the Related Agreements and upon
no other representations or statements of Seller, the Subsidiaries or any of
their representatives, and acknowledg-
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es and agrees that nothing in this Agreement or the Related Agreements shall
be deemed to create any implied duty, disclosure obligation or responsibility
on the part of Seller or the Subsidiaries. Buyer further acknowledges that
during the course of the due diligence investigation, material information
related to the matters that are the subject of the Unusual Proceedings may not
have been discovered by or disclosed to it. Seller represents and warrants
that, at those scheduled confidential meetings held among counsel for Buyer and
Seller on the dates referenced in Schedule 4.11, which meetings were held for
the purpose of conducting Buyer's due diligence regarding the Unusual
Proceedings, statements of fact concerning the Unusual Proceedings made by
Seller's counsel present at such meetings were not materially inaccurate.
ARTICLE 5
COVENANTS OF EACH PARTY
Section 5.1 Efforts to Consummate Transactions. Subject to the terms
and conditions herein provided including, without limitation, Articles 8 and
9 hereof, each of the parties hereto agrees to use its reasonable commercial
efforts to take, or to cause to be taken, all reasonable actions and to do, or
to cause to be done, all reasonable things necessary, proper or advisable under
applicable Laws to consummate and make effective, as soon as reasonably practi-
cable, the Transactions contemplated hereby, including the satisfaction of all
conditions thereto set forth herein. Such actions shall include, without
limitation, exerting their reasonable efforts to obtain the consents,
authorizations and approvals of all private parties and governmental
authorities whose consent is reasonably necessary to effectuate the
Transactions contemplated hereby, and effecting all other necessary
registrations and filings, including but not limited to filings under Laws
relating to the transfer or obtaining of necessary Licenses, under the HSR Act
and all other necessary filings with governmental authorities. The foregoing
notwithstanding, it shall be the responsibility of Buyer to use its reasonable
commercial efforts and to act diligently and at its expense to obtain any
authorizations, approvals and consents in connection with acquiring Licenses
and program participations that will permit it to operate the Facilities after
the Scheduled Closings, provided that Buyer will seek to obtain Licenses and
program participations subject to the existing conditions under which the
Subsidiaries operate the Facilities and will not seek to change the same until
the Transferred Assets and Assumed Liabilities respecting the Facilities in
question have been transferred to and assumed
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by Buyer. Seller and its Subsidiaries shall cooperate with Buyer's efforts to
obtain the requisite regulatory consents, provided neither Seller nor any of
its Subsidiaries shall be obligated to incur any liabilities or assume any
obligations in connection therewith. Other than Buyer's and Seller's
obligations under Section 5.5, neither party shall have any liability to the
other if, after using its reasonable commercial efforts (and, in the case of
Buyer's efforts to obtain requisite Licenses, acting diligently), it is unable
to obtain any consents, authorizations or approvals necessary for such party
to consummate the Transactions. As used herein, the terms "reasonable
commercial efforts" or "reasonable efforts" do not include the provision of any
consideration to any third party or the suffering of any economic detriment to
a party's ongoing operations for the procurement of any such consent,
authorization or approval except for the costs of gathering and supplying data
or other information or making any filings, fees and expenses of counsel and
consultants and for customary fees and charges of governmental authorities and
accreditation organizations.
Section 5.2 Cooperation; Regulatory Filings. Prior to and after the
Final Closing, upon prior reasonable written request, each party agrees to
cooperate with the other in every reasonable commercial way to consummate the
Transactions. Notwithstanding the foregoing, all analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of either party hereto in connection with proceedings
under or relating to the HSR Act or any other federal or state antitrust or
fair trade law, or made or submitted by or on behalf of Buyer in connection
with proceedings to obtain the Licenses and program participations referred to
in Section 5.1 hereof, shall be subject to the joint approval or disapproval
and the joint control of Buyer and Seller, acting with the advice of their
respective counsel, it being the intent of the foregoing that the parties
hereto will consult and cooperate with one another, and consider in good faith
the views of one another, in connection with any such analysis, presentation,
memorandum, brief, argument, appearance, opinion or proposal; provided that
nothing herein shall prevent either party hereto or any of their Affiliates or
their authorized representatives from (a) making or submitting any such
analysis, appearance, presentation, memorandum, brief, argument, opinion or
proposal in response to a subpoena or other legal process or as otherwise
required by Law, or (b) submitting factual information to the United States
Department of Justice, the Federal Trade Commission, any other governmental
agency or any court or administrative law judge in response to a request
therefor or as otherwise required by Law.
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Section 5.3 Further Assistance. From time to time, at the reasonable
request of either party, whether on or after a Scheduled Closing, without
further consideration, either party, at its expense and within a reasonable
amount of time after request hereunder is made, shall execute and deliver such
further instruments of assignment, transfer and assumption and take such other
action as may be reasonably required to more effectively assign and transfer
the Transferred Assets to, and vest the Assumed Liabilities in, Buyer, deliver
or make the payment of the Purchase Price to Seller or any amounts due from one
party to the other pursuant to the terms of this Agreement or confirm Seller's
ownership of the Excluded Assets and obligations with respect to the Excluded
Liabilities.
Section 5.4 Cooperation Respecting Proceedings. After the Scheduled
Closings, upon prior reasonable written request, each party shall cooperate
with the other, at the requesting party's expense (but including only out-of-
pocket expenses to third parties and not the costs incurred by any party for
the wages or other benefits paid to its officers, directors or employees), in
furnishing information, testimony and other assistance in connection with any
inquiries, actions, tax or Cost Report audits, proceedings, arrangements or
disputes involving either of the parties hereto (other than in connection with
disputes between the parties hereto) and based upon contracts, arrangements or
acts of Seller or any of the Subsidiaries which were in effect or occurred on
or prior to any Scheduled Closing and which relate to the Transferred Assets,
including, without limitation, arranging discussions with (and the calling as
witness of) officers, directors, employees, agents, and representatives of
Buyer.
Section 5.5 Expenses. Whether or not the Transactions contemplated
hereby are consummated, except as otherwise provided in this Agreement, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses. Notwithstanding the foregoing:
(a) Costs associated with preliminary title reports and title
policies shall be borne by Seller up to the costs that would have been incurred
had the title policies been standard coverage policies of title insurance, and
the remaining costs, if any, including costs for Extended Coverage and any
surveys in connection therewith, shall be borne by Buyer;
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(b) All costs of the Environmental Survey referred to in Section
6.2(b) shall be borne one-half by Buyer and one-half by Seller, other than any
cost incurred in connection with any "Phase II" investigation conducted by
Buyer's environmental consultant (which shall be borne by Buyer);
(c) All escrow charges, appraisal fees, and charges of any neutral
independent public accountant or mediator, and related costs, shall be borne
one-half by Buyer and one-half by Seller (it being agreed that each party shall
bear the costs of its own independent public accountant or designated
mediator);
(d) All recording costs and charges respecting real property will
be borne one-half by Seller and one-half by Buyer;
(e) All transfer taxes respecting real property will be borne one-
half by Buyer and one-half by Seller;
(f) All fees and expenses relating to the filings under the HSR
Act shall be borne by the party incurring such fees and expenses;
(g) All fees and charges of governmental authorities and
accreditation agencies in connection with the transfer, issuance or authoriza-
tion of any License, accreditation or program participation shall be borne by
Buyer;
(h) All fees or costs associated with the issuance of any bond or
the establishment of any escrow required by Section 2.10(a) shall be borne by
Buyer;
(i) All fees, charges or costs (other than internal costs of
Seller or any Subsidiary), including auditing fees and expenses, incurred as
a result of Buyer's compliance with the Securities Exchange Act of 1934, as
amended, or the Securities Act of 1933, as amended, and the rules and
regulations thereunder, shall be borne by Buyer;
(j) Out-of-pocket costs incurred by Seller and the Subsidiaries
in connection with providing transitional assistance to Buyer shall be borne
by Buyer, whether such assistance is provided before or after a Scheduled
Closing, including costs associated with attendance at meetings requested by
Buyer;
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(k) All liabilities or obligations of Seller or a Subsidiary for
Taxes in the nature of sales taxes incurred as a result of the sale of the
Transferred Assets hereunder to Buyer shall be borne one-half by Seller and
one-half by Buyer; and
(l) All fees, charges and costs of economists and other experts,
if any, jointly retained by Buyer and Seller in connection with submissions
made to any government agency and advice in connection therewith respecting
approval of the Transactions, including proceedings under the HSR Act, will be
borne one-half by Buyer and one-half by Seller.
All such charges and expenses shall be promptly settled between the parties at
the relevant Scheduled Closing or upon termination or expiration of further
proceedings under this Agreement, or with respect to such charges and expenses
not determined as of such time, as soon thereafter as is reasonably
practicable.
Section 5.6 Announcements; Confidentiality. Prior to the Final Closing
Date, no press or other public announcement, or public statement or comment in
response to any inquiry, relating to the transactions contemplated by this
Agreement shall be issued or made by Buyer or Seller or any Subsidiary without
the joint approval of Buyer and Seller; provided that a press release or other
public announcement, regulatory filing, statement or comment made without such
joint approval shall not be in violation of this Section if it is made in order
to comply with applicable securities Laws or stock exchange policies and in the
reasonable judgment of the party making such release or announcement, based
upon advice of counsel, prior review and joint approval, despite reasonable
efforts to obtain the same, would prevent dissemination of such release or
announcement in a timely enough fashion to comply with such Laws or policies,
provided that in all instances prompt notice from one party to the other shall
be given with respect to any such release, announcement, statement or comment.
Subject to the foregoing, the parties hereto recognize and agree that all
information, instruments, documents and details concerning the businesses of
Buyer, Seller and the Subsidiaries are strictly confidential, and Seller and
Buyer expressly covenant and agree with each other that, prior to and after the
Scheduled Closings, they will not, nor will they allow any of their respective
officers, directors, employees, representatives or agents (including
professional advisors) to disclose or publicly comment upon any matters
relating to the business of
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the other or relating to this Agreement, including, without limitation, the
terms, timing or progress of the transactions contemplated hereby, or its
negotiation, terms, provisions or conditions, including Purchase Price, except
for disclosure to their respective professional advisors and lenders or
prospective financing sources (each of whom shall agree not to disclose the
same) which is reasonably necessary to effectuate the Transactions contemplated
hereby and in a manner consistent with the provisions of this Agreement. Each
party shall keep all information (i) obtained from the other either before or
after the date of this Agreement, or (ii) related to Buyer's proposed purchase
of the Transferred Assets, Seller's proposed sale of the Transferred Assets,
the contents of this Agreement or the negotiation of this Agreement confiden-
tial, and neither party shall reveal such information to, nor produce copies
of any written information for, any person outside its management group or its
professional advisors (including lenders and prospective financing sources)
without the prior written consent of the other party, unless such party is
compelled to disclose such information by judicial or administrative process
or by any other requirements of Law or disclosure is reasonably necessary to
obtain a License or a consent listed on the Schedule of Required Consents. If
the Transactions contemplated by this Agreement should fail to close for any
reason, each party shall return to the other as soon as practicable all
originals and copies of written information provided to such party by or on
behalf of the other party and none of such information shall be used by either
party, or their employees, agents or representatives in the business operations
of any person. Notwithstanding the foregoing, (i) each party's obligations
under this Section shall not apply to any information or document which is or
becomes available to the public other than as a result of a disclosure by the
other party in violation of this Agreement or other obligation of
confidentiality under which such information may be held or becomes available
to the party on a non-confidential basis from a source other than the other
party or its officers, directors, employees, representatives or agents and (ii)
without the prior written consent of Seller, or except as may be required by
Law (as determined by the written opinion of independent counsel in form and
substance satisfactory to Seller) the schedules to this Agreement shall not be
disclosed to or filed with any person (including any governmental entity or
regulatory board) if such filing or disclosure could result in such schedules
becoming available to the public. The parties' obligations under this Section
shall survive the termination of this Agreement. Nothing in this Section
shall, or is intended to, impair or modify any of the rights or obligations of
Buyer or its Affiliates under that certain letter agreement dated as of
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September 15, 1993, all of which remain in effect until termination of such
letter agreement in accordance with its terms.
Section 5.7 Preservation of and Access to Certain Records.
(a) As set forth in Section 2.2(e), all or any portion of the
medical, clinical and other records directly or indirectly associated with the
admission, care and treatment of patients on or prior to the relevant Closing
Date on which the relevant Facility is transferred (collectively, for all
Facilities, the "Patient Records") and all financial and other records of, or
located at, a Facility for the period ending on or prior to the relevant
Closing Date, whether or not maintained at or by a Facility (the Patient
Records and such other records for all Facilities are collectively referred to
as the "Hospital Records") shall be Excluded Assets. Notwithstanding the
foregoing, the parties will cooperate in providing copies and access to such
records as set forth below.
(b) Notwithstanding that the Hospital Records are Excluded Assets,
to the extent required by applicable Law or at Seller's election, Seller may
choose not to remove the Hospital Records from a transferred Facility or
otherwise acquire possession of them after a Scheduled Closing. Unless and
until removed by Seller, the Buyer shall, in accordance with applicable Laws,
maintain the Hospital Records at the Facilities (or at such other mutually
approved locations) at Buyer's cost, and as agent of and bailee for Seller,
until the expiration of seven (7) years from the relevant Scheduled Closing
(and, if at the expiration thereof any tax or Payor audit or judicial
proceeding is in progress or the applicable statute of limitations has been
extended, for such longer period as such audit or proceeding is in progress or
such statutory period is extended)(the "Document Retention Period"). After a
Scheduled Closing and subject to applicable Laws, Buyer shall grant Seller full
access to the Hospital Records (including any Patient Records) as needed for
any lawful purpose (including Seller's inspection and copying of same), and
Seller shall have the same rights of access to inspect and copy (at Seller's
cost) any or all of the Hospital Records that Seller had prior to the Scheduled
Closing. Buyer shall instruct the appropriate employees of the Facilities to
cooperate in providing access to such records to Seller and its authorized
representatives as contemplated herein. Access to such records shall be,
wherever reasonably possible, during normal business hours, with reasonable
prior written notice to Buyer of the time when such access shall be needed.
Seller's employees, representatives and agents shall
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conduct themselves in such a manner so that Buyer's normal business activities
shall not be unduly or unnecessarily disrupted. After the expiration of the
aforementioned Document Retention Period, Buyer shall not, without ninety-one
(91) days' prior written notification to Seller, destroy any Hospital Records
in its possession. Within ninety (90) days after its receipt of such notice
of intent to destroy, Seller shall have the right, at its own expense, to
require Buyer to deliver any such records to Seller in accordance with Seller's
reasonable instructions. Buyer shall adopt a record retention policy with
respect to the Hospital Records which requires that all Hospital Records be
maintained for the Document Retention Period and destroyed only after
compliance with the notice provisions of this Subsection (b) (including the
passage of time), and shall take all reasonable steps necessary to inform its
employees of such policy.
(c) Buyer acknowledges and agrees that Seller shall have the right
to remove, and may remove, from time to time on or prior to the relevant
Closing Date and during the Document Retention Period any or all of the
Hospital Records. In the event of Seller's removal of any Hospital Records
from a Facility, it shall, at Seller's cost and subject to applicable Laws,
provide Buyer with copies (or originals, if required by applicable law or
accreditation standards) of the following Hospital Records if Buyer elects to
retain such copies: (i) the Patient Records for patients who are patients of
the Facilities at the relevant Scheduled Closing or who are the subject of
Receivables transferred to Buyer hereunder, (ii) the personnel records of the
Hired Employees, and (iii) any records Buyer would be required to have to
comply with accreditation standards. If the Hospital Records are removed by
Seller, then it shall maintain such Hospital Records at its expense during such
period of time and at such location as is deemed appropriate by Seller in its
sole and absolute discretion. For so long as the Hospital Records are
maintained by Seller, Seller shall make Hospital Records (other than those
protected by or subject to the attorney-client privilege) available to Buyer,
subject to applicable Laws, as needed by Buyer for any lawful purpose and if
reasonably necessary to permit Buyer to operate the Facilities or other
Transferred Assets. Seller shall instruct its appropriate employees to
cooperate in providing access to such records to Buyer and its authorized
representatives as contemplated herein. Buyer's access to such Hospital
Records shall be during normal business hours, with reasonable prior written
notice to Seller of the time when such access shall be needed. Buyer may make
copies of or extracts from any such Hospital Records to which Buyer has access
hereunder at Buyer's sole cost and expense.
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Notwithstanding the foregoing, Buyer's access to, or right to copies of, any
Patient Records shall be subject to any applicable Law, accreditation standard
or rule of confidentiality or privilege.
(d) After Closing, Buyer or the applicable Buyer Subsidiary shall
have the right to assign to an entity which purchases from Buyer or a Buyer
Subsidiary a Facility or substantially all the assets of a Facility, all of the
rights of Buyer under this Section 5.7, provided that such entity expressly
assumes all obligations of Buyer under this Section 5.7 with respect to the
purchased Facility.
ARTICLE 6
ADDITIONAL COVENANTS OF SELLER
Seller hereby additionally covenants, promises and agrees as follows:
Section 6.1 Conduct Pending Closing. Prior to consummation of the
Transactions contemplated hereby or the termination or expiration of this
Agreement pursuant to its terms, unless Buyer shall otherwise consent in
writing, which consent shall not be unreasonably withheld or delayed, and
except for actions taken pursuant to Assumed Contracts, or which arise from or
are related to the anticipated transfer of the Transferred Assets, the conduct
or resolution of the Unusual Proceedings or effectuation of ongoing compliance
programs, or as otherwise contemplated by this Agreement or disclosed in
Schedule 6.1 or another Schedule to this Agreement, Seller shall, and shall
cause the Subsidiaries to:
(a) Conduct the business represented by, and otherwise deal with,
the Transferred Assets only in the usual and ordinary course, materially
consistent with practices followed prior to the execution of this Agreement;
(b) Use reasonable efforts to keep intact the Transferred Assets
and the business they represent and to preserve relationships beneficial to
such business that doctors, patients, Payors, suppliers, employees and others
have with the Facilities;
(c) Except as required by their terms, not amend, terminate,
renew, fail to renew or renegotiate any material contract, except in the
ordinary course of business and consistent with practices of the recent
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past, or default (or take or omit to take any action that, with or without the
giving of notice or passage of time, would constitute a default) in any of its
obligations under any such contracts, that would be an Assumed Contract as of
the date hereof;
(d) Not (i) sell, lease, transfer or dispose of, or make any
contract for the sale, lease, transfer or disposition of, any assets or
properties which would be included in the Transferred Assets in an amount in
excess of $1,000,000 in the aggregate (other than sales in the ordinary course
of business); (ii) incur, assume, guaranty, or otherwise become liable in
respect of any indebtedness for money borrowed which would result in Buyer
assuming such liability hereunder after the Closing; (iii) purchase or make any
contract for the purchase of a material amount of assets or properties which
would be included in the Transferred Assets (other than purchases in the
ordinary course of business and other than capital expenditures within the
aggregate thresholds set forth in clause (v) below); (iv) accelerate or delay
the purchase of Inventory, or the payment of amounts due to or from the
Subsidiaries in a manner inconsistent with past practice; (v) make any new
commitments which would require an expenditure of more than $50,000 in the
aggregate other than in the ordinary course of business; (vi) encumber or
voluntarily subject to any lien any Transferred Asset (except for Permitted
Encumbrances); or (vii) assign or transfer accounts receivable to collection
agencies in a manner inconsistent with past practice.
(e) Maintain in force and effect the insurance policies identified
in Section 3.26(b);
(f) Not enter into any contract or amendment of a contract that,
had such contract or amendment been entered into prior to the date hereof,
would have been included on Schedule 2.1(f), unless Buyer has failed to
disapprove of such contract or amendment in a written notice to Seller given
within two (2) business days of Seller's written notice to Buyer of such
contract or amendment accompanied by a copy thereof, provided that Buyer's
disapproval of such contract or amendment shall not be unreasonable, and
provided further that any contract entered into in violation of this Section
6.1(f) shall be subject to the provisions of Section 2.18;
(g) Not grant any general or uniform increase in the rates of pay
or benefits to Retained Employees (or a class thereof) or any increase
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in salary or benefits of any chief executive or financial officer of any
Facility, except for compensation previously agreed to prior to the date
hereof; or
(h) Subject to Section 6.3, not take any action which would cause
any of Seller's representations and warranties set forth in Article 3 to be
false as of the relevant Scheduled Closing;
provided that nothing in this Section shall (i) obligate Seller or any
Subsidiary to make expenditures other than in the ordinary course of business
and consistent with practices of the recent past or to otherwise suffer any
economic detriment, (ii) preclude Seller from paying, prepaying or otherwise
satisfying any liability which, if outstanding as of a Closing Date, would be
an Assumed Liability or an Excluded Liability, (iii) preclude Seller from
incurring any liabilities or obligations to any third party in connection with
obtaining such party's consent to any transaction contemplated by this
Agreement or the Related Agreements provided such liabilities and obligations
under this clause (iii) shall be Excluded Liabilities pursuant to Section
2.4(h) hereof if not approved in advance by Buyer (which approval shall not be
unreasonably withheld), or (iv) preclude Seller from instituting or completing
any program designed to promote compliance or comply with Laws or other good
business practices respecting the Facilities.
Section 6.2 Access and Information; Environmental Survey; Remediation
or Adjustment.
(a) Subject to the restrictions set forth in Section 5.6
respecting confidentiality and provided that Buyer has complied with each and
every provision thereof, Seller shall, and shall cause the Subsidiaries to,
afford Buyer, and the counsel, accountants and other representatives of Buyer,
reasonable access, throughout the period from the date hereof to the relevant
Closing Date, to the Transferred Assets and the employees, personnel and
medical staff associated therewith and all the properties, books, contracts,
commitments, Cost Reports and records respecting the Transferred Assets
(regardless of where such information, may be located) which Seller has or to
which it has access. Such access shall be afforded to Buyer after no less than
24 hours prior written notice, during normal business hours and only in such
manner so as not to disturb patient care or to interfere with the normal
operations of the Facilities; provided, however, that, notwithstanding the
foregoing and subject to the provisions
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concerning nondisclosure set forth in Section 5.6, without first obtaining the
written consent of Mr. Donald Thayer which consent shall not be unreasonably
withheld, neither Buyer nor its counsel, accountants and other representatives
shall tour or visit the Facilities or contact any of the employees, personnel
or medical staff thereof; and provided further that until the first to occur
of the Termination Date or the Final Closing, under no circumstances shall
Buyer directly or indirectly solicit the employment of any employees of Seller
or its Subsidiaries, except as Hired Employees pursuant to the terms hereof or
except as may be permitted with the prior written consent of a responsible
officer of Seller. Seller's covenants under this Section are made with the
understanding that Buyer shall use all such information in compliance with all
Laws. The foregoing notwithstanding, Buyer acknowledges and agrees that
Buyer's access to the books and records of the Transferred Assets shall not
include access to, and Seller shall not have any obligation to deliver to
Buyer, any information concerning any alleged dispute or any pending
litigation, investigation or proceeding involving Seller or its Affiliates that
is protected by or subject to the attorney-client privilege, or the disclosure
of which is restricted by an agreement entered into in connection with such
dispute, litigation, investigation or proceeding or an order entered by any
court, or (in the case of the Unusual Proceedings) certain non-public
information; moreover, Buyer shall not have access to patient or employee
records or any other records the disclosure of which would be prohibited by any
Law, accreditation standards, or rule or agreement (express or implied) of
confidentiality, except that Buyer may be granted access to such records to the
extent they are appropriately redacted and in conformity with such other
reasonable procedures as may be required to conform to any such requirements
of Law, accreditation standards or rule or agreement of confidentiality.
(b) Seller has provided (or, with respect to Facility No. 30, will
reasonably soon provide) to Buyer copies of an environmental survey conducted
with respect to each of the Facilities (the "Environmental Survey"). The
Environmental Survey was conducted by an environmental consulting firm or firms
(the "Consultant") in accordance with applicable professional standards in
effect at the time the Environmental Survey was conducted and such reasonable
procedures as were determined by Seller. In the event of a disagreement
between Buyer and Seller concerning the procedures employed by the Consultant,
Buyer may at Buyer's expense employ a separate environmental consultant to
conduct such procedures requested by Buyer (subject to Seller's prior approval
of such procedures,
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which shall not unreasonably be withheld), and the findings of the Buyer's
Environmental consultant shall be included as an addendum to the Environmental
Survey. The results of any such Environmental Survey shall be delivered to and
owned by Seller, and all proceedings in connection with the Environmental
Survey and the results thereof shall be subject to the confidentiality
provisions of Section 5.6. Buyer acknowledges and agrees that the Environ-
mental Survey is and shall be only an initial "Phase I" environmental site
assessment. If subsequently determined by Seller, the Consultant and the
Buyer, to be necessary or prudent to conduct sampling, laboratory analyses, or
additional investigation work at any of the Facilities, Seller shall direct the
Consultant to undertake a further "Phase II" investigation involving additional
investigation and appropriate sampling and laboratory analyses respecting such
Facilities the results of which are to be included in the Environmental Survey.
In any "Phase II" investigation, Seller shall give Buyer no less than 24 hours'
notice before the Consultant enters onto any Facility, and the "Phase II"
Environmental Survey shall be conducted so as not to interfere with the normal
operation of the Facilities. Buyer shall be permitted to have one of its
employees or agents present during all inspections of, and sample gatherings
(including borings) from the soil or any floor tile, insulation or other
internal component of, a Facility and shall be entitled to split samples upon
Buyer's request. In the event that Buyer considers it necessary to conduct any
"Phase II" investigation work that Seller refuses to order, Buyer may at
Buyer's expense employ a separate environmental consultant to conduct such
"Phase II" investigation work at least thirty (30) days before the First
Closing. Buyer shall give Seller no less than 24 hours' notice before Buyer's
environmental consultant enters onto any Facility, and any such "Phase II" work
performed by Buyer's environmental consultant shall be conducted so as not to
interfere with the normal operations of the Facilities. Seller shall be
permitted to have one of its employees or agents present during all inspections
of and sample gatherings (including borings) from the soil or any floor tile,
insulation, or other internal component of a Facility performed by Buyer's
environmental consultant and shall be entitled to split samples upon Seller's
request. Buyer shall be liable for any repairs or other costs required to
correct damage to the Facilities resulting from such "Phase II" investigation.
The findings of any Phase II investigation prepared by Buyer's environmental
consultant shall be included as an addendum to the Environmental Survey.
Notwithstanding the foregoing, Seller may elect not to permit Buyer to conduct
a "Phase II" investigation through its own environmental consultant, in which
case Buyer can exclude the affected
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Facility, and the Transferred Assets and Assumed Liabilities respecting such
Facility from the Transactions, in which case the parties shall negotiate in
good faith an equitable adjustment to the Purchase Price, or if they cannot
agree upon the same, such adjustment shall be determined in accordance with
Section 2.14.
(c) With respect to any matters disclosed by such Environmental
Survey or listed on Schedule 3.16 that would constitute a breach of Seller's
warranties in Section 3.16, but for the qualifications to such warranties based
on Seller's knowledge or disclosures in the Environmental Survey or on such
Schedule 3.16, Seller will at its election, either (i) clean up or otherwise
remediate such matters in a reasonable manner prior to the Closing Date related
to such Facility, at its expense; or (ii) agree in writing prior to the Closing
Date to reimburse Buyer for the costs specified in such written agreement of
such reasonable clean-up or remediation incurred by Buyer after the Closing
Date related to such Facility, and to promptly reimburse Buyer after Buyer
incurs such expenses subsequent to the Closing Date related to such Facility;
or (iii) elect to exclude the affected Facility, and Transferred Assets and
Assumed Liabilities respecting such Facility, from the Transactions, in which
case the parties shall negotiate in good faith an equitable adjustment to the
Purchase Price, or if they cannot agree upon the same, such adjustment shall
be determined in accordance with Section 2.14; provided, however, that in no
case will Seller be required to remove or otherwise remediate (or bear the
costs of same) any Hazardous Materials used as construction materials in
structures or improvements constituting the Facilities, or in equipment
contained therein, unless the current condition of such Hazardous Materials has
resulted in either: (i) noncompliance with any Environmental Law or License
issued pursuant to an Environmental Law; or (ii) an unreasonable hazard to
human health, human safety or the environment.
Section 6.3 Updating. Seller shall notify Buyer of any changes or
additions to any of Seller's Schedules to this Agreement with respect to a
particular Facility or the Transferred Assets or Assumed Liabilities related
thereto by the delivery of updates thereof, if any, as of a reasonably current
date prior to the relevant Scheduled Closing not later than three (3) business
days prior to the Scheduled Closing with respect to such Subject Transferred
Assets, provided, however, that the Financial Schedule shall not be updated to
cover any period or periods subsequent to the respective dates thereof. No
such updates made pursuant to this Section
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shall be deemed to cure any breach of any representation or warranty made in
this Agreement, unless Buyer specifically agrees thereto in writing, nor shall
any such notification be considered to constitute or give rise to a waiver by
Buyer of any condition set forth in this Agreement.
Section 6.4 No Solicitation. Seller will not, and shall cause the
Subsidiaries not to, and will use its best efforts to cause its and their
officers, employees, agents and representatives (including any investment
banker) not to, directly or indirectly, solicit, encourage or initiate any
discussions with, or, subject to fiduciary duties to shareholders, negotiate
or otherwise deal with, or provide any information to, any corporation,
partnership, person or other entity or group, other than Buyer and its
officers, employees and agents, concerning any sale of or similar transactions
involving the Transferred Assets or the stock of the Subsidiaries. None of the
foregoing shall prohibit providing information to others in a manner in keeping
with the ordinary conduct of Seller's or the Subsidiaries' businesses. Seller
shall notify Buyer promptly of any inquiry, proposal or offer received by
Seller concerning the sale of or similar transactions involving the Transferred
Assets or the stock of the Subsidiaries. Subject to the foregoing, in the
exercise of its aforementioned fiduciary duties to shareholders, Seller may
terminate this Agreement on written notice to Buyer, which termination shall
have the effect set forth in Section 10.2, provided that upon consummation
prior to the first anniversary of this Agreement of any transaction or
transactions with one or more third parties covering substantially all of the
Transferred Assets, Seller shall be obligated to pay Buyer the sum of Fifteen
Million Dollars ($15,000,000), and provided further that the payment of such
sum shall be deemed to constitute liquidated damages in lieu of any and all
other liability of Seller and the Subsidiaries to Buyer and the Buyer
Subsidiaries in connection with or related to or arising from this Agreement
or the transactions contemplated hereby, or in connection with or related to
or arising from the termination hereof.
Section 6.5 Name Changes. To the extent that the corporate names of any
of the Subsidiaries incorporate or are substantially similar to the Transferred
Business Names, Seller agrees to cause the Subsidiaries promptly after the
relevant Scheduled Closing to take all action necessary to change such names
so as not to incorporate or be substantially similar to the Transferred
Business Names.
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Section 6.6 Filing of Cost Reports. Seller shall cause to be prepared
and timely filed all Cost Reports and all other filings which are required to
be filed with Medicare and any other cost-based Payors with respect to the
operations of the Facilities for any and all periods ending on or prior to a
relevant Closing Date. Seller and the Subsidiaries shall retain all rights to
any amounts receivable from Medicare or other Payors with respect to such
reports or filings or with respect to such periods and, as between Buyer, on
the one hand, and Seller and Subsidiaries, on the other, shall remain obligated
for all amounts due Medicare or such other Payors with respect to such reports
or filings or with respect to such periods, and the parties hereby acknowledge
and agree that Buyer is not being assigned or otherwise receiving and is not
hereby assuming any of the same. Seller's rights shall include, without
limitation, the right to dispute or to appeal any determinations relating to
such reports.
Section 6.7 Purchase of Supplies. Buyer may request Seller or its
Affiliates to permit Facilities transferred at such Scheduled Closing to
participate in specified national purchasing contracts of Seller or its
Affiliates for a fee to be agreed upon. If Buyer wishes to enter into such an
agreement with Seller, it shall notify Seller no later than five (5) days prior
to such Scheduled Closing, and at the Scheduled Closing the parties shall
execute a Purchasing Contract substantially in the form of Exhibit D hereto.
Schedule 6.7 lists all of the national purchasing contracts of Seller and its
Affiliates in effect as of the date thereof which do not preclude participation
by persons which are not Affiliates of Seller.
Section 6.8 Covenant Not to Compete.
(a) Covenant. Subject to the further provisions of this Section
6.8, during the "Covenant Period" (as defined in Section 6.8(d)), none of the
Subsidiaries, Seller or any other subsidiaries of Seller in which Seller owns
a majority of the voting interests (collectively, "Covered Parties") shall,
directly or indirectly (whether through a majority-owned subsidiary or
otherwise), in any Specified Capacity (as defined in this Section 6.8), engage
in the business of delivering mental health or alcohol or substance abuse
services through the operation of a hospital or otherwise, including without
limitation through the delivery of inpatient, partial hospitalization,
residential or outpatient services (as limited by the provisions of Section
6.8(b), a "Competing Business"). For purposes hereof, the term "Specified
Capacity" shall mean, subject to Section 6.8(b), each of the following
capacities:
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(i) As an operator, manager or sole owner of the Competing
Business, whether directly or indirectly;
(ii) As a constituent partner, joint venturer or equity
shareholder of an entity engaged in the Competing Business if the voting
equity interest held is greater than 10% of all voting equity interests
in such entity;
(iii) As a lender of money to, or a guarantor of indebted-
ness for money borrowed by, any other entity engaged in a Competing
Business in a principal amount in excess of $1,000,000, except for (A)
loans or guarantees made in the ordinary course of business and not as
an investment in such entity; (B) loans or guarantees made or entered
into in connection with the sale of a Competing Business by a Covered
Party; or (C) loans represented by publicly traded instruments.
(b) Exceptions. The provisions of this Section 6.8 shall not
apply to and shall not prohibit the following:
(i) Psychiatric Facilities and Contracts Not Acquired By
Buyer. The conduct of a Competing Business from any facility (including
renovations and expansions thereof) at which a Covered Party, in any
Specified Capacity, primarily engages in a Competing Business as of the
Final Closing, or pursuant to any contract (including modifications,
extensions and renewals thereof) under which a Covered Party, in any
Specified Capacity, engages in a Competing Business as of the Final
Closing, if (A) such facility, contract or Specified Capacity is not
acquired or assumed by Buyer or a Buyer Subsidiary pursuant to this
Agreement, or (B) such facility, contract or Specified Capacity, is,
after the Final Closing, reacquired by a Covered Party from Buyer or a
Buyer Subsidiary pursuant to this Agreement;
(ii) Facilities Outside Geographic Area. The conduct of a
Competing Business from any location that is not within twenty-five (25)
miles of a Facility (not including satellite locations) that (A) was
acquired by Buyer or a Buyer Subsidiary pursuant to this Agreement, and
(B) at the time in question, is still owned, operated or managed by Buyer
or by a person or entity which, directly or indirectly, controls, is
controlled by or is under
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common control with Buyer (Facilities meeting the requirements of both
clauses (A) and (B) being herein referred to as "Covered Facilities");
(iii) Acute Hospitals. The conduct of a Competing Business
from or through any hospital, commonly referred to as an acute care
hospital, that is licensed to provide general medical and surgical
services, including related facilities that operate on the same campus
as, or under the auspices of, such acute care hospital (such hospitals
and related facilities being herein referred to as "Acute Hospitals"),
including the provision of management services to an Acute Hospital,
provided that the conduct of any Competing Business from or through a
Specified Acute Hospital or an Acquired Acute Hospital (as each such term
is defined in Section 6.8(c)) shall be subject to the further provisions
of Section 6.8(c);
(iv) Divestiture of Acquired Psychiatric Facilities. Other
than an Acquired Acute Hospital, the conduct of a Competing Business in
a Specified Capacity first acquired by any Covered Party after the date
hereof as part of the acquisition of interests in healthcare assets other
than the Competing Business, provided that no Covered Party engages in
such Competing Business after the expiration of twelve (12) months from
such acquisition and no such Competing Business is expanded during such
twelve (12) month period, except for expansions for which regulatory
approval exists, or for which capital expenditures have been undertaken
or are in process, or which are required by existing contracts (together,
"Permitted Expansions"); or
(v) Acquiring Entities. The conduct of a Competing Business
for, on behalf of, or by (A) any entity that is not a Covered Party that
acquires majority ownership or substantially all the assets of a Covered
Party after the date hereof, (B) any entity that is not a Covered Party
that acquires a Competing Business from a Covered Party after the date
hereof, (C) any surviving entity (other than a Covered Party) of a
consolidation, merger, reorganization or spinoff (each, a
"Reorganization") involving a Covered Party as a result of which
shareholders directly or indirectly owning a majority of such Covered
Party immediately before such Reorganization do not own a majority of
such surviving entity immediately
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after such Reorganization, or (D) any majority-owned subsidiary of any
such acquiring or surviving entity that is not a Covered Party.
(c) Acute Hospital Affiliations. With respect to an Acute
Hospital listed on Schedule 6.8(c) (a "Specified Acute Hospital"), and except
as set forth below, the exception provided by Section 6.8(b)(iii) above shall
apply but only to the extent such Specified Acute Hospital conducts a Competing
Business (including Permitted Expansions, the "Exempted Competing Business")
on the Scheduled Closing Date with respect to the Facility shown on Schedule
6.8(c) as the Specified Acute Hospital's "Affiliation Facility." On and after
such Scheduled Closing Date, a Specified Acute Hospital shall not expand its
services or its Competing Business beyond the Exempted Competing Business
except in accordance with, and subject to, clauses (i) through (iii) below.
With respect to any Acute Hospital acquired by a Covered Party after the date
of this Agreement and which is within twenty (20) miles of a Covered Facility
(an "Acquired Acute Hospital"), the exception provided by Section 6.8(b)(iii)
shall apply but only to the extent of such Acquired Acute Hospital's Exempted
Competing Business on the date the acquisition of such Acquired Acute Hospital
is consummated (the "Acquisition Date"). On and after such Acquisition Date,
an Acquired Acute Hospital shall not expand its services or its Competing
Business beyond the Exempted Competing Business except in accordance with, and
subject to, clauses (i) through (iii) below.
(i) Seller or its relevant Affiliate must first provide
Buyer notice that it proposes to expand its services or Competing
Business beyond the Exempted Competing Business, and shall briefly
describe the nature and scope of the expanded Competing Business in which
it proposes to engage. Within thirty (30) days following its receipt of
such notice, Buyer shall cause (A) the Affiliation Facility with respect
to a Specified Acute Hospital (as noted in Schedule 6.8(c)) to offer the
Specified Acute Hospital the opportunity to enter into an affiliation
agreement with its Affiliation Facility, or (B) the closest Covered
Facility with respect to an Acquired Acute Hospital to offer the Acquired
Acute Hospital the opportunity to enter into an affiliation agreement.
All affiliation agreements must be on customary industry terms, pursuant
to which the relevant Covered Facility will agree to provide all services
comprising the expanded Competing Business to Payors and patients of, and
to subscribers or other participants in services or
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programs provided by, the Acute Hospital at the Covered Facility's usual
and customary prices, terms and conditions which the parties shall
negotiate expeditiously and in good faith. The term of the affiliation
agreement shall be for the Covenant Period for such Specified or
Acquired Acute Hospital and shall give the Specified Acute Hospital or
Acquired Acute Hospital, as the case may be, the right to extend the
agreement for two successive one-year periods.
(ii) The Covered Facility must have the capacity to provide
the desired services in a quantity and manner comparable to the quantity
and manner in which such services are proposed to be provided by the
Specified or Acquired Acute Hospital.
(iii) The entry into such affiliation agreement by the
Specified Acute Hospital or Acquired Acute Hospital, and the performance
thereof by the Specified Acute Hospital or Acquired Acute Hospital
(including, without limitation, the failure to provide such Competing
Business by the Specified Acute Hospital or Acquired Acute Hospital) will
not violate or conflict with, or cause a default under, the terms of any
License, accreditation standard or Payor contract to which the Specified
Acute Hospital or Acquired Acute Hospital is then subject.
If the terms and conditions set forth in clause (i) through (iii) (other than
the first sentence of clause (i)) are not met as to the expanded Competing
Business of a Specified or Acquired Acute Hospital, the exception provided by
Section 6.8(b)(iii) above shall apply to such expanded Competing Business of
such Specified or Acquired Acute Hospital.
(d) Covenant Period. The term of the covenant (the "Covenant
Period") set forth in Section 6.8(a) shall expire on the third anniversary of
the Final Closing, except (i) as to a Specified Acute Hospital, the covenant
shall expire on the earlier of the third anniversary of the Final Closing or
the date on which such Specified Acute Hospital's Affiliation Facility is no
longer a Covered Facility, and (ii) as to an Acquired Acute Hospital, the
covenant shall expire on the earlier of the third anniversary of the Final
Closing or the second anniversary of the Acquisition Date for such Acquired
Acute Hospital.
(e) Severability. To the extent that this covenant or any
provision of this Section 6.8 shall be deemed illegal or unenforceable by
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a court or other tribunal of competent jurisdiction with respect to (i) any
geographic area, (ii) any part of the time period covered by this covenant,
(iii) any activity or Specified Capacity covered by this covenant, or (iv) any
other aspect of this covenant, such determination shall not affect this
covenant with respect to any other geographic area, time period, activity or
other aspect covered by this covenant.
(f) Injunctive Relief. Each of the parties to this Agreement
acknowledges that (i) the covenant and restrictions contained in this Section
6.8 are necessary, fundamental and required for the protection of the business
of Buyer and its operation (through the Buyer Subsidiaries) of the Facilities;
(ii) this covenant relates to matters which are of a special character and
which give this covenant a special value; and (iii) a breach of the covenant
contained in this Section 6.8 will result in irreparable harm and damages to
Buyer and Buyer Subsidiaries which cannot be adequately compensated for by a
monetary award. Accordingly, it is expressly agreed that in addition to all
other remedies available in law or in equity, Buyer and Buyer Subsidiaries
shall be entitled to the remedy of a temporary restraining order, preliminary
injunction or such other form of injunctive or equitable relief as may be
issued by any court of competent jurisdiction to restrain or enjoin a Covered
Party from breaching this covenant or any provision of this Section 6.8 or
otherwise to specifically enforce the provisions of this covenant.
(g) Value: The parties agree that the value of the covenant
contained in this Section 6.8 is the value assigned to it in Section 2.5 and
that each will account for and report the value of such covenant in accordance
with such valuation and all of the terms and provisions of Section 2.7.
Section 6.9 Audited Statements. Prior to and after any relevant
Scheduled Closing, Seller shall make the books and records (other than those
protected by or subject to the attorney-client privilege) and unaudited
financial statements of the Subsidiaries which are related to the Facilities
and are for periods prior to such Scheduled Closing available to Buyer and
Buyer's and Seller's independent accountants at reasonable times and in a
manner so as to not unduly interfere with Seller's operations, and otherwise
cooperate with Buyer in order to permit an audit of the Subsidiaries' financial
statements for periods prior to such Scheduled Closing. The audit (including,
without limitation, all services
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of Seller's independent accountants rendered in connection therewith) will be
paid for by Buyer.
Section 6.10 Post-Closing Insurance. Seller for five years after the
Final Closing, shall maintain its existing comprehensive general liability and
hospital professional liability insurance coverages with respect to the
Facilities for all periods prior to the Closing in substantially their present
form as described on Schedule 3.26(b) (the "Insurance Program"), provided that
(a) Seller shall have the right to reduce (but not increase beyond $2,000,000
per occurrence) the existing deductible under the Insurance Program and (b)
shall have the right to cancel or terminate, or have cancelled or terminated,
the coverages under the Insurance Program so long as Seller acquires (from (i)
its present insurance company or (ii) another reasonably acceptable insurance
company under a reasonably acceptable policy) an extended discovery period of
not less than five years after any such cancellation or termination for periods
prior to the Final Closing. Such Insurance Program, if maintained, shall be
maintained at Seller's expense, and if such Insurance Program is maintained
Seller shall cause Buyer and each Buyer Subsidiary to be named as an additional
insured with respect to the applicable Facility and Seller shall provide Buyer
with copies thereof and copies of renewals prior to the expiration of the prior
policy or policies. Seller shall use commercially reasonable efforts to avoid
invalidating the insurance policies referred to in this Section 6.10.
Section 6.11 Use of Controlled Substance Licenses. To the extent
permitted by Law, Buyer shall have the right, for a period not to exceed sixty
(60) days following a relevant Scheduled Closing, to operate under the Licenses
of the Subsidiaries relating to controlled substances and the operation of
pharmacies, until Buyer is able to obtain such Licenses for itself. Seller
shall cause the pertinent Subsidiaries to execute and deliver to Buyer any
powers of attorney and other instruments which Buyer or the appropriate
governmental agency may reasonably require in connection with Buyer's use of
such Licenses. Buyer acknowledges that it shall apply for all such Licenses
as soon as reasonably possible before or after the relevant Scheduled Closing
and diligently pursue such applications in accordance with Section 5.1.
Section 6.12 Non-Disturbance Agreements. Seller hereby agrees to
exercise its reasonable commercial efforts, prior to the relevant Scheduled
Closing, to obtain from each existing mortgagee of each
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Facility identified below a non-disturbance agreement providing in substance
that in the event the lessor or sublessor of such Facility defaults in its
obligations to the mortgagee respecting indebtedness existing at the relevant
Scheduled Closing and as a result thereof the mortgagee forecloses upon,
exercises a power of sale or otherwise succeeds to the ownership of such
property, then and in such event, such foreclosure or other change in ownership
shall not terminate or affect the validity of the Real Property Lease
respecting such Facility assigned to Buyer hereunder, provided that Buyer
hereby agrees that, in connection with Seller's obtaining any such non-
disturbance agreement, Buyer will execute such reasonable agreements in favor
of such mortgagee confirming the attornment of Buyer to such mortgagee or its
assigns, and subordinating the Real Property Lease to the interest of such
mortgagee, under such circumstances. In the event that Seller shall be unable
to obtain any such non-disturbance agreement and the lessor's or sublessor's
default under indebtedness existing at the relevant Scheduled Closing results
in the termination of any such Real Property Lease prior to the expiration of
the current term and any renewal terms available in the Real Property Lease as
of the relevant Scheduled Closing, then Seller shall indemnify Buyer, in
accordance with the provisions of Section 11.3(a)(ii), for Losses arising
therefrom but not in excess of the portion of the Purchase Price allocated to
such Facility in the Allocation Schedule, provided that Buyer shall provide
Seller with notice of any such default or claimed default by the lessor or
sublessor reasonably promptly following Buyer's receipt of any notice or
knowledge respecting same. The Facilities and Real Property Leases to which
this Section shall apply are the Real Property Leases respecting the hospitals
numbered as Facility Nos. 40, 44, 46, 49 and 50.
ARTICLE 7
ADDITIONAL COVENANTS OF BUYER
Section 7.1 Waiver of Bulk Sales Law Compliance. Subject to the
indemnification provisions of Section 11.3(a)(iii) hereof, Buyer hereby waives
compliance by Seller and the Subsidiaries with the requirements, if any, of
Article 6 of the Uniform Commercial Code as in force in any state in which
Transferred Assets are located and all other similar laws applicable to bulk
sales and transfers.
Section 7.2 Resale Certificate. Buyer agrees to furnish to Seller and
the Subsidiaries any resale certificate or certificates or other similar
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documents reasonably requested by Seller to comply with pertinent sales and use
tax laws.
Section 7.3 Cost Reports and Audit Contests. After each Scheduled
Closing and for the period of time necessary to conclude any pending or
potential audit or contest of any Cost Reports with respect to the Facilities
transferred at such Scheduled Closing that include periods ending on or before
the relevant Closing Date, Buyer shall (a) properly keep and preserve all
financial books and records delivered to Buyer by Seller and the Subsidiaries
(if any) and utilized in preparing such Cost Reports, including, without
limitation, accounts payable invoices, Medicare logs and billing information
in accordance with Section 5.7, and (b) within five (5) days of Buyer's receipt
of the same, forward to Seller all information received from Payors relating
to periods prior to and as of the relevant Closing Date including, without
limitation, Cost Report Settlements, notices of program reimbursements, demand
letters for payment and proposed audit adjustments. Upon reasonable written
notice by Seller, Seller (or its agents) shall be entitled, at Seller's
expense, during regular business hours, to have access to, inspect and make
copies of all such books and records. Upon the reasonable request of Seller,
Buyer shall assist Seller and the Subsidiaries in obtaining information deemed
by Seller to be necessary or desirable in connection with any audit or contest
of such reports. To the extent required to meet its obligations under this
Section, Buyer shall provide the reasonable support of its employees at no cost
to Seller.
Section 7.4 Tax Matters. After each Scheduled Closing, Buyer shall be
responsible for causing its employees, at no cost to Seller, to assist Seller
and the Subsidiaries, in the same manner and to the extent that personnel of
the Facilities currently provide such assistance, in the preparation and filing
of all returns relating to taxes imposed upon the businesses operated through
the Transferred Assets that relate to periods ending on or prior to the
relevant Scheduled Closing but are due after the relevant Closing Date and that
are not related to Taxes included in the Assumed Liabilities, including without
limitation, income tax and information returns. It is further acknowledged by
Buyer that Taxes (including, without limitation, the Florida indigent care tax)
imposed upon the right or privilege to do business from the Facilities after
the Closing shall be Buyer's responsibility even if measured by gross receipts,
net operating revenues or patient days for a period ending on, before or
including a Closing Date and that Taxes included in Accrued Operating
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Expenses shall be only those properly accruable, in accordance with generally
accepted accounting principles, for the right or privilege of doing business
through the relevant Closing Date. Buyer further agrees to exercise its
reasonable commercial efforts to have the income tax year of any venture or
partnership referred to in Section 2.1(c) terminated as of the relevant
Scheduled Closing with respect to the pertinent Subsidiary or Subsidiaries
transferring its interests therein.
Section 7.5 Letters of Credit. Subject to the terms and conditions
hereof, at the relevant Scheduled Closing, Buyer shall cause letters of credit
and indemnity or performance bonds to be provided to substitute for those
letters of credit and bonds listed in Schedule 7.5, so that at and as of such
Scheduled Closing Seller and its Affiliates shall have no further obligation
to provide such designated letters of credit or bonds.
Section 7.6 Conduct Pending Closing. Prior to consummation of the
Transactions contemplated hereby or the termination or expiration of this
Agreement pursuant to its terms, unless Seller shall otherwise consent in
writing, Buyer shall not, and shall not permit any Buyer Subsidiary to, take
any action which would cause any of Buyer's representations and warranties set
forth in Article 4 to be false as of the relevant Scheduled Closing.
Section 7.7 Securities Offerings. Buyer hereby agrees to indemnify and
hold harmless Seller and each of its Affiliates, in accordance with the
provisions of Section 11.4(a)(ii), against any and all Losses, as incurred,
arising out of the offer or sale by Buyer of securities, except to the extent
that such Loss arises from any untrue statement or alleged untrue statement of
a material fact contained in any such securities offering materials or
prospectus used by Buyer or its representatives, or from the omission or
alleged omission therefrom of a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, which untrue or alleged untrue statement or omission or alleged
omission is made in reliance upon and in conformity with written information
furnished to Buyer by Seller under a cover letter from Seller's counsel stating
that such information is expressly for use in such offering materials or
prospectus.
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ARTICLE 8
BUYER'S CONDITIONS TO CLOSING
The obligations of Buyer to consummate the Transactions with respect to
a Facility and the Transferred Assets and Assumed Liabilities related thereto
shall be subject to the requirements of Section 2.13 and to the fulfillment at
or prior to the relevant Scheduled Closing of the following conditions, unless
Buyer waives in writing such fulfillment:
Section 8.1 Performance of Agreement. Seller shall have performed in
all material respects its agreements and obligations contained in this
Agreement required to be performed on or prior to the Scheduled Closing.
Section 8.2 Accuracy of Representations and Warranties. The representa-
tions and warranties of Seller set forth in Article 3 of this Agreement shall
be true in all respects as of the date of this Agreement (unless the inaccuracy
or inaccuracies which would otherwise result in a failure of this condition
have been cured by the Scheduled Closing) and as of the Scheduled Closing (as
updated by the revising of Schedules contemplated by Section 6.3) as if made
as of such time, except where such inaccuracy or inaccuracies would not
individually or in the aggregate result in a Material Adverse Effect on the
Facility in question.
Section 8.3 Officers' Certificate. Buyer shall have received from
Seller an officers' certificate, executed on Seller's behalf by its chief
executive officer, president, chief financial officer or treasurer (in his or
her capacity as such) dated the Closing Date and stating that to the knowledge
of such individual, the conditions in Sections 8.1 and 8.2 above have been met.
Section 8.4 Consents. The waiting period under the HSR Act shall have
expired or been terminated, and, subject to the provisions of Section 2.12,
all approvals, consents, authorizations and waivers from governmental and
accreditation agencies the absence of which would render Buyer unable to
operate the facility in the manner operated prior to such Scheduled Closing,
and all approvals, consents, authorizations and waivers from other third
parties to the extent shown on the Schedule of Required Consents (collectively
"Consents") required for Buyer to consummate the Transactions with respect to
such Facility, shall have been obtained, except that a Consent from a third
party to the sale and assignment of a
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Transferred Asset, such as a Medicare or Medicaid provider agreement, or the
assumption of an Assumed Liability with respect thereto, shall not constitute
a condition to Buyer's consummation of the Transactions with respect to a
Facility if such sale, assignment or assumption may lawfully be made subject
to a customary condition subsequent that the Consent be obtained from the third
party based upon determinations of such third party, including without
limitation needs surveys or evaluations of Buyer, to be completed after the
Scheduled Closing. As to each of the Real Property Leases listed on the
Schedule of Required Consents, Buyer shall have received an estoppel
certificate, identifying the lease and stating that such lease is in full force
and effect, that the lessee under such lease is current in all of its
obligations under such lease and that the lessor is not aware of any default
by lessee under such lease.
Section 8.5 Absence of Injunctions. There shall be no:
(a) Injunction, restraining order or order of any nature issued by
any court of competent jurisdiction or governmental agency which directs that
the Transactions related to such Facility contemplated hereby shall not be
consummated as herein provided or compels or would compel Buyer to dispose of
or discontinue, or materially restrict the operations of, such Facility or any
significant portion of the Transferred Assets with respect thereto as a result
of the consummation of the Transactions contemplated hereby;
(b) Suit, action or other proceeding by any governmental agency
pending before any court, governmental agency or non-governmental, self-
regulatory organization, or threatened (pursuant to a written notification),
wherein such complainant seeks the restraint or prohibition of the consummation
of the Transactions related to such Facility or asserts the illegality of the
Transactions related to such Facility; or
(c) Action taken, or law enacted, promulgated or deemed applicable
to the Transactions related to such Facility, by any governmental agency which
would render consummation of such Transactions illegal or which would threaten
the imposition of any penalty or material economic detriment upon Buyer if such
Transactions were consummated;
provided that the parties will use their reasonable efforts to litigate
against, or to obtain the lifting of, any such injunction, restraining or other
order, restraint, prohibition, action, suit, law or penalty, and the existence
of any
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temporary restraining order or injunction or pending or threatened proceeding
or action shall operate only to delay the Scheduled Closing (and extend the
Termination Date, if necessary) until the tenth day following the lifting of
any such order or injunction or the termination of such pending or threatened
proceedings or action, except that such delay may not extend the original
Termination Date for more than three (3) months; and provided further that
clauses (a) through (c) above notwithstanding, the effect of any such event,
action or suit shall be to exclude the affected Facility from the Scheduled
Closing and, if such Facility is not transferred in a subsequent Closing, to
adjust the Purchase Price pursuant to the Allocation Schedule or, if the
parties do not agree on such adjustment, pursuant to Section 2.14.
Section 8.6 Opinion of Counsel. Buyer shall have received, on and as
of the Closing Date, an opinion of Mr. Scott Brown, general counsel to Seller,
substantially as to the matters set forth in Sections 3.1, 3.2, 3.3, 3.4, 3.5,
3.6 and 3.14, subject to customary conditions and limitations.
Section 8.7 Title to Real Property. Title to Transferred Assets related
to the Facility comprised of interests in real property shall have been
evidenced by the willingness of Chicago Title Insurance Company (or an
Affiliate thereof) (the "Title Insurer") to issue at regular rates ALTA (or the
local equivalents thereof) owner's, or lessee's, as the case may be, extended
coverage policies of title insurance (1990 Form B) (the "Title Policies"), with
the survey exception removed, in amounts equal to the respective portions of
the Purchase Price allocated to such interests, showing title to such interests
in such real property vested in Buyer subject to transfer of such interest to
Buyer. Each such Title Policy shall be free of exceptions relating to (i),
except for Title Policies respecting Facilities located in Texas, any claim
which arises out of the transaction vesting in Buyer the estate or interest
insured by the Title Policy, by reason of the operation of federal bankruptcy,
state insolvency or similar creditors's rights laws, and (ii) rights of the
United States of America, and the state in which the real property covered by
the Title Policy is located, or either or them, to recover any federal funds
advanced as provided in the Hill-Burton Act, 42 U.S.C. secs. 291 et. seq. Such
Title Policies shall additionally be free of all other exceptions, including
other standard exceptions, other than the following:
(a) A lien or liens to secure payment of real estate taxes, not
delinquent;
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(b) Exceptions, other than those listed on Schedule 8.7(b),
disclosed by current standard ALTA Preliminary Title Reports, delivered to and
approved (except as shown on Schedule 8.7(b)) by Buyer prior to the date hereof
(as indicated by Buyer's signature of approval appended thereto) together with
copies of all documents underlying the exceptions contained therein; and
(c) Other possible minor matters that in the aggregate are not
substantial in amount and do not materially detract from or interfere with the
present or intended use of such real property, including such minor matters as
may be disclosed by surveys taken after the date hereof.
The willingness of the Title Insurer to issue the Title Policies shall be
evidenced either by the issuance thereof at the relevant Scheduled Closing or
the written commitments or binders, dated as of the relevant Scheduled Closing,
of the Title Insurer to issue such Title Policies within a reasonable time
after the relevant Closing Date, subject to actual transfer of the real
property in question. If the Title Insurer is unwilling to issue any such
Title Policy, it shall be required to provide Buyer and Seller, in writing,
notice setting forth the reason(s) for such unwillingness on or before the
relevant Closing Date. Seller shall have the right to seek to cure any defect
which is the reason for such unwillingness, and, if such notice by the Title
Insurer is given less than ten (10) business days prior to the then Scheduled
Closing, then the relevant Closing Date (and, to the extent necessary, the
Termination Date) shall be extended for a period of up to ten (10) business
days to provide to Seller such opportunity to cure. In the event that, despite
Seller's efforts to cure, the Title Insurer remains unwilling to issue any such
Title Policy on the Final Closing Date (as may be extended as provided herein),
then, at the election of Buyer, and without affecting the other conditions of
the parties to consummation of the Transactions, such real property interests
not covered by such a Title Policy shall not be included in the Transferred
Assets and shall be deemed to be Excluded Assets, and liabilities associated
therewith that would otherwise be Assumed Liabilities shall be deemed to be
Excluded Liabilities; and Buyer and Seller shall negotiate in good faith prior
to the Final Closing Date an adjustment in the Purchase Price based on the
Allocation Schedule. If the parties cannot agree upon such adjustment, then
the disagreement shall be resolved in accordance with Section 2.14.
Notwithstanding the foregoing, Buyer may accept such title to any such
interests as the pertinent Subsidiary may be able to convey, and such title
insurance with respect to the same as the Title Insurer is willing to issue,
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in which case such interests shall be conveyed as part of the Transferred
Assets without reduction of the Purchase Price or any credit or allowance
against the same and without any other liability on the part of Seller or the
Subsidiaries.
Section 8.8 Receipt of Other Documents. Buyer shall have received the
following:
(a) Certified copies of the resolutions of Seller's and each
relevant Subsidiary's board of directors respecting this Agreement, the Related
Agreements and the Transactions, together with certified copies of any
shareholder resolutions which are necessary to approve the execution and
delivery of this Agreement and any Agreements and/or the performance of the
obligations of Seller and the Subsidiaries hereunder and thereunder;
(b) Certified copies of Seller's and each relevant Subsidi-ary's
Charter Documents, together with a certificate of the corporate secretary of
each that none of such documents have been amended;
(c) One or more certificates as to the incumbency of each officer
of Seller or of any Subsidiary who has signed the Agreement, any Related
Agreement or any certificate, document or instrument delivered pursuant to the
Agreement or any Related Agreement;
(d) Good standing certificates for Seller and each of the relevant
Subsidiaries from the Secretaries of State of their respective states of
incorporation, dated as of a date not earlier than fifteen (15) business days
prior to the relevant Closing Date;
(e) Copies of all third party and governmental consents, permits
and authorizations that Seller or any Subsidiary has received in connection
with the Agreement, the Related Agreements and the Transactions to occur at the
relevant Scheduled Closing; and
(f) Certificates of non-foreign status in the form required by
Section 1445 of the Code duly executed by Seller and the relevant Subsidiaries.
Section 8.9 Licenses and Permits. The Buyer shall have obtained any and
all authorizations, approvals and consents in connection with
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acquiring Licenses that will permit it to operate the Facility after the
relevant Scheduled Closing substantially as operated by the relevant Subsidiary
immediately prior to the relevant Scheduled Closing.
Section 8.10 Casualty; Condemnation.
(a) Casualty. If any part of the Transferred Assets related to
the Facility are damaged, lost or destroyed (whether by fire, theft, vandalism
or other casualty) in whole or in part prior to the relevant Scheduled Closing,
and the fair market value of such damage or destruction is less than thirty
percent (30%) of the allocated portion of the Purchase Price for such Facility
set forth in the Allocation Schedule, Seller shall, at its option, either (i)
reduce the Purchase Price by the fair market value of the assets destroyed,
such value to be determined as of the date immediately prior to such
destruction or, as the case may be, by the estimated cost to restore damaged
assets, (ii) provided that the proceeds are obtainable without delay and are
sufficient to fully restore the damaged assets, upon the relevant Scheduled
Closing transfer the proceeds or the rights to the proceeds of applicable
insurance to Buyer, and Buyer may restore the improvements, or (iii) repair or
restore such damages or destroyed improvements. If any part of the Transferred
Assets related to the Facility are damaged, lost or destroyed (whether by fire,
theft, vandalism or other cause or casualty) in whole or in part prior to the
relevant Scheduled Closing and the fair market value of such damages is greater
than thirty percent (30%) of such allocated portion of the Purchase Price,
Buyer may elect either to (i) require Seller upon the relevant Scheduled
Closing to transfer the proceeds (or the right to the proceeds) of applicable
insurance to Buyer and Buyer may restore the improvements, or (ii) terminate
this Agreement with respect to the damaged assets or Facility only, with a
reduction in the Purchase Price determined as follows. The reduction in
Purchase Price shall be mutually determined by Buyer and Seller on the basis
of the Allocation Schedule, or if the Buyer and Seller fail to agree, then such
reduction shall be determined in accordance with Section 2.14.
(b) Condemnation. From the date hereof until the relevant
Scheduled Closing, in the event that any portion of the Transferred Assets
related to the Facility becomes subject to or is threatened with any
condemnation or eminent domain proceedings (except for an immaterial portion),
then Buyer, at its sole option, may elect to terminate this Agreement with
respect only to that part which is condemned or
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threatened to be condemned with a reduction in the Purchase Price determined
as provided in Section 8.10(a).
Section 8.11 Reasonable Assurances. There shall not have been any
actions taken by the United States government to indicate that it is reasonably
likely that either the Unusual Proceedings or any proceeding, investigation,
claim or lawsuit relating thereto, in each case relating to periods prior to
the relevant Scheduled Closing, (a) shall be applied to or be expanded to
include an assertion against Buyer or the applicable Buyer Subsidiaries with
respect to their operation of the Facility after the relevant Scheduled
Closing, or (b) would be the basis of any investigation or proceeding to
exclude Buyer or the applicable Buyer Subsidiaries from participation in any
government healthcare program with respect to the operations of the Facility
after the relevant Scheduled Closing, or (c) would result in the Transferred
Assets being subjected to forfeiture under 18 U.S.C. secs. 1961-1966 or
otherwise.
Section 8.12 Certain Events. During the thirty (30) days preceding the
date of the relevant Scheduled Closing, there shall not have occurred or be
continuing (a) any suspension of trading on the New York Stock Exchange or
material governmental restrictions (not in force on the date hereof) on trading
in securities generally, or (b) any banking moratorium declared by Federal,
California or New York authorities, or (c) any material disruption of or any
material adverse change in the financial, banking or capital markets, or (d)
any outbreak or material escalation of hostilities affecting the United States
of America or other calamity, panic or crisis, the effect of which on the
financial markets of the United States in each case described in clauses (a),
(b), (c) or (d) above, is that lending institutions have generally ceased
providing funding for transactions of the size contemplated hereby, provided
that the occurrence of such event shall operate only to delay the Scheduled
Closing (and extend the Termination Date, if necessary) until the tenth day
following the date upon which lending institutions generally have resumed
providing funding for transactions of the size contemplated hereby and that
such delay may not extend the original Termination Date for more than sixty
(60) days, after which time there shall be deemed to be a failure of this
condition.
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ARTICLE 9
SELLER'S CONDITIONS TO CLOSING
The obligations of Seller to consummate the Transactions with respect to
a Facility and the Transferred Assets and Assumed Liabilities related thereto
shall be subject to the fulfillment at or prior to the relevant Scheduled
Closing of the following conditions, unless Seller waives in writing such
fulfillment:
Section 9.1 Performance of Agreement. Buyer shall have performed in all
material respects its agreements and obligations contained in this Agreement
required to be performed on or prior to the Scheduled Closing.
Section 9.2 Accuracy of Representations and Warranties. The representa-
tions and warranties of Buyer set forth in Article 4 of this Agreement shall
be true in all material respects as of the date of this Agreement (unless the
inaccuracy or inaccuracies which would otherwise result in a failure of this
condition have been cured by the Scheduled Closing) and as of the Scheduled
Closing as if made as of such time.
Section 9.3 Officers' Certificate. Seller shall have received from
Buyer an officers' certificate, executed on Buyer's behalf by its chief
executive officer, president, chief financial officer or treasurer (in his or
her capacity as such) dated the Closing Date and stating that to the actual
knowledge of such individual, the conditions in Sections 9.1 and 9.2 above have
been met.
Section 9.4 Consents. The waiting period under the HSR Act shall have
expired or been terminated, and, subject to the provisions of Section 2.12, all
Consents required for Seller to consummate the Transactions with respect to
such Facility shall have been obtained, except that a Consent from a third
party to the sale and assignment of a Transferred Asset, such as a Medicare or
Medicaid provider agreement, or the assumption of an Assumed Liability with
respect thereto, shall not constitute a condition to Seller's consummation of
the Transactions with respect to such Facility if such sale, assignment or
assumption may lawfully be made subject to a customary condition subsequent
that the Consent be obtained from the third party based upon determinations of
such third party, including without limitation needs surveys or evaluations of
Buyer, to be completed after the Scheduled Closing, whether or not such third
party indicates prior
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to the Scheduled Closing that any such Consent is likely or not likely to be
given.
Section 9.5 Absence of Injunctions. There shall be no:
(a) Injunction, restraining order or order of any nature issued by
any court of competent jurisdiction or governmental agency which directs that
the Transactions related to such Facility contemplated hereby shall not be
consummated as herein provided;
(b) Suit, action or other proceeding by any governmental agency
pending before any court, governmental agency or non-governmental, self-
regulatory organization, or threatened (pursuant to a written notification),
wherein such complainant seeks the restraint or prohibition of the consummation
of the Transactions related to such Facility or asserts the illegality of the
Transactions related to such Facility; or
(c) Action taken, or law enacted, promulgated or deemed applicable
to the Transactions related to such Facility, by any governmental agency which
would render consummation of such Transactions illegal or which would threaten
the imposition of any penalty or material economic detriment upon Seller or the
Subsidiaries if such Transactions were consummated;
provided that the parties will use their reasonable efforts to litigate
against, or to obtain the lifting of, any such injunction, restraining or other
order, restraint, prohibition, action, suit, law, penalty or damages, and the
existence of any temporary restraining order or injunction or pending or
threatened proceeding or action shall operate only to delay the Scheduled
Closing (and extend the Termination Date, if necessary) until the tenth day
following the lifting of any such order or injunction or the termination of
such pending or threatened proceedings or action, except that such delay may
not extend the original Termination Date for more than three (3) months; and
provided further that clauses (a) through (c) above notwithstanding, the effect
of any such event, action or suit shall be to exclude the affected Facility
from the Scheduled Closing and, if such Facility is not transferred in a
subsequent Closing, to adjust the Purchase Price pursuant to the Allocation
Schedule or, if the parties do not agree on such adjustment, pursuant to
Section 2.14.
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Section 9.6 Opinion of Counsel. Seller shall have received, on and as
of the Closing Date, an opinion of King & Spalding, counsel to Buyer,
substantially as to the matters set forth in Sections 4.1, 4.2, 4.3, 4.4, and
4.5, subject to customary conditions and limitations.
Section 9.7 Receipt of Other Documents. Seller shall have received the
following:
(a) Certified copies of the resolutions of Buyer's and each
relevant Buyer Subsidiary's board of directors respecting this Agreement, the
Related Agreements and the Transactions;
(b) Certified copies of Buyer's and each relevant Buyer
Subsidiary's Charter Documents, together with a certificate of Buyer's and each
Buyer Subsidiary's corporate secretary that none of such documents have been
amended;
(c) One or more certificates as to the incumbency of each officer
of Buyer who has signed the Agreement, any Related Agreement, or any
certificate, document or instrument delivered pursuant to the Agreement or any
Related Agreement;
(d) Good standing certificates for Buyer and for each relevant
Buyer Subsidiary from the Secretaries of State of their respective states of
incorporation, dated as of a date not earlier than fifteen (15) business days
prior to the relevant Closing Date;
(e) Copies of all third party and governmental consents, permits
and authorizations that Buyer has received in connection with the Agreement,
the Related Agreements and the Transactions; and
(f) A certificate of Buyer executed on its behalf by the Chief
Executive Officer and the Chief Financial Officer of Buyer stating that to the
best of their knowledge and belief, specifying in reasonable detail their basis
for same, after giving effect to the Transactions, neither Buyer nor any
relevant Buyer Subsidiary is insolvent or will be rendered insolvent by
obligations incurred in connection therewith, or will be left with unreasonably
small capital with which to engage in their businesses, or will have incurred
obligations beyond their respective abilities to perform the same as and when
due.
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ARTICLE 10
TERMINATION
Section 10.1 Termination. Any Transactions contemplated hereby that
have not been consummated may be terminated:
(a) At any time, by mutual written consent of Seller and Buyer;
or
(b) By either Buyer or Seller upon written notice to the other
party, if (i) the relevant Scheduled Closing shall not have occurred by its
Termination Date; or (ii)(A) in the case of termination by Seller, the
conditions set forth in Section 2.13 and Article 9 for the relevant Scheduled
Closing cannot reasonably be met by its Termination Date or Seller has
terminated this Agreement pursuant to Section 6.4, and (B) in the case of
termination by Buyer, the conditions set forth in Section 2.13 and Article 8
for the relevant Scheduled Closing cannot reasonably be met by its Termination
Date, unless in either of the cases described in clauses (A) or (B), the
failure of the condition is the result of the material breach of this Agreement
by the party seeking to terminate. The Termination Date for the First Closing
shall be August 1, 1994, and provided the First Closing has occurred, the
Termination Date for any subsequent Scheduled Closing and the Final Closing
shall be September 30, 1994. Each such date, or such later date as may be
specifically provided for in this Agreement or agreed upon by the parties, is
herein referred to as the "Termination Date."
Each party's right of termination hereunder is in addition to any other rights
it may have hereunder or otherwise.
Section 10.2 Effect of Termination. If there has been a termination
pursuant to Section 10.1 prior to the First Closing, then this Agreement shall
be deemed terminated, and all further obligations of the parties hereunder
shall terminate, except that the obligations set forth in Sections 5.5 and 5.6
and in Articles 11 and 12 shall survive. In the event of termination of this
Agreement as provided above, there shall be no liability on the part of a party
to another under and by reason of this Agreement or the transactions
contemplated hereby except as set forth in Article 11 and except for
intentionally fraudulent acts by a party, the remedies for which shall not be
limited by the provisions of this Agreement. In the event of a termination
after the First Closing, then all further
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obligations of the parties respecting Transactions that have not been
consummated shall terminate, except that the obligations set forth in Sections
5.5 and 5.6 and in Articles 11 and 12 shall survive, and there shall be no
liability on the part of a party to another in respect of such unconsummated
Transactions except as set forth in Article 11 and except for intentionally
fraudulent acts by a party, the remedies for which shall not be limited by this
Agreement. The foregoing provisions shall not, however, limit or restrict the
availability of specific performance or other injunctive or equitable relief
to the extent that specific performance or such other relief would otherwise
be available to a party hereunder.
ARTICLE 11
SURVIVAL AND REMEDIES; INDEMNIFICATION
Section 11.1 Survival. Except as may be otherwise expressly set forth
in this Agreement, the representations, warranties, covenants and agreements
of Buyer and Seller set forth in this Agreement, or in any writing required to
be delivered in connection with this Agreement, shall survive the Scheduled
Closings and the consummations of the Transactions.
Section 11.2 Exclusive Remedy. Absent intentional fraud or unless
otherwise specifically provided herein, the sole exclusive remedy for damages
of a party hereto for any breach of the representations, warranties, covenants
and agreements of the other party contained in this Agreement and the Related
Agreements shall be the remedies contained in this Article 11. Notwithstanding
the foregoing, with respect to any matters associated with any of the Owned
Real Properties or Leased Real Properties involving environmental contamination
or noncompliance with any applicable Environmental Law, if the First Closing
occurs, nothing in this Article 11 shall limit or restrict a party's rights or
remedies against, or obligations to, another party or any third party arising
under any Environmental Law, if such matter (a) was in existence on or prior
to the relevant Scheduled Closing, (b) was not identified in the Environmental
Survey or Schedule 3.16 (or an update thereto pursuant to Section 6.3), (c) was
unknown to Seller or any Subsidiary as of the relevant Scheduled Closing, and
(d) would not constitute a breach of Seller's warranties in Section 3.16.
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Section 11.3 Indemnity by Seller.
(a) Seller shall indemnify Buyer and the Buyer Subsidiaries and
hold them harmless from and against any and all claims, demands, suits, loss,
liability, damage and expense, including reasonable attorneys' fees and costs
of investigation, litigation, settlement and judgment (collectively "Losses"),
which they may sustain or suffer or to which they may become subject as a
result of:
(i) The inaccuracy of any representation or the breach of
any warranty made by Seller herein or by Seller or a Subsidiary in a
Related Agreement, provided, that any such inaccuracy or breach shall be
determined without regard to any qualification of such representation or
warranty relating to materiality or any Material Adverse Effect;
(ii) The nonperformance or breach of any covenant or
agreement made or undertaken by Seller in this Agreement or by Seller or
a Subsidiary in a Related Agreement; and
(iii) If a Scheduled Closing occurs, the failure of Seller
or any Subsidiary to pay, discharge or perform as and when due, any of
the Excluded Liabilities (including, without limitation, the Excluded
Liabilities enumerated in Sections 2.4(c), (d), (e) and (g), and any
Losses as a result of or in connection with the failure of Seller and the
Subsidiaries to comply with any Bulk Sales Laws referred to in Section
7.1).
(b) The indemnification obligations of Seller provided above
shall, in addition to the qualifications and conditions set forth in Sections
11.5 and 11.6, be subject to the following qualifications:
(i) Buyer and the Buyer Subsidiaries shall not be entitled
to indemnity under Subsection (a)(i) above (except for claims arising
under Sections 3.1, 3.2, 3.3 and 3.7) unless:
(A) Written notice to Seller of such claim specifying
the basis thereof is made, or an action at law or in equity with
respect to such claim is served, before the second anniversary of
the earlier to occur of the relevant
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Closing Date or the date on which this Agreement is terminated, as
the case may be;
(B) If a Scheduled Closing occurs, the Losses sus-
tained or suffered by Buyer and the Buyer Subsidiaries or to which
they may be subject as a result of circumstances described in such
Subsection (a)(i) exceed, in the aggregate, the sum of Three
Million Dollars ($3,000,000) (the "Trigger Amount"), in which case
Buyer and the Buyer Subsidiaries shall be entitled only to recover
the amount by which Losses exceed Two Million Dollars ($2,000,000)
(the "Deductible Amount"), provided, however, that individual
claims of Two Thousand Dollars ($2,000) or less shall not be
aggregated for purposes of calculating either the Trigger Amount,
the Deductible Amount or the excess of Losses over the Deductible
Amount;
(C) If a Scheduled Closing occurs, in no event shall
Seller be liable to Buyer and the Buyer Subsidiaries under
Subsection (a)(i) for Losses in the nature of consequential
damages, lost profits, damage to reputation or the like, but such
damages shall be limited to out-of-pocket Losses and diminution in
value; and
(D) If a Scheduled Closing occurs, in no event shall
Seller be liable to Buyer and the Buyer Subsidiaries under
Subsection (a)(i) for amounts which, in the aggregate, exceed the
sum of the amounts specified in Section 2.5(a) and the last
sentence of Section 2.5; provided that in the event Buyer and the
Buyer Subsidiaries make claims in the aggregate for Losses with
respect to a Facility that exceed seventy-five percent (75%) of the
portion of the Purchase Price allocated to such Facility in the
Allocation Schedule, then substantially concurrently with the
making of such claim or claims, Buyer shall cause such Facility to
be offered in writing for resale to Seller at a cash price equal
to such allocated portion of the Purchase Price less amounts, if
any, previously paid by Seller to Buyer with respect to Buyer's
claims for Losses with respect to such Facility and on an "as is,
where is" basis, in which case:
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(1) Seller shall have thirty (30) days to accept such
offer in writing;
(2) If Seller accepts such offer, it shall have one
hundred fifty (150) days to close such transaction;
(3) At the closing of such transaction, Buyer shall
cause all of the right, title and interest of its Affiliates
in such Facility and related assets to be conveyed to Seller
(or a designee of Seller) in the same condition of title as
the Facility and related assets were originally sold,
assigned, transferred and conveyed by Seller and the
Subsidiaries hereunder, and Seller (or such designee) shall
assume disclosed operating liabilities of the Facility of the
same types as the Assumed Liabilities provided that if the
dollar amount of such liabilities exceeds the dollar amount
of the Assumed Liabilities respecting such Facility
originally assumed by Buyer hereunder, then there shall be
a dollar-for-dollar reduction in the purchase price payable
by Seller (or its designee) to the extent of such excess; and
(4) Simultaneous with such closing, Buyer and the
Buyer Subsidiaries shall release Seller from further
liability under Subsection (a)(i) for Losses with respect to
such Facility.
(ii) If a Scheduled Closing occurs, Buyer and the Buyer
Subsidiaries shall not be entitled to indemnity under Subsections
(a)(ii)-(iii) above except for out-of-pocket Losses actually suffered or
sustained by them or to which they may become subject as a result of
circumstances described in such Subsections (a)(ii)-(iii), and such
indemnity shall not include Losses in the nature of consequential damag-
es, lost profits, diminution in value, damage to reputation or the like;
except that the provisions of this clause (b)(ii) shall not apply to
breaches of Sections 5.6 and 6.8, provided that the liability of Seller
and the Subsidiaries for breaches of such Sections shall be subject to
the provisions of Subsection (b)(i)(D) above and that the liability of
Seller and the Subsidiaries for breaches of such Sections shall be
aggregated
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with the liability of Seller under Subsection (a)(i) for purposes of
Subsection (b)(i)(D).
(iii) Seller shall have no liability for Losses arising from
the breach of any warranty related to Net Book Values, including without
limitation the warranties contained in Sections 3.17 and 3.18, and no
such Losses shall be applied against the Trigger Amount or the Deductible
Amount or the excess of Losses over the Deductible Amount, it being
agreed that the liability of the Seller with respect to Net Book Values,
if any, shall be resolved in accordance with the provisions of Sections
2.6(a), (b) and (c).
Section 11.4 Indemnity by Buyer.
(a) Buyer shall indemnify Seller and the Subsidiaries and hold
Seller and the Subsidiaries harmless from and against any and all Losses which
they may sustain or suffer or to which they may become subject as a result of:
(i) The inaccuracy of any representation or the breach of
any warranty made by Buyer herein or by Buyer or a Buyer Subsidiary in
a Related Agreement, provided that any such inaccuracy or breach shall
be determined without regard to any qualification of such representation
or warranty relating to materia-lity or any Material Adverse Effect;
(ii) The nonperformance or breach of any covenant or
agreement made or undertaken by Buyer in this Agreement or by Buyer or
a Buyer Subsidiary in a Related Agreement;
(iii) If a Scheduled Closing occurs, the failure of Buyer
to pay, discharge or perform as and when due, any of the Assumed
Liabilities; and
(iv) If a Scheduled Closing occurs, the ongoing operations
of Buyer and the Transferred Assets after the relevant Closing Date,
including but not limited to the continuation or performance by Buyer
after the relevant Closing Date of any agreement or practice of the
Seller or the Subsidiaries.
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(b) The indemnification obligations of Buyer provided above shall,
in addition to the qualifications and conditions set forth in Sections 11.5 and
11.6, be subject to the following qualifications:
(i) Seller and the Subsidiaries shall not be entitled to
indemnity under Subsection (a)(i) above (except for claims under Sections
4.1, 4.2, 4.3 and 4.7) unless:
(A) Written notice to Buyer of such claim specifying
the basis thereof is made, or an action at law or in equity with
respect to such claim is served, before the second anniversary of
the earlier to occur of the relevant Closing Date or the date on
which this Agreement is terminated, as the case may be;
(B) If a Scheduled Closing occurs, the Losses sus-
tained or suffered by Seller and the Subsidiaries or to which they
may be subject as a result of circumstances described in such
Subsection (a)(i) exceed, in the aggregate, the Trigger Amount, in
which case Seller and the Subsidiaries shall be entitled only to
recover the amount by which such Losses exceed, in the aggregate,
the Deductible Amount, provided, however, that individual claims
of Two Thousand Dollars ($2,000) or less shall not be aggregated
for purposes of calculating either the Trigger Amount, the
Deductible Amount or the excess of Losses over the Deductible
Amount; and
(C) If a Scheduled Closing occurs, in no event shall
Buyer be liable to Seller and the Subsidiaries under Subsection
(a)(i) for Losses in the nature of consequential damages, lost
profits, damage to reputation or the like, but such damages shall
be limited to out-of-pocket Losses and diminution in value.
(ii) If a Scheduled Closing occurs, Seller and the Subsid-
iaries shall not be entitled to indemnity under Subsections (a)(ii)-(iv)
above except for out-of-pocket Losses actually suffered or sustained by
them or to which they may become subject as a result of circumstances
described in such Subsections (a)(ii)-(iv), and such indemnity shall not
include Losses in the nature of consequential
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damages, lost profits, diminution in value, damage to reputation or the
like, except that the provisions of this clause (b)(ii) shall not apply
to breaches of Sections 5.6 or 5.7.
Section 11.5 Further Qualifications Respecting Indemnification. The
right of a party (an "Indemnitee") to indemnity hereunder shall be subject to
the following additional qualifications:
(a) The Indemnitee shall promptly upon its discovery of facts or
circumstances giving rise to a claim for indemnification, including receipt by
it of notice of any demand, assertion, claim, action or proceeding, judicial,
governmental or otherwise, by any third party (such third party actions being
collectively referred to herein as "Third Party Claims"), give notice thereof
to the indemnifying party (the "Indemnitor"), such notice in any event to be
given within sixty (60) days from the date the Indemnitee obtains actual
knowledge of the basis or alleged basis for the right of indemnity or such
shorter period as may be necessary to avoid material prejudice to the
Indemnitor; and
(b) In computing Losses, such amounts shall be computed net of any
related recoveries to which the Indemnitee is entitled under insurance policies
or other related payments received or receivable from third parties and net of
any tax benefits actually received by the Indemnitee or for which it is
eligible, taking into account the income tax treatment of the receipt of
indemnification.
Section 11.6 Procedures Respecting Third Party Claims. In providing
notice to the Indemnitor of any Third Party Claim (the "Claim Notice"), the
Indemnitee shall provide the Indemnitor with a copy of such Third Party Claim
or other documents received and shall otherwise make available to the
Indemnitor all relevant information material to the defense of such claim and
within the Indemnitee's possession. The Indemnitor shall have the right, by
notice given to the Indemnitee within fifteen (15) days after the date of the
Claim Notice, to assume and control the defense of the Third Party Claim that
is the subject of such Claim Notice, including the employment of counsel
selected by the Indemnitor after consultation with the Indemnitee, and the
Indemnitor shall pay all expenses of, and the Indemnitee shall cooperate fully
with the Indemnitor in connection with, the conduct of such defense. The
Indemnitee shall have the right to employ separate counsel in any such
proceeding and to participate in (but not control) the defense of such Third
Party Claim, but
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the fees and expenses of such counsel shall be borne by the Indemnitee unless
the Indemnitor shall agree otherwise; provided, however, if the named parties
to any such proceeding (including any impleaded parties) include both the
Indemnitee and the Indemnitor, the Indemnitor requires that the same counsel
represent both the Indemnitee and the Indemnitor, and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them, then the Indemnitee shall have the right to
retain its own counsel at the cost and expense of the Indemnitor. If the
Indemnitor shall have failed to assume the defense of any Third Party Claim in
accordance with the provisions of this Section, then the Indemnitee shall have
the absolute right to control the defense of such Third Party Claim, and, if
and when it is finally determined that the Indemnitee is entitled to indemni-
fication from the Indemnitor hereunder, the fees and expenses of Indemnitee's
counsel shall be borne by the Indemnitor, provided that the Indemnitor shall
be entitled, at its expense, to participate in (but not control) such defense.
The Indemnitor shall have the right to settle or compromise any such Third
Party Claim for which it is providing indemnity so long as such settlement does
not impose any obligations on the Indemnitee (except with respect to providing
releases of the third party). The Indemnitor shall not be liable for any
settlement effected by the Indemnitee without the Indemnitor's consent except
where the Indemnitee has assumed the defense because Indemnitor has failed or
refused to do so. The Indemnitor may assume and control, or bear the costs,
of any such defense subject to its reservation of a right to contest the
Indemnitee's right to indemnification hereunder, provided that it gives the
Indemnitee notice of such reservation within fifteen (15) days of the date of
the Claim Notice.
ARTICLE 12
GENERAL PROVISIONS
Section 12.1 Notices. All notices, requests, demands, waivers, consents
and other communications hereunder shall be in writing, shall be delivered
either in person, by telegraphic, facsimile or other electronic means, by
overnight air courier or by mail, and shall be deemed to have been duly given
and to have become effective (a) upon receipt if delivered in person or by
telegraphic, facsimile or other electronic means, (b) one business day after
having been delivered to an air courier for overnight delivery or (c) three
business days after having been deposited in the mails as certified or
registered mail, return receipt requested, all fees prepaid, directed to the
parties or their permitted assignees at the following
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addresses (or at such other address as shall be given in writing by a party
hereto):
If to Seller, addressed to:
National Medical Enterprises
2700 Colorado Avenue
Santa Monica, CA 90404
Attn: Treasurer
Facsimile: (310) 998-6507
with a copy to counsel for Seller:
National Medical Enterprises
2700 Colorado Avenue
Santa Monica, CA 90404
Attn: General Counsel
Facsimile: (310) 998-6956
and
Munger, Tolles & Olson
355 South Grand Avenue
35th Floor
Los Angeles, CA 90071
Attn: Robert L. Adler
Facsimile: (213) 687-3702
If to Buyer, addressed to:
Charter Medical Corporation
577 Mulberry St.
Macon, GA 31298
Attn: Executive Vice President - Finance
Facsimile: (912) 751-2832
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with a copy to counsel for Buyer:
King & Spalding
191 Peachtree Street
Atlanta, GA 30303-1763
Attn: Robert W. Miller
Facsimile: (404) 572-5144
Section 12.2 Attorneys' Fees. In any litigation or other proceeding
relating to this Agreement, including litigation with respect to any Related
Agreement (but excluding any proceedings under Sections 2.6(b), 2.6(c) or
2.14), the prevailing party shall be entitled to recover its costs and
reasonable attorneys' fees.
Section 12.3 Successors and Assigns. The rights under this Agreement
shall not be assignable or transferable nor the duties delegable by either
party without the prior written consent of the other; and nothing contained in
this Agreement, express or implied, is intended to confer upon any person or
entity, other than the parties hereto and their permitted successors-in-
interest and permitted assignees, any rights or remedies under or by reason of
this Agreement unless so stated to the contrary. Notwithstanding the
foregoing, (a) Buyer may grant to its lenders a security interest in its rights
under this Agreement, and (b) subject to the terms and provisions of Section
5.7, Buyer may assign its rights under Section 5.7 to the entities and in the
circumstances described in Section 5.7(d).
Section 12.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 12.5 Captions and Paragraph Headings. Captions and paragraph
headings used herein are for convenience only and are not a part of this
Agreement and shall not be used in construing it.
Section 12.6 Entirety of Agreement; Amendments. This Agreement
(including the Schedules and Exhibits hereto) and the other documents and
instruments specifically provided for in this Agreement contain the entire
understanding between the parties concerning the subject matter of this
Agreement and such other documents and instruments and, except as expressly
provided for herein, supersede all prior understandings
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and agreements, whether oral or written, between them with respect to the
subject matter hereof and thereof. There are no representations, warranties,
agreements, arrangements or understandings, oral or written, between the
parties hereto relating to the subject matter of this Agreement and such other
documents and instruments which are not fully expressed herein or therein.
This Agreement may be amended or modified only by an agreement in writing
signed by each of the parties hereto. All Exhibits and Schedules attached to
or delivered in connection with this Agreement are integral parts of this
Agreement as if fully set forth herein.
Section 12.7 Construction. This Agreement and any documents or
instruments delivered pursuant hereto shall be construed without regard to the
identity of the person who drafted the various provisions of the same. Each
and every provision of this Agreement and such other documents and instruments
shall be construed as though the parties participated equally in the drafting
of the same. Consequently, the parties acknowledge and agree that any rule of
construction that a document is to be construed against the drafting party
shall not be applicable either to this Agreement or such other documents and
instruments.
Section 12.8 Waiver. The failure of a party to insist, in any one or
more instances, on performance of any of the terms, covenants and conditions
of this Agreement shall not be construed as a waiver or relinquishment of any
rights granted hereunder or of the future performance of any such term,
covenant or condition, but the obligations of the parties with respect thereto
shall continue in full force and effect. No waiver of any provision or
condition of this Agreement by a party shall be valid unless in writing signed
by such party or operational by the terms of this Agreement. A waiver by one
party of the performance of any covenant, condition, representation or warranty
of the other party shall not invalidate this Agreement, nor shall such waiver
be construed as a waiver of any other covenant, condition, representation or
warranty. A waiver by any party of the time for performing any act shall not
constitute a waiver of the time for performing any other act or the time for
performing an identical act required to be performed at a later time.
Section 12.9 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of California, without regard to the principles of conflicts of law
thereof, provided that the validity, interpretation and effect of any
instruments by which real property is conveyed at a Scheduled Closing
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shall be governed by the laws of the state in which such real property is
located. Any action arising under this Agreement shall be adjudicated (a) in
Los Angeles, California, if brought by Buyer or its Affiliates against Seller,
any Subsidiary or their respective Affiliates, and (b) in [Atlanta], Georgia,
if brought by Seller or its Affiliates against Buyer, any Buyer Subsidiary or
their respective Affiliates, provided that any cross-claim or counterclaim
shall also be adjudicated in the court in which the underlying action has been
brought in accordance with this Section 12.9.
Section 12.10 Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be valid, binding and
enforceable under applicable law, but if any provision of this Agreement is
held to be invalid, void (or voidable) or unenforceable under applicable law,
such provision shall be ineffective only to the extent held to be invalid, void
(or voidable) or unenforceable, without affecting the remainder of such
provision or the remaining provisions of this Agreement.
Section 12.11 Consents Not Unreasonably Withheld. Wherever the consent
or approval of any party is required under this Agreement, such consent or
approval shall not be unreasonably withheld, unless such consent or approval
is to be given by such party at the sole or absolute discretion of such party
or is otherwise similarly qualified.
Section 12.12 Time Is of the Essence. Time is hereby expressly made of
the essence with respect to each and every term and provision of this
Agreement. The parties acknowledge that each will be relying upon the timely
performance by the other of its obligations hereunder as a material inducement
to each party's execution of this Agreement.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement
on the date first above written.
Buyer:
CHARTER MEDICAL CORPORATION
By /s/ Lawrence W. Drinkard
Name Lawrence W. Drinkard
Title E.V.P./CEO
Seller:
NATIONAL MEDICAL ENTERPRISES,
INC.
By /s/ Raymond L. Mathiasen
Name Raymond L. Mathiasen
Title Sr. V.P. - CFO
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EXHIBIT A
BULK BILL OF SALE AND ASSIGNMENT
(General Closing)
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency
of which are hereby acknowledged, NATIONAL MEDICAL ENTERPRISES, INC., a Nevada
corporation (the "Seller"), and each subsidiary of Seller set forth in Rider
A hereto (individually a "Subsidiary" and collectively, the "Subsidiaries"),
pursuant to, and subject to the terms, provisions and conditions of, that
certain Asset Sale Agreement dated ________________, 1994 (the "Agreement"),
by and between Seller and CHARTER MEDICAL CORPORATION, a Delaware corporation
(the "Buyer"), do hereby sell, convey, assign, transfer and deliver to Buyer,
its successors and assigns, the Transferred Assets of Seller and the
Subsidiaries described in the Agreement, except for those Transferred Assets
sold, conveyed, assigned, transferred or delivered by Seller or a Subsidiary
to Buyer or to a subsidiary of Buyer pursuant to separate instruments of sale,
conveyance, assignment, transfer or delivery, including, without limitation,
any Facility Specific Bill of Sale and Assignment, any deed, or any Assignment
and Assumption of Real Property Lease.
The sale, conveyance, assignment, transfer and delivery made
hereunder is made without warranty of any kind, except as may be provided in
the Agreement, including the warranty of merchantability or fitness for any
purpose.
Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Agreement. This instrument is governed by and
subject to all of the representations, warranties, covenants, indemnities and
other terms and conditions of the Agreement.
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IN WITNESS WHEREOF, the Seller and each Subsidiary have executed
this Bulk Bill of Sale and Assignment this ___ day of _________, 1994,
effective as of the date and time specified in the Agreement.
NATIONAL MEDICAL ENTERPRISES, INC.
For Itself And As Attorney-In-Fact
For The Subsidiaries Listed In Rider A
By: ___________________________
Title: ________________________
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RIDER A
TO
BULK BILL OF SALE AND ASSIGNMENT
(List of Subsidiaries)
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FACILITY SPECIFIC
BILL OF SALE AND ASSIGNMENT
(Facility No. ___)
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency
of which are hereby acknowledged, NATIONAL MEDICAL ENTERPRISES, INC., a Nevada
corporation (the "Seller"), and each subsidiary of Seller set forth in Rider
A hereto (individually a "Subsidiary" and collectively, the "Subsidiaries"),
pursuant to, and subject to the terms, provisions and conditions of, that
certain Asset Sale Agreement dated __________________, 1994 (the "Agreement"),
by and between Seller and CHARTER MEDICAL CORPORATION, a Delaware corporation
(the "Buyer"), do hereby sell, convey, assign, transfer and deliver to the
subsidiary of Buyer identified in Rider A hereto (the "Buyer's Subsidiary"),
its successors and assigns, the Transferred Assets of Seller and the
Subsidiaries described in the Agreement that are related to the healthcare
facilities identified in Rider A hereto (together with related outpatient or
satellite clinics, if any, the "Facilities"), except for those Transferred
Assets sold, conveyed, assigned, transferred or delivered by Seller or a
Subsidiary to Buyer or to Buyer's Subsidiary pursuant to separate instruments
of sale, conveyance, assignment, transfer or delivery, of even date herewith,
including, without limitation, any deed, or any Assignment and Assumption of
Real Property Lease.
The sale, conveyance, assignment, transfer and delivery made
hereunder is made without warranty of any kind, except as may be provided in
the Agreement, including the warranty of merchantability or fitness for any
purpose.
Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Agreement. This instrument is governed by and
subject to all of the representations, warranties, covenants, indemnities and
other terms and conditions of the Agreement.
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IN WITNESS WHEREOF, the Seller and each Subsidiary have executed
this Facility Specific Bill of Sale and Assignment this ___ day of _________,
1994, effective as of the date and time specified in the Agreement.
NATIONAL MEDICAL ENTERPRISES, INC.
For Itself And As Attorney-In-Fact
For The Subsidiaries Listed In Rider A
By: ___________________________
Title: ________________________
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RIDER A
TO
FACILITY SPECIFIC BILL OF SALE AND ASSIGNMENT
1. Subsidiaries of Seller:
______________________________
______________________________
NME Psychiatric Properties, Inc.
NME Psychiatric Hospitals, Inc.
NME Hospitals, Inc.
2. Facilities:
______________________________
______________________________
______________________________
Related outpatient facilities:
______________________________
______________________________
______________________________
3. Buyer's Subsidiary:
______________________________
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EXHIBIT B
ASSIGNMENT AND ASSUMPTION OF REAL PROPERTY LEASE
(Facility No. ___)
WHEN RECORDED, MAIL TO:
THIS ASSIGNMENT AND ASSUMPTION OF REAL PROPERTY LEASE (this
"Assignment") is entered into as of _____________, 1994, by and between the
undersigned assignor (the "Assignor") and the undersigned assignee (the
"Assignee"), pursuant to that certain Asset Sale Agreement dated __________,
1994 (the "Asset Sale Agreement"), by and between the parent corporation of the
Assignor, National Medical Enterprises, Inc., a Nevada corporation (the
"Assignor's Parent"), and the parent corporation of the Assignee, Charter
Medical Corporation, a Delaware corporation (the "Assignee's Parent").
WITNESSETH:
WHEREAS, Assignor is the tenant under that certain real property
lease described in Rider A attached hereto wherein Assignor leases that certain
real property described in Rider B attached hereto (the "Real Property Lease");
and
WHEREAS, Assignor desires to assign all of its right, title and
interest under the Real Property Lease and Assignee desires to assume all of
Assignor's obligations thereunder;
NOW, THEREFORE, the parties agree as follows:
1. Assignment of Lease. Assignor hereby assigns unto Assignee all
of the Assignor's right, title and interest in the Real Property Lease,
including, without limitation, any rights to renew, terminate or extend the
term of the Real
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Property Lease, and any rights of first refusal respecting and options to
purchase the leased premises that are the subject of the Real Property Lease.
2. Assumption of Real Property Lease Obligations. Assignee and
Assignee's Parent, jointly and severally, do hereby assume all of the
obligations of the Assignor under the Real Property Lease and all of the
obligations of any guarantor of the Assignor's obligations under the Real
Property Lease^.
3. General Provisions. Assignee and Assignee's Parent hereby
confirm that Assignee has irrevocably appointed Assignee's Parent as its sole
and exclusive representative, agent and attorney-in-fact with respect to all
matters arising from or related to this Assignment. Notices hereunder to the
Assignor or the Assignor's Parent, or to the Assignee or the Assignee's Parent,
as the case may be, shall be given to the Assignor's Parent or the Assignee's
Parent, as the case may be, in accordance with the provisions of the Asset Sale
Agreement. The provisions of this Assignment shall be binding upon and inure
to the benefit of each party hereto, the Assignor's Parent, any guarantor of
the Assignor's obligations under the Real Property Lease, the lessor under the
Real Property Lease, and the respective predecessors, successors and permitted
assigns of each of the foregoing. Unless otherwise expressly provided by the
Real Property Lease, nothing in this Assignment and Assumption shall relieve
the Assignor of its obligations to the lessor under the Real Property Lease or
any such guarantor of its obligations under any such guaranty. This instrument
is governed by and subject to all of the representations, warranties,
covenants, indemnities and other terms and conditions of the Asset Sale
Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Assignment
as of the day and year first above written.
ASSIGNOR: ASSIGNEE:
______________________________, ______________________________,
a _______________ corporation a ________________ corporation
By: __________________________ By: _____________________________
Title: _________________________ Title: ___________________________
And By: ______________________ And By: _________________________
Title: _________________________ Title: ___________________________
CHARTER MEDICAL CORPORATION
By: _____________________________
Title: ___________________________
And By: ________________________
Title: ___________________________
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STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On ___________________, 1994, before me, the undersigned, a Notary
Public in and for said County and State, personally appeared,
____________________ and _____________________, proved to me on the basis of
satisfactory evidence to be the persons whose names are subscribed to the
within instrument and acknowledged to me that they executed the same in their
authorized capacities as ____________________ and _______________,
respectively, of ___________________________________, a _____________
corporation, and that by their signatures on the instrument, the entity upon
behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
_____________________________
Notary Public
(Notary Seal)
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On ___________________, 1994, before me, the undersigned, a Notary
Public in and for said County and State, personally appeared,
____________________ and _____________________, proved to me on the basis of
satisfactory evidence to be the persons whose names are subscribed to the
within instrument and acknowledged to me that they executed the same in their
authorized capacities as ____________________ and _______________,
respectively, of ___________________________________, a _______________
corporation, and that by their signatures on the instrument, the entity upon
behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal.
_____________________________
Notary Public
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(Notary Seal)
STATE OF CALIFORNIA )
) ss.
COUNTY OF LOS ANGELES )
On ___________________, 1994, before me, the undersigned, a Notary
Public in and for said County and State, personally appeared,
____________________ and _____________________, proved to me on the basis of
satisfactory evidence to be the persons whose names are subscribed to the
within instrument and acknowledged to me that they executed the same in their
authorized capacities as ____________________ and _______________,
respectively, of Charter Medical Corporation, a Delaware corporation, and that
by their signatures on the instrument, the entity upon behalf of which the
persons acted, executed the instrument.
WITNESS my hand and official seal.
_____________________________
Notary Public
(Notary Seal)
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RIDER A
TO
ASSIGNMENT AND ASSUMPTION OF REAL PROPERTY LEASE
(Description of Lease and Any Separate
First Refusal Rights and/or Purchase Options)
__________________________________.
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RIDER B
TO
ASSIGNMENT AND ASSUMPTION OF REAL PROPERTY LEASE
(Description of Leased Premises)
______________________________
______________________________
______________________________
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EXHIBIT C
GENERAL ASSUMPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency
of which are hereby acknowledged, and pursuant to, and subject to the terms,
provisions and conditions of, that certain Asset Sale Agreement dated
___________, 1994 (the "Agreement"), by and between NATIONAL MEDICAL ENTER-
PRISES, INC., a Nevada corporation (the "Seller") and CHARTER MEDICAL CORPORA-
TION, a Delaware corporation (the "Buyer"), Buyer does hereby assume, and does
hereby agree to pay, discharge and perform as and when due, the Assumed
Liabilities described in the Agreement of Seller and of each subsidiary of
Seller set forth in Rider A hereto (individually a "Subsidiary" and
collectively, the "Subsidiaries"), except for those Assumed Liabilities
assumed, jointly and severally, by Buyer and a subsidiary of Buyer pursuant to
separate instruments of assumption, including, without limitation, any Facility
Specific Assumption Agreement or any Assignment and Assumption of Real Property
Lease executed by Buyer and/or any subsidiary of Buyer in favor of Seller
and/or any of the Subsidiaries.
Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Agreement. This instrument is governed by and
subject to all of the representations, warranties, covenants, indemnities and
other terms and conditions of the Agreement.
This Assumption Agreement is being delivered in favor of Seller and
each of the Subsidiaries.
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IN WITNESS WHEREOF, Buyer has executed this Assumption Agreement
this ___ day of ________, 1994, effective as of the date and time specified in
the Agreement.
CHARTER MEDICAL CORPORATION
By: _____________________________
Title: ___________________________
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RIDER A
TO
GENERAL ASSUMPTION AGREEMENT
(List of Subsidiaries)
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FACILITY SPECIFIC ASSUMPTION AGREEMENT
(Facility No. ___)
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency
of which are hereby acknowledged, and pursuant to, and subject to the terms,
provisions and conditions of, that certain Asset Sale Agreement dated
_____________, 1994 (the "Agreement"), by and between NATIONAL MEDICAL ENTER-
PRISES, INC., a Nevada corporation (the "Seller") and CHARTER MEDICAL CORPORA-
TION, a Delaware corporation (the "Buyer"), Buyer and the subsidiary of Buyer
identified in Rider A hereto (the "Buyer's Subsidiary"), jointly and severally,
do hereby assume, and do hereby agree to pay, discharge and perform as and when
due, the Assumed Liabilities described in the Agreement of Seller and of each
subsidiary of Seller set forth in Rider A hereto (individually a "Subsidiary"
and collectively, the "Subsidiaries") that are related to the healthcare
facilities identified in Rider A hereto (together with related outpatient or
satellite clinics, if any, the "Facilities"), except for those Assumed
Liabilities assumed, jointly and severally, by Buyer and the Buyer's Subsidiary
pursuant to separate instruments of assumption, of even date herewith,
including, without limitation, Assignment and Assumption of Real Property Lease
executed by Buyer and/or the Buyer's Subsidiary in favor of Seller and/or any
of the Subsidiaries.
Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Agreement. This instrument is governed by and
subject to all of the representations, warranties, covenants, indemnities and
other terms and conditions of the Agreement.
This Facility Specific Assumption Agreement is being delivered in
favor of Seller and each of the Subsidiaries.
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IN WITNESS WHEREOF, Buyer and the Buyer's Subsidiary have executed
this Facility Specific Assumption Agreement this ___ day of _________, 1994,
effective as of the date and time specified in the Agreement.
BUYER'S SUBSIDIARY: CHARTER MEDICAL CORPORATION
______________________________,
a_______________ corporation
By: ______________________________
By: __________________________
Title: _____________________________
Title: ________________________
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RIDER A
TO
FACILITY SPECIFIC ASSUMPTION AGREEMENT
1. Subsidiaries of Seller:
______________________________
______________________________
NME Psychiatric Properties, Inc.
NME Psychiatric Hospitals, Inc.
NME Hospitals, Inc.
2. Facilities:
______________________________
______________________________
______________________________
Related outpatient facilities:
______________________________
______________________________
______________________________
3. Buyer's Subsidiary:
______________________________
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EXHIBIT D
NATIONAL PURCHASING PARTICIPATION AGREEMENT
THIS NATIONAL PURCHASING PARTICIPATION AGREEMENT (the "Agreement") is
made and entered into as of the 3rd day of January, 1994, by and between
NATIONAL MEDICAL ENTERPRISES, INC., a Nevada corporation ("Seller"), and
CHARTER MEDICAL CORPORATION, a Delaware corporation ("Buyer"), with reference
to the following facts.
A. Buyer and Seller are parties to an Asset Sale Agreement dated
___________, 1994 (the "Asset Sale Agreement"), pursuant to which Seller is
causing certain of its wholly-owned subsidiaries (the "Subsidiaries") to sell,
and Buyer and certain of its wholly-owned subsidiaries (the "Buyer
Subsidiaries") are buying, certain mental health facilities (the "Facilities")
and related assets (such Facilities and related assets being referred to as the
"Transferred Assets") through which the Subsidiaries have provided mental
health services to the public.
B. To assist in the orderly transition in the ownership of the
Facilities following the purchases and sales contemplated by the Asset Sale
Agreement (the "Transactions"), Seller has agreed to, or will cause its
pertinent Affiliates (as such term is defined in the Asset Sale Agreement) to,
permit the Facilities to participate in certain national purchasing contracts
of Seller and its Affiliates (together, the "Seller Group") to the extent such
Facilities have previously participated therein, all in accordance with the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements contained herein and in the Asset Sale Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, do hereby
agree as follows:
Section 1 Participation In National Purchasing Contracts. On the terms
and subject to the conditions hereof, Seller hereby agrees to exercise its
reasonable commercial efforts for the term set forth in Section 6.1 to permit
Buyer and the Buyer Subsidiaries to participate to the extent they choose in
the national purchasing contracts or programs of Seller and its Affiliates set
forth in Rider A
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hereto (as modified from time to time, the "National Contracts") on
substantially the same basis as members of the Seller Group participate in such
National Contracts, provided that such participation shall be solely for the
purpose of supporting and shall be limited to the operations of the Facilities.
Section 2 Primary Negotiating Party. Buyer agrees that Seller or
pertinent members of the Seller Group shall remain the primary negotiating
party (the "Primary Negotiating Party") with respect to dealing with third
parties under all such National Contracts, and Buyer agrees that without the
prior written consent of Seller or the pertinent member of the Seller Group
(which consent shall be in the absolute discretion of Seller or such pertinent
member of the Seller Group), neither Buyer nor any Affiliate of Buyer (the
"Buyer Group") shall initiate any discussions or engage in any dealings with
third parties with respect to matters arising under or related to such National
Contracts. Seller agrees to cause the Primary Negotiating Party to consider
the unique needs of the Facilities when negotiating terms, provisions and
purchasing arrangements under such National Contracts, but the Primary
Negotiating Party shall be under no obligation to expend any efforts,
reasonable or otherwise, to address such needs if to do so would cause any
economic detriment to any member of the Seller Group.
Section 3 Fees and Charges. In consideration for participation in the
National Contracts, Buyer agrees as follows:
3.1 Buyer shall pay Seller a monthly participation fee (the
"Participation Fee") as set forth in Rider B hereto. Such Participation Fee
shall be payable on the first day of each month during the term of this
Agreement, pro-rated for partial periods.
3.2 In the event that, pursuant to arrangements applicable to a
particular purchase or purchases under a National Contract, a member of the
Buyer Group becomes directly obligated to third parties for the Cost of goods
and services provided to such member of the Buyer Group, then such member of
the Buyer Group shall promptly pay to such third parties the Costs billed to
such member of the Buyer Group upon presentation to it of reasonably detailed
invoices therefor, such payments to be made in accordance with the terms and
tenor of such invoices.
3.3 Buyer hereby agrees to indemnify and hold harmless Seller and
each member of the Seller Group from and against any and all loss, liability,
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damage and expense, including reasonable attorneys' fees and costs of
investigation, litigation, settlement and judgment, which Seller and each
member of the Seller Group may sustain or suffer or to which they may become
subject as a result of any failure of any member of the Buyer Group to comply
with the foregoing provisions of this Section 3.
Section 4 Disclaimer of Warranties. Seller agrees to use reasonable
efforts to permit members of the Buyer Group to participate in the National
Contracts to the extent set forth in Section 1, but no member of the Seller
Group shall be liable to any member of the Buyer Group for any loss, damage or
expense which may result from such participation, for negligent performance by
any member of the Seller Group in connection with such participation, or for
any changes in the terms, manner, method or mode by which goods and services
are procured under the National Contracts. Neither Seller nor any member of
the Seller Group makes any warranty, express or implied, to Buyer or any member
of the Buyer Group respecting goods and services supplied under a National
Contract or this Agreement, including without limitation warranties of
merchantability or fitness for a particular purpose, and as between members of
the Seller Group and members of the Buyer Group, goods and services shall be
provided and accepted "AS IS" and "WITH ALL FAULTS." Without limiting the
generality of the foregoing, Seller agrees to exercise reasonable efforts, and
to cause members of the Seller Group to exercise reasonable efforts, to pass
through to pertinent members of the Buyer Group the benefit of any warranties
provided by third parties, to the extent permitted by the warranties in
question, with respect to goods and services supplied by such third parties to
such members of the Buyer Group, provided that such reasonable efforts shall
not include the initiation of any legal proceedings and provided further that
Buyer shall, or shall cause the pertinent member or members of the Buyer Group
to, reimburse Seller and each member of the Seller Group for any expenses
incurred by them in connection with passing through the benefit of any such
warranty or warranties.
Section 5 Limitation on Obligations of Seller Group. The parties agree
that the sole obligation of Seller and members of the Seller Group under this
Agreement is to exercise reasonable efforts to permit, subject to the terms
hereof and the terms of the National Contracts, members of the Buyer Group to
participate in the National Contracts. Nothing herein shall obligate any
member of the Seller Group to enforce any rights of any member of the Buyer
Group arising under any National Contract or with respect to any third party.
Absent fraud or conversion, and notwithstanding the form in which any claim or
action
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may be brought or asserted, the liability of members of the Seller Group for
acts or omissions arising from or relating to the performance of this Agreement
shall be limited to repayment, as general damages, of the Participation Fee
paid by Buyer for the month or months in which such acts or omissions occurred,
and no member of the Seller Group shall, under any circumstances, have any
other financial liability hereunder to members of the Buyer Group whatsoever.
Buyer agrees, and shall cause each participating member of the Buyer Group to
agree, that the provisions of this Section 5 limiting their remedies and
liquidating their damages are reasonable in the circumstances existing on the
date of this Agreement.
Section 6 Term and Termination.
6.1 This Agreement is effective on the date first written above,
and shall remain in effect for the term set forth herein unless sooner
terminated in accordance with the provisions hereof. The initial term of this
Agreement shall be for a period of ___________ ( ) days from the date first
written above. The term of this Agreement may be extended by mutual agreement
of the parties, provided that such mutual agreement shall be evidenced by a
duly executed amendment to this Agreement.
6.2 Buyer may terminate this Agreement upon written notice if
Seller or any member of the Seller Group commits any material breach of this
Agreement, and fails to cure the breach within thirty (30) days after written
notice or, if the breach cannot be cured within thirty (30) days, fails to
commence diligent efforts to cure the breach within that period.
6.3 Seller may terminate the participation of Buyer or any member
of the Buyer Group with respect to any National Contract in accordance with
Section 7.2. In addition, Seller may terminate this Agreement upon written
notice to Buyer if Buyer or any member of the Buyer Group (i) fails to pay any
amount when due hereunder, or (ii) commits any material breach of this
Agreement and, if such breach is other than a failure to pay any amount when
due hereunder, fails to cure the breach within thirty (30) days after written
notice or, if the breach cannot be cured within thirty (30) days, fails to
commence diligent efforts to cure the breach within that period.
6.4 Buyer may terminate this Agreement, with or without cause,
upon forty-five (45) days' written notice.
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6.5 Seller may terminate this Agreement if Buyer or any Buyer
Subsidiary becomes insolvent or admits in writing its insolvency or inability
to pay its debts as they become due; is unable or does not pay its debts as
they become due; makes or proposes an assignment for the benefit of creditors;
convenes or proposes to convene a meeting of its creditors or any class
thereof, for purposes of effecting a moratorium upon or extension or
composition of its debts; proposes any such moratorium, extension or
composition; or commences or has filed against it any bankruptcy,
reorganization, liquidation or insolvency proceeding under any law in any
jurisdiction for the relief of debtors; or if any receiver, trustee, liquidator
or custodian is appointed to take possession of any substantial portion of its
assets.
6.6 Termination of this Agreement in whole or in part, for cause,
shall be without prejudice to any other remedy otherwise available to the
innocent party.
Section 7 General Provisions.
7.1 Force Majeure. If any party's performance is prevented,
hindered or delayed by reason of any cause(s) beyond such party's reasonable
control ("Force Majeure") which cannot be overcome by reasonable diligence,
including without limitation, war, labor disputes, civil disorders,
governmental acts, epidemics, quarantines, embargoes, fires, earthquakes,
storms, power failures, equipment failures, transmission failures, or acts of
God, such party shall be excused from performance to the extent that it is
prevented, hindered or delayed thereby, during the continuance of such
cause(s); and such party's obligations hereunder shall be excused so long as
and to the extent that such cause(s) prevent or delay performance.
7.2 Requirements of Third Parties. Notwithstanding any other
provision hereof, Buyer acknowledges and agrees that members of the Buyer Group
shall not be entitled to participate in one or more National Contracts to the
extent that to do so would violate the contractual arrangements that may exist
from time to time between members of the Seller Group and third party suppliers
and vendors or to the extent that such participation is unacceptable to any
such third party supplier or vendor, and that the continued participation of
any member of the Buyer Group in one or more National Contracts may be
terminated immediately upon written notice to Buyer in such event.
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7.3 Entirety of Agreement; Amendments. This Agreement (including
the Riders hereto), the Asset Sale Agreement (including the Schedules and
Exhibits thereto), and the other documents and instruments specifically
provided for herein and therein contain the entire understanding between the
parties concerning the subject matter of this Agreement and such other
documents and instruments and, except as expressly provided for herein or
therein, supersede all prior understandings and agreements, whether oral or
written, between them with respect to the subject matter hereof and thereof.
The are no representations, warranties, agreements, arrangements or
understandings, oral or written, between the parties hereto relating to the
subject matters of this Agreement and such other documents and instruments
which are not fully expressed herein or therein. This Agreement may be amended
or modified only by an agreement in writing signed by each of the parties
hereto.
7.4 Incorporation of Provisions of Asset Sale Agreement. The
following provisions of the Asset Sale Agreement are incorporated herein by
reference mutatis mutandis: Sections 2.16, 12.1 through 12.5, and 12.7 through
12.12.
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IN WITNESS WHEREOF, the parties have duly executed this Agreement
on the date first above written.
Buyer:
CHARTER MEDICAL CORPORATION
For Itself and as Duly
Authorized Agent and
Attorney-In-Fact for each
Buyer Subsidiary
By __________________________
Name _______________________
Title ______________________
Seller:
NATIONAL MEDICAL ENTERPRISES,
INC.
By __________________________
Name ____________________
Title ___________________
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RIDER A
TO
NATIONAL PURCHASING PARTICIPATION AGREEMENT
[List of National Purchasing Contracts Attached Hereto]
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RIDER B
TO
NATIONAL PURCHASING PARTICIPATION AGREEMENT
(Participation Fee To Come)
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EXHIBIT E
REMAINING SCHEDULES
[To Come]
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$464,700,000
CREDIT AGREEMENT
Dated as of April 13, 1994
among
NATIONAL MEDICAL ENTERPRISES, INC.,
as Borrower and Account Party,
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
THE BANK OF NEW YORK
BANKERS TRUST COMPANY and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Banks,
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Issuing Bank and Administrative Agent
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
THE BANK OF NEW YORK
BT SECURITIES CORPORATION and
J.P. MORGAN SECURITIES INC.
as Managing Agents
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TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. . . . . . . . . . . . . . . . . . . 1
1.02 Accounting Terms and
Determinations . . . . . . . . . . . . . . . .16
ARTICLE II
THE CREDITS
SECTION 2.01 Commitments to Lend. . . . . . . . . . . . . . .16
2.02 Notice of Borrowing. . . . . . . . . . . . . . .17
2.03 Notice to Banks; Funding of Loans. . . . . . . .17
2.04 Notes. . . . . . . . . . . . . . . . . . . . . .18
2.05 Termination or Reduction of
Tranche A Commitments; Maturity
of Loans . . . . . . . . . . . . . . . . . . .18
2.06 Termination or Reduction of
Tranche B and C Commitments. . . . . . . . . .19
2.07 Optional Prepayments . . . . . . . . . . . . . .19
2.08 Interest Rates . . . . . . . . . . . . . . . . .20
2.09 Method of Electing Interest Rates. . . . . . . .21
2.10 Letters of Credit. . . . . . . . . . . . . . . .23
2.11 Fees . . . . . . . . . . . . . . . . . . . . . .28
2.12 General Provisions as to Payments. . . . . . . .29
2.13 Funding Losses . . . . . . . . . . . . . . . . .30
2.14 Computation of Interest. . . . . . . . . . . . .30
2.15 Regulation D Compensation. . . . . . . . . . . .31
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01 Financial Condition. . . . . . . . . . . . . . .32
3.02 No Change. . . . . . . . . . . . . . . . . . . .32
3.03 Corporate Existence; Compliance
with Law . . . . . . . . . . . . . . . . . . .32
3.04 Corporate Power; Authorization;
Enforceable Obligations. . . . . . . . . . . .34
3.05 No Legal Bar . . . . . . . . . . . . . . . . . .34
3.06 Material Litigation. . . . . . . . . . . . . . .35
3.07 No Default . . . . . . . . . . . . . . . . . . .36
3.08 Title to Properties; Liens . . . . . . . . . . .36
3.09 No Burdensome Restrictions . . . . . . . . . . .36
3.10 Taxes. . . . . . . . . . . . . . . . . . . . . .37
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3.11 Federal Regulations. . . . . . . . . . . . . . .37
3.12 ERISA. . . . . . . . . . . . . . . . . . . . . .37
3.13 Investment Company Act . . . . . . . . . . . . .37
3.14 Leases . . . . . . . . . . . . . . . . . . . . .37
3.15 Environmental Matters. . . . . . . . . . . . . .38
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01 Conditions to Effectiveness. . . . . . . . . . .38
4.02 Conditions to All Loans. . . . . . . . . . . . .41
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.01 Financial Statements . . . . . . . . . . . . . . . . . .42
5.02 Payment of Obligations . . . . . . . . . . . . .44
5.03 Maintenance of Properties;
Insurance. . . . . . . . . . . . . . . . . . .45
5.04 Notices. . . . . . . . . . . . . . . . . . . . .45
5.05 Conduct of Business; Maintenance
of Existence and Compliance
With Law . . . . . . . . . . . . . . . . . . .46
5.06 Inspection of Property; Books and
Records. . . . . . . . . . . . . . . . . . . .47
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.01 Limitation on Indebtedness . . . . . . . . . . . . . . .48
6.02 Limitations on Liens and Negative
Pledges. . . . . . . . . . . . . . . . . . . .48
6.03 Limitation on Contingent Obligations . . . . . .50
6.04 Limitation on Investments. . . . . . . . . . . .50
6.05 Limitation on Fundamental Changes. . . . . . . .50
6.06 Maintenance of Consolidated Net
Worth. . . . . . . . . . . . . . . . . . . . .51
6.07 Ratio of Consolidated Indebtedness
to Consolidated Net Worth. . . . . . . . . . .51
6.08 Fixed Charge Coverage. . . . . . . . . . . . . .51
6.09 Dividends. . . . . . . . . . . . . . . . . . . .52
6.10 Consolidated Capital Expenditures. . . . . . . .52
6.11 No Limitation on Payment of Dividends
by Subsidiaries. . . . . . . . . . . . . . . .52
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6.12 Use of Proceeds; Ineligible
Securities . . . . . . . . . . . . . . . . . .52
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01 Events of Default. . . . . . . . . . . . . . . .53
ARTICLE VIII
THE AGENT
SECTION 8.01 Appointment and Authorization. . . . . . . . . . . . . .58
8.02 Agent and Affiliates . . . . . . . . . . . . . .58
8.03 Action by Agent. . . . . . . . . . . . . . . . .58
8.04 Consultation with Experts. . . . . . . . . . . .58
8.05 Liability of Agent . . . . . . . . . . . . . . .58
8.06 Indemnification. . . . . . . . . . . . . . . . .59
8.07 Credit Decision. . . . . . . . . . . . . . . . .59
8.08 Successor Agent. . . . . . . . . . . . . . . . .59
8.09 Agent's Fee. . . . . . . . . . . . . . . . . . .60
8.10 Managing Agents. . . . . . . . . . . . . . . . .60
ARTICLE IX
CHANGE IN CIRCUMSTANCES
SECTION 9.01 Basis for Determining Interest
Rate Inadequate or Unfair. . . . . . . . . . .60
9.02 Illegality . . . . . . . . . . . . . . . . . . .61
9.03 Increased Cost and Reduced Return. . . . . . . .61
9.04 Taxes. . . . . . . . . . . . . . . . . . . . . .63
9.05 Domestic Loans Substituted for
Affected Euro-Dollar Loans . . . . . . . . . .64
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Notices. . . . . . . . . . . . . . . . . . . . .65
10.02 No Waivers . . . . . . . . . . . . . . . . . . .65
10.03 Expenses; Indemnification. . . . . . . . . . . .65
10.04 Sharing of Set-Offs. . . . . . . . . . . . . . .66
10.05 Amendments and Waivers . . . . . . . . . . . . .67
10.06 Successors and Assigns . . . . . . . . . . . . .67
10.07 Collateral . . . . . . . . . . . . . . . . . . .69
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10.08 Governing Law; Submission to
Jurisdiction . . . . . . . . . . . . . . . . .69
10.09 Counterparts; Integration. . . . . . . . . . . .69
10.10 WAIVER OF JURY TRIAL . . . . . . . . . . . . . .70
Schedule I Commitments
Schedule II Credit Lines Existing at February 28, 1994
Schedule III Contingent Obligations
Exhibit A Form of Note
Exhibit B Form of Credit Suisse Letter of Credit
Exhibit C Form of Sanwa Letters of Credit
Exhibit D Form of Hospitals Guaranty
Exhibit E Form of Pledge Agreement
Exhibit F Form of Officer's Certificate as
to Continued Accuracy of
Representations and No Default
Exhibit G Opinion of Special Counsel for
the Company and Hospitals
Exhibit H Opinion of Internal Counsel for
the Company and Hospitals
Exhibit I Opinion of Special Counsel for
the Agent
Exhibit J Form of Assignment and Assumption
Agreement
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CREDIT AGREEMENT
AGREEMENT dated as of April 13, 1994 among NATIONAL MEDICAL
ENTERPRISES, INC., as borrower and account party, BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, THE BANK OF NEW YORK, BANKERS TRUST COMPANY
and MORGAN GUARANTY TRUST COMPANY OF NEW YORK as Banks, and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as the Issuing Bank and Administrative Agent.
WHEREAS the Company has asked the Banks to provide it with a
revolving credit facility in the aggregate amount of $222,000,000 and
intends to apply the proceeds of the initial borrowing thereunder, together
with other funds, to repay all loans outstanding under its Existing Credit
Agreement and all interest and fees accrued thereunder;
WHEREAS this Agreement is intended by the Company to be a
replacement for the Existing Credit Agreement;
WHEREAS the Company has asked the Issuing Bank to issue a standby
letter of credit with a face amount of $146,200,000 to backstop an
outstanding direct-pay letter of credit issued by Credit Suisse to support
commercial paper issued by MP Funding Corporation for the benefit of certain
Subsidiaries of the Company;
WHEREAS the Company has asked the Issuing Bank to issue two
standby letters of credit with an aggregate face amount of $96,500,000 to
backstop two outstanding direct-pay letters of credit issued by The Sanwa
Bank Limited, Dallas Agency, to support certain bonds issued by Metrocrest
Hospital Authority for the benefit of a Subsidiary of the Company; and
WHEREAS the Banks are willing to provide such revolving credit
facility and participate in such standby letters of credit on the terms and
conditions set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. The following terms, as used
herein, have the following meanings:
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"Administrative Agent" means Morgan Guaranty Trust Company of New
York in its capacity as administrative agent for the Banks under this
Agreement.
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted
to the Agent (with a copy to the Company) duly completed by such Bank.
"Adversely Determined" means, with respect to any cause of action,
litigation or investigation, a determination of liability or culpability on
the part of the defendant (or cross-defendant) or an agreement by the
defendant (or cross-defendant) to settle such litigation or investigation,
which, in any case, requires the payment of the maximum amount or the
imposition of the most disadvantageous alternative remedy or sanction
reasonably likely to be assessed, imposed or required for settlement as
opposed to the maximum amount sought or which could be possible under any
circumstances.
"Affiliate" means, as to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such Per-
son, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as Administrative Agent under this Agreement and the Hospitals
Guaranty and agent for the Secured Parties under the Pledge Agreement, and
its successors in such capacity.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office and (ii) in the
case of its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Asset Sale" means the sale, transfer, lease or other disposition
by the Company or any of its Subsidiaries in a single transaction or a
series of related transactions to any Person (other than the Company or any
of its wholly-owned Subsidiaries) of (i) any of the stock of any of the
Company's Subsidiaries, (ii) substantially all of the assets of any division
or line of business of the Company or any of its Subsidiaries, or (iii) any
other assets (whether tangible or intangible) of the Company or any of its
Subsidiaries outside of the ordinary course of business (including the sale
or securitization of any receivable); provided, in the case of any such
sale, transfer, lease or other disposition, that the assets sold,
transferred, leased or otherwise disposed of have a fair market value in
excess of $1,000,000.
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"Assignee" has the meaning set forth in Section 10.06(c).
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 10.06(c), and their
respective successors.
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus
the Federal Funds Rate for such day.
"Borrowing" means the aggregation of Loans made to the Company at
the same time by the Banks pursuant to Section 2.01, all of which Loans are
of the same type (subject to Article IX) and have the same Interest Period
or initial Interest Period. A Borrowing is a "Domestic Borrowing" if such
Loans are Domestic Loans or a "Euro-Dollar Borrowing" if such Loans are
Euro-Dollar Loans.
"Commitments" means, with respect to each Bank, its Tranche A
Commitment, Tranche B Commitment and Tranche C Commitment.
"Company" means National Medical Enterprises, Inc., a Nevada
corporation, and its successors.
"Consolidated Adjusted EBITDA" means, for any period, the sum of
the amounts for such period of (i) Consolidated Net Income (excluding
(a) any extraordinary gains or gains or losses from Asset Sales and (b) any
Realignment and Unusual Litigation Costs and the FASB 109 Tax Credit),
(ii) Consolidated Interest Expense, (iii) provisions for taxes based on
income, (iv) total depreciation expense and (v) total amortization expense,
all of the foregoing as determined on a consolidated basis for the Company
and its Subsidiaries in conformity with GAAP.
"Consolidated Capital Expenditures" means, for any period, the sum
of (i) the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that portion of
capital leases which is capitalized on the consolidated balance sheet of the
Company and its Subsidiaries) by the Company and its Subsidiaries during
that period that, in conformity with GAAP, should be included in "purchases
of property, plant and equipment" or comparable items reflected in the
consolidated statement of cash flows of the Company and its Subsidiaries
plus (ii) to the extent not covered by clause (i) of this definition, the
aggregate of all expenditures by the Company and its Subsidiaries during
that period to acquire (by purchase or otherwise) the business, property or
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fixed assets of, or stock or other evidence of beneficial ownership of, any
Person.
"Consolidated Contingent Obligations" means, at any date, all
Contingent Obligations of the Company and its Consolidated Subsidiaries, on
a consolidated basis, at such date.
"Consolidated Earnings" means, for any period, the consolidated
earnings, before extraordinary items and before taxes, of the Company and
its Consolidated Subsidiaries as determined in accordance with GAAP for such
period.
"Consolidated Indebtedness" means, at a particular date, all
Indebtedness of the Company and its Consolidated Subsidiaries, on a
consolidated basis, at such date.
"Consolidated Interest Expense" means, for any period, total inter-
est expense (including that portion attributable to capital leases in accor-
dance with GAAP and capitalized interest) of the Company and its
Subsidiaries on a consolidated basis with respect to all outstanding
Indebtedness of the Company and its Subsidiaries, including, without
limitation, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and net costs
under interest rate agreements, but excluding (i) any amortization or write-
off of amendment fees paid under the Existing Credit Agreement and (ii) any
amortization of the fees referred to in Section 2.11(d).
"Consolidated Net Earnings" means, for any period, the consolidated
earnings, after taxes but before extraordinary items (including taxes
relating to such extraordinary items), of the Company and its Consolidated
Subsidiaries as determined in accordance with GAAP for such period.
"Consolidated Net Income" means, for any period, the net income (or
loss) of the Company and its Subsidiaries on a consolidated basis for such
period taken as a single accounting period determined in conformity with
GAAP; provided that any calculation of Consolidated Net Income shall exclude
any non-cash charge to income or other non-cash effect resulting from any
sale of all or a portion of the Company's Psychiatric Division (as
constituted on February 28, 1994).
"Consolidated Net Worth" means, at a particular date, all amounts
which, in conformity with GAAP, would be included under stockholders' equity
on a consolidated balance sheet of the Company and its Consolidated
Subsidiaries at such date.
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"Consolidated Rental Expense" means, for any period, the aggregate
amount of all rents paid under all capital and operating leases of the
Company and its Subsidiaries as lessee (net of sublease income and excluding
any such rents or portions thereof included in Consolidated Interest
Expense, as defined above).
"Consolidated Subsidiaries" means all Subsidiaries of the Company,
the accounts of which have been, or which in accordance with GAAP should be,
consolidated with the accounts of the Company on a consolidated balance
sheet of the Company.
"Contingent Obligation" means any obligation of the Company and its
Consolidated Subsidiaries required by GAAP to be disclosed in the
consolidated financial statements of the Company and its Consolidated
Subsidiaries or the footnotes thereto guaranteeing or in effect guaranteeing
any Indebtedness of any Person (other than the Company or a Consolidated
Subsidiary), including, without limitation, (i) in the case of Indebtedness
of others secured by any lien upon property owned by the Company or a
Consolidated Subsidiary, whether or not assumed, the lesser of the amount of
such Indebtedness and the fair market value of such property securing such
Indebtedness and (ii) any obligation to reimburse or pay any amount drawn
under a letter of credit which supports the payment of any such
Indebtedness.
"Contingent Value Rights" means unsecured instruments issued by the
Company to plaintiffs in settlement of shareholder class-action litigation
that represent the right to receive a payment from the Company not earlier
than three years from their issuance.
"Counsel for the Company" means, at any date, such counsel, who may
be the General Counsel or Assistant General Counsel of the Company at such
date, as may be selected by the Company.
"Credit Suisse Letter of Credit" has the meaning set forth in
Section 2.10(a).
"Default" means any of the events specified in Article VII, whether
or not any requirement for the giving of notice, the lapse of time, or both,
has been satisfied.
"Dollars" and "$" means dollars in lawful currency of the United
States of America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City or Los Angeles are
authorized by law to close.
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"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending
Office) or such other office as such Bank may hereafter designate as its
Domestic Lending Office by notice to the Company and the Agent.
"Domestic Loan" means (i) a loan to be made or maintained by a Bank
hereunder as a Loan bearing interest at the Base Rate pursuant to the
applicable Notice of Borrowing or Notice of Interest Rate Election or the
provisions of Article IX or (ii) an overdue amount which was a Domestic Loan
immediately before it became overdue.
"Draft 10-Q" means the draft marked "#15 2:30 PST", heretofore
delivered to the Banks, of the Company's report on Form 10-Q for the fiscal
quarter ended February 28, 1994.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 4.01.
"Environmental Laws" means any and all laws, statutes, rules,
regulations or ordinances in effect from time to time relating to the
regulation or protection of human or animal health or safety or of the
environment or to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals or toxic, infectious or hazardous
substances or wastes into the indoor or outdoor environment, including
ambient air, soil, surface water, ground water, wetlands, land or subsurface
strata, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or toxic, infectious or hazardous substances or
wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as the same may be amended, supplemented or modified from time to time.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) which together with the Company or a Subsidiary would be
deemed to be a "single employer" within the meaning of Section 4001 of
ERISA.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for
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international business (including dealings in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to
each Bank, its office, branch or affiliate located at
its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Euro-Dollar Lending Office) or such
other office, branch or affiliate of such Bank as it may hereafter designate
as its Euro-Dollar Lending Office by notice to the Company and the Agent.
"Euro-Dollar Loan" means (i) a loan to be made or maintained by a
Bank hereunder as a Loan bearing interest at a Euro-Dollar Rate pursuant to
the applicable Notice of Borrowing or Notice of Interest Rate Election or
(ii) an overdue amount which was a Euro-Dollar Loan immediately before it
became overdue.
"Euro-Dollar Margin" has the meaning set forth in Section 2.08(b).
"Euro-Dollar Rate" means a rate of interest determined pursuant to
Section 2.08(b) on the basis of a London Interbank Offered Rate.
"Euro-Dollar Reference Banks" means the principal London offices of
Bank of America National Trust and Savings Association, The Bank of New
York, Bankers Trust Company and Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" has the meaning set forth in
Section 2.15.
"Event of Default" means any of the events specified in Article
VII, provided that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Existing Credit Agreement" means the Seventh Amended and Restated
Revolving Credit and Term Loan Agreement dated as of September 30, 1990
among National Medical Enterprises, Inc., Bankers Trust Company, as Agent
and the Banks parties thereto, as amended prior to the date hereof.
"FASB 109 Tax Credit" means the credit taken during the Company's
fiscal quarter ended August 31, 1993 in the approximate amount of
$60,000,000 resulting from the Company's giving effect to Financial
Accounting Standards Board Statement Number 109 "Accounting for Income
Taxes".
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"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on
such day, as published by the Federal Reserve Bank of New York on the
Domestic Business Day next succeeding such day, provided that (i) if such
day is not a Domestic Business Day, the Federal Funds Rate for such day
shall be such rate on such transactions on the next preceding Domestic
Business Day as so published on the next succeeding Domestic Business Day,
and (ii) if no such rate is so published on such next succeeding Domestic
Business Day, the Federal Funds Rate for such day shall be the average rate
quoted to Morgan Guaranty Trust Company of New York on such day on such
transactions as determined by the Agent.
"Final Settlement" means the execution and delivery of:
(a) a criminal plea agreement between the United States Department
of Justice (the "DOJ") and the Company and/or one or more of its
Subsidiaries (other than Hospitals and its Subsidiaries);
(b) a civil settlement agreement between the DOJ and the Company
and/or one or more of its Subsidiaries; and
(c) written confirmation from the United States Department of
Health and Human Services ("HHS") that it will not use the foregoing
agreements, or any guilty plea pursuant thereto, as a basis to exclude
the Company or any of its Subsidiaries from participating in or receiving
payments under any federal programs,
which agreements and written confirmation shall (i) resolve all currently
open investigations by the DOJ and HHS of the Company, its
Subsidiaries and their facilities and (ii) in the case of the civil settlement
agreement, release the Company and its Subsidiaries from any further
liability to the United States Government and its agencies relating to such
investigations.
"Final Settlement Date" means the date on which both of the
agreements and the written confirmation referred to in the definition of
"Final Settlement" shall have been executed and delivered by all of the
parties thereto; provided that such agreements and written confirmation shall
not require the Company and its Subsidiaries to make payments aggregating more
than $400,000,000 on a pre-tax basis.
"Fixed Charges" means, at any date, the sum of (i) the amount of
interest (including without limitation any imputed interest) deducted in
computing Consolidated Earnings for the immediately preceding four full
fiscal
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quarters of the Company on all Indebtedness of the Company and its
Consolidated Subsidiaries, plus (ii) an amount equal to the aggregate amount
of all rentals paid or accrued by the Company and its Consolidated
Subsidiaries during the immediately preceding four full fiscal quarters of
the Company on lease obligations.
"GAAP" means generally accepted accounting principles as in effect
from time to time in the United States.
"Governmental Approvals" means any authorization, consent,
approval, license, lease, ruling, permit, waiver, exemption, filing,
registration or notice by or with any state, local or federal governmental
authority or agency.
"Group of Loans" means at any time a group of Loans consisting of
(i) all Loans which are Domestic Loans having the same Interest Period at
such time or (ii) all Loans which are Euro-Dollar Loans having the same
Interest Period at such time; provided that, if a Loan of any Bank is
converted to or made as a Domestic Loan pursuant to Section 9.02 or 9.05,
such Loan shall be included in the same Group or Groups of Loans from time
to time as it would have been in if it had not been so converted or made.
"Hospitals" means NME Hospitals, Inc., a Delaware corporation.
"Hospitals Guaranty" means the guaranty by Hospitals of all
obligations of the Company under this Agreement, the Pledge Agreement and
the Notes pursuant to a Guaranty Agreement, substantially in the form of
Exhibit D hereto, as such guaranty may be amended from time to time.
"Indebtedness" for any Person means (i) all obligations of such
Person for borrowed money and for the deferred purchase price of property or
services, and all obligations evidenced by bonds, debentures, notes or other
similar instruments which in accordance with GAAP would be shown on the
balance sheet of such Person as a liability; (ii) all rental obligations of
such Person under leases required to be capitalized under GAAP; and (iii)
all Contingent Value Rights issued by such Person.
"Indemnitee" has the meaning set forth in Section 10.03(b).
"Independent Certified Public Accountants" means independent
accountants of national reputation selected by the Company.
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"Ineligible Securities" means securities which may not be
underwritten or dealt in by member banks of the Federal Reserve System under
Section 16 of the Banking Act of 1933 (12 U.S.C. sec 24, Seventh), as amended.
"Interest Period" means:
(a) with respect to each Euro-Dollar Loan, the period commencing on
the date of borrowing specified in the applicable Notice of Borrowing or on
the date specified in an applicable Notice of Interest Rate Election and
ending one, two, three or six months thereafter, as the Company may elect in
the applicable notice; provided that:
(i) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall, subject to clause (iii) below,
be extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(ii) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (iii) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(iii) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(b) with respect to each Domestic Loan, successive periods of 30
days each, commencing on the date of borrowing specified in the applicable
Notice of Borrowing or on the date specified in an applicable Notice of
Interest Rate Election; provided that:
(i) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall, subject to clause (ii) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(ii) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
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"Issuing Bank" means Morgan Guaranty Trust Company of New York in
its capacity as issuer of the Letters of Credit, and its successors in such
capacity.
"LC Fee Rate" has the meaning set forth in Section 2.11(b).
"LC Indemnitees" has the meaning set forth in Section 2.10(j).
"Letter of Credit" means the Credit Suisse Letter of Credit or
either of the Sanwa Letters of Credit, and "Letters of Credit" means all of
them.
"Lien" means any mortgage, pledge, hypothecation, assignment,
security interest, lien, charge or encumbrance, or preference, priority or
other security agreement or arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction), provided that the term "Liens" shall
not be deemed to include, for the purposes of Sections 6.01 and 6.02 hereof,
any of the following (a) Liens for taxes not yet due or which are being
contested in good faith and by appropriate proceedings if adequate reserves
with respect thereto are maintained on the books of the Company or its
Subsidiaries, as the case may be, in accordance with GAAP; (b) carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business and deposits made in the ordinary
course of business to obtain the release of any such Liens; (c) Liens,
pledges or deposits in connection with workmen's compensation, unemployment
insurance and other social security legislation; provided that in no case
shall such Lien secure any letter of credit reimbursement obligation with
respect to a letter of credit issued in support thereof; (d) Liens, pledges
or deposits to secure the performance of bids, trade contracts (other than
for borrowed money), leases, public or statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature;
provided that in no case shall such Lien secure any letter of credit
reimbursement obligation with respect to a letter of credit issued in
support thereof; (e) leases entered into by the Company or any Subsidiary as
lessor in the ordinary course of business; (f) landlord's Liens imposed by
law; (g) Liens and encumbrances consisting of zoning restrictions,
easements, restrictions on the use of real property of the Company or any
Subsidiary and minor irregularities in title to such real property, none of
which encumbrances materially impairs
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the use of any property by the Company or any of its Subsidiaries or the
operation of their respective businesses; and (h) Liens, pledges or deposits
securing (or in lieu of) surety, stay, appeal or customs bonds, or securing
payment of taxes, assessments, customs duties or other similar charges.
"Loan" means a Domestic Loan or a Euro-Dollar Loan and "Loans"
means Domestic Loans or Euro-Dollar Loans or any combination of the
foregoing; provided that, if any such loan or loans (or portions thereof)
are combined or subdivided pursuant to a Notice of Interest Rate Election,
the term "Loan" shall refer to the combined principal amount resulting from
such combination or to each of the separate principal amounts resulting from
such subdivision, as the case may be.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.08(b).
"Managing Agents" means Bank of America National Trust and Savings
Association, The Bank of New York, BT Securities Corporation and J.P. Morgan
Securities Inc., in their respective capacities as managing agents for the
credit facility provided to the Company under this Agreement.
"Margin Stock" has the meaning assigned to the term "margin stock"
in subsection 221.2(h) of Regulation U of the Board of Governors of the
Federal Reserve System, as the same may be amended, supplemented or modified
from time to time.
"MP Funding" means MP Funding Corporation, a Delaware corporation.
"MP Funding Credit Agreement" means the First Amended and Restated
Credit Agreement dated as of November 30, 1988, as further amended and
restated as of January 25, 1990, and as the same may be still further
amended, supplemented or otherwise modified from time to time, among MP
Funding, Credit Suisse, as the "L/C Bank", the banks parties thereto and
Credit Suisse, as Agent.
"MP Funding Master Loan Agreement" means the First Amended and
Restated Master Loan Agreement dated as of November 30, 1988, as further
amended and restated as of January 25, 1990 and as amended by Amendment No.
1 as of November 2, 1993, and as the same may be still further amended,
supplemented or otherwise modified from time to time, among MP Funding and
the borrowers parties thereto and the additional borrowers that may become
parties thereto.
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"Non-Restricted Assets" means any stock, property or other assets
of the Company and its Subsidiaries other than any Restricted Assets.
"Notes" means promissory notes of the Company, substantially in the
form of Exhibit A hereto, evidencing the obligation of the Company to repay
the Loans, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" has the meaning set forth in Section 2.02.
"Notice of Interest Rate Election" has the meaning set forth in
Section 2.09.
"Parent" means, with respect to any Bank, any Person controlling
such Bank.
"Participant" has the meaning set forth in Section 10.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Line Rollovers" means renewals or extensions, after
February 28, 1994, of the existing unsecured uncommitted credit lines listed
on Schedule II hereto, including any refinancings of any such credit line
with borrowings under another similar line entered into after February 28,
1994 so long as any such similar line is entered into by the Company or any
of its Subsidiaries (other than Hospitals or any of its Subsidiaries) and is
neither guarantied by Hospitals or any of its Subsidiaries nor secured and
is on terms no more onerous to the Company than the terms of the lines
identified on Schedule II.
"Person" means an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture
or other entity or a government or any agency or political subdivision
thereof.
"Plan" means any plan of a type described in Section 4021(a) of
ERISA established or maintained by the Company or a Subsidiary in respect of
which the Company or a Subsidiary or a commonly controlled entity is an
"employer" as defined in Section 3(5) of ERISA.
"Pledge Agreement" means the pledge agreement, substantially in the
form of Exhibit E hereto, pursuant to which the Company pledges all of the
outstanding capital stock of Hospitals to secure the payment of the
Company's
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obligations under this Agreement and the Notes, as such pledge agreement may
be amended from time to time.
"Prime Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York in New York City from time to time
as its Prime Rate.
"Psychiatric Division" means the operations of the Company and its
Subsidiaries conducted at 61 freestanding psychiatric hospitals, residential
treatment centers and substance abuse recovery facilities, including,
without limitation, the stock of such Subsidiaries and the assets used in
such operations.
"Quarterly Date" means the last Euro-Dollar Business Day of each
January, April, July and October.
"Realignment and Unusual Litigation Costs" means (i) the charges
taken against income during the Company's fiscal quarter ended August 31,
1993, in an aggregate amount not exceeding $143,000,000 on an after-tax
basis, with respect to certain legal proceedings against the Company and its
Subsidiaries and (ii) the charge taken against income during the Company's
fiscal quarter ended February 28, 1994, in an aggregate amount not exceeding
$375,000,000 on a pre-tax basis with respect to the matters expected to be
resolved by the Final Settlement.
"Reimbursement Obligation" means any obligation of the Company to
reimburse the Issuing Bank for a drawing under a Letter of Credit or any
portion of any such obligation to which a Bank has become subrogated
pursuant Section 2.10(e).
"Reportable Event" means any of the events set forth in
Section 4043(b) of ERISA or the regulations thereunder.
"Required Banks" means at any time (i) Banks having at least 51% of
the aggregate amount of the Commitments or (ii) if the Commitments shall
have been terminated, Banks holding unpaid Reimbursement Obligations and/or
Notes evidencing unpaid Loans that comprise at least 51% of the aggregate
unpaid principal amount of all the Reimbursement Obligations and Loans
outstanding at such time.
"Restricted Assets" means (a) any of the stock, property or other
assets of Hospitals or any of its Subsidiaries, (b) any of the stock,
properties or other assets of the Company's or its Subsidiaries'
international operations, including, without limitation, the stock of
International-NME, Inc. or any of its Subsidiaries, and (c)
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any stock or other investment in Westminster Health Care Holdings plc or The
Hillhaven Corporation or their respective subsidiaries.
"Sanwa Letters of Credit" has the meaning set forth in
Section 2.10(a).
"Sanwa Reimbursement Agreement" means the First Amended and
Restated Letter of Credit and Reimbursement Agreement dated as of October 1,
1993 between the Company and The Sanwa Bank Limited, Dallas Agency, as the
same may be amended, modified or supplemented from time to time.
"Section 20 Subsidiary" means a subsidiary of the bank holding
company controlling any Bank, which subsidiary has been granted authority by
the Federal Reserve Board to underwrite and deal in certain Ineligible
Securities.
"Significant Subsidiary" means any Subsidiary other than a
Subsidiary that (a) is not actively engaged in business and has assets of
less than $5,000,000 and liabilities of less than $5,000,000 or (b) has
assets of less than $1,000,000 and liabilities of less than $1,000,000.
"Subsidiary" means any corporation of which more than 50% of the
outstanding shares of stock of each class having ordinary voting power
(other than stock having such power only by reason of the happening of a
contingency) is at the time owned by the Company or by one or more
Subsidiaries or by the Company and one or more Subsidiaries.
"Temporary Cash Investments" means any investment in (i) direct
obligations of the United States or any agency thereof, or obligations
guaranteed by the United States or any agency thereof, (ii) commercial paper
rated at least A-1 by Standard & Poor's Corporation and at least P-1 by
Moody's Investors Service, Inc. or (iii) time deposits with, including
certificates of deposit issued by, any office located in the United States
of any bank or trust company which is organized under the laws of the United
States or any state thereof and has capital, surplus and undivided profits
aggregating at least $1,000,000,000, provided in each case that such
Investment matures within 30 days from the date of acquisition thereof by
the Agent.
"Termination Date" means April 12, 1995, or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"Total Commitment" means, with respect to each Bank, the amount set
forth opposite the name of such Bank on Schedule I hereto as its Total
Commitment, representing the
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sum of such Bank's Tranche A Commitment, Tranche B Commitment and Tranche C
Commitment, as such Total Commitment may be reduced from time to time
pursuant to Sections 2.05 and 2.06.
"Tranche A Commitment" means, with respect to each Bank, the amount
set forth opposite the name of such Bank on Schedule I hereto as its Tranche
A Commitment, as such amount may be reduced from time to time pursuant to
Section 2.05.
"Tranche B Commitment" means, with respect to each Bank, the amount
set forth opposite the name of such Bank on Schedule I hereto as its Tranche
B Commitment, as such amount may be reduced from time to time pursuant to
Section 2.06.
"Tranche C Commitment" means, with respect to each Bank, the amount
set forth opposite the name of such Bank on Schedule I hereto as its Tranche
C Commitment, as such amount may be reduced from time to time pursuant to
Section 2.06.
"United States" means the United States of America, including the
states thereof and the District of Columbia, but excluding its territories
and possessions.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Company's Independent Certified Public Accountants) with
the most recent audited consolidated financial statements of the Company and
its Consolidated Subsidiaries delivered to the Banks.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. Each Bank severally agrees,
subject to the terms and conditions set forth in this Agreement, to make
Loans to the Company pursuant to this Section from time to time prior to the
Termination Date; provided that the aggregate principal amount of Loans by
such Bank at any one time outstanding shall not exceed the amount of such
Bank's Tranche A Commitment. Each Borrowing under this Section shall be in
an aggregate principal amount of $10,000,000 or any larger
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multiple of $1,000,000 (except that any such Borrowing may be in an
aggregate amount equal to the aggregate unused amount of the Tranche A
Commitments) and shall be made from the several Banks ratably in proportion
to their respective Tranche A Commitments. Within the foregoing limits, the
Company may borrow under this Section, prepay Loans to the extent permitted
by Section 2.07, and reborrow at any time prior to the Termination Date
under this Section.
SECTION 2.02. Notice of Borrowing. The Company shall give the
Agent notice (a "Notice of Borrowing") not later than 11:00 a.m. (New York
City time) on (x) the date of each Domestic Borrowing and (y) the third
Euro-Dollar Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to bear
interest initially at the Base Rate or at a Euro-Dollar Rate, and
(d) in the case of a Euro-Dollar Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
SECTION 2.03. Notice to Banks; Funding of Loans. (a) Upon
receipt of a Notice of Borrowing, the Agent shall promptly notify each Bank
of the contents thereof and of such Bank's share of such Borrowing and such
Notice of Borrowing shall not thereafter be revocable by the Company.
(b) Not later than (i) 11:00 a.m. (New York City time) on the date
of each Euro-Dollar Borrowing and (ii) 1:00 p.m. (New York City time) on the
date of each Domestic Borrowing, each Bank shall make available its ratable
share of such Borrowing, in Federal or other funds immediately available in
New York City, to the Agent at its address referred to in Section 10.01.
Unless the Agent determines that any applicable condition specified in
Article IV has not been satisfied, the Agent will make the funds so received
from the Banks available to the Company at the Agent's aforesaid address.
(c) Unless the Agent shall have received notice from a Bank prior
to the date of any Borrowing that such Bank will not make available to the
Agent such Bank's share of such Borrowing, the Agent may assume that such
Bank has
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made such share available to the Agent on the date of such Borrowing in
accordance with subsection (b) of this Section 2.03 and the Agent may, in
reliance upon such assumption, make available to the Company on such date a
corresponding amount. If and to the extent that such Bank shall not have so
made such share available to the Agent, such Bank and the Company severally
agree to repay to the Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is
made available to the Company until the date such amount is repaid to the
Agent, at (i) in the case of the Company, a rate per annum equal to the
higher of the Federal Funds Rate and the interest rate applicable thereto
pursuant to Section 2.08 and (ii) in the case of such Bank, the Federal
Funds Rate. If such Bank shall repay to the Agent such corresponding
amount, such amount so repaid shall constitute such Bank's Loan for purposes
of this Agreement.
SECTION 2.04. Notes. (a) The Loans of each Bank shall be
evidenced by a single Note payable to the order of such Bank for the account
of its Applicable Lending Office in an amount equal to the aggregate unpaid
principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Company and the Agent, request
that its Domestic Loans and Euro-Dollar Loans be evidenced by separate
Notes. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Domestic Loans or Euro-Dollar Loans, as the case may be. Each
reference in this Agreement to the "Note" of such Bank shall be deemed to
refer to and include either or both of such Notes, as the context may
require.
(c) Upon receipt of each Bank's Note pursuant to Section 4.01(b),
the Agent shall forward such Note to such Bank. Each Bank shall record the
date, amount, type and maturity of each Loan made by it and the date and
amount of each payment of principal made by the Company with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding; provided that the failure of any Bank to
make any such recordation or endorsement shall not affect the obligations of
the Company hereunder or under the Notes. Each Bank is hereby irrevocably
authorized by the Company so to endorse its Note and to attach to and make a
part of its Note a continuation of any such schedule as and when required.
SECTION 2.05. Termination or Reduction of Tranche A Commitments;
Maturity of Loans. (a) On the Termination
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Date, the Tranche A Commitments shall terminate and the Company shall repay
in full, and there shall become due and payable, the aggregate principal
amount of the Loans then outstanding, together with all accrued and unpaid
interest thereon.
(b) The Company may, upon at least three Domestic Business Days'
notice to the Agent, (i) terminate the Tranche A Commitments at any time
prior to the Termination Date, if no Loans are outstanding at such time or
(ii) ratably reduce from time to time prior to the Termination Date, by an
aggregate amount of $10,000,000 or any larger multiple of $1,000,000, the
unused portion of the Tranche A Commitments. If the Tranche A Commitments
are terminated in their entirety, all accrued commitment fees shall be
payable on the effective date of such termination.
SECTION 2.06. Termination or Reduction of Tranche B and C
Commitments. (a) The Tranche B Commitments shall be automatically reduced
pro rata, whenever the Issuing Bank (or the Banks as subrogees of its
rights) is reimbursed for an amount drawn under the Credit Suisse Letter of
Credit, by an aggregate amount equal to the amount of such drawing so
reimbursed. The Tranche B Commitments shall terminate when the Credit
Suisse Letter of Credit has expired or been fully drawn and all related
Reimbursement Obligations have been paid in full.
(b) The Tranche C Commitments shall be automatically reduced pro
rata, whenever the Issuing Bank (or the Banks as subrogees of its rights) is
reimbursed for an amount drawn under the Sanwa Letters of Credit, by an
aggregate amount equal to the amount of such drawing so reimbursed. The
Tranche C Commitments shall terminate when both of the Sanwa Letters of
Credit have expired or been fully drawn and all related Reimbursement
Obligations have been paid in full.
SECTION 2.07. Optional Prepayments. (a) The Company may, upon at
least one Domestic Business Day's notice to the Agent, prepay any Group of
Domestic Loans in whole at any time, or from time to time in part in amounts
aggregating $10,000,000 or any larger multiple of $1,000,000, by paying the
principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of the several Banks included in such Group.
(b) The Company may, upon at least three Euro-Dollar Business
Days' notice to the Agent, subject to Section 2.13, prepay any Group of
Euro-Dollar Loans, in whole at any time, or from time to time in part in
amounts
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aggregating $10,000,000 or any larger multiple of $1,000,000, by paying the
principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of the several Banks included in such Group.
(c) Upon receipt of a notice of prepayment pursuant to this
Section, the Agent shall promptly notify each Bank of the contents thereof
and of such Bank's ratable share of such prepayment and such notice shall
not thereafter be revocable by the Company.
SECTION 2.08. Interest Rates. (a) Each Domestic Loan shall bear
interest on the outstanding principal amount thereof, for each day from the
date such Loan is made until it becomes due, at a rate per annum equal to
the Base Rate for such day. Such interest shall be payable for each
Interest Period on the last day thereof and, with respect to the principal
amount of any Domestic Loan converted to a Euro-Dollar Loan, on the date
such Domestic Loan is so converted. Any overdue principal of or interest on
any Domestic Loan shall bear interest, payable on demand, for each day until
paid at a rate per annum equal to the sum of 2% plus the Base Rate for such
day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during each Interest Period
applicable thereto, at a rate per annum equal to the sum of the Euro-Dollar
Margin for such day plus the London Interbank Offered Rate applicable to
such Interest Period. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than
three months, three months after the first day thereof.
"Euro-Dollar Margin" means (i) 1% from and including the Effective
Date to but excluding the Final Settlement Date and (ii) 3/4 of 1% on and after
the Final Settlement Date.
The "London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher
1/16 of 1%) of the respective rates per annum at which deposits in dollars
are offered to each of the Euro-Dollar Reference Banks in the London
interbank market at approximately 11:00 a.m. (London time) two Euro-Dollar
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Euro-Dollar Loan of such
Euro-Dollar Reference Bank to which such Interest Period is to apply and for
a period of time comparable to such Interest Period.
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(c) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day from and including the
date payment thereof was due to but excluding the date of actual payment, at
a rate per annum equal to the sum of 2% plus the higher of (i) the sum of
the Euro-Dollar Margin plus the average (rounded upward, if necessary, to
the next higher 1/16 of 1%) of the respective rates per annum at which one
day (or, if such amount due remains unpaid more than three Euro-Dollar
Business Days, then for such other period of time not longer than three
months as the Agent may select) deposits in dollars in an amount
approximately equal to such overdue payment due to each of the Euro-Dollar
Reference Banks are offered to such Euro-Dollar Reference Bank in the London
interbank market for the applicable period determined as provided above (or,
if the circumstances described in clause (a) or (b) of Section 9.01 shall
exist, the Base Rate for such day) and (ii) the sum of the Euro-Dollar
Margin plus the London Interbank Offered Rate applicable to such Loan
immediately before such payment was due.
(d) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Company and the
Banks of each rate of interest so determined, and its determination thereof
shall be conclusive in the absence of manifest error.
(e) Each Euro-Dollar Reference Bank agrees to use its best efforts
to furnish quotations to the Agent as contemplated by this Section. If any
Euro-Dollar Reference Bank does not furnish a timely quotation, the Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Euro-Dollar Reference Bank or Banks
or, if none of such quotations is available on a timely basis, the
provisions of Section 9.01 shall apply.
SECTION 2.09. Method of Electing Interest Rates. (a) The Loans
included in each Borrowing shall bear interest initially at the type of rate
specified by the Company in the applicable Notice of Borrowing. Thereafter,
the Company may from time to time elect to change or continue the type of
interest rate borne by each Group of Loans (subject in each case to the
provisions of Article IX), as follows:
(i) if such Loans are Domestic Loans, the Company may elect to
convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business
Day; or
(ii) if such Loans are Euro-Dollar Loans, the Company may elect to
convert such Loans to Domestic Loans or elect to continue such Loans as
Euro-Dollar Loans for an additional Interest Period, in each case
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effective on the last day of the then current Interest Period applicable
to such Loans.
Each such election shall be made by delivering a notice (a "Notice of
Interest Rate Election") to the Agent at least three Euro-Dollar Business
Days before the conversion or continuation selected in such notice is to be
effective (unless the relevant Loans are to be continued as Domestic Loans
for an additional Interest Period, in which case no such notice shall be
delivered to the Agent at least three Domestic Business Days before such
continuation is to be effective). A Notice of Interest Rate Election may,
if it so specifies, apply to only a portion of the aggregate principal
amount of the relevant Group of Loans; provided that (i) such portion is
allocated ratably among the Loans comprising such Group and (ii) the portion
to which such Notice applies, and the remaining portion to which it does not
apply, are each $10,000,000 or any larger multiple of $1,000,000.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in
such notice is to be effective, which shall comply with the applicable
clause of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the new
type of Loans and, if such new Loans are Euro-Dollar Loans, the duration
of the initial Interest Period applicable thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an
additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the
Company pursuant to subsection (a) above, the Agent shall promptly notify
each Bank of the contents thereof and such notice shall not thereafter be
revocable by the Company. If the Company fails to deliver a timely Notice
of Interest Rate Election to the Agent for any Group of Euro-Dollar Loans,
such Loans shall be converted into Domestic Loans on the last day of the
then current Interest Period applicable thereto.
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SECTION 2.10. Letters of Credit.
(a) Agreement to Issue Letters of Credit. Subject to the terms
and conditions set forth herein, the Issuing Bank agrees to issue on the
Effective Date for the account of the Company (i) a standby letter of credit
in favor of Credit Suisse substantially in the form of Exhibit B hereto (the
"Credit Suisse Letter of Credit") and (ii) two standby letters of credit in
favor of The Sanwa Bank Limited, Dallas Agency substantially in the form of
Exhibit C hereto (the "Sanwa Letters of Credit"). Each Bank agrees to
participate in any drawings made under the Credit Suisse Letter of Credit
ratably in proportion to its Tranche B Commitment and to participate in any
drawings made under the Sanwa Letters of Credit ratably in proportion to its
Tranche C Commitment.
(b) Expiry. Each Letter of Credit will expire on the fifth
Domestic Business Day prior to the Termination Date.
(c) Drawings. (i) Upon receipt from the beneficiary of any Letter
of Credit of demand for payment under such Letter of Credit, the Issuing
Bank shall determine in accordance with the terms of such Letter of Credit
whether such request for payment should be honored.
(ii) If the Issuing Bank determines that a demand for payment by
the beneficiary of any Letter of Credit should be honored, the Issuing Bank
shall make available to such beneficiary in accordance with the terms of
such Letter of Credit the amount of the drawing under such Letter of Credit.
The Issuing Bank shall thereupon notify the Company, the Agent and each Bank
of the amount of such drawing paid by it and the amount of each Bank's
participation therein.
(d) Reimbursement and Other Payments by the Company. (i) If any
amount is drawn under any Letter of Credit, the Company irrevocably and
unconditionally agrees to reimburse the Issuing Bank for all amounts paid by
the Issuing Bank upon such drawing, together with any and all reasonable
charges and expenses which the Issuing Bank may pay or incur relative to
such drawing and interest on the amount drawn at the Federal Funds Rate for
each day from and including the date such amount is drawn to but excluding
the date such reimbursement payment is due and payable. Such reimbursement
payment shall be due and payable (x) at or before 12:00 Noon (New York City
time) on the date the Issuing Bank notifies the Company of such drawing, if
such notice is given at or before 10:00 a.m. (New York City time) on such
date, or (y) at or before 12:00 Noon (New York City time) on the first
Domestic Business Day succeeding the date
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such notice is given, if such notice is given after 10:00 a.m. (New York
City time); provided that no payment otherwise required by this sentence to
be made by the Company at or before 12:00 Noon (New York City time) on any
day shall be overdue hereunder if arrangements for such payment satisfactory
to the Issuing Bank, in its sole discretion, shall have been made by the
Company at or before 12:00 Noon (New York City time) on such day and such
payment is actually made at or before 3:00 p.m. (New York City time) on such
day. The Issuing Bank shall provide a copy of any such notice to the Agent.
(ii) In addition, the Company agrees to pay to the Issuing Bank
interest on any and all amounts unpaid by the Company when due hereunder
with respect to a Letter of Credit, for each day from and including the date
when such amount becomes due to but excluding the date such amount is paid
in full, whether before or after judgment, payable on demand, at a rate per
annum equal to the sum of 2% plus the Base Rate for such day.
(iii) Each payment to be made by the Company pursuant to this
Section 2.10(d) shall be made, in Federal or other funds immediately
available in New York City, to the Issuing Bank at its address referred to
in or pursuant to Section 10.01.
(e) Payments by Banks with Respect to Letters of Credit. (i)
Each Bank shall make available an amount equal to its ratable share of any
drawing under a Letter of Credit, in Federal or other funds immediately
available in New York City, to the Issuing Bank by 3:00 p.m. (New York City
time) on the Domestic Business Day following such drawing, together with
interest on such amount for each day from and including the date of such
drawing to but excluding the day such payment is due from such Bank at the
Federal Funds Rate for such day, at the Issuing Bank's address specified in
or pursuant to Section 10.01; provided that each Bank's obligation shall be
reduced by its pro rata share of any reimbursement theretofore paid by the
Company in respect of such drawing pursuant to Section 2.10(d)(i). The
Issuing Bank shall notify each Bank and the Agent of the amount of such
Bank's obligation in respect of any drawing under a Letter of Credit not
later than 1:00 p.m. (New York City time) on the day such payment by such
Bank is due. Upon payment in full thereof, each Bank shall be subrogated to
the rights of the Issuing Bank against the Company to the extent of such
Bank's pro rata share of the related Reimbursement Obligation (including
interest accrued thereon).
(ii) If any Bank fails to pay any amount required pursuant to
subclause (i) of this clause (e) on the date on
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which such payment is due, interest shall accrue on such Bank's obligation
to make such payment, for each day from and including the date such payment
becomes due to but excluding the date such Bank makes such payment, whether
before or after judgment, at a rate per annum equal to (A) in the case of
each day from and including the day such payment is due through and
including the first succeeding Domestic Business Day (and any intervening
days), the Federal Funds Rate for each such day as determined by the Issuing
Bank and (B) for each day thereafter, the sum of 2% plus the Base Rate for
such day. Any payment made by any Bank after 3:00 p.m., New York City time,
on any Domestic Business Day shall be deemed for purposes of the preceding
sentence to have been made on the next succeeding Domestic Business Day.
(iii) If the Company shall reimburse the Issuing Bank for any
drawing under a Letter of Credit after any Bank shall have made funds
available to the Issuing Bank with respect to such drawing in accordance
with subclause (i) of this clause (e), the Issuing Bank shall promptly upon
receipt of such reimbursement distribute to such Bank its pro rata share
thereof, including interest, to the extent received by the Issuing Bank.
(f) Payment upon Acceleration. If the principal of the Loans
shall become immediately due and payable pursuant to Section 7.01 or if the
Agent directs the Company pursuant to Section 7.01 to make the payment
required by this clause (f), the Company shall pay to the Issuing Bank for
application to drawings under any then outstanding Letters of Credit an
amount equal to the aggregate amount which is then, or may thereafter
become, available for drawing under such Letters of Credit. The Issuing
Bank shall invest any amount paid to it pursuant to the first sentence of
this clause (f) in Temporary Cash Investments at the direction of the Agent.
Any amount paid by the Company to the Issuing Bank pursuant to the first
sentence of this clause (f) with respect to a Letter of Credit and not
applied to a drawing thereunder (together with interest or other income, to
the extent received by the Issuing Bank on the related Temporary Cash
Investments) shall, as promptly as practicable after such Letter of Credit
expires or is fully drawn and all related Reimbursement Obligations
(together with all interest accrued thereon, whether or not allowed or
allowable as a claim in a proceeding referred to in clause (g) or (h) of
Section 7.01), be paid by the Issuing Bank to the Agent and applied by the
Agent to pay any other amounts then due and payable by the Company
hereunder. When all such amounts shall have been paid in full, the Agent
shall repay the remaining balance, if any, to the Company.
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(g) Increased Cost and Reduced Return. If, on or after the date
hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank or the Issuing Bank with
any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency, shall impose, modify or
deem applicable any tax, reserve, special deposit or similar requirement
against or with respect to or measured by reference to letters of credit or
participations therein, and the result of any of the foregoing is to
increase the cost to such Bank or the Issuing Bank of issuing or maintaining
any Letter of Credit or any participation therein, or to reduce any amount
receivable by any Bank or the Issuing Bank under this Section 2.10 in
respect of any Letter of Credit or any participation therein (which increase
in cost, or reduction in amount receivable, shall be the result of such
Bank's or the Issuing Bank's reasonable allocation of the aggregate of such
increases or reductions resulting from such event), then, within 15 days
after demand by such Bank or the Issuing Bank (with a copy to the Agent),
the Company agrees to pay to such Bank or the Issuing Bank, from time to
time as specified by such Bank or the Issuing Bank, such additional amounts
as shall be sufficient to compensate such Bank or the Issuing Bank for such
increased cost or reduction. A certificate of such Bank or the Issuing Bank
submitted to the Company pursuant to this Section 2.10(g) and setting forth
the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error.
(h) Exculpatory Provisions. The Company's obligations under this
Section 2.10 shall be absolute and unconditional under any and all
circumstances and irrespective of any setoff, counterclaim or defense to
payment which the Company may have or have had against the Issuing Bank, any
Bank, the beneficiary of any Letter of Credit or any other Person. The
Company assumes all risks of the acts or omissions of any beneficiary of any
Letter of Credit with respect to its use of such Letter of Credit. The
Company agrees that the Issuing Bank and the Banks and their respective
officers, directors, employees and agents shall not be responsible for, and
the obligations of each Bank to make payments (other than obligations of
such Bank resulting solely from the gross negligence or willful misconduct
of the Issuing Bank), and of the Company to reimburse the Issuing Bank for
drawings, pursuant to this Section shall not be excused or affected by,
among other things, (i) the use which may be made of any Letter of Credit or
any acts or omissions of either beneficiary or any
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transferee in connection therewith; (ii) the validity, sufficiency or
genuineness of documents presented under any Letter of Credit or of any
endorsements thereon, even if such documents should in fact prove to be in
any or all respects invalid, insufficient, fraudulent or forged; (iii)
payment by the Issuing Bank against presentation of documents to the Issuing
Bank which do not comply with the terms of any Letter of Credit or (iv) any
dispute between or among the Company, any of its Subsidiaries, the
beneficiary of any Letter of Credit or any other Person or any claims or
defenses whatsoever of the Company, any of its Subsidiaries or any other
Person against the beneficiary of any Letter of Credit. The Issuing Bank
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit. The Company agrees
that any action taken or omitted by the Issuing Bank or any Bank under or in
connection with any Letter of Credit and the related drafts and documents,
if done without willful misconduct or gross negligence, shall be binding
upon the Company and shall not place the Issuing Bank or any Bank under any
liability to the Company.
(i) Reliance, Etc. To the extent not inconsistent with
Section 2.10(h), the Issuing Bank shall be entitled to rely, and shall be
fully protected in relying upon advice and statements of legal counsel,
independent accountants and other experts selected by the Issuing Bank and
upon any Letter of Credit, draft, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and may accept documents that appear on their face to be
in order, without responsibility for further investigation, regardless of
any notice or information to the contrary unless the beneficiary and the
Company shall have notified the Issuing Bank that such documents do not
comply with the terms and conditions of such Letter of Credit. The Issuing
Bank shall be fully justified in refusing to take any action requested of it
under this Section 2.10 in respect of any Letter of Credit unless it shall
first have received such advice or concurrence of the Required Banks as it
reasonably deems appropriate or it shall first be indemnified to its
reasonable satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to
take, or omitting or continuing to omit, any such action. Notwithstanding
any other provision of this Section 2.10, the Issuing Bank shall in all
cases be fully protected in acting, or in refraining from acting, under this
Section 2.10 in respect of any Letter of Credit in accordance with a request
of the
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Required Banks, and such request and any action taken or failure to act
pursuant thereto shall be binding upon the Banks and all future holders of
participations in such Letter of Credit.
(j) Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Bank, the Issuing Bank and the Agent (the
"LC Indemnitees") from and against any and all claims and damages, losses,
liabilities, costs or expenses (including, without limitation, the
reasonable fees and disbursements of counsel) which any such LC Indemnitee
may reasonably incur (or which may be claimed against any such LC Indemnitee
by any Person whatsoever) by reason of or in connection with the execution
and delivery or transfer of or payment or failure to pay under any Letter of
Credit or any actual or proposed use of any Letter of Credit, including any
claims, damages, losses, liabilities, costs or expenses which the Issuing
Bank may incur by reason of or in connection with the failure of any Bank to
fulfill or comply with its obligations to the Issuing Bank hereunder (but
nothing herein contained shall affect any rights the Company may have
against any defaulting Bank); provided that the Company shall not be
required to indemnify any LC Indemnitee for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, caused
by (i) the willful misconduct or gross negligence of the Issuing Bank in
determining whether a request presented under any Letter of Credit complied
with the terms of Letter of Credit or (ii) the Issuing Bank's failure to pay
under any Letter of Credit after the presentation to it of a request
strictly complying with the terms and conditions of such Letter of Credit.
Nothing in this Section 2.10(j) is intended to limit the obligations of the
Company under any other provision of this Section 2.10.
(k) Indemnification by the Banks. Each Bank shall, ratably in
accordance with the sum of its Tranche B Commitment and Tranche C
Commitment, indemnify the Issuing Bank, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by
the Company) against any cost, expense (including reasonable counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitee's gross negligence or willful misconduct or the
Issuing Bank's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit) that any such indemnitee may suffer or
incur in connection with this Section 2.10 or any action taken or omitted by
such indemnitee under this Section 2.10.
SECTION 2.11. Fees. (a) The Company shall pay to the Agent for
the account of the Banks ratably in
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proportion to their Tranche A Commitments a commitment fee at the rate of
1/4 of 1% per annum on the daily average amount by which the aggregate
amount of the Tranche A Commitments exceeds the aggregate outstanding
principal amount of the Loans. Such commitment fee shall accrue from and
including the Effective Date to but excluding the Termination Date (or
earlier date of termination of the Commitments in their entirety) and shall
be payable quarterly in arrears on each Quarterly Date and upon the
Termination Date.
(b) The Company shall pay to the Agent, for the account of the
Banks ratably in proportion to the aggregate amounts of their Tranche B
Commitments and Tranche C Commitments, a letter of credit fee for each day
at the LC Fee Rate for such day, on the aggregate amount available on such
day for drawing under the Letters of Credit, which fee shall be payable
quarterly in arrears on each Quarterly Date and upon the Termination Date.
"LC Fee Rate" per annum means (i) 1% per annum from and including the
Effective Date to but excluding the Final Settlement Date and (ii) 3/4 of 1%
on and after the Final Settlement Date.
(c) The Company shall pay to the Issuing Bank for its own account
a fronting fee at the rate of 1/4 of 1% per annum on the aggregate amount
available on any day for drawing under the Letters of Credit, which fee
shall be payable quarterly in arrears on each Quarterly Date and upon the
Termination Date.
(d) The Company shall also pay fees as specified in a letter
agreement dated April 12, 1994 between the Company and the Agent.
(e) Any fee payable pursuant to clauses (a), (b) or (c) of this
Section shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day but excluding the
last day).
SECTION 2.12. General Provisions as to Payments. (a) The Company
shall make each payment of principal of, and interest on, the Loans and of
fees hereunder, not later than 11:00 a.m. (New York City time) on the date
when due, in Federal or other funds immediately available in New York City,
to the Agent at its address referred to in Section 10.01. The Agent will
promptly distribute to each Bank its ratable share of each such payment
received by the Agent for the account of the Banks. Whenever any payment of
principal of, or interest on, the Domestic Loans or of fees shall be due on
a day which is not a Domestic Business Day, the date
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for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business
Day, the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case the date for payment thereof shall be
the next preceding Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon
shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Company
prior to the date on which any payment is due to the Banks hereunder that
the Company will not make such payment in full, the Agent may assume that
the Company has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Bank on such due date an amount equal to the amount then due such Bank. If
and to the extent that the Company shall not have so made such payment, each
Bank shall repay to the Agent forthwith on demand such amount distributed to
such Bank together with interest thereon, for each day from the date such
amount is distributed to such Bank until the date such Bank repays such
amount to the Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Company makes any payment or
prepayment of principal with respect to any Euro-Dollar Loan or any Euro-
Dollar Loan is converted to a Domestic Loan (pursuant to Article VII or IX
or otherwise) on any day other than the last day of an Interest Period
applicable thereto or the last day of an applicable period fixed pursuant to
Section 2.08(c), or if the Company fails to borrow or prepay any Euro-Dollar
Loans after notice has been given to any Bank in accordance with Section
2.03(a) or 2.07(c), the Company shall reimburse each Bank within 15 days
after demand for any resulting loss or expense incurred by it (or, subject
to the provisions of Section 10.06(e), by an existing or prospective
Participant in the related Loan), including (without limitation) any loss
incurred in obtaining, liquidating or employing deposits from third parties,
but excluding loss of margin for the period after any such payment or
conversion or failure to borrow or prepay; provided that such Bank shall
have delivered to the Company a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of manifest
error.
SECTION 2.14. Computation of Interest. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and paid for the actual number of days elapsed
(including the
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first day but excluding the last day). Interest based on the London
Interbank Offered Rate or the Federal Funds Rate shall be computed on the
basis of a year of 360 days and paid for the actual number of days elapsed
(including the first day but excluding the last day).
SECTION 2.15. Regulation D Compensation. Each Bank may require
the Company to pay, contemporaneously with each payment of interest on the
Euro-Dollar Loans, additional interest on the related Euro-Dollar Loan of
such Bank at a rate per annum determined by such Bank up to but not
exceeding the excess of (i) (A) the applicable London Interbank Offered Rate
divided by (B) one minus the Euro-Dollar Reserve Percentage over (ii) the
applicable London Interbank Offered Rate. Any Bank wishing to require
payment of such additional interest (x) shall so notify the Company and the
Agent, in which case such additional interest on the Euro-Dollar Loans of
such Bank shall be payable to such Bank at the place indicated in such
notice with respect to each Interest Period commencing at least three Euro-
Dollar Business Days after the giving of such notice and (y) shall notify
the Company at least five Euro-Dollar Business Days prior to each date on
which interest is payable on the Euro-Dollar Loans of the amount then due it
under this Section. Such rate shall be adjusted automatically on and as of
the effective date of any change in the Euro-Dollar Reserve Percentage.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by
the Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars
in respect of "Eurocurrency liabilities" (or in respect of any other
category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of
extensions of credit or other assets which includes loans by a non-United
States office of any Bank to United States residents).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
In order to induce the Agent, the Banks and the Issuing Bank to enter
into this Agreement and to extend the credit herein provided for, the
Company hereby represents and warrants to the Agent, each Bank and the
Issuing Bank that:
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SECTION 3.01. Financial Condition. (a) The condensed consolidated
balance sheet of the Company and its Consolidated Subsidiaries as at
February 28, 1994 and the related condensed consolidated statements of
operations and cash flows for the nine-month period then ended, copies of
which have heretofore been furnished to each Bank, are true, complete and
correct and present fairly the consolidated financial condition of the
Company and its Consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows
for the nine-month period then ended. All such financial statements have
been prepared in accordance with GAAP applicable to interim financial
statements on a basis consistently maintained throughout the period involved
and the corresponding period during the prior fiscal year except as
disclosed therein, and show all material liabilities, direct and contingent,
of the Company and its Consolidated Subsidiaries required to be shown in
accordance with such principles.
(b) The condensed consolidated balance sheet of Hospitals and its
Consolidated Subsidiaries as at February 28, 1994 and the related condensed
consolidated statement of operations for the nine-month period then ended,
copies of which have heretofore been furnished to each Bank, are true, complete
and correct and present fairly the consolidated financial condition of the
Hospitals and its Consolidated Subsidiaries as at such date and the
consolidated results of their operations for the nine-month period then ended.
All such financial statements have been prepared in accordance with GAAP
applicable to interim financial statements on a basis consistently maintained
throughout the period involved and the corresponding period during the prior
fiscal year except as disclosed therein, and show all material liabilities,
direct and contingent, of Hospitals and its Consolidated Subsidiaries required
to be shown in accordance with such principles.
SECTION 3.02. No Change. (a) Since February 28, 1994 there has
been no material adverse change in the business, operations, properties or
financial or other condition of the Company and its Consolidated
Subsidiaries taken as a whole, except matters disclosed in the Draft 10-Q
and matters relating to the Company or any of its Subsidiaries (other than
Hospitals or any of its Subsidiaries) arising from substantially similar
events, facts or circumstances, or based upon substantially similar
allegations referred to therein.
(b) Since May 31, 1993 there has been no material adverse change
in the business, operations, properties or financial or other condition of
Hospitals and its Subsidiaries taken as a whole.
SECTION 3.03. Corporate Existence; Compliance with Law. Except as
could not, in the aggregate, reasonably be expected to have a material
adverse effect on the business, operations, properties or financial
condition of the Company and its Subsidiaries taken as a whole, or could not
materially adversely affect the ability of the Company to perform its
obligations under this Agreement, the Pledge Agreement and the Notes or the
ability of Hospitals to perform its obligations under the Hospitals
Guaranty, each of the Company and its Significant Subsidiaries (a) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (b) has the corporate power, authority
and legal right to own or operate its properties or to lease the properties
it operates and to conduct the business in which it is currently engaged,
(c) is duly qualified as a foreign corporation and in good standing under
the laws of each jurisdiction where its
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ownership, lease or operation of properties or the conduct of its business
requires such qualification, and (d) is in compliance with all laws,
regulations, decrees and orders applicable to the Company or any of its
Significant Subsidiaries (including without limitation laws, regulations,
decrees and orders relating to environmental, occupational and health
standards and controls and in respect of antitrust, monopoly, restraint of
trade or unfair competition), except to the extent that compliance with any
such laws, regulations, decrees or orders would cause the Company or a
Significant Subsidiary to violate laws of the United States of America to
which the Company or such Significant Subsidiary is subject. The Company
and its Significant Subsidiaries have obtained all certifications, licenses,
accreditation and approvals that are necessary to conduct their respective
businesses. Except for orders or notices received with respect to matters
referred to in the Draft 10-Q and matters relating to the Company or any of
its Subsidiaries (other than Hospitals or any of its Subsidiaries) arising
from substantially similar events, facts or circumstances, or based upon
substantially similar allegations against or with respect to the Company or
any of its Subsidiaries (other than Hospitals or any of its Subsidiaries),
referred to therein, none of the Company or any of its Significant
Subsidiaries has received or expects to receive any order or notice of any
violation or claim of violation of any law, regulation, decree, rule,
judgment or order of any governmental authority or agency relating to the
ownership or operation of any hospital or other facility owned or operated
by it, as to which the cost or consequence of compliance or the consequences
of noncompliance, individually or in the aggregate, would or might be
material and adverse to the business, operations, properties, prospects or
financial or other condition of the Company and its Subsidiaries, taken as a
whole, or Hospitals or which might impair the ability of the Company to
discharge any of its obligations under this Agreement and the Pledge
Agreement or the ability of Hospitals to discharge its obligations under the
Hospitals Guaranty. None of Hospitals or any of its Subsidiaries has
received or expects to receive any order or notice of any violation or claim
of violation of any law, regulation, decree, rule, judgment or order of any
governmental authority or agency relating to the ownership or operation of
any hospital or other facility owned or operated by it, as to which the cost
or consequence of compliance or the consequences of noncompliance,
individually or in the aggregate, would or might be material and adverse to
the business, operations, properties, prospects or financial or other
condition of the Company and its Subsidiaries, taken as a whole, or
Hospitals or which might impair the ability of the Company to discharge any
of its obligations under this Agreement and the Pledge
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Agreement or the ability of Hospitals to discharge its obligations under the
Hospitals Guaranty.
SECTION 3.04. Corporate Power; Authorization; Enforceable
Obligations. (a) The Company has the corporate power, authority and legal
right to make, deliver and perform this Agreement, the Pledge Agreement and
the Notes and to borrow hereunder and to cause the Letters of Credit to be
issued hereunder and incur the related Reimbursement Obligations and has
taken all necessary corporate action to authorize the borrowings on the
terms and conditions of this Agreement and the Notes, the issuance of the
Letters of Credit, the incurrence of the related Reimbursement Obligations
and the execution, delivery and performance of this Agreement, the Pledge
Agreement and the Notes.
(b) Hospitals has the corporate power, authority and legal right to
make, deliver and perform the Hospitals Guaranty and has taken all necessary
corporate action to authorize the execution, delivery and performance
thereof.
(c) No consent of any other Person (including without limitation
stockholders and creditors of the Company), and no authorization of, notice
to, or other act by or in respect of the Company or Hospitals by any
governmental authority, agency or instrumentality is required in connection
with the borrowings hereunder or the issuance of the Letters of Credit or
the execution, delivery, performance, validity or enforceability of this
Agreement, the Hospitals Guaranty, the Pledge Agreement or the Notes.
(d) Each of this Agreement, the Pledge Agreement and the Notes has
been duly executed and delivered on behalf of the Company and constitutes a
legal, valid and binding agreement or obligation of the Company enforceable
against the Company in accordance with its terms.
(e) The Hospitals Guaranty has been duly executed and delivered on
behalf of Hospitals and constitutes a legal, valid and binding obligation of
Hospitals enforceable against Hospitals in accordance with its terms.
SECTION 3.05. No Legal Bar. The execution, delivery and
performance by the Company of this Agreement, the Pledge Agreement and the
Notes, the borrowings hereunder and the use of the proceeds thereof, the
issuance of the Letters of Credit and the incurrence of the related
Reimbursement Obligations, and the execution, delivery and performance by
Hospitals of the Hospitals Guaranty, will not violate (except to the extent
that such violation, if any, would not have a material adverse effect on the
business, operations, properties or financial or other condition of
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the Company and its Subsidiaries taken as a whole) any provision of any
existing law or regulation applicable to the Company or any of its
Significant Subsidiaries or of any award, order or decree applicable to the
Company or any of its Significant Subsidiaries of any court, arbitrator or
governmental authority, or of the articles of incorporation or by-laws of
the Company, or of the certificate of incorporation or by-laws of Hospitals,
or of any security issued by the Company or Hospitals or of any material
mortgage, indenture, lease, contract or other agreement or undertaking to
which the Company or Hospitals is a party or by which the Company or
Hospitals or any of their respective properties or assets may be bound, and
will not result in, or require, the creation or imposition of any Lien
prohibited by Section 6.02 on any of their respective properties or revenues
pursuant to the provisions of any such mortgage, indenture, contract, lease
or other agreement.
SECTION 3.06. Material Litigation. No litigation, investigations
or proceedings of or before any arbitrator or governmental authority have
been instituted or, to the knowledge of the Company, threatened by or
against the Company or any of its Subsidiaries or any of its or their
properties or revenues which individually or in the aggregate, if Adversely
Determined, would have a material adverse effect on the business,
operations, properties, condition (financial or otherwise) or prospects of
the Company and its Subsidiaries, taken as a whole, except for matters set
forth in the Draft 10-Q, or Hospitals and its Subsidiaries, taken as a
whole, without exception for matters set forth in the Draft 10-Q. No
developments have occurred on or after April 11, 1994 in any such
litigation, investigations or proceedings which individually or in the
aggregate have a reasonable likelihood of either (i) materially increasing
the likelihood that such litigation, proceedings or investigations will be
Adversely Determined if such adverse determination would have a material
adverse effect on the business, operations, properties, condition (financial
or otherwise) or prospects of Hospitals and its Subsidiaries, taken as a
whole, or (ii) materially increasing the likelihood that, if Adversely
Determined, such litigation, proceedings or investigations would,
individually or in the aggregate, have a material adverse effect on the
business, operations, properties, condition (financial or otherwise) or
prospects of Hospitals and its Subsidiaries, taken as a whole. For the
purposes of this Section 3.06, it is assumed that (x) medical malpractice
litigation will not have a material adverse effect on the business,
operations, properties, condition (financial or otherwise) or prospects of
the Company and its Subsidiaries, taken as a whole, or Hospitals to the
extent adequately covered by insurance (as to which the insurer has
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acknowledged coverage) and (y) in medical malpractice actions now pending or
threatened against the Company and its Subsidiaries, damages would be
assessed consistent with the Company's past experience. For the purposes of
this Section 3.06, it is agreed and understood that the institution of
lawsuits against or with respect to Company or any of its Subsidiaries
(other than Hospitals or any of its Subsidiaries), or joinder in existing
lawsuits, by new plaintiffs, based upon facts, circumstances or allegations
against or with respect to Company or any of its Subsidiaries (other than
Hospitals or any of its Subsidiaries) substantially similar to existing
litigation, shall not constitute the institution of "new litigation" and
will not constitute a "development" in existing litigation which would have
such a material adverse effect.
SECTION 3.07. No Default. Neither the Company nor any of its
Significant Subsidiaries is in default in any material respect under or with
respect to any contract, agreement or other instrument (other than any
contract, agreement or instrument that involves an aggregate amount that is
less than $5,000,000) to which it is a party or by which it or its assets is
bound, and no Default or Event of Default has occurred and is continuing.
Except as would not have a material adverse effect on the business,
operations, properties or financial condition of the Company and its
Subsidiaries taken as a whole, neither the Company nor any of its
Significant Subsidiaries is in default under any order, award or decree of
any court, arbitrator, or other governmental authority binding upon or
affecting it or by which any of its assets is bound or affected. Neither
the Company nor any of its Significant Subsidiaries is subject to any order,
award or decree which would materially adversely affect its ability to carry
on its business as presently conducted or to perform its obligations under
any other order, award or decree.
SECTION 3.08. Title to Properties; Liens. The Company and each of
its Significant Subsidiaries have good and marketable title to their
respective properties and assets, including the properties and assets
reflected in the balance sheet referred to in Section 3.01, subject to no
Lien of any kind except Liens permitted by Section 6.02.
SECTION 3.09. No Burdensome Restrictions. No contract, agreement
or other instrument by which the Company or any of its Significant
Subsidiaries is bound materially adversely affects, or insofar as the
Company may reasonably foresee may so affect, the business, operations,
properties or financial or other condition of the Company and its
Subsidiaries taken as a whole.
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SECTION 3.10. Taxes. Each of the Company and its Significant
Subsidiaries has filed or caused to be filed all tax returns which to the
knowledge of the Company are required to be filed, and has paid all taxes
shown to be due and payable on said returns or on any assessments made
against it, except for returns which have been appropriately extended, and
all other taxes, fees or other charges imposed on it by any governmental
authority, agency or instrumentality which have become due and payable
(other than those the amount or validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided).
SECTION 3.11. Federal Regulations. Neither the Company nor any of
its Subsidiaries is engaged or will engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings
of each of the quoted terms under Regulation U of the Board of Governors of
the Federal Reserve System as now and from time to time hereafter in effect.
The Company will not use any part of the proceeds of any loans hereunder for
any purpose which violates, or which would be inconsistent with, the pro-
visions of Regulation U or X of such Board of Governors, as the same may be
amended, supplemented or modified from time to time.
SECTION 3.12. ERISA. No material Plan had a material accumulated
funding deficiency (as the term "accumulated funding deficiency" is defined
in Section 302 of ERISA except that employer contributions for such plan
year not made after the end of the most recent fiscal year shall be taken
into account in determining the existence or amount of such accumulated
funding deficiency to any extent permitted under Section 302(c)(10) of
ERISA) as of the last day of the most recent fiscal year of such Plan ended
prior to the date hereof, or would have had an accumulated funding
deficiency (as so defined) on such day if such year were the first year of
such Plan to which Part 3 of Subtitle B of Title I of that Act applied, and
no material liability to the PBGC has been, or is expected by the Company or
any Subsidiary to be, incurred with respect to any such Plan by the Company
or any Subsidiary.
SECTION 3.13. Investment Company Act. The Company is not an
"investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
SECTION 3.14. Leases. Except as could not, in the aggregate,
reasonably be expected to have a material adverse effect on the business,
operations, properties or
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financial condition of the Company and its Subsidiaries, taken as a whole,
and could not materially adversely affect the ability of the Company to
perform its obligations under this Agreement, the Pledge Agreement and the
Notes or the ability of Hospitals to perform its obligations under the
Hospitals Guaranty, (a) the Company and each of its Significant Subsidiaries
enjoy peaceful and undisturbed possession under all leases under which they
operate, subject to subleases in the ordinary course of business, (b) all of
such leases are valid and subsisting and are in full force and effect, (c)
there is no default on the part of the Company or any Significant Subsidiary
existing under any of such leases, and (d) none of such leases contains any
unusual or burdensome provision which adversely affects or in the future may
(so far as the Company may reasonably foresee) adversely affect the
Company's or such Significant Subsidiary's right of occupancy and right to
continue its operations under such lease.
SECTION 3.15. Environmental Matters. Each of the Company and its
Subsidiaries has obtained all Governmental Approvals required under all
Environmental Laws to carry on its business as now being or as proposed to
be conducted, except to the extent failure to have any such Governmental
Approvals would not have a material adverse effect on the property,
business, operations or financial condition of the Company and its
Subsidiaries, taken as a whole. Each of such Governmental Approvals is in
full force and effect and each of the Company and its Subsidiaries is in
compliance with the terms and conditions of such Governmental Approvals, and
is also in compliance with all other provisions of any applicable
Environmental Law, and all rules or regulations adopted thereunder, except
to the extent failure to comply with such provisions would not have a
material adverse effect on the property, business, operations or financial
condition of the Company and its Subsidiaries, taken as a whole.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01. Conditions to Effectiveness. This Agreement shall
not become effective until the date (the "Effective Date") on which all of
the following conditions have been satisfied (or waived, in accordance with
Section 10.05):
(a) The Agent shall have received counterparts hereof signed by
each of the parties hereto (or, in the case of any party as to which an
executed counterpart shall not have been received, the Agent shall have
received, in form
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satisfactory to it, telegraphic, telex, facsimile or other written
confirmation from such party of execution of a counterpart hereof by such
party).
(b) The Agent shall have received for the account of each Bank a
Note executed by a duly authorized officer of the Company and dated the
Effective Date, which Notes comply with the provisions of Section 2.04.
(c) The Agent shall have received a copy of the Pledge Agreement
signed by the Company, together with stock certificates evidencing all of
the outstanding capital stock of Hospitals and signed stock powers relating
thereto.
(d) The Agent shall have received a copy of the Hospitals Guaranty
signed by Hospitals.
(e) The Agent shall have received evidence satisfactory to it as
to (i) the repayment in full of all amounts accrued and owing by the Company
(including, without limitation, all accrued commitment fees and interest to
but excluding April 13, 1994) under the Existing Credit Agreement and the
termination of the commitments of the banks thereunder and (ii) the waiver of
all financial covenants in the MP Funding Credit Agreement and the Sanwa
Reimbursement Agreement.
(f) The Agent shall have received, with an original counterpart
for each Bank, a certificate dated the Effective Date, substantially in the
form of Exhibit F, executed by an Executive Vice President, a Senior Vice
President or the Treasurer of the Company.
(g) The Agent shall have received, with an original counterpart
for each Bank, a certificate executed by a duly authorized officer of the
Company and dated the Effective Date certifying that, except as disclosed in
the Draft 10-Q, no material adverse change has occurred in the financial
condition, results of operations or business of the Company or its
Subsidiaries, taken as a whole, since February 28, 1994.
(h) The Agent shall have received, with an original counterpart
for each Bank, an opinion of special counsel for the Company and Hospitals,
dated the Effective Date and addressed to the Agent, the Issuing Bank and
the Banks, substantially in the form of Exhibit G and covering such other
matters incident to the transactions contemplated by this Agreement as the
Agent or any Bank shall reasonably request.
(i) The Agent shall have received, with an original counterpart
for each Bank, an opinion of internal
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counsel for the Company and Hospitals, dated the Effective Date and
addressed to the Agent, the Issuing Bank and the Banks, substantially in the
form of Exhibit H and covering such other matters incident to the
transactions contemplated by this Agreement as the Agent or any Bank shall
reasonably request.
(j) The Agent shall have received, with an original counterpart
for each Bank, an opinion of Davis Polk & Wardwell, special counsel for the
Agent, substantially in the form of Exhibit I and covering such other
matters incident to the transactions contemplated by this Agreement as the
Agent or any Bank shall reasonably request.
(k) The Agent shall have received, with an original counterpart
for each Bank, a certificate of the Secretary of the Company, dated the
Effective Date, as to the articles of incorporation and bylaws of the
Company, no amendments thereto, the adoption by the board of directors of
the Company of the resolutions referred to in subclause (m) of this Section
4.01 and the incumbency and signature of each officer of the Company
authorized to sign this Agreement, the Pledge Agreement and the Notes and
each certificate or other document to be delivered pursuant to this
Agreement, together with evidence of the incumbency of such Secretary.
(l) The Agent shall have received, with an original counterpart
for each Bank, a certificate of the Secretary of Hospitals, dated the
Effective Date, as to the articles of incorporation and bylaws of Hospitals,
no amendments thereto, the adoption by the board of directors of Hospitals
of the resolutions referred to in subclause (n) of this Section 4.01 and the
incumbency and signature of the officer of Hospitals who signed the
Hospitals Guaranty, together with evidence of the incumbency of such
Secretary.
(m) The Agent shall have received, with a copy for each Bank, a
copy (in form and substance satisfactory to the Agent) of the resolutions of
the board of directors of the Company authorizing the borrowings provided
for herein and the execution, delivery and performance of this Agreement,
the Pledge Agreement and the Notes, certified to be in full force and effect
without modification by the Secretary of the Company on the Effective Date.
(n) The Agent shall have received, with a copy for each Bank, a
copy (in form and substance satisfactory to the Agent) of the resolutions of
the board of directors of Hospitals authorizing the execution, delivery and
performance of the Hospitals Guaranty, certified to be in full force and
effect without modification by the Secretary of Hospitals on the Effective
Date.
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(o) The Agent shall have received, with an original counterpart
for each Bank, a true copy of any consent or approval of any Person which
may be required in connection with the transactions contemplated by this
Agreement, including, without limitation, any consent required under (i) the
Overdraft Financing Facility Agreement dated as of December 16, 1992 between
the Company and Bank of America N.T. & S.A., as amended by the First
Amendment thereto dated as of September 27, 1993 or (ii) the Advance Account
Agreement dated as of December 16, 1993 between the Company and Bank of
America N.T. & S.A.
(p) The Company shall have paid (i) the fees to be paid at
closing pursuant to the letter agreement referred to in Section 2.11(d) and
(ii) all expenses payable by the Company on or before the Effective Date
pursuant to Section 10.03(a) of this Agreement and Section 9.6 of the
Existing Credit Agreement.
(q) The Agent shall have received all documents the Agent may
reasonably request relating to the existence of the Borrower and Hospitals,
the corporate authority for and the validity of this Agreement, the
Hospitals Guaranty, the Pledge Agreement and the Notes, and any other
matters relevant hereto, all in form and substance satisfactory to the
Agent.
SECTION 4.02. Conditions to All Loans. The obligation of each
Bank to make any Loan (including the initial Loan) to be made by it
hereunder is subject to the satisfaction of the following conditions:
(a) the fact that this Agreement shall have become effective
pursuant to Section 4.01 on or prior to April 15, 1994;
(b) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02;
(c) the fact that the representations and warranties made by the
Company in this Agreement and the Pledge Agreement or which are contained in
any certificate, document or financial or other statement furnished at any
time hereunder or in connection herewith, will be true and correct on and as
of the date of such Loan as if made on and as of such date (except that
representations and warranties made with respect to specified dates or
periods will be true and correct as of such specified dates or for such
specified periods, as the case may be); and
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(d) the fact that no Default or Event of Default will have
occurred and be continuing on the date of such Loan before or after giving
effect to such Loan.
Each borrowing by the Company hereunder shall constitute a representation
and warranty by the Company hereunder as of the date of such borrowing that
the conditions in clauses (c) and (d) of this Section have been satisfied
(provided, however, that each such representation and warranty as to clause
(d) shall be to the best of the Company's knowledge with respect to a
Default or an Event of Default due to a breach of the covenants set forth in
Sections 6.03, 6.06, 6.07 and 6.08).
ARTICLE V
AFFIRMATIVE COVENANTS
The Company hereby covenants and agrees that, so long as any Commitment
remains in effect, any amount remains available for drawing under any Letter
of Credit, any Note remains outstanding and unpaid or any amount is owing to
any Bank, the Issuing Bank or the Agent hereunder, the Company shall, unless
otherwise consented to in writing by the Required Banks:
SECTION 5.01. Financial Statements. Furnish to each Bank:
(a) as soon as available, but in any event not later than ninety
days after the close of each fiscal year of the Company, a copy of the
audited consolidated balance sheet of the Company and its Consolidated
Subsidiaries as at the end of such fiscal year, and related audited consoli-
dated statements of operations, changes in common stock and other
stockholders' equity and cash flows of the Company and its Consolidated
Subsidiaries for such fiscal year, setting forth in each case in comparative
form the corresponding figures for the preceding fiscal year, all in
reasonable detail, prepared in accordance with GAAP applied on a basis
consistently maintained throughout the period involved and with the prior
fiscal year except as disclosed therein, such consolidated financial
statements to be certified by Independent Certified Public Accountants
acceptable to the Required Banks (such certification not to be qualified or
limited because of any restricted or limited examination made by such
accountants);
(b) as soon as available, but in any event not later than
forty-five days after the end of each of the first three quarterly periods
of each fiscal year of the Company, unaudited consolidated financial
statements of the
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Company and its Consolidated Subsidiaries, including a condensed con-
solidated balance sheet of the Company and its Subsidiaries as at the end of
such fiscal quarter and related condensed consolidated statements of
operations and cash flows of the Company and its Consolidated Subsidiaries,
all for the period from the beginning of such fiscal year to the end of such
fiscal quarter, the consolidated financial statements of the Company and its
Consolidated Subsidiaries setting forth in each case corresponding figures
for the like period of the preceding fiscal year; all (i) in reasonable
detail, (ii) prepared in accordance with the instructions of the Securities
and Exchange Commission for filings on Form 10-Q and in accordance with GAAP
applicable to interim financial statements on a basis consistently
maintained throughout the period involved and with prior periods except as
disclosed therein and except that such financial statements shall not
necessarily include all information and footnotes required by GAAP for
complete year-end financial statements, and (iii) certified by an Executive
Vice President, a Senior Vice President or the Treasurer of the Company;
(c) concurrently with the delivery of the financial statements
referred to in clause (a) above, a certificate of such Independent Certified
Public Accountants, stating that in making the examination necessary for
certifying such financial statements no knowledge was obtained of any Event
of Default or Default hereunder, except as specifically indicated;
(d) concurrently with the delivery of the financial statements
referred to in clauses (a) and (b) above, a certificate of an Executive Vice
President, a Senior Vice President or the Treasurer of the Company
(i) stating that, to the best of his knowledge, the Company during such
period, has kept, observed, performed and fulfilled each and every covenant
and condition contained in this Agreement, the Pledge Agreement and the
Notes and that he has obtained no knowledge of any Default or Event of
Default hereunder except as specifically indicated and (ii) showing in
detail the calculations supporting such statement in respect of Sections
6.03, 6.06, 6.07, 6.08, 6.09 and 6.10 of this Agreement (provided that the
certificate showing in detail the calculations in respect of Sections 6.03
and 6.10 shall only be furnished concurrently with the delivery of the
financial statements referred to in clause (a) above);
(e) promptly after the same are sent, copies of all financial
statements and reports which the Company sends to its stockholders, and
promptly after the same are filed, copies of all financial statements and
reports which the Company may make to, or file with, the Securities and
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Exchange Commission or any public body succeeding to any or all of the func-
tions of the Securities and Exchange Commission;
(f) as soon as available, but in any event not later than 30 days
after the end of each of the first two months in each fiscal quarter and not
later than 45 days after the end of the third month in each fiscal quarter,
unaudited condensed consolidated financial statements of the Company and its
Consolidated Subsidiaries, including a condensed consolidated balance sheet
of the Company and its Subsidiaries as at the end of such month, the related
condensed consolidated statements of operations and the related condensed
consolidated statement of cash flows of the Company and its Consolidated
Subsidiaries, all in reasonable detail and prepared in accordance with GAAP
(but without the accompanying notes required by GAAP) and certified by an
Executive Vice President, a Senior Vice President or the Treasurer of the
Company;
(g) as soon as available, but in any event not later than 30 days
after the end of each of the first two months in each fiscal quarter and not
later than 45 days after the end of the third month in each fiscal quarter,
reports (in form and substance satisfactory to the Agent and substantially
in the form presented to the banks under the Existing Credit Agreement prior
to February 28, 1994) providing condensed consolidated statements of income
and cash flows of each of the Company's major divisions, all in reasonable
detail and prepared in accordance with GAAP (but without the accompanying
notes required by GAAP) and certified by an Executive Vice President, a
Senior Vice President or the Treasurer of the Company;
(h) promptly upon any sale, disposition or liquidation of Non-
Restricted Assets in excess of $1,000,000, a certificate from an Executive
Vice President, a Senior Vice President or the Treasurer of the Company
setting forth in reasonable detail any cash or non-cash charges or other
effects of such disposition or liquidation;
(i) promptly upon receipt thereof, a copy of the documents
referred to in the definition of Final Settlement; and
(j) promptly, such additional financial and other information as
any Bank may from time to time reasonably request.
SECTION 5.02. Payment of Obligations. Pay and discharge, and
cause its Significant Subsidiaries to pay and discharge, at or before
maturity, all their respective obligations and liabilities, except (a)
(other than with
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respect to tax liabilities and obligations and liabilities hereunder and
under the Notes) where the failure to pay or discharge, or to cause to be
paid or discharged, would not in the aggregate have a material adverse
effect on the business, operations, property or financial or other condition
of the Company and its Subsidiaries taken as a whole, or (b) (other than
with respect to obligations and liabilities hereunder and under the Notes)
where the same may be contested in good faith, in which case the Company
shall maintain, and cause its Significant Subsidiaries to maintain, in
accordance with GAAP, appropriate reserves for the accrual of any of the
same.
SECTION 5.03. Maintenance of Properties; Insurance. Keep, and
cause its Significant Subsidiaries to keep, all properties useful and
necessary in the business of the Company and its Significant Subsidiaries in
good working order and condition; maintain, and cause its Significant
Subsidiaries to maintain, with financially sound and reputable insurance
companies, which insurance companies may be Affiliates of the Company or
part of the Company's self-insurance program, insurance on all their
properties in at least such amounts and against at least such risks as are
usually insured against in the same general area and by companies engaged in
the same or a similar business and maintain professional liability and
malpractice insurance against claims usually insured against by medical
personnel and hospitals and other health facilities; and furnish to each
Bank, upon written request, full information as to the insurance carried.
SECTION 5.04. Notices. (a) Promptly give notice to the Agent and
each Bank of (i) the occurrence of any Default or Event of Default hereunder,
(ii) any event of default under any material instrument or other agreement
of the Company or any of its Significant Subsidiaries, (iii) any litigation,
proceeding, investigation or dispute which may exist at any time between the
Company or any of its Subsidiaries and any health or medical insurance
company or governmental authority which might have a material and adverse
effect upon the business, operations, assets or condition, financial or
otherwise of the Company and its Subsidiaries, taken as a whole, and of any
material development in any such litigation, proceeding, investigation or
dispute and (iv) any other litigation and proceedings (and any material
developments therein) against the Company or any of its Subsidiaries (i) in
which, if Adversely Determined, the amount involved equals or exceeds
$25,000,000 or (ii) in which injunctive or similar relief is sought and
which might have any reasonable possibility of having a material adverse
effect on the Company and its Subsidiaries, taken as a whole.
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(b) As soon as possible and in any event within 30 days after the
Company knows or has reason to know that any Reportable Event which might
have a material adverse effect upon the business, operations, assets or
condition, financial or otherwise, of the Company and its Subsidiaries,
taken as a whole, has occurred with respect to any Plan or that PBGC or the
Company or any Subsidiary has instituted or will institute proceedings under
Title IV of ERISA to terminate any Plan, which termination might have a
material adverse effect upon the business, operations, assets or condition,
financial or otherwise, of the Company and its Subsidiaries, taken as a
whole, deliver to the Agent and each Bank a certificate of an Executive Vice
President, a Senior Vice President or the Treasurer of the Company setting
forth details as to such Reportable Event and the action that the Company
proposes to take with respect thereto, together with a copy of any notice of
such Reportable Event that may be required to be filed with the PBGC, or any
notice delivered by the PBGC evidencing its intent to institute such
proceedings or any notice to the PBGC that such Plan is to be terminated, as
the case may be. For all purposes of this subsection (b), the Company shall
be deemed to have all knowledge or knowledge of all facts attributable to
the administrator of such Plan.
(c) Immediately after the occurrence of a material adverse change
in the business, operations, assets or condition, financial or otherwise, of
the Company and its Subsidiaries, taken as a whole, deliver to the Agent and
each Bank a statement of an Executive Vice President, a Senior Vice
President or the Treasurer of the Company setting forth the details of such
change and what action the Company proposes to take with respect thereto.
SECTION 5.05. Conduct of Business; Maintenance of Existence and
Compliance With Law. Continue, and cause its Significant Subsidiaries to
continue, to engage primarily in business of the same general type as now
conducted by the Company and its Significant Subsidiaries, and preserve,
renew and keep in full force and effect their corporate existence and take
all reasonable action to maintain their rights, privileges and franchises
necessary or desirable in the normal conduct of business, provided that the
foregoing shall not be deemed to prohibit any actions expressly permitted
under Section 6.05 hereof; comply, and cause each of its Significant
Subsidiaries to comply, with all material applicable laws, ordinances,
rules, regulations and requirements of governmental authorities (including
without limitation Environmental Laws, ERISA and the rules and regulations
thereunder and Public Law 92-603), and hold and maintain, and at all times
cause each of its Significant Subsidiaries to hold and maintain, in full
force and effect all certifications, favorable governmental reviews,
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governmental approvals, licenses and permits necessary or desirable to
enable the Company and its Subsidiaries to conduct their respective
businesses as now conducted except where the failure to comply therewith or
hold and maintain such certifications, favorable governmental reviews,
governmental approvals, licenses or permits would not, individually or in
the aggregate, have a material adverse effect on the business, operations,
property or financial or other condition of the Company and its Subsidiaries
taken as a whole and except where compliance with any such laws, ordinances,
rules, regulations or requirements would cause the Company or a Subsidiary
to violate laws of the United States of America to which the Company or such
Subsidiary is subject; notwithstanding the foregoing, (i) a Subsidiary may
reincorporate in another state or merge with or into the Company or another
Subsidiary and (ii) the Company may reincorporate in another state or merge
with or into a Subsidiary, provided that the surviving corporation (if other
than the Company) is incorporated under the laws of a state of the United
States and assumes in writing all the obligations of the Company hereunder
and said surviving corporation delivers to each Bank an opinion of Counsel
for the Company, in form and substance satisfactory to each Bank, to the
effect that the assumption by such surviving corporation of such obligations
is effective and is fully binding upon and enforceable against such
surviving corporation; and provided further, that neither NME Psychiatric
Properties or any of its Subsidiaries nor Hospitals or any of its
Subsidiaries shall merge or consolidate with the Company or any of its
Subsidiaries, except (i) Subsidiaries of NME Psychiatric Properties may
merge with other Subsidiaries of NME Psychiatric Properties and (ii)
Subsidiaries of Hospitals may merge with Hospitals (so long as Hospitals is
the surviving corporation) or with other Subsidiaries of Hospitals.
SECTION 5.06. Inspection of Property; Books and Records. Keep,
and cause each of its Significant Subsidiaries to keep, proper books of
record and account in which full, true and correct entries in conformity
with generally accepted accounting principles shall be made of all dealings
and transactions in relation to its business and activities; and permit, and
cause its Significant Subsidiaries to permit, representatives of any Bank to
visit and inspect any of their respective properties and examine and make
abstracts (at such Bank's expense, unless an Event of Default shall have
occurred and be continuing, in which case, at the Company's expense) from
any of the books and records of the Company and any of its Significant
Subsidiaries upon reasonable notice at any reasonable time and as often as
may reasonably be desired.
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ARTICLE VI
NEGATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in
effect, any amount remains available for drawing under any Letter of Credit,
any Note remains outstanding and unpaid or any amount is owing to any Bank,
the Issuing Bank or the Agent hereunder, the Company shall not, unless
otherwise consented to in writing by the Required Banks:
SECTION 6.01. Limitation on Indebtedness. Create, incur, assume
or suffer to exist, or permit any Subsidiary to create, incur, assume or
suffer to exist, any Indebtedness, except (a) Indebtedness in respect of the
Notes; (b) Indebtedness existing on February 28, 1994 and reflected in the
Draft 10-Q; (c) unsecured Indebtedness, provided that no Default or Event of
Default has occurred and is continuing or shall have occurred after giving
effect thereto; (d) any nonrecourse debt incurred in connection with
leveraged lease financing; (e) Indebtedness secured by Liens not prohibited
by Section 6.02, provided that no Default or Event of Default has occurred
and is continuing or shall have occurred after giving effect thereto; (f)
Contingent Value Rights issued in settlement of litigation referred to in
the Draft 10-Q or other similar litigation; (g) Indebtedness caused by
overdrafts incurred consistent with historical practices of the cash
management arrangements for the Company and its Subsidiaries backed by
committed overdraft facilities from a commercial bank; and (h) Indebtedness
of Australian Medical Enterprises Limited which shall not be guaranteed by
the Company or any other Subsidiary of the Company; provided that the
aggregate outstanding principal amount of Indebtedness incurred after
February 28, 1994 (excluding any Permitted Line Rollovers, extensions and
renewals (but not increases) of unsecured Indebtedness outstanding as of
February 28, 1994 or Indebtedness incurred to finance Consolidated Capital
Expenditures permitted under Section 6.13) pursuant to clause (c) of this
Section 6.01 shall not at any time exceed $25,000,000.
SECTION 6.02. Limitations on Liens and Negative Pledges. (a)
Create, incur, assume or suffer to exist, or permit any Subsidiary to
create, incur, assume or suffer to exist, any Lien upon any of its
properties, assets, income or profits, whether now owned or hereafter
acquired, except (i) the Liens referred to in the Company's audited
financial statements as at May 31, 1993 and for the fiscal year then ended
(and any refinancings, extensions or renewals of such Liens by reason of any
refinancing, extension or renewal of the Indebtedness secured by such
Liens), provided that
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such Liens are not spread to cover other or additional Indebtedness of the
Company or any of its Subsidiaries (it being agreed and understood that all
or any portion of the Indebtedness of the Company or any of its Subsidiaries
outstanding under the MP Funding Master Loan Agreement may be secured by any
Lien securing any portion of such Indebtedness on the date hereof) and
provided, further, that any refinancing permitted by this clause (i) shall
be on terms no less favorable to the Company or a Subsidiary than the
Indebtedness of the Company or such Subsidiary being refinanced; (ii) Liens
securing Indebtedness of a Subsidiary to another Subsidiary or to the
Company and Liens securing Indebtedness of the Company to any Subsidiary;
(iii) Liens on property, or on property owned by corporations, acquired by
the Company or any Subsidiary after February 28, 1994; (iv) Liens securing
all or any part of the purchase price or the cost of construction of
property or equipment acquired by the Company or a Subsidiary, provided that
the indebtedness secured and related Lien are incurred within one year after
acquisition, or completion of construction and full operation, whichever is
later; (v) Liens on property owned by the Company or a Subsidiary required
to secure indebtedness incurred to construct additions, substantial repairs
or alterations or substantial improvements to such properties, provided,
further, that the amount of the indebtedness secured does not exceed the
expense incurred to construct such additions, substantial repairs or
alterations or substantial improvements and provided, further, that the
indebtedness secured and related Lien are incurred within one year after the
completion of construction and full operation; (vi) Liens to secure
indebtedness on which the interest payments to bondholders are exempt from
Federal income tax under Section 103 of the Internal Revenue Code of 1986;
(vii) Liens in favor of a government or a governmental entity which secure
Indebtedness of the Company and its Subsidiaries which is guaranteed by the
government or governmental entity or Indebtedness of Company and its
Subsidiaries incurred to finance all or some of the purchase price or cost
of construction of goods, products or facilities produced under contract or
subcontract for the government or governmental entity and (viii) the Lien
created by the Pledge Agreement or (b) after February 28, 1994, enter, or
permit any of its Subsidiaries to enter, into any agreement whereby the
Company or any of its Subsidiaries agrees not to grant Liens on any of its
properties, assets, income or profits, whether then existing or thereafter
acquired, to secure the obligations arising in connection with this
Agreement, including, without limitation, any agreement that would require
that Liens granted to secure such obligations equally and ratably secure any
other obligations or Indebtedness of the Company or any of its Subsidiaries
owed to any other Person.
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SECTION 6.03. Limitation on Contingent Obligations. Incur or
remain liable with respect to, or permit any Subsidiary to incur or remain
liable with respect to, any Contingent Obligation except Contingent
Obligations existing as of February 28, 1994 and listed on Schedule III and
additional Contingent Obligations incurred after February 28, 1994, provided
the aggregate contingent liability of the Company and its Subsidiaries with
respect to such additional Contingent Obligations shall not at any time
exceed $50,000,000; and provided, further, that the Company shall not permit
Hospitals or any Subsidiary of Hospitals to incur any Contingent Obligations
except Contingent Obligations in favor of Hospitals or any of its
Subsidiaries.
SECTION 6.04. Limitation on Investments. Make or commit to make,
or permit any Subsidiary to make or commit to make, any investment (whether
by means of stock purchase, capital contribution, loan, advance, transfer of
assets or any other type of investment) in any Person at any time when a
Default or an Event of Default has occurred and is continuing or would occur
after giving effect to such investment, or any investment in the Psychiatric
Division except investments made in the ordinary course of the Company's
existing cash management practices.
SECTION 6.05. Limitation on Fundamental Changes. Merge or
consolidate with any other Person (except as expressly permitted by
Section 5.05 hereof) unless the Company is the surviving corporation and,
after giving effect to such merger or consolidation, no Default or Event of
Default has occurred and is continuing, or permit any Subsidiary to merge or
consolidate with any other Person (except as expressly permitted by
Section 5.05 hereof) unless, after giving effect to such merger or
consolidation, no Default or Event of Default has occurred and is
continuing, or liquidate or dissolve itself (or suffer any liquidation or
dissolution), or dispose of or lease or sell or permit any Subsidiary to
dispose of or lease or sell all, substantially all or any substantial
portion of its properties, assets and business or any Restricted Assets to
any other Person, except that:
(a) after February 28, 1994, the Company and its Subsidiaries may
sell or otherwise dispose of properties and assets of Hospitals (other than
the stock of any of its Subsidiaries) having an aggregate fair market value
not exceeding $25,000,000; and
(b) the Company and its Subsidiaries may sell Non-Restricted Assets
in one or more transactions approved by the Company's board of directors;
provided that (1) all such stock, property or assets are sold for fair
market value,
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(2) the proceeds of any such sale or disposition are deposited into a
segregated deposit account in the name of the Company and thereafter either
held therein and invested in cash or cash equivalent securities or withdrawn
therefrom and used (i) to prepay the Loans and the Notes, to pay the
Reimbursement Obligations or to make any payment required by Section
2.10(f), (ii) to pay legal fees, or (iii) to pay judgments, awards, fines or
settlements in respect to any litigation or government investigation
existing as of April 11, 1994 and referred to in the Draft 10-Q (or
subsequent litigation relating to the Company or any of its Subsidiaries
(other than Hospitals or any of its Subsidiaries) based upon facts or
circumstances or allegations against or with respect to the Company or any
of its Subsidiaries (other than Hospitals or any of its Subsidiaries)
substantially similar to such existing litigation or government
investigation) and provided, further, that none of the stock or, except as
permitted by Section 6.02, property or assets of Hospitals shall be
encumbered by any Lien or transferred to the Company or any of its
Subsidiaries other than Subsidiaries of Hospitals. Promptly upon any
disposition of Non-Restricted Assets in excess of $1,000,000, the Company
shall deliver an officer's certificate as required pursuant to Section
5.01(h).
SECTION 6.06. Maintenance of Consolidated Net Worth. Permit at
any time Consolidated Net Worth to be less than 90% of Consolidated Net
Worth determined as of February 28, 1994, increased by 50% of cumulative
Consolidated Net Earnings after February 28, 1994 (calculated without giving
effect to any operating loss in any period for the Company and its
Subsidiaries or any non-cash charge or other non-cash income effect of any
sale or disposition of the Psychiatric Division (as constituted on February
28, 1994) during the period from such date to the date of determination.
SECTION 6.07. Ratio of Consolidated Indebtedness to Consolidated
Net Worth. Permit the ratio of Consolidated Indebtedness to Consolidated
Net Worth to exceed 0.80:1.00 at any time.
SECTION 6.08. Fixed Charge Coverage. Permit the ratio, as of the
last day of any fiscal quarter of the Company, of (a) Consolidated Adjusted
EBITDA plus Consolidated Rental Expense to (b) Consolidated Interest Expense
plus Consolidated Rental Expense plus the amount of cash dividends declared
by the Company with respect to its outstanding capital stock, in each case
determined for the four consecutive fiscal quarter period ending on the last
day of such fiscal quarter, to be less than 2.10:1.00.
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SECTION 6.09. Dividends. Declare or pay any dividends on, make
any other distribution in respect of, or redeem, purchase or otherwise
acquire, any shares of the outstanding capital stock of the Company;
provided that, so long as no Event of Default has occurred and is continuing
or would result therefrom, the Company may declare dividends thereon in any
fiscal quarter up to the lesser of (a) $.12 per outstanding share of common
stock but in no event more than $21,200,000 in the aggregate, and (b) the
amount by which 40% of Consolidated Net Earnings for the period from
February 28, 1994 through the date of determination exceeds the aggregate
amount of such dividends and distributions theretofore declared or paid
during the same period; and provided, further, that the aggregate amount of
dividends paid for the fiscal year ending May 31, 1994 shall not exceed 40%
of Consolidated Net Earnings (determined without giving effect to
Realignment and Unusual Litigation Costs or the FASB 109 Tax Credit) for
such fiscal year. If the Company is in compliance with this Section 6.09 on
the date of the declaration of any dividend, it may pay such dividend on the
payment date fixed in such declaration notwithstanding the intervening
occurrence of an Event of Default or Default (other than a Default arising
from such declaration).
SECTION 6.10. Consolidated Capital Expenditures. Make or incur,
or permit its Subsidiaries to make or incur, Consolidated Capital
Expenditures, in any fiscal year, in an aggregate amount in excess of
$225,000,000.
SECTION 6.11. No Limitation on Payment of Dividends by
Subsidiaries. After February 28, 1994 enter, or permit any of its
Subsidiaries to enter into, any agreement limiting or prohibiting the
declaration or payment of dividends by any of its Subsidiaries.
SECTION 6.12. Use of Proceeds, Ineligible Securities. The
Company shall not, directly or indirectly, use any portion of the proceeds
of the Loans (i) knowingly to purchase Ineligible Securities from a Section
20 Subsidiary during any period in which such Section 20 Subsidiary makes a
market in such Ineligible Securities, (ii) knowingly to purchase during the
underwriting or placement period Ineligible Securities being underwritten or
privately placed by a Section 20 Subsidiary, or (iii) to make payments of
principal or interest on Ineligible Securities underwritten or privately
placed by a Section 20 Subsidiary and issued by or for the benefit of the
Company or any Affiliate of the Company.
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ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default. Upon the occurrence of any of
the following Events of Default:
(a) The Company shall fail to pay when due the principal of any
Note or Reimbursement Obligation, or shall fail to pay any interest on
any Note or Reimbursement Obligation, any fee payable hereunder or any
other amount payable hereunder within three Domestic Business Days after
such interest, fee or other amount becomes due; or
(b) Any representation or warranty made or deemed made by the
Company in this Agreement or the Pledge Agreement or which is contained
in any certificate, document or financial or other statement furnished at
any time under or in connection with this Agreement shall prove to have
been incorrect in any material respect on or as of the date made or
deemed made; or
(c) The Company shall default in the observance or performance of
any agreement or covenant contained in Article VI hereof or Section 5, 7
or 8 of the Pledge Agreement; or
(d) The Company shall default in the observance or performance of
any other agreement or covenant contained in this Agreement or the Pledge
Agreement, and such default shall not have been remedied within 30 days;
or
(e) The Company or any Subsidiary shall (i) default in any
payment of principal of or interest on any Indebtedness or in the payment
of any Contingent Obligation, beyond the period of grace, if any,
provided in the instrument or agreement under which such Indebtedness or
Contingent Obligation was created; or (ii) default in the observance or
performance of any other agreement, term or condition (other than any
term, agreement or condition relating to any pledge of, or restriction on
the pledge or other disposition of, Margin Stock now or hereafter held by
the Company or any of its Subsidiaries) contained in any such
Indebtedness or Contingent Obligation or in any instrument or agreement
evidencing, securing or relating thereto (or if any other event of
default or default under any such agreement shall occur and be
continuing), the effect of which event or default is to cause, or to
permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such
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Contingent Obligation (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause, such Indebtedness or
Contingent Obligation to become due prior to its stated maturity,
provided that nothing contained in this clause (e) shall constitute an
Event of Default if (i) the relevant default exists in respect of
Indebtedness stated to be in an amount that is less than $5,000,000 or in
respect of a Contingent Obligation that involves an ultimate liability of
less than $5,000,000 and (ii) such default is being contested in good
faith; or
(f) A material Plan shall fail to maintain the minimum funding
standard required by Section 412 of the Code for any plan year or a
waiver of such standard is sought or granted under Section 412(d), or a
material Plan is, shall have been or is likely to be, terminated or the
subject of termination proceedings under ERISA, or the Company or an
ERISA Affiliate has incurred or is likely to incur a liability to or on
account of a Plan under Sections 4062, 4063, 4064, 4201 or 4204 of ERISA,
and there shall result from any such event or events either a liability
or a material risk of incurring a liability to the PBGC or a Plan, which
in the reasonable opinion of the Required Banks will have a material
adverse effect on the business, financial condition, results of
operations or prospects of the Company and its Subsidiaries taken as a
whole; or
(g) The Company or any Significant Subsidiary shall commence any
case, proceeding or other action relating to it in bankruptcy or seeking
reorganization, liquidation, dissolution, winding up, arrangement,
composition or readjustment of its debts, or for any other relief, under
any bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement, composition, readjustment of debt or other similar act or
law of any jurisdiction, domestic or foreign, now or hereafter existing;
or the Company or any Significant Subsidiary shall apply for a receiver,
custodian or trustee of it or for all or a substantial part of its
properties; or the Company or any Significant Subsidiary shall make an
assignment for the benefit of creditors; or the Company or any
Significant Subsidiary shall admit in writing its inability to pay its
debts generally as they become due; or a receiver, custodian or trustee
of the Company or any Significant Subsidiary or for all or a substantial
part of its or their respective properties shall be appointed, and the
Company or such Significant Subsidiary by any act expressly indicates its
approval thereof, consent thereto, or acquiescence therein;
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(h) Any case, proceeding or other action against the Company or
any Significant Subsidiary shall be commenced in bankruptcy or seeking
reorganization, liquidation, dissolution, winding-up, arrangement,
composition or readjustment of its debts, or any other relief, under any
bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement, composition, readjustment of debt or other similar act or
law of any jurisdiction, domestic or foreign, now or hereafter existing;
or a warrant of attachment, execution or distraint, or similar process,
shall be issued against any substantial part of the property of the
Company or any of its Significant Subsidiaries; and in each such case
such condition shall continue for a period of 60 days undismissed,
undischarged or unbonded; or an order, judgment or decree is entered
adjudicating the Company or any Significant Subsidiary bankrupt or
insolvent, or approving the petition in any such proceedings, and such
order, judgment or decree remains unstayed and in effect for more than 60
days; or
(i) Any order, judgment or decree is entered in any proceedings
against the Company decreeing the dissolution of the Company and such
order, judgment or decree remains unstayed and in effect for more than 60
days; or any order, judgment or decree is entered in any proceedings
against the Company or any Significant Subsidiary decreeing a split-up of
the Company or such Significant Subsidiary which requires the divestiture
of a substantial part, or the divestiture of the stock of any Subsidiary
whose assets constitute a substantial part, of the consolidated assets of
the Company and its Subsidiaries, or which requires the divestiture of
assets, or the stock of any Subsidiary, which shall have contributed a
substantial part of Consolidated Net Earnings for any of the three fiscal
years then most recently ended, and such order, judgment or decree
remains unstayed and in effect for more than 60 days; or
(j) Any Person (other than the Company or any Subsidiary of the
Company or any employee benefit plan or employee stock plan of the
Company or of any Subsidiary or any Person organized, appointed,
established or holding securities by, for or pursuant to, the terms of
any such plan) shall purchase or otherwise acquire, directly or
indirectly, beneficial ownership of securities of the Company and, as a
result of such purchase or acquisition, such Person (together with its
"associates" and "affiliates" as such terms are defined in Rule 12B-2 of
the General Rules and Regulations under the Security Exchange Act of
1934, as
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in effect on the date hereof) shall directly or indirectly beneficially
own in the aggregate 20% or more of the combined voting power of the
Company's voting securities, in each case outstanding on the date
immediately prior to the date of such purchase or acquisition (or, if
there is more than one, the last such purchase or acquisition); or
(k) A majority of the board of directors of the Company shall no
longer be composed of individuals (i) who were members of that board on
the date hereof, (ii) whose election or nomination to that board was
approved by individuals referred to in clause (i) above constituting at
the time of such election or nomination at least a majority of that board
or (iii) whose election or nomination to that board was approved by
individuals referred to in clauses (i) and (ii) above constituting at the
time of such election or nomination at least a majority of that board; or
(l) The institution of any litigation, proceeding or
investigation brought against the Company or any of its Subsidiaries
which, if Adversely Determined, in the reasonable judgment of the Company
or the Required Banks, could have a material adverse effect, individually
or in the aggregate, on the business, operations, properties, condition
(financial or otherwise) or prospects of Hospitals or the occurrence of
any development in any litigation, proceeding or investigation existing
on April 11, 1994 or in any litigation, proceeding or investigation
subsequently commenced which, in the reasonable judgment of the Company
or the Required Banks, either (i) materially increases the likelihood
that such litigation, proceeding or investigation will be Adversely
Determined, if such adverse determination would have a material adverse
effect on the business, operations, properties, condition (financial or
otherwise) or prospects of Hospitals, or (ii) materially increases the
likelihood that, if Adversely Determined, such litigation, proceeding or
investigation would, individually or in the aggregate, have a material
adverse effect on the business, operations, properties, condition
(financial or otherwise) or prospects of Hospitals. For the purposes of
this clause (l), the institution of lawsuits against or with respect to
the Company or any of its Subsidiaries (other than Hospitals or any of
its Subsidiaries), or joinder in existing lawsuits, by new plaintiffs,
based upon facts, circumstances or allegations against or with respect to
Company or any of its Subsidiaries (other than Hospitals or any of its
Subsidiaries) substantially similar to existing litigation, shall not
constitute
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the institution of "new litigation" and will not constitute a
"development" in existing litigation which would have such a material
adverse effect; or
(m) a judgment or order (other than the Final Settlement) for the
payment of money in excess of $25,000,000 (net of insurance to the extent
that the insurer shall have admitted coverage thereof) shall be rendered
against the Company or any of its Subsidiaries and such judgment or order
shall continue unsatisfied and unstayed for a period of 30 days; or
(n) the liability of the Company and its Subsidiaries under the
Final Settlement shall exceed $400,000,000 on a pre-tax basis; or
(o) Hospitals takes any action to revoke the Hospitals Guaranty
or asserts (or a court of competent jurisdiction determines) that the
Hospitals Guaranty is invalid in whole or in part; or
(p) at any time before the Final Settlement shall have been
consummated, either the Company or the Required Banks, in their
reasonable judgment, shall determine that the cost to the Company and its
Subsidiaries of resolving the matters expected to be resolved by the
Final Settlement (as described in the Draft 10-Q), including related
state Medicaid claims, is likely to exceed $400,000,000 on a pre-tax
basis;
then, (a) if such event is an Event of Default specified in clause (g) or
(h) above, automatically the Commitments shall immediately terminate and the
loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement and the Notes shall immediately be due and payable,
without presentment, demand, protest or other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the Notes
to the contrary notwithstanding, and (b) if such event is any other Event of
Default, so long as such Event of Default is continuing, any of the
following actions may be taken: (i) upon the request of the Required Banks,
the Agent shall, by notice to the Company, declare the Tranche A Commitments
to be terminated forthwith, whereupon the Tranche A Commitments shall
immediately terminate; (ii) upon the request of the Required Banks, the
Agent shall, by notice of default to the Company, declare the Loans (with
accrued interest thereon) and all other amounts owing under this Agreement
and the Notes to be due and payable forthwith, whereupon the same shall
immediately become due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived, anything
contained herein or in the Notes to the contrary
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notwithstanding and (iii) upon request of the Required Banks, the Agent
shall direct the Company to make the payment to the Issuing Bank provided
for in Section 2.10(f).
ARTICLE VIII
THE AGENT
SECTION 8.01. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes the Agent (i) to take such action as
agent on its behalf and to exercise such powers under this Agreement, the
Pledge Agreement, the Hospitals Guaranty and the Notes as are delegated to
the Agent by the terms hereof or thereof, together with all such powers as
are reasonably incidental thereto and (ii) to execute and deliver the Pledge
Agreement and the Hospitals Guaranty.
SECTION 8.02. Agent and Affiliates. Morgan Guaranty Trust Company
of New York shall have the same rights and powers under this Agreement, the
Pledge Agreement and the Hospitals Guaranty as any other Bank and may
exercise or refrain from exercising the same as though it were not the
Agent, and Morgan Guaranty Trust Company of New York and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Company or any Subsidiary or Affiliate of the Company as
if it were not the Agent hereunder.
SECTION 8.03. Action by Agent. The obligations of the Agent under
this Agreement and the Pledge Agreement are only those expressly set forth
herein and therein. Without limiting the generality of the foregoing, the
Agent shall not be required to take any action with respect to any Default,
except as expressly provided in Article VII and in Section 14(A) of the
Pledge Agreement.
SECTION 8.04. Consultation with Experts. The Agent may consult
with legal counsel (who may be counsel for the Company), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
SECTION 8.05. Liability of Agent. Neither the Agent nor any of
its Affiliates nor any of their respective directors, officers, agents or
employees shall be liable for any action taken or not taken by it in
connection herewith (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Agent nor any of its
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Affiliates nor any of their respective directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire
into or verify (i) any statement, warranty or representation made in
connection with this Agreement or any borrowing hereunder; (ii) the
performance or observance of any of the covenants or agreements of the
Company; (iii) the satisfaction of any condition specified in Article IV,
except receipt of items required to be delivered to the Agent; or (iv) the
validity, effectiveness or genuineness of this Agreement, the Hospitals
Guaranty, the Pledge Agreement, the Notes or any other instrument or writing
furnished in connection herewith. The Agent shall not incur any liability
by acting in reliance upon any notice, consent, certificate, statement, or
other writing (which may be a bank wire, telex, facsimile transmission or
similar writing) believed by it to be genuine or to be signed by the proper
party or parties.
SECTION 8.06. Indemnification. Each Bank shall, ratably in
accordance with its Total Commitment, indemnify the Agent, its affiliates
and their respective directors, officers, agents and employees (to the
extent not reimbursed by the Company) against any cost, expense (including
counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from such indemnitees' gross negligence or willful
misconduct) that such indemnitees may suffer or incur in connection with
this Agreement or any action taken or omitted by such indemnitees hereunder.
SECTION 8.07. Credit Decision. Each Bank acknowledges that it
has, independently and without reliance upon any Managing Agent, the
Administrative Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it
will, independently and without reliance upon any Managing Agent, the
Administrative Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking any action under this
Agreement.
SECTION 8.08. Successor Agent. The Agent may resign at any time
by giving notice thereof to the Banks and the Company. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a commercial
bank organized or licensed under the laws of the United States of
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America or of any State thereof and having a combined capital and surplus of
at least $50,000,000. Upon the acceptance of its appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed
to and become vested with all the rights and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent.
SECTION 8.09. Agent's Fee. The Company shall pay to the Agent for
its own account fees in the amounts and at the times previously agreed upon
between the Company and the Agent.
SECTION 8.10. Managing Agents. The Managing Agents, in their
capacities as such, shall have no duties or obligations of any kind under
this Agreement.
ARTICLE IX
CHANGE IN CIRCUMSTANCES
SECTION 9.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any
Euro-Dollar Borrowing:
(a) the Agent is advised by the Euro-Dollar Reference Banks that
deposits in dollars (in the applicable amounts) are not being offered to
the Euro-Dollar Reference Banks in the London interbank market for such
Interest Period, or
(b) Banks having 50% or more of the aggregate amount of the
Tranche A Commitments advise the Agent that the London Interbank Offered
Rate as determined by the Agent will not adequately and fairly reflect
the cost to such Banks of funding their Euro-Dollar Loans for such
Interest Period,
the Agent shall forthwith give notice thereof to the Company and the Banks,
whereupon until the Agent notifies the Company that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to
make Euro-Dollar Loans shall be suspended. Unless the Company notifies the
Agent at least two Domestic Business Days before the date of any Borrowing
for which a Notice of Borrowing has previously been given that it elects not
to borrow on such date, such Borrowing shall instead be made as a Domestic
Borrowing.
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SECTION 9.02. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Euro-Dollar
Lending Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency shall
make it unlawful or impossible for any Bank (or its Euro-Dollar Lending
Office) to make, maintain or fund its Euro-Dollar Loans and such Bank shall
so notify the Agent, the Agent shall forthwith give notice thereof to the
other Banks and the Company, whereupon until such Bank notifies the Company
and the Agent that the circumstances giving rise to such suspension no
longer exist, the obligation of such Bank to make Euro-Dollar Loans shall be
suspended. Before giving any notice to the Agent pursuant to this Section,
such Bank shall designate a different Euro-Dollar Lending Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. If such
Bank shall determine that it may not lawfully continue to maintain and fund
any of its outstanding Euro-Dollar Loans to maturity and shall so specify in
such notice, the Company shall immediately prepay in full the then
outstanding principal amount of each such Euro-Dollar Loan, together with
accrued interest thereon. Concurrently with prepaying each such Euro-Dollar
Loan, the Company shall borrow a Domestic Loan in an equal principal amount
from such Bank (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks),
and such Bank shall make such a Domestic Loan.
SECTION 9.03. Increased Cost and Reduced Return. (a) If on or
after the date hereof, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation
or administration thereof, or compliance by any Bank (or its Euro-Dollar
Lending Office) with any request or directive (whether or not having the
force of law) of any such authority, central bank or comparable agency shall
impose, modify or deem applicable any reserve (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding any such requirement included in an
applicable Euro-Dollar Reserve Percentage), special deposit, insurance
assessment or similar requirement against assets of, deposits with or for
the account of, or credit extended by, any Bank (or its Euro-Dollar Lending
Office) or shall impose
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on any Bank (or its Euro-Dollar Lending Office) or the London interbank
market any other condition affecting its Euro-Dollar Loans, its Note or its
obligation to make Euro-Dollar Loans and the result of any of the foregoing
is to increase the cost to such Bank (or its Euro-Dollar Lending Office) of
making or maintaining any Euro-Dollar Loan, or to reduce the amount of any
sum received or receivable by such Bank (or its Euro-Dollar Lending Office)
under this Agreement or under its Note with respect thereto, by an amount
deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Agent), the Company shall pay to such Bank
such additional amount or amounts as will compensate such Bank for such
increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change
in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation
or administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing
the rate of return on capital of such Bank (or its Parent) as a consequence
of such Bank's obligations hereunder to a level below that which such Bank
(or its Parent) could have achieved but for such adoption, change, request
or directive (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Bank to be material, then from time to
time, within 15 days after demand by such Bank (with a copy to the Agent),
the Company shall pay to such Bank such additional amount or amounts as will
compensate such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Company and the Agent of
any event of which it has knowledge, occurring after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will
avoid the need for, or reduce the amount of, such compensation and will not,
in the judgment of such Bank, be otherwise disadvantageous to such Bank. A
certificate of any Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such amount,
such Bank may use any reasonable averaging and attribution methods.
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SECTION 9.04. Taxes. (a) For purposes of this Section 9.04,
the following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by
the Company pursuant to this Agreement or under any Note, and all
liabilities with respect thereto, excluding (i) in the case of each Bank and
the Agent, taxes imposed on its income, and franchise or similar taxes
imposed on it, by a jurisdiction under the laws of which such Bank or the
Agent (as the case may be) is organized or in which its principal executive
office is located or, in the case of each Bank, in which its Applicable
Lending Office is located and (ii) in the case of each Bank, any United
States withholding tax imposed on such payments but only to the extent that
such Bank is subject to United States withholding tax at the time such Bank
first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary
taxes and any other excise or property taxes, or similar charges or levies,
which arise from any payment made pursuant to this Agreement or under any
Note or from the execution or delivery of, or otherwise with respect to,
this Agreement or any Note.
(b) Any and all payments by the Company to or for the account of
any Bank or the Agent hereunder or under any Note shall be made without
deduction for any Taxes or Other Taxes; provided that, if the Company shall
be required by law to deduct any Taxes or Other Taxes from any such
payments, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to
additional sums payable under this Section 9.04) such Bank or the Agent (as
the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Company shall make such
deductions, (iii) the Company shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law and (iv) the Company shall furnish to the Agent, at its address referred
to in Section 10.01, the original or a certified copy of a receipt
evidencing payment thereof.
(c) The Company agrees to indemnify each Bank and the Agent for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts
payable under this Section 9.04) paid by such Bank or the Agent (as the case
may be) and any liability (including penalties, interest and expenses)
arising therefrom or with respect thereto. This indemnification shall be
paid within 15 days
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after such Bank or the Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside
the United States, on or prior to the date on which it becomes a Bank, and
from time to time thereafter if requested in writing by the Company (but
only so long as such Bank remains lawfully able to do so), shall provide the
Company with Internal Revenue Service form 1001 or 4224, as appropriate, or
any successor form prescribed by the Internal Revenue Service, certifying
that such Bank is entitled to benefits under an income tax treaty to which
the United States is a party which exempts the Bank from United States
withholding tax or reduces the rate of withholding tax on payments of
interest for the account of such Bank or certifying that the income
receivable pursuant to this Agreement is effectively connected with the
conduct of a trade or business in the United States.
(e) For any period with respect to which a Bank has failed to
provide the Company with the appropriate form pursuant to Section 9.04(d)
(unless such failure is due to a change in treaty, law or regulation
occurring subsequent to the date on which such form originally was required
to be provided), such Bank shall not be entitled to indemnification under
Section 9.04(b) or (c) with respect to Taxes imposed by the United States;
provided that if a Bank, which is otherwise exempt from or subject to a
reduced rate of withholding tax, becomes subject to Taxes because of its
failure to deliver a form required hereunder, the Company shall take such
steps as such Bank shall reasonably request to assist such Bank to recover
such Taxes.
(f) If the Company is required to pay additional amounts to or
for the account of any Bank pursuant to this Section 9.04, then such Bank
will change the jurisdiction of its Applicable Lending Office if, in the
judgment of such Bank, such change (i) will eliminate or reduce any such
additional payment which may thereafter accrue and (ii) is not otherwise
disadvantageous to such Bank.
SECTION 9.05. Domestic Loans Substituted for Affected Euro-Dollar
Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has been
suspended pursuant to Section 9.02 or (ii) any Bank has demanded
compensation under Section 9.03 or 9.04 with respect to its Euro-Dollar
Loans and the Company shall, by at least five Euro-Dollar Business Days'
prior notice to such Bank through the Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until
such Bank notifies the Company that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
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(a) all Loans which would otherwise be made by such Bank as
Euro-Dollar Loans shall be made instead as Domestic Loans (on which
interest and principal shall be payable contemporaneously with the
related Euro-Dollar Loans of the other Banks), and
(b) after each of its Euro-Dollar Loans has been repaid, all
payments of principal which would otherwise be applied to repay such
Euro-Dollar Loans shall be applied to repay its Domestic Loans instead.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank
wire, telex, facsimile transmission or similar writing) and shall be given
to such party: (x) in the case of the Company, the Issuing Bank or the
Agent, at its address, facsimile number or telex number set forth on the
signature pages hereof, (y) in the case of any Bank, at its address,
facsimile number or telex number set forth in its Administrative
Questionnaire or (z) in the case of any party, such other address, facsimile
number or telex number as such party may hereafter specify for the purpose
by notice to the Agent and the Company. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, (iii) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage
prepaid, addressed as aforesaid or (iv) if given by any other means, when
delivered at the address specified in this Section; provided that notices to
the Agent under Article II or Article IX shall not be effective until
received.
SECTION 10.02. No Waivers. No failure or delay by the Agent or
any Bank in exercising any right, power or privilege hereunder or under any
Note shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 10.03. Expenses; Indemnification. (a) The Company shall
pay (i) all out-of-pocket expenses of the
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Agent, including fees and disbursements of special counsel for the Agent, in
connection with the preparation and administration of this Agreement, any
waiver or consent hereunder or any amendment hereof or any Default or
alleged Default hereunder, (ii) all out-of-pocket expenses of each Managing
Agent (including fees and disbursements of their counsel or allocated costs
of their internal counsel up to a maximum of $10,000 for each Managing
Agent) and (iii) if an Event of Default occurs, all out-of-pocket expenses
incurred by the Agent and each Bank, including (without duplication) the
fees and disbursements of counsel and the allocated cost of internal
counsel, in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting
therefrom.
(b) The Company agrees to indemnify the Agent, the Managing Agents,
each Bank, their respective affiliates and the respective directors, officers,
agents and employees of the foregoing (each an "Indemnitee") and hold each
Indemnitee harmless from and against any and all liabilities, claims, losses,
damages, costs and expenses of any kind, including, without limitation, the
reasonable fees and disbursements of counsel, which may be incurred by such
Indemnitee in connection with any investigative, administrative or judicial
proceeding (whether or not such Indemnitee shall be designated a party
thereto) brought or threatened relating to or arising out of this Agreement
or the Letters of Credit or any actual or proposed use of the proceeds of
the Loans or the Letters of Credit; provided that no Indemnitee shall have
the right to be indemnified hereunder for such Indemnitee's own gross
negligence or willful misconduct as determined by a court of competent
jurisdiction.
SECTION 10.04. Sharing of Set-Offs. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise,
receive payment of a proportion of the aggregate amount of principal and
interest due with respect to any Note or Reimbursement Obligation held by it
which is greater than the proportion received by any other Bank in respect
of the aggregate amount of principal and interest due with respect to any
Note or Reimbursement Obligation, as the case may be, held by such other
Bank, the Bank receiving such proportionately greater payment shall purchase
such participations in the Notes or Reimbursement Obligations, as the case
may be, held by the other Banks, and such other adjustments shall be made,
as may be required so that all such payments of principal and interest with
respect to the Notes and Reimbursement Obligations held by the Banks shall
be shared by the Banks pro rata; provided that nothing in this Section shall
impair the right of any Bank to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such exercise to
the payment of indebtedness of the Company
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other than its indebtedness hereunder. The Company agrees, to the fullest
extent it may effectively do so under applicable law, that any holder of a
participation in a Note or Reimbursement Obligation, whether or not acquired
pursuant to the foregoing arrangements, may exercise rights of set-off or
counterclaim and other rights with respect to such participation as fully as
if such holder of a participation were a direct creditor of the Company in
the amount of such participation.
SECTION 10.05. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Company, the Required
Banks and the Issuing Bank (and, if the rights or duties of the Agent are
affected thereby, by the Agent); provided that no such amendment or waiver
shall, unless signed by all the Banks, (i) increase or decrease any
Commitment of any Bank (except for a ratable decrease in the corresponding
Commitments of all Banks) or subject any Bank to any additional obligation,
(ii) reduce the principal of or rate of interest on any Loan or
Reimbursement Obligation or any fees hereunder, (iii) postpone the date
fixed for any payment of principal of or interest on any Loan or
Reimbursement Obligation or any fees hereunder or for the expiration of any
letter of credit or the termination of any Commitment, (iv) release the
Hospitals Guaranty or release any shares of capital stock of Hospitals from the
lien of the Pledge Agreement, (v) waive any condition specified in Section 4.01,
(vi) waive any provision hereof requiring payments to the Banks to be made
ratably or (vii) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Notes and Reimbursement Obligations, or the
number of Banks, which shall be required for the Banks or any of them to take
any action under this Section or any other provision of this Agreement.
SECTION 10.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, except that the Company
may not assign or otherwise transfer any of its rights under this Agreement
without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in any of its
Commitments or any or all of its Loans and Reimbursement Obligations. In
the event of any such grant by a Bank of a participating interest to a
Participant, whether or not upon notice to the Company and the Agent, such
Bank shall remain responsible for the performance of its obligations
hereunder, and the Company and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's
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rights and obligations under this Agreement and the Pledge Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility
to enforce the obligations of the Company under this Agreement, the Pledge
Agreement and the Hospitals Guaranty including, without limitation, the
right to approve any amendment, modification or waiver of any provision of
this Agreement, the Pledge Agreement or the Hospitals Guaranty; provided
that such participation agreement may provide that such Bank will not agree
to any modification, amendment or waiver of this Agreement described in
clause (i), (ii), (iii) or (iv) of Section 10.05 without the consent of the
Participant. The Company agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the benefits of
Article IX with respect to its participating interest. An assignment or
other transfer which is not permitted by subsection (c) or (d) below shall
be given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent
to an initial Total Commitment of not less than $10,000,000 comprised of
proportionate parts of its Tranche A Commitment, Tranche B Commitment and
Tranche C Commitment) of all, of its rights and obligations under this
Agreement and the Notes, and such Assignee shall assume such rights and
obligations, pursuant to an Assignment and Assumption Agreement in
substantially the form of Exhibit J hereto executed by such Assignee and
such transferor Bank, with (and subject to) the subscribed consent of the
Issuing Bank and upon notice to the Agent (but without the Company's
consent); provided that no such consent shall be required if (i) the Assignee
is an Affiliate of the transferor Bank and is of a credit quality equal to or
better than the credit quality of the transferor Bank or (ii) the Assignee was
a Bank immediately prior to such assignment. Upon execution and delivery
of such instrument and payment by such Assignee to such transferor Bank of
an amount equal to the purchase price agreed between such transferor Bank
and such Assignee, such Assignee shall be a Bank party to this Agreement and
shall have all the rights and obligations of a Bank with Commitments as set
forth in such instrument of assumption, and the transferor Bank shall be
released from its obligations hereunder to a corresponding extent, and no
further consent or action by any party shall be required. Upon the
consummation of any assignment pursuant to this subsection (c), the
transferor Bank, the Agent and the Company shall make appropriate
arrangements so that, if required, a new Note is issued to the Assignee. In
connection with any such assignment, the transferor Bank shall pay to the
Agent an administrative fee for processing such assignment in the amount of
$2,500. If the Assignee is
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<PAGE>
<PAGE>
not incorporated under the laws of the United States of America or a state
thereof, it shall deliver to the Company and the Agent certification as to
exemption from deduction or withholding of any United States federal income
taxes in accordance with Section 9.04.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 2.13,
9.03 or 9.04 than such Bank would have been entitled to receive with respect
to the rights transferred, unless such transfer is made with the Company's
prior written consent or by reason of the provisions of Section 9.02, 9.03
or 9.04 requiring such Bank to designate a different Applicable Lending
Office under certain circumstances or at a time when the circumstances
giving rise to such greater payment did not exist.
SECTION 10.07. Collateral. Each of the Banks represents to the
Agent and each of the other Banks that it in good faith is not relying upon
any Margin Stock as collateral in the extension or maintenance of the credit
provided for in this Agreement.
SECTION 10.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance
with the laws of the State of New York. The Company hereby submits to the
nonexclusive jurisdiction of the United States District Court for the
Southern District of New York and of any New York State court sitting in New
York City for purposes of all legal proceedings arising out of or relating
to this Agreement, the Pledge Agreement or the transactions contemplated
hereby. The Company irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the
venue of any such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum.
SECTION 10.09. Counterparts; Integration. This Agreement may be
signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject
matter hereof.
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<PAGE>
<PAGE>
SECTION 10.10. WAIVER OF JURY TRIAL. EACH OF THE COMPANY, THE
AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
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<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their duly authorized officers as of
the date and year first above written.
NATIONAL MEDICAL ENTERPRISES, INC.
By: /s/ Maris Andersons
Title: Treasurer
By: /s/ Raymond Mathiasen
Title: Chief Financial Officer
2700 Colorado Avenue
Santa Monica, California 90404
Attn: Mr. Maris Andersons
Executive Vice President and
Treasurer
Telecopy: (310) 998-6507
with a copy to:
Attn: General Counsel
Telecopy: (310) 998-6688
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Clay Cole
Title: Vice President
THE BANK OF NEW YORK
By: /s/ Lisa Y Brown
Title: Vice President
BANKERS TRUST COMPANY
By: /s/ Mary Jo Jolly
Title: Assistant Vice President
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<PAGE>
<PAGE>
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as a Bank and
as the Administrative Agent
By: /s/ Robert M Osieski
Title:
60 Wall Street
New York, New York 10260
Attn: Robert M. Osieski
Telecopy: 212-648-5014
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Issuing Bank
By: /s/ Diana H Imhot
Title: Associate
c/o J.P. Morgan Services, Inc.
500 Stanton Christiana Road
Newark, DE 19713
Attn: International Trade Services
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<PAGE>
<PAGE>
SCHEDULE I
COMMITMENTS OF BANKS
Tranche A Tranche B Tranche C Total
Bank Commitment Commitment Commitment Commitment
Bank of America National $55,500,000 $36,550,000 $24,125,000 $116,175,000
Trust and Savings
Association
The Bank of New York $55,500,000 $36,550,000 $24,125,000 $116,175,000
Bankers Trust Company $55,500,000 $36,550,000 $24,125,000 $116,175,000
Morgan Guaranty Trust $55,500,000 $36,550,000 $24,125,000 $116,175,000
Company of New York
$222,000,000 $146,200,000 $96,500,000 $464,700,000
<PAGE>
<PAGE>
SCHEDULE II
Uncommitted Lines of Credit
(all are direct to or guaranteed by
National Medical Enterprises, Inc.)
Currency &
Amount of Outstanding Maturity
Bank Line A/O 9/30/93 Date
============================================================================
Wachovia US $ 25,000,000 0 demand
Banco di Napoli US $ 10,000,000 0 demand
Chase National
Corp. Services MR 16,000,000 MR 15,327,000 demand
Chase North
American Corp. S $ 18,000,000 S $ 18,500,000 demand
Oversea-Chinese
Banking Corp. S $ 30,000,000 S $ 25,000,000 demand
Hong Kong Shanghi
Bank S $ 50,000,000 0 demand
United Overseas
Bank S $ 53,000,000 0 demand
Development Bank
of Singapore S $ 60,000,000 S $ 30,000,000 demand
<PAGE>
<PAGE>
SCHEDULE III
CONTINGENT OBLIGATIONS
(IN US$ EXCEPT AS NOTED)
FACILITY AMOUNT EXPIRY DATE NOTES
=============================================================================
RMSC - SUNRISE 50,770 5/31/95 Lease Guarantees
RMSC - SEA PINES 82,175 5/31/95 Lease Guarantees
FACILITIES
158, 461, 462 141,543 GTEE of Acquisition
Note
NORTHEAST REHAB 209,832 5/31/97 Lease Guarantees
RHSC- WICHITA 215,464 5/31/98 Lease Guarantees
WESTERN REHAB 333,999 5/31/98 Lease Guarantees
RHSC - GARDEN STATE 404,452 5/31/00 Lease Guarantees
ALAMANCE, NC (193) 712,500 4/01/01 Guaranty of IRB.
MARIGARDE, OH (3297) 887,500 12/01/96 Guaranty of IRB.
RHSC- GREATER 905,103 5/31/98 Lease Guarantees
WASHINGTON
RHSC - LAKE ERIE 972,334 5/31/98 Lease Guarantees
VARIOUS 1,159,358 Guarantees of
Doctors' Loans
D/S A/O 5/31/93
OAKWOOD, MA (517) 1,186,500 3/31/95 GTEE of IDB.
Evergreen with
13 mos. notice of
cancellation by
Wachovia
CARROLLWOOD 1,522,916 10/10/05 Guaranty of IDB
CARE CTR. FL
FACILITY (416) 1,602,097 9/01/98 Long Term note.
WINCHESTER, OH (572) 1,955,000 5/01/03 IRB
<PAGE>
<PAGE>
BLUBERRY HILL, MA 2,126,250 3/31/95 Guaranty of IDB.
(581) Evergreen with
13 mos. notice of
cancellation by
Wachovia
LEBANON, OH (868) 2,135,000 9/01/13 Guaranty of IRB
PICKERINGTON, OH 2,225,000 11/01/03 Guaranty of IRB
(570)
MEMPHIS, TN (822) 2,235,000 12/01/04 Guaranty of IRB
Will be redeemed
5/1/94
FRANKLIN WOODS, OH 2,330,000 10/01/04 Guaranty of IRB
(560)
RHSC - TEXARKANA 2,472,431 5/31/11 Lease Guarantees
RHSC - AUSTIN 2,485,580 5/31/05 Lease Guarantees
GRAYLING, MI 2,515,000 3/01/13 Guaranty of IRB
(3695)
HILLHAVEN 2,613,312 Guarantees of First
Mortgages.
A/O 5/31/93
LANSING, MI 2,700,000 12/01/10 Guaranty of IRB
(3778)
HOLLIDAY (PAULL 3,200,000 10/01/10 Guarantee of IRB.
RANDLE) All of bonds
held by Hillhaven.
IDAK #1, MA 3,354,750 3/31/95 GTEE of 28B.
Evergreen with 13
mos. Notice of
cancellation by
Wachovia. B.T.
Covenants by
reference. No vote
including waivers.
HICKORY HOLLOW,TN 3,430,000 7/01/10 Guaranty of IRB
(387)
FLINT, MI (3777) 3,580,000 12/01/10 Guaranty of IRB
<PAGE>
<PAGE>
LEDGEWOOD HEALTH 4,160,000 4/01/10 Guaranty of IRB
(387)
HILLHAVEN 4,406,869 Guarantees of L.T.
notes. A/O 11/30/93
SAN MARCOS NURSING 4,410,000 3/31/95 NME GTEE of IOB.
HM, CA Evergreen with 13
months notice of
cancellation by
Wachovia.
SAN MARCOS RTMT 4,725,000 6/15/94 Guaranty of IDB
VILLAGE
SEDONA, AZ (653) 4,769,325 GTEE of IDB.
Evergreen with 13
months notice of
cancellation by
Wachovia.
RHSC -GARDEN STATE 4,870,900 5/31/00 Lease Guarantees.
IDAK #2, MA 4,919,250 3/31/95 GTEE of IDB.
Evergreen with 13
months notice of
cancellation by
Wachovia.
HERITAGE, TN 6,465,914 3/01/25 NME Guarantee of HUD
(7182) Loan
RHSC -TREASURE COAST 9,164,892 5/01/01 Lease Guarantees
RHSC -CAPITAL 9,375,275 12/31/01 Lease Guarantees
RHSC-ALTOONA 13,213,074 5/31/01 Lease Guarantees
RHSC-MONTGOMERY 13,325,355 5/01/02 Lease Guarantees
RHSC-MECHANICSBURG 14,492,290 12/01/02 Lease Guarantees
RHSC-FT. SMITH 14,599,321 10/31/01 Lease Guarantees
<PAGE>
<PAGE>
RHSC-NITTANY VALLEY 15,845,052 5/31/08 Lease Guarantees
RHSC-YORK 16,168,145 9/01/07 Lease Guarantees
RHSC-SAN ANTONIO 16,699,809 5/31/03 Lease Guarantees
RHSC-GREAT LAKES 17,480,968 9/30/94 Lease Guarantees
RHSC-DALLAS 18,178,608 5/31/39 Lease Guarantees
RHSC-SARASOTA 21,500,417 5/31/12 Lease Guarantees
RHSC-GREATER 23,038,552 12/01/02 Lease Guarantees
PITTSBURG
HILLHAVEN 30,000,000 6/30/94 Short Fall G-TEE for
Medicaid receivables
of program. Expect
to release us 4/15/94
HILLHAVEN 231,200,684 Guarantees of Leases
A/O 11/30/93
NEW TEKNON '500,000,000 3/31/02 Partial Loan G'Tee
PTA
ROYAL CLINICS "220,000 SR 1/06/95 Performance bond.
ROYAL CLINICS "904,636 SR 12/31/94 Advance payment bond.
_______________________________________
' Spanish Pesetas
" Saudi Riyals
<PAGE>
<PAGE>
<PAGE>
Execution Copy
WAIVER AND AMENDMENT NO. 2 ("Amendment No. 2"), dated as of
April 13, 1994, between MP Funding Corporation (the "Lender") and the
Borrowers parties hereto (the "Borrowers").
W I T N E S S E T H:
WHEREAS, the Lender and the Borrowers are parties to a First
Amended and Restated Master Loan Agreement, dated as of November 30, 1988,
as further amended and restated as of January 25, 1990, as amended by
Amendment No. 1 dated as of November 2, 1993 (the "Master Loan Agreement");
and
WHEREAS, the Lender and the Borrowers now desire to further
amend the Master Loan Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for good and other valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
1. Capitalized terms used but not defined in this Amendment
No. 2 shall have the meanings given to those terms in the Master Loan
Agreement.
2. The following new defined terms shall be added in the
appropriate alphabetical order to Section 1.01 of the Master Loan Agreement:
"MGTC" shall have the meaning provided in Section 3.05(c) hereof.
"Standby Letter of Credit" shall mean an irrevocable standby letter of
credit, substantially in the form of Exhibit J hereto, issued in
accordance with Section 3.05 hereof for the benefit of the Agent.
3. A new Section 3.05 is hereby added to Article III as
follows:
Section 3.05. Standby Letter of Credit. (a) The Borrowers shall
provide or cause to be provided on April 13, 1994, and shall maintain
or cause to be maintained in full force and effect at all times
thereafter through the Final Loan Date, a Standby Letter of Credit.
The initial face amount of the Standby Letter of Credit shall be
$146,200,000. The named beneficiary under the Standby Letter of
Credit shall be the Agent under the Credit Agreement. Drawings under
the Standby Letter of Credit shall be deemed to reduce the Obligations
on a pro rata basis.
<PAGE>
<PAGE>
(b) The Standby Letter of Credit shall be issued by a bank
organized under the laws of the United States or any state thereof or
a branch or agency of a foreign bank located in the United States
which is subject to regulation and supervision by U.S. federal or
state banking authorities. The issuer of the Standby Letter of Credit
shall at all times have a long-term senior unsecured debt rating of at
least "AA-" by Standard and Poor's Corporation and "Aa3" by Moody's
Investors Service, Inc. In the event that the Standby Letter of
Credit issuer's credit rating shall fail to meet the requirements set
forth above, the Borrowers shall promptly, and in any event within 30
days, deliver to the Agent a replacement Standby Letter of Credit
issued by an institution meeting the requirements set forth in this
Section 3.05(b). Anything herein to the contrary notwithstanding, the
Borrowers' failure to timely deliver a satisfactory replacement
Standby Letter of Credit shall constitute an immediate Event of
Default hereunder.
(c) Initially, the Standby Letter of Credit shall be issued by
Morgan Guaranty Trust Company of New York ("MGTC"). Except as
required pursuant to Sections 3.05(a) and (b) above, the Borrowers
shall have no right, without the Agent's consent, to replace MGTC as
the issuer of the Standby Letter of Credit.
4. A new Section 9.17 is hereby added to Article IX of the
Credit Agreement as follows:
"Section 9.17. Standby Letter of Credit. The Standby Letter of
Credit is in full force and effect."
5. The first sentence of Section 10.02 is hereby amended to
delete the word "and" immediately preceding clause (f) of that sentence and
to add the following to the end of such sentence:
"and (g) immediately, and in any event within two (2) Business Days
after obtaining knowledge thereof, of any change or proposed change in
the credit rating of the issuer of the Standby Letter of Credit."
6. Section 10.22 is hereby deleted in its entirety.
7. The Lender hereby waives compliance, on and after the date
hereof, by the Borrowers with Sections 10.01(h), (j) and (k), 10.03, 10.05,
10.06, 10.07, 10.08, 10.09, 10.10, 10.11, 10.12, 10.13, 10.16, 10.17, 10.18,
10.19, 10.20 or 10.21 so long as (a) the Standby Letter of Credit shall not
cease for any reason to be in full force and effect or the validity or
enforceability thereof, or right of the Agent to make draws thereunder,
shall be contested by any Person or governmental entity or any Person
obligated under the Standby Letter of Credit shall deny it has any liability
or obligation thereunder and (b) no Event of Default which has not been
waived has occurred and is continuing.
- 2 -
<PAGE>
<PAGE>
8. There is hereby added to the Master Loan Agreement Exhibit
J, "Form of Standby Letter of Credit", a copy of which is attached to this
Amendment No. 2 as Annex I.
9. This Amendment No. 2 shall become effective on the date
when signed by the Lender and the Borrowers and the Lender shall have
received the following items:
(a) duly executed counterparts of this Amendment No. 2 from
the parties hereto;
(b) the Standby Letter of Credit issued by MGTC;
(c) a duly executed counterpart of the Waiver and Amendment
No. 2 to the First Amended and Restated Credit Agreement dated as of the
date hereof among the Company, as borrower, Credit Suisse, as L/C Bank, the
Banks parties thereto and Credit Suisse, as Agent substantially in the form
attached hereto as Annex II ("Amendment No. 2 to Credit Agreement");
(d) a duly executed counterpart of the Waiver to Guaranty
dated as of the date hereof between the Guarantor and the Company,
substantially in the form attached hereto as Annex III (the "Waiver to
Guaranty");
(e) an opinion of counsel to MGTC with respect to the due
authorization, execution and delivery of the Standby Letter of Credit issued
by MGTC, the enforceability against MGTC of such Standby Letter of Credit
and such other matters as the Lender may reasonably require; and
(f) such other documents, certificates, financial or other
information or opinions as the Agent or any Bank may reasonably request.
10. The Borrowers hereby agree to pay to the Lender all
reasonable out-of-pocket costs and expenses, including the reasonable fees
and disbursements of counsel, incurred by the Lender in connection with (i)
the preparation, execution and delivery of this Amendment No. 2, Amendment
No. 2 to Credit Agreement, Waiver to Guaranty and any amendments thereto and
each of the other documents and instruments contemplated hereunder or
thereunder or delivered in connection herewith or therewith.
11. The Borrowers hereby represent and warrant that, except as
set forth in Annex IV hereto, each of the representations and warranties
made under Article IX of the Master Loan Agreement are Accurate and Complete
with the same force and effect as though made on and as of the date of this
Amendment No. 2, except to the extent that such representations and
warranties expressly relate to an earlier date, in which case, such
representations and warranties were Accurate and Complete on and as of such
earlier date.
12. Each of the Borrowers hereby represents and warrants that
as of the date of this Amendment No. 2, no Event of Default or
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<PAGE>
<PAGE>
Potential Default which has not been waived, has occurred and is continuing
or would result from the consummation of the transactions contemplated by
this Amendment No. 2.
13. Except as expressly waived, modified and amended hereby,
the Master Loan Agreement remains unchanged and in full force and effect in
all respects.
14. THIS AMENDMENT NO. 2 SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
- 4 -
<PAGE>
<PAGE>
15. This Amendment No. 2 may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each
of which counterparts, when so executed and delivered, shall be deemed to be
an original and all of which counterparts, taken together, shall constitute
but one and the same Amendment No. 2.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment No. 2 to be executed by their officers thereunto duly authorized
as of the date first above written.
MP Funding Corporation
By: /s/ Theresa Miles
Name: Theresa Miles
Title:
National Medical Enterprises, Inc.
By: /s/ Terence P. McMullen
Name: Terence P. McMullen
Title: Vice President
Capital Hospital Corporation
By: /s/ Terence P. McMullen
Name: Terence P. McMullen
Title: Vice President
NME Headquarters, Inc.
By: /s/ Terence P. McMullen
Name: Terence P. McMullen
Title: Vice President
NME Hospitals, Inc.
By: /s/ Terence P. McMullen
Name: Terence P. McMullen
Title: Vice President
- 5 -
<PAGE>
<PAGE>
Rehabilitation Facility at
San Diego, Inc.
By: /s/ Terence P. McMullen
Name: Terence P. McMullen
Title: Vice President
Rehabilitation Facility
at Austin, Inc.
By: /s/ Terence P. McMullen
Name: Terence P. McMullen
Title: Vice President
R.H.S.C. El Paso, Inc.
By: /s/ Terence P. McMullen
Name: Terence P. McMullen
Title: Vice President
R.H.S.C. Hospitals, Inc.
By: /s/ Terence P. McMullen
Name: Terence P. McMullen
Title: Vice President
North Houston Healthcare Campus, Inc.
By: /s/ Terence P. McMullen
Name: Terence P. McMullen
Title: Vice President
R.H.S.C. Midland, Inc.
By: /s/ Terence P. McMullen
Name: Terence P. McMullen
Title: Vice President
- 6 -
<PAGE>
<PAGE>
R.H.S.C. Modesto, Inc.
By: /s/ Terence P. McMullen
Name: Terence P. McMullen
Title: Vice President
Rehabilitation Facility at
San Ramon, Inc.
By: /s/ Terence P. McMullen
Name: Terence P. McMullen
Title: Vice President
CONSENTED TO:
Credit Suisse, as Collateral Agent
By: /s/ Stephen M. Flynn
Name: Stephen M. Flynn
Title: Member of Senior Managment
By: /s/ Marilou Palenzuela
Name: Marilou Palenzuela
Title: Member of Senior Managment
- 7 -
<PAGE>
<PAGE>
Annex IV
to
Amendment No. 2 to
Master Loan Agreement
1. The representation set forth in Section 9.02 is given only
for the period since February 28, 1994.
2. The representation set forth in Section 9.08 is qualified
to include the Liens granted under the Pledge Agreement executed by NME in
connection with that certain Credit Agreement dated as of April 13, 1994
among NME, the banks parties thereto and Morgan Guaranty Trust Company of
New York, as Issuing Bank and Agent.
<PAGE>
<PAGE>
<PAGE>
Execution Copy
WAIVER TO GUARANTY
WAIVER TO GUARANTY, dated as of April 13, 1994 ("Waiver")
between NATIONAL MEDICAL ENTERPRISES, INC. (the "Guarantor"), and MP FUNDING
CORPORATION (the "Lender").
W I T N E S S E T H:
WHEREAS, the Guarantor has provided the Lender with a certain
Second Amended and Restated Guaranty dated as of January 25, 1990 as amended
by Amendment No. 1 dated as of November 2, 1993 (the "Guaranty"), and
WHEREAS, the Guarantor has requested that the Lender waive
certain provisions of the Guaranty; and
WHEREAS, Lender is willing to grant such waiver on the terms and
subject to the conditions set forth herein;
NOW, THEREFORE, for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Guarantor and
the Lender hereby agree as follows:
1. All capitalized terms used but not defined in this Waiver
shall have the meanings given to those terms in the Guaranty.
2. The Lender hereby waives compliance, on and after the date
hereof, by the Guarantor with Sections 6.1, 6.2, 6.3, 6.4, 6.5, 6.6, 6.7,
6.8, 6.9, 6.12, 6.13, 6.14 and 6.15 so long as (a) the Standby Letter of
Credit (as defined in the Loan Agreement) shall not cease for any reason to
be in full force and effect or the validity or enforceability thereof, or
right of the Agent to make draws thereunder, shall be contested by any
Person or governmental entity or any Person obligated under the Standby
Letter of Credit shall deny it has any liability or obligation thereunder
and (b) no Event of Default (as defined in the Loan Agreement) which has not
been waived has occurred and is continuing under the Loan Agreement.
3. This Waiver shall become effective upon: (a) execution
and delivery by the Guarantor and the Lender of this Waiver, (b) the
effectiveness of Amendment No. 2 to the Credit Agreement, dated as of the
date hereof, and (c)
<PAGE>
<PAGE>
the effectiveness of the Waiver and Amendment No. 2 to the Loan Agreement
dated as of the date hereof.
4. The Guarantor hereby consents to and acknowledges receipt
of the amendments to the Credit Agreement and the Loan Agreement referred to
in paragraph 3 hereof and confirms that the Guaranty remains in full force
and effect.
5. The Guarantor hereby represents and warrants that, except
as set forth on Annex I hereto, each of the representations and warranties
made under Section 4 of the Guaranty are Accurate and Complete with the same
force and effect as though made on and as of the date of this Waiver, except
to the extent that such representations and warranties expressly relate to
an earlier date, in which case, such representations and warranties were
Accurate and Complete on and as of such earlier date.
6. The Guarantor hereby represents and warrants that as of
the date of this Waiver, no Event of Default or Potential Default which has
not been waived, has occurred and is continuing or would result from the
consummation of the transactions contemplated by this Waiver.
7. Except as expressly modified and amended hereby, the
Guaranty remains unchanged and in full force and effect in all respects.
8. THIS WAIVER SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
9. This Waiver may be executed in any number of counterparts
and by different parties hereto on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute but
one and the same Waiver.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Waiver to be executed by their officers thereunto duly authorized as of the
date first above written.
NATIONAL MEDICAL ENTERPRISES, INC.
By:
Name: /s/ Terence P. McMullen
Title: Vice President
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<PAGE>
<PAGE>
MP FUNDING CORPORATION
By: Theresa Miles
Name: Theresa Miles
Title: ______________________
CONSENTED TO:
Credit Suisse, as Collateral Agent
By: /s/ Stephen M. Flynn
Name: Stephen M. Flynn
Title: Member of Senior Managment
By: /s/ Marilou Palenzuela
Name: Marilou Palenzuela
Title: Member of Senior Managment
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ANNEX I
WAIVER TO GUARANTY
1. The representation set forth in Section 4(b) is given only
for the period since February 28, 1994.
2. The representation set forth in Section 4(h) is qualified
to include the Liens under the Pledge Agreement executed by the Guarantor in
connection with that certain Credit Agreement dated as of April 13, 1994
among the Guarantor, the banks parties and Morgan Guaranty Trust Company of
New York, as Issuing Bank and Agent.
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Execution Copy
AMENDMENT NO. 2 TO CREDIT AGREEMENT
AMENDMENT NO. 2 ("Amendment No. 2"), dated as of April 13, 1994,
among MP Funding Corporation (the "Company"), Credit Suisse, as issuer of
the letter of credit under the Credit Agreement referred to below (in such
capacity, the "L/C Bank"), the banks parties hereto (the "Banks") and Credit
Suisse, as agent for such Banks (in such capacity, the "Agent").
WHEREAS, the Company, the L/C Bank, the Banks and the Agent are
parties to a First Amended and Restated Credit Agreement, dated as of
November 30, 1988, as further amended and restated as of January 25, 1990,
as amended by Amendment No. 1 dated as of November 2, 1993 (the "Credit
Agreement"); and
WHEREAS, the Company, the L/C Bank, the Banks and the Agent now
desire to further amend the Credit Agreement;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
1. Capitalized terms used but not defined in this Amendment
No. 2 shall have the meanings given to those terms in the Credit Agreement.
2. The following new defined terms shall be added in the
appropriate alphabetical order to Section 1.01 of the Credit Agreement:
"MGTC" shall have the meaning provided in Section 2.09 hereof.
"Standby Letter of Credit" shall mean an irrevocable standby letter of
credit, substantially in the form of Exhibit H hereto, issued in accordance
with Section 2.09 for the benefit of the Agent.
3. The definition of "Related Documents" set forth in Section
1.01 of the Credit Agreement is hereby amended by inserting after the phrase
"Management Agreement" appearing therein the phrase ", the Standby Letter of
Credit".
4. A new Section 2.09 is hereby added to Article II of the
Credit Agreement as follows:
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Section 2.09. Standby Letter of Credit. (a) The Company
shall provide or cause to be provided on April 13, 1994, and shall
maintain or cause to be maintained in full force and effect at all
times thereafter through the Final Date, a Standby Letter of Credit.
The initial face amount of the Standby Letter of Credit shall be equal
to $146,200,000. The named beneficiary under the Standby Letter of
Credit shall be the Agent. Drawings under the Standby Letter of
Credit shall be applied pro rata with respect to each Bank's share of
Reimbursement Obligations.
(b) The Standby Letter of Credit shall be issued by a bank
organized under the laws of the United States or any state thereof or
a branch or agency of a foreign bank located in the United States
which is subject to regulation and supervision by U.S. federal or
state authorities. The issuer of the Standby Letter of Credit shall
at all times have a long-term senior unsecured debt rating of at least
"AA-" by Standard and Poor's Corporation and "Aa3" by Moody's
Investors Service,Inc. In the event that the issuer's credit rating
shall fail to meet the requirements set forth above, the Borrowers
shall promptly, and in any event within 30 days, deliver to the Agent
a replacement Standby Letter of Credit issued by an institution
meeting the requirements set forth in this Section 2.09(b). Anything
in this Agreement to the contrary notwithstanding, the Borrowers'
failure to timely deliver a satisfactory replacement Standby Letter of
Credit shall constitute an immediate Event of default hereunder.
(c) Initially, the Standby Letter of Credit shall be issued by
Morgan Guaranty Trust Company of New York ("MGTC"). Except as
required pursuant to Section 2.09(a) and (b) above, the Company shall
have no right, without the Agent's consent, to replace MGTC as issuer
of the Standby Letter of Credit.
5. A new Section 7.16 is hereby added to Article VII of the
Credit Agreement as follows:
"Section 7.16. Standby Letter of Credit. The Standby Letter of
Credit is in full force and effect."
6. Section 8.05 of the Credit Agreement is hereby amended to
add the following sentence to the end thereof:
"The Company shall immediately, and in any event within two (2)
Business Days after obtaining knowledge thereof, notify the Agent of
any change or proposed change in the credit rating of the issuer of
the Standby Letter of Credit."
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7. Sections 8.12 and 8.13 of the Credit Agreement are hereby
deleted in their entirety.
8. Section 10.01 of the Credit Agreement is hereby amended by
deleting in clause (b) (ii) thereof the phrase "if the failure to pay such
amount continues for one Business Day after" and substituting in lieu
thereof the word "on".
9. Section 10.02 of the Credit Agreement is hereby amended
by:
(i) inserting after the word "actions" in the eighth line thereof,
the following phrase "(in addition to actions specified in the last
sentence hereof)"; and
(ii) inserting at the end thereof the following sentence "In addition
to the foregoing remedies, the Agent may, and at the request of the
Majority Banks shall, upon the failure of the Company to reimburse the
L/C Bank for the full amount of any L/C Payment as and when due,
immediately draw on the Standby Letter of Credit for the unpaid amount
of such L/C Payment (including any accrued and unpaid interest owing
thereon); provided that the Agent may not request the first drawing
under the Standby Letter of Credit until five Business Days after the
date on which the first unreimbursed L/C Payment was due."
10. There is hereby added to the Credit Agreement Exhibit H
"Form of Standby Letter of Credit", a copy of which is attached to this
Amendment No. 2 as Annex I.
11. This Amendment No. 2 shall become effective on the date
when signed by the Majority Banks and the Company and the Agent shall have
received the following items, which effectiveness shall be promptly notified
to each of the parties hereto:
(a) duly executed counterparts of this Amendment No. 2 from
the parties hereto;
(b) the Standby Letter of Credit issued by MGTC;
(c) a duly executed counterpart of the Waiver to Guaranty
dated as of the date hereof (the "Waiver to Guaranty") between the
Guarantor to the Company, substantially in the form attached hereto as
Annex II;
(d) a duly executed counterpart of the Waiver and Amendment
No. 2 to the Master Loan Agreement ("Amendment No. 2 to Master Loan
Agreement") dated as of the date hereof among
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the Company, as lender, and the Borrowers, substantially in the form
attached hereto as Annex III;
(e) an opinion of counsel to MGTC with respect to the due
authorization, execution and delivery of the Standby Letter of Credit
by MGTC, the enforceability against MGTC of such Standby Letter of
Credit and such other matters as the Banks may reasonably require; and
(f) such other documents, certificates, financial or other
information or opinions as the Agent or any Bank may reasonably
request.
12. The Company hereby represents and warrants that each of
the representations and warranties made under Article VII of the Credit
Agreement are Accurate and Complete with the same force and effect as though
made on and as of the date of this Amendment No. 2, except to the extent
that such representations and warranties expressly relate to an earlier
date, in which case, such representations and warranties were Accurate and
Complete on and as of such earlier date. As of the date of this Amendment
No. 2, no Event of Default or Potential Default which has not been waived,
has occurred and is continuing or would result from the transactions
contemplated hereby.
13. The Company hereby agrees to pay to the Agent all
reasonable out-of-pocket costs and expenses incurred by the Agent in
connection with the preparation, execution and delivery of this Amendment
No. 2, including, without limitation, the reasonable fees and disbursements
of counsel to the Agent.
14. By its signature below, each Bank and the Agent hereby
authorizes the Collateral Agent to consent (i) pursuant to Section 9 of the
Consent, to Amendment No. 2 to Master Loan Agreement and (ii) pursuant to
Section 7 of the Guarantor's Consent, to the Waiver to Guaranty.
15. Except as expressly modified and amended hereby, the
Credit Agreement remains unchanged and in full force and effect in all
respects.
16. THIS AMENDMENT NO. 2 SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
17. This Amendment No. 2 may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each
of which counterparts, when so executed and delivered, shall be deemed to be
an original and all of which
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counterparts, taken together, shall constitute but one and the same
Amendment No. 2.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment No. 2 to be executed by their officers thereunto duly authorized
as of the date first above written.
MP Funding Corporation
By: /s/ Theresa Miles
Name: Theresa Miles
Title:
Credit Suisse,
as L/C Bank and Agent
By: /s/ Stephen M. Flynn
Name: Stephen M. Flynn
Title: Member of Senior Managment
By: /s/ Marilou Palenzuela
Name: Marilou Palenzuela
Title: Member of Senior Managment
BANKS
Credit Suisse
By: /s/ Stephen M. Flynn
Name: Stephen M. Flynn
Title: Member of Senior Managment
By: /s/ Marilou Palenzuela
Name: Marilou Palenzuela
Title: Member of Senior Managment
CONSENTED TO:
NATIONAL MEDICAL ENTERPRISES, INC.
By: /s/ Terence P. McMullen
Name: Terence P. McMullen
Title: Vice President
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NATIONAL MEDICAL ENTERPRISES, INC.
LIMITED WAIVER AND CONSENT
TO FIRST AMENDED AND RESTATED
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT
This LIMITED WAIVER AND CONSENT TO FIRST AMENDED AND RESTATED
LETTER OF CREDIT AND REIMBURSEMENT AGREEMENT (this "Waiver") is dated as of
April 13, 1994 and entered into by and between National Medical Enterprises,
Inc., a Nevada corporation ("Company"), and The Sanwa Bank Limited, Dallas
Agency (the "Bank"), and is made with reference to that certain First
Amended and Restated Letter of Credit and Reimbursement Agreement dated as
of October 1, 1993 (as now in effect, the "L/C Agreement"), by and between
the Company and the Bank. Capitalized terms used herein without definition
shall have the same meanings herein as set forth in the L/C Agreement.
RECITALS
WHEREAS, the Company has requested that the Bank (A) waive
compliance with certain covenants set forth in the L/C Agreement to permit
the Company (i) to enter into a certain Credit Agreement, dated as of April
13, 1994, among the Company, the banks parties thereto and Morgan Guaranty
Trust Company of New York, as Issuing Bank and Agent (as amended or
otherwise modified from time to time, the "Morgan Agreement"), (ii) to repay
in full all indebtedness owed by the Company under that certain Seventh
Amended and Restated Revolving Credit and Term Loan Agreement, dated as of
October 15, 1993, among the Company, the banks named therein and Bankers
Trust Company, and (iii) to fail to comply (but only to the extent provided
herein) with certain financial and other negative covenants contained in the
L/C Agreement (it being understood that the waivers contemplated by this
clause (iii) will constitute, without further action, the necessary waivers
in respect of the matters addressed in clauses (i) and (ii) above), and (B)
waive compliance with Section 4.1(a) of the L/C Agreement insofar, but only
insofar, as such Section requires the payment of a Letter of Credit Fee in
excess of the amounts set forth in Section 1 below;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto
agree as follows:
Section 1.LIMITED WAIVER AND CONSENT.
Subject to the terms and conditions set forth herein, and in
reliance upon the representations and warranties of the Company herein
contained, the Bank hereby (A) waives compliance, on and after the Waiver
Effective Date (as hereinafter defined), by the Company with the provisions
of Sections 8.1-8.15, inclusive, of the L/C Agreement so long and only so
long as no Event of Default (as defined in the Morgan Agreement) shall occur
and be continuing
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under the Morgan Agreement, and (B) waives compliance by the Company with
the provisions of Section 4.1(a) of the L/C Agreement insofar, but only
insofar, as such Section requires the payment of a Letter of Credit Fee (i)
in excess of 1.00% per annum, during the period from and including April 13,
1994 to but excluding July 12, 1994, or (ii) in excess of 1.25% per annum,
at any time on or subsequent to July 13, 1994.
Section 2.CONDITIONS TO EFFECTIVENESS
Section 1 of this Waiver shall become effective only upon the
satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "Waiver
Effective Date"):
A. The Bank shall have received waivers or amendments to each
of the agreements listed on Exhibit A hereto, in each case in form and
substance satisfactory to the Bank, which shall waive the covenants set
forth in such agreements analogous to the covenants set forth in
Sections 8.1-8.15, inclusive, of the L/C Agreement so that, upon giving
effect thereto, such covenants are not more restrictive than the analogous
covenants set forth in the L/C Agreement, as modified by this Waiver (the
"Modified Agreement");
B. The Bank shall have received from Morgan Guaranty Trust
Company of New York ("Morgan Guaranty") irrevocable letters of credit,
issued for the account of the Company and for the benefit of the Bank, in
amounts not less than $72,440,000 and $24,060,000, respectively, and
otherwise in form and substance satisfactory to the Bank;
C. The Bank shall have received from Davis Polk & Wardwell,
counsel for Morgan Guaranty, a legal opinion in form and substance
satisfactory to the Bank, together with a letter from Morgan Guaranty
directing such counsel to issue such legal opinion to the Bank; and
D. On or before the Waiver Effective Date, all corporate and
other proceedings taken or to be taken in connection with the transactions
contemplated hereby shall be satisfactory in form and substance to the Bank
and its counsel, and the Bank or such counsel shall have received all
documents as the Bank may reasonably request.
Section 3.COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to enter into this Waiver, the
Company represents and warrants to the Bank that the following statements
are true, correct and complete as of the Waiver Effective Date:
A. Corporate Power and Authority. The Company has all
requisite corporate power and authority to enter into this Waiver and to
carry out the transactions contemplated by, and to perform its obligations
under, the Modified Agreement.
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B. Authorization of Agreements. The execution and delivery
of this Waiver and the performance of the Modified Agreement have been duly
authorized by all necessary corporate action on the part of the Company.
C. No Conflict. The execution and delivery by the Company of
this Waiver, the performance by the Company of the Modified Agreement and
the consummation by the Company of the transactions contemplated by the
Morgan Agreement do not and will not (i) violate any provision of any law or
any governmental rule or regulation applicable to the Company or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of the
Company or any of its Subsidiaries or any order, judgment or decree of any
court or other agency of government binding on the Company or any of its
Subsidiaries, (ii) after giving effect to the waivers set forth in Section 1
hereof, conflict with, result in a breach of or constitute (with due notice
or lapse of time or both) a default under, any contractual obligation of the
Company or any of its Subsidiaries, (iii) result in or require the creation
or imposition of any Lien upon any of the properties or assets of the
Company or any of its Subsidiaries, except the Lien granted by the Company
with respect to its pledge of the capital stock of NME Hospitals, Inc. as
security for its obligations in respect of the Morgan Agreement (the "Stock
Pledge"), or (iv) require any approval of stockholders or any approval or
consent of any Person under any contractual obligation of the Company or any
of its Subsidiaries, except for such approvals or consents which have been
obtained on or before the Waiver Effective Date and disclosed in writing to
the Bank.
D. Restrictive Covenants. After giving effect to the waivers
set forth in Section 1 above, neither the Company nor any of its
Subsidiaries is a party to any agreement, other than the Morgan Agreement,
containing covenants with respect to the subject matters of
Sections 8.1-8.15, inclusive, of the L/C Agreement that are more restrictive
than the covenants set forth in the Modified Agreement.
E. Governmental Consents. The execution and delivery by the
Company of this Waiver and the performance by the Company of the Modified
Agreement do not and will not require any registration with, consent or
approval of, or notice to, or other action to, with or by, any federal,
state or other governmental authority or regulatory body.
F. Binding Obligation. This Waiver has been duly executed
and delivered by the Company and the Modified Agreement is the legally valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
limiting creditors' rights generally or by equitable principles relating to
enforceability.
G. Incorporation of Representations and Warranties From
L/C Agreement. The representations and warranties contained in Section 6.1
of the L/C Agreement are and will be true, correct and complete in all
material respects on and as of the Waiver Effective Date to the same extent
(except that for purposes of this Section 3G, the reference to May 31, 1993
in Section 6.1(b) of the L/C Agreement shall be deemed to be
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February 28, 1994 and the references to Liens permitted by Section 8.2 of
the L/C Agreement in Section 6.1(h) of the L/C Agreement shall be deemed to
include the Liens under the Stock Pledge) as though made on and as of that
date, except to the extent such representations and warranties specifically
relate to an earlier date, in which case they were true, correct and
complete in all material respects on and as of such earlier date.
H. Absence of Default. After giving effect to this Waiver,
no event has occurred and is continuing or will result from the consummation
of the transactions contemplated by this Waiver that would constitute an
Event of Default or a Default. Prior to giving effect to the waivers set
forth in Section 1 above, no event has occurred and is continuing that
(a) would constitute an Event of Default or Default under Section 8.6, 8.7,
8.9 or 8.11 of the L/C Agreement, except as a result of the charge to
earnings in an amount not in excess of $375,000,000 for a reserve against
liabilities in respect of certain Federal and state governmental
investigations reflected on the unaudited balance sheet of the Company and
its Consolidated Subsidiaries as at February 28, 1994, or (b) would
otherwise constitute an Event of Default or Default.
I. Collateral. Except for the Stock Pledge, neither the
Company nor any of its Subsidiaries has provided, or has any present
intention to provide, any collateral to or for the benefit of Morgan
Guaranty or any other Person under or in connection with the Morgan
Agreement.
J. Financial Information. The unaudited balance sheet of the
Company and its Consolidated Subsidiaries as at February 28, 1994, and the
related unaudited consolidated statements of income, cash flows and changes
in common stock and other stockholders' equity, copies of which have been
furnished to the Bank, are true, complete and correct and fairly present the
consolidated financial condition of the Company and the Consolidated
Subsidiaries as at such date and the consolidated results of their
operations and their cash flows for the period then ended. There has been
no material adverse change in the financial condition or results of
operations of the Company and its Subsidiaries, taken as a whole, since
February 28, 1994.
Section 4.WAIVER FEE. On April 14, 1994 the Company shall pay
to the Bank, in immediately available funds, the sum of $239,125 as partial
consideration for the waivers set forth in Section 1 above.
Section 5.MISCELLANEOUS
A. Reference to and Effect on the L/C Agreement and the Bond
Documents; Limitation of Waivers.
(1) On and after the Waiver Effective Date, each
reference in the L/C Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the
L/C Agreement, and each reference in the Bond Documents to
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the "L/C Agreement", "thereunder", "thereof" or words of like import
referring to the L/C Agreement shall mean and be a reference to the
Modified Agreement.
(2) Except as specifically waived hereby, the
L/C Agreement and the Bond Documents shall remain in full force and
effect and are hereby ratified and confirmed, and the execution,
delivery and performance of this Waiver shall not, except as expressly
provided herein, operate as a waiver of any right, power or remedy of
the Bank under the L/C Agreement. Without limiting the generality of
the foregoing, the waivers set forth in Section 1 above shall be
limited precisely as written and shall relate only to the Company's
noncompliance with Sections 8.1-8.15, inclusive, of the L/C Agreement
(and then so long and only so long as no Event of Default (as defined
in the Morgan Agreement) shall occur and be continuing under the
Morgan Agreement), and nothing in this Waiver shall be deemed (a) to
constitute a waiver of compliance by the Company with respect to any
other provision or condition of the L/C Agreement or (b) to prejudice
any right or remedy that the Bank may now have (except to the extent
such right or remedy was based upon existing defaults that will not
exist after giving effect to this Waiver) or may have in the future
under or in connection with the L/C Agreement or any other instrument
referred to therein.
B. Fees and Expenses. The Company acknowledges that all
costs, fees and expenses as described in Section 10.4 of the L/C Agreement
incurred by the Bank and its counsel with respect to this Waiver and the
documents and transactions contemplated hereby shall be for the account of
the Company.
C. Headings. Section and subsection headings in this Waiver
are included herein for convenience of reference only and shall not
constitute a part of this Waiver for any other purpose or be given any
substantive effect.
D. Applicable Law. THIS WAIVER SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF TEXAS, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
E. Counterparts; Effectiveness. This Waiver may be executed
in any number of counterparts and by different parties hereto in separate
counterparts each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and
the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature
pages are physically attached to the same document. Upon the satisfaction
of the conditions set forth in Section 2, this Waiver shall be deemed
effective as of the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver
to be duly executed and delivered by their respective officers thereunto
duly authorized as of the date first written above.
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NATIONAL MEDICAL ENTERPRISES, INC.
By: /s/
Name: Terence P. McMullen
Title: Vice President
THE SANWA BANK LIMITED,
DALLAS AGENCY
By: /s/ Blake Wright
Name: Blake Wright
Title: Assistant Vice President
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Exhibit A
OTHER AGREEMENTS
Overdraft Financing Facility Agreement, dated as of December 16, 1992,
between the Company and Bank of America N.T. & S.A., as amended by the
First Amendment thereto, dated as of September 27, 1993
Advance Account Agreement, dated as of December 17, 1992, between the
Company and Bank of America N.T. & S.A., as amended by the First
Amendment thereto, dated as of September 27, 1993
First Amended and Restated Master Loan Agreement, dated as of January 25,
1990, among the Company, certain subsidiaries and affiliates of the
Company, and MP Funding Corporation, as amended by that
certain Amendment No. 1 thereto, dated as of November 2, 1993.
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SECOND AMENDMENT TO OVERDRAFT
FINANCING FACILITY AGREEMENT
THIS SECOND AMENDMENT TO OVERDRAFT FINANCING FACILITY AGREEMENT
("Second Amendment") is entered into as of April 13, 1994, by and among Bank
of America National Trust and Savings Association ("Bank"), National Medical
Enterprises, Inc., a Nevada corporation ("NME"), and the corporations listed
on Exhibit A to the Agreement hereinafter referred to (the "Account
Subsidiaries") (NME and the Account Subsidiaries referred to herein
collectively as the "Borrowers") and amends the Overdraft Financing Facility
Agreement dated as of December 16, 1992, by and among the Bank and the
Borrowers, as amended by the First Amendment dated as of September 27, 1993
(as so amended, the "Agreement").
RECITAL
The Borrowers and the Bank wish to further amend the Agreement
on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereby agree as
follows:
1. Terms. All capitalized terms used herein shall have the
same meanings as in the Agreement unless otherwise defined herein. All
references to the Agreement shall mean the Agreement as hereby amended.
2. Amendments and Consent. The Bank and the Borrowers hereby
agree to amend the Agreement as follows:
2.1 Section 1.1 and Section 1.4 of the Agreement are each
amended by deleting "December 31, 1993" in each place where it appears in
each such section and inserting in place thereof "April 30, 1995".
2.2 The parenthetical contained in the first sentence of
Section 3.1 of the Agreement is amended by restating such parenthetical in
its entirety as follows:
"(as defined in the Credit Agreement dated as of April 13,
1994, among NME, the banks party thereto and Morgan Guaranty
Trust Company of New York, as a bank and as administrative agent
for the banks, as amended or modified from time to time, the
"Credit Agreement")"
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2.3 Section 4 of the Agreement is amended and restated in its
entirety as follows:
"4. COVENANTS
So long as credit is available under this Agreement and
until full and final payment of all of Borrowers' obligations
under this Agreement and any instrument or agreement required
under this Agreement, NME shall perform and comply with each and
every covenant and agreement required to be performed or
observed by it pursuant to Articles 5 and 6 of the Credit
Agreement as in effect from time to time, and all such
provisions, together with the related definitions of terms
contained therein, are hereby incorporated by reference herein
with the same force and effect as if each and every such
provision were set forth herein in its entirety and that the
term "Bank" therein shall be deemed to refer to the Bank herein
for the purpose of any such information reporting and similar
requirements contained therein. Any amendment, waiver,
restatement or similar modification of such incorporated
provisions under and pursuant to the Credit Agreement shall
operate to amend, modify or restate, as the case may be, such
provisions as they are incorporated into this Agreement. In the
event that this Agreement remains in effect and the Credit
Agreement is terminated, or all amounts under the Credit
Agreement are paid in full, NME and its Subsidiaries shall
continue to comply with and perform all of their affirmative and
negative financial covenants contained in the Credit Agreement
as in effect immediately prior to such termination or payment
(which affirmative and negative covenants, and related
definitions, shall continue to be incorporated herein by
reference with the same force and effect as if set forth in full
herein)."
2.4 Section 5.3 of the Agreement is amended and restated in
its entirety as follows:
"5.3 The occurrence of an "Event of Default" within the
meaning of Article 7 of the Credit Agreement as in effect from
time to time, the provisions of which, together with the related
definitions of terms contained therein, are hereby incorporated
by reference herein with the same force and effect as if each
and every such provision were set forth herein in its entirety.
Any amendment, waiver, restatement or similar modification of
such incorporated provisions under and pursuant to the Credit
Agreement shall
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operate to amend, modify or restate, as the case may be, such
provisions as they are incorporated into this Agreement. In the
event that this Agreement remains in effect and the Credit
Agreement is terminated, or all amounts under the Credit
Agreement are paid in full, the Events of Default set forth in
Article 7 of the Credit Agreement as in effect immediately prior
to such termination or payment shall continue in effect for
purposes of this Agreement (which provisions, and related
definitions, shall continue to be incorporated herein by
reference with the same force and effect as if set forth in full
herein);"
2.5 The Bank hereby consents to the repayment of all
obligations under and termination of the Credit Agreement, as defined in the
First Amendment, and the execution, delivery and performanceby NME of the
Credit Agreement, as defined in this Second Amendment.
3. Representations and Warranties. The Borrowers jointly and
severally represent and warrant to the Bank:
3.1 Authorization. The execution, delivery and performance of
this Second Amendment by the Borrowers have been authorized by all necessary
corporate action.
3.2 Binding Obligation. This Second Amendment has been duly
executed and delivered by the Borrowers and constitutes the legal, valid and
binding obligations of the Borrowers, enforceable in accordance with its
terms.
3.3 No Legal Obstacle to Agreement. Neither the execution of
this Second Amendment, the making of any borrowings under the Agreement, nor
the performance of the Agreement has constituted or resulted in or will
constitute or result in a breach of the provisions of any contract to which
any Borrower is a party, or the violation of any law, judgment, decree or
governmental order, rule or regulation applicable to the Borrowers or result
in the creation under any agreement or instrument of any security interest,
lien, charge, or encumbrance upon any of the assets of any Borrower. No
approval or authorization of any governmental authority is required to
permit the execution, delivery or performance of this Second Amendment, the
Agreement, or the transactions contemplated hereby or thereby, or the making
of any borrowing under the Agreement.
3.4 Default. No Default or Event of Default under the
Agreement (as modified hereby) has occurred and is continuing.
4. Miscellaneous.
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4.1 Effect of Second Amendment. Except as expressly amended
hereby, the Agreement shall remain in full force and effect in accordance
with its terms. Except as otherwise provided herein, the Agreement is in
all respects ratified and confirmed, and nothing contained in this Second
Amendment shall, or shall be construed to, modify, invalidate or otherwise
affect any provision of the Agreement or any right of the parties thereto.
4.2 Waivers. This Second Amendment is specific in time and in
intent and does not constitute, nor should it be construed as, a waiver of
any other right, power or privilege under the Agreement, or under any
agreement, contract, indenture, document or instrument mentioned in the
Agreement; nor does it preclude any exercise thereof or the exercise of any
other right, power or privilege, nor shall any future waiver of any right,
power, privilege or default hereunder, or under any agreement, contract,
indenture, document or instrument mentioned in the Agreement, constitute a
waiver of any other default of the same or of any other term or provision.
4.3 Applicable Law. This Second Amendment shall be governed
by and shall be construed and enforced in accordance with the internal laws
of the State of California.
4.4 Counterparts. This Second Amendment may be executed in
any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed
an original, but all such counterparts together shall constitute but one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment by their duly authorized officers as of the date first written
above.
BANK OF AMERICA NATIONAL NATIONAL MEDICAL ENTERPRISES,
TRUST AND SAVINGS ASSOCIATION INC.
By /s/ Clay Cole By /s/ Maris Andersons
Vice President Maris Andersons
Executive Vice President
and Treasurer
THE ACCOUNT SUBSIDIARIES
By /s/ Maris Andersons
Maris Andersons
Executive Vice President
and Treasurer
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FIRST AMENDMENT TO
ADVANCE ACCOUNT AGREEMENT
THIS FIRST AMENDMENT TO ADVANCE ACCOUNT AGREEMENT ("First
Amendment") is entered into as of April 13, 1994, by and between National
Medical Enterprises, Inc., a Nevada corporation ("NME") and Bank of America
National Trust and Savings Association ("Bank"), and amends the Advance
Account Agreement dated as of December 16, 1993, by and among NME and the
Bank, (the "Agreement").
RECITAL
NME and the Bank wish to amend the Agreement on the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereby agree as
follows:
1. Terms. All capitalized terms used herein shall have the
same meanings as in the Agreement unless otherwise defined herein. All
references to the Agreement shall mean the Agreement as hereby amended.
2. Amendments and Consent. NME and the Bank hereby agree to
amend the Agreement as follows:
2.1 Section 2 of the Agreement is hereby amended by deleting the
last sentence thereof and inserting in lieu thereof the following:
" "Applicable Margin" shall have the meaning ascribed to the term
"Euro-Dollar Margin" in the Credit Agreement (as hereinafter
defined, such definition, and all defined terms included therein
being incorporated by reference herein with full force and effect
as if set forth in full herein)."
2.2 Section 8(c) of the Agreement is hereby amended and
restated in its entirety as follows:
"The representations and warranties contained in Sections
3.07 through 3.14 of the Credit Agreement dated as of April 13,
1994, among NME, the banks party thereto, and Morgan Guaranty
Trust Company of New York, as a bank and as the administrative
agent for the banks, the "Credit Agreement")(as the same may be
amended, modified or restated from time to time) are true and
correct on and as of the date of delivery of this Agreement
(except to the extent they expressly relate to an earlier date),
with the same force and effect as though made on and as of such
date. Terms not defined herein have the meanings assigned to
them in the Credit Agreement."
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2.3 Section 9 of the Agreement is amended and restated in its
entirety as follows:
"9. NME shall: So long as credit is available under this
Agreement and until full and final payment of NME's obligations
under this Agreement and any instrument or agreement required
under this Agreement, perform and comply with each and every
covenant and agreement required to be performed or observed by
it pursuant to Articles 5 and 6 of the Credit Agreement as in
effect from time to time, and all such provisions, together with
the related definitions of terms contained therein, are hereby
incorporated by reference herein with the same force and effect
as if each and every such provision were set forth herein in its
entirety and that the term "Bank" therein shall be deemed to
refer to the Bank herein for the purpose of any such information
reporting and similar requirements contained therein. Any
amendment, waiver, restatement or similar modification of such
incorporated provisions under and pursuant to the Credit
Agreement shall operate to amend, modify or restate, as the case
may be, such provisions as they are incorporated into this
Agreement. In the event that this Agreement remains in effect
and the Credit Agreement is terminated, or all amounts under the
Credit Agreement are paid in full, NME and its Subsidiaries
shall continue to comply with and perform all of their
affirmative and negative financial covenants contained in the
Credit Agreement as in effect immediately prior to such
termination or payment (which affirmative and negative
covenants, and related definitions, shall continue to be
incorporated herein by reference with the same force and effect
as if set forth in full herein)."
2.4 Section 10(c) of the Agreement is amended and restated in
its entirety as follows:
"c. The occurrence of an "Event of Default" within the
meaning of Article 7 of the Credit Agreement as in effect from
time to time, the provisions of which, together with the related
definitions of terms contained therein, are hereby incorporated
by reference herein with the same force and effect as if each
and every such provision were set forth herein in its entirety.
Any amendment, waiver, restatement or similar modification of
such incorporated provisions under and pursuant to the Credit
Agreement shall operate to amend, modify or restate, as the case
may be, such provisions as they are incorporated into this
Agreement. In the event that this Agreement remains in
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effect and the Credit Agreement is terminated, or all amounts
under the Credit Agreement are paid in full, the Events of
Default set forth in Article 7 of the Credit Agreement as in
effect immediately prior to such termination or payment shall
continue in effect for purposes of this Agreement (which
provisions, and related definitions, shall continue to be
incorporated herein by reference with the same force and effect
as if set forth in full herein);"
2.5 The Bank hereby consents to the repayment of all
obligations under and termination of the Credit Agreement, as defined in the
First Amendment, and the execution, delivery and performance by NME of the
Credit Agreement, as defined in this First Amendment.
3. Representations and Warranties. NME represents and
warrants to the Bank:
3.1 Authorization. The execution, delivery and performance of
this First Amendment by NME have been authorized by all necessary corporate
action.
3.2 Binding Obligation. This First Amendment has been duly
executed and delivered by NME and constitutes the legal, valid and binding
obligations of NME, enforceable in accordance with its terms.
3.3 No Legal Obstacle to Agreement. Neither the execution of
this First Amendment, the making of any borrowings under the Agreement, nor
the performance of the Agreement has constituted or resulted in or will
constitute or result in a breach of the provisions of any contract to which
NME is a party, or the violation of any law, judgment, decree or
governmental order, rule or regulation applicable to NME or result in the
creation under any agreement or instrument of any security interest, lien,
charge, or encumbrance upon any of the assets of NME. No approval or
authorization of any governmental authority is required to permit the
execution, delivery or performance of this First Amendment, the Agreement,
or the transactions contemplated hereby or thereby, or the making of any
borrowing under the Agreement.
3.4 Default. No Default or Event of Default under the
Agreement (as modified hereby) has occurred and is continuing.
4. Miscellaneous.
4.1 Effect of First Amendment. Except as expressly amended
hereby, the Agreement shall remain in full force and effect in accordance
with its terms. Except as otherwise
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provided herein, the Agreement is in all respects ratified and confirmed,
and nothing contained in this First Amendment shall, or shall be construed
to, modify, invalidate or otherwise affect any provision of the Agreement or
any right of the parties thereto.
4.2 Waivers. This First Amendment is specific in time and in
intent and does not constitute, nor should it be construed as, a waiver of
any other right, power or privilege under the Agreement, or under any
agreement, contract, indenture, document or instrument mentioned in the
Agreement; nor does it preclude any exercise thereof or the exercise of any
other right, power or privilege, nor shall any future waiver of any right,
power, privilege or default hereunder, or under any agreement, contract,
indenture, document or instrument mentioned in the Agreement, constitute a
waiver of any other default of the same or of any other term or provision.
4.3 Applicable Law. This First Amendment shall be governed by
and shall be construed and enforced in accordance with the internal laws of
the State of California.
4.4 Counterparts. This First Amendment may be executed in any
number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed an original,
but all such counterparts together shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this First
Amendment by their duly authorized officers as of the date first written
above.
BANK OF AMERICA NATIONAL NATIONAL MEDICAL ENTERPRISES,
TRUST AND SAVINGS ASSOCIATION INC.
By /s/ Clay Cole By /s/ Maris Andersons
Vice President Maris Andersons
Executive Vice President
and Treasurer
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