<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): June 2, 1997 (June 2, 1997)
CHILDREN'S COMPREHENSIVE SERVICES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Tennessee 0-16162 62-1240866
- ---------------------------------------------- ------------------------ ------------------
(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
</TABLE>
805 South Church Street, Murfreesboro, Tennessee 37130
- ------------------------------------------------ --------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (615) 896-3100
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets.
- --------------------------------------------------------------------------------
On June 2, 1997, Children's Comprehensive Services, Inc. (the
"Registrant") acquired substantially all the assets of Vendell Healthcare, Inc.
and its subsidiaries ("Vendell"). Based in Nashville, Tennessee, Vendell
operated residential facilities for adolescents and adults. The Registrant
acquired seven of the residential facilities with a total current capacity of
564 licensed beds in approximately 390,000 square feet, located on 220 acres of
land. In addition, the Registrant acquired 13 day treatment facilities
associated with these seven residential facilities. The residential facilities
are located in seven states: Arkansas, Florida, Kentucky, Michigan, Montana,
Texas and Utah. The Registrant intends to use the acquired assets to strengthen
its continuum of services to at risk and troubled children.
The aggregate consideration paid to Vendell consisted of approximately
$18,000,000 in cash and $7,600,000 (642,978 shares) in shares of the
Registrant's Common Stock, $0.01 par value per share (the "Common Stock"). Of
the $18,000,000 in cash, approximately $3,900,000 will be deposited in escrows
to cover certain offsets and contingencies. The aggregate consideration paid in
connection with the acquisition was determined based upon arm's length
negotiations among the parties.
The source of funds for the cash consideration paid to Vendell was cash
from the Registrant's public offering of Common Stock in August 1996 and
borrowings under the Registrant's existing line of credit with First American
National Bank.
2
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
- --------------------------------------------------------------------------------
(a) and (b). Financial Statements of Businesses Acquired and Pro Forma
Financial Information.
To be filed by amendment. The Registrant believes that (i) it is
impracticable prior to the filing of this Form 8-K to complete preparation of
the financial statements required to be filed pursuant to Rule 3-05 of
Regulation S-X and the pro forma financial information to be filed pursuant to
Article 11 of Regulation S-X, and (ii) such information will be available, and
will be filed by the Registrant with the Commission as promptly as practicable,
within sixty days after this Form 8-K is required to be filed.
(c). Exhibits.
2.1 Asset Purchase Agreement By and Among Vendell Healthcare, Inc., the
Subsidiaries of Vendell Healthcare, Inc. and the Company, which is incorporated
herein by reference to Exhibit 2 of Registrant's Quarterly Report on Form 10-Q
for the period ending March 31, 1997;
2.2 Amendment to Asset Purchase Agreement By and Among Vendell
Healthcare, Inc., the Subsidiaries of Vendell Healthcare, Inc. and the Company
dated March 24, 1997; and
2.3 Second Amendment to Asset Purchase Agreement By and Among Vendell
Healthcare, Inc., the Subsidiaries of Vendell Healthcare, Inc. and the Company
dated June 2, 1997.
2.4 Third Amendment to Asset Purchase Agreement By and Among Vendell
Healthcare, Inc., the Subsidiaries of Vendell Healthcare, Inc. and the Company
dated June 2, 1997.
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CHILDREN'S COMPREHENSIVE
SERVICES, INC.
Date: June 2, 1997 By: /s/ DONALD B. WHITFIELD
------------------------
Donald B. Whitfield
Vice President of Finance, Secretary and
Treasurer
4
<PAGE> 5
EXHIBIT INDEX
Item Description
- --------------------------------------------------------------------------------
2.1 Asset Purchase Agreement By and Among Vendell Healthcare, Inc., the
Subsidiaries of Vendell Healthcare, Inc. and the Company, which is incorporated
herein by reference to Exhibit 2 of Registrant's Quarterly Report on Form 10-Q
for the period ending March 31, 1997;
2.2 Amendment to Asset Purchase Agreement By and Among Vendell
Healthcare, Inc., the Subsidiaries of Vendell Healthcare, Inc. and the Company
dated March 24, 1997; and
2.3 Second Amendment to Asset Purchase Agreement By and Among Vendell
Healthcare, Inc., the Subsidiaries of Vendell Healthcare, Inc. and the Company
dated June 2, 1997.
2.4 Third Amendment to Asset Purchase Agreement By and Among Vendell
Healthcare, Inc., the Subsidiaries of Vendell Healthcare, Inc. and the Company
dated June 2, 1997.
5
<PAGE> 1
Exhibit 2.2
AMENDMENT
THIS AMENDMENT (the "Amendment") is made and entered into by and among
Vendell Healthcare, Inc., a Delaware corporation ("Vendell"), certain
subsidiaries of Vendell (the "Vendell Subsidiaries"), and Children's
Comprehensive Services, Inc., a Tennessee corporation ("CCS").
WHEREAS, the parties hereto are parties to that certain Asset Purchase
Agreement, dated as of February 27, 1997, by and among Vendell, the Vendell
Subsidiaries and CCS (the "Asset Purchase Agreement"); and
WHEREAS, the parties wish to make certain amendments to the Asset
Purchase Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
1. Section 8.1(e) of the Asset Purchase Agreement be amended by (i)
deleting the words "within 15 Business Days of the filing of the bankruptcy
petition" and inserting in their stead the words "on or prior to the April 8,
1997," and (ii) deleting the words "within such fifteen (15) Business Day
period" and inserting in their stead the words "on or prior to April 8, 1997."
2. Except as herein specifically provided, the Asset Purchase Agreement
shall not be amended or modified in any respect whatsoever and shall stay in
full force and effect in the form originally executed.
3. This Amendment may be executed in counterparts, each of which, when
executed, shall be deemed to be an original, and all of which together shall
constitute one and the same instrument.
4. This Amendment shall be interpreted, construed and enforced in
accordance with the laws of the State of Tennessee, applied without giving
effect to any conflicts-of-law principles.
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their duly authorized officers as of March 24, 1997.
CHILDREN'S COMPREHENSIVE SERVICES,
INC.
By: /s/ William H Ballard
----------------------------------------------
William H Ballard, Chief Executive Officer
<PAGE> 2
VENDELL HEALTHCARE, INC.
RIVENDELL OF ARKANSAS, INC.
RIVENDELL OF KENTUCKY, INC.
RIVENDELL OF MICHIGAN, INC.
RIVENDELL OF MONTANA, INC.
RIVENDELL OF BAY COUNTY, INC.
RIVENDELL OF UTAH, INC.
RIVENDELL HOUSTON PSYCHIATRIC CENTER, INC.
RIVENDELL WICHITA FALLS PSYCHIATRIC CENTER,
INC.
VENDELL MANAGEMENT COMPANY
ALTACARE OF ALABAMA, INC.
ALTACARE OF DELAWARE, INC.
ALTACARE OF FLORIDA, INC.
ALTACARE OF KENTUCKY, INC.
ALTACARE OF MICHIGAN, INC.
BEHAVIORAL CARE MANAGEMENT, INC.
EMERALD COAST ADVANTAGE, INC.
BEHAVIORAL HEALTH SERVICES OF MICHIGAN
VENDELL OF FLORIDA, INC.
By: /s/ H. Neil Campbell
---------------------------------------------
H. Neil Campbell, Chief Executive Officer
<PAGE> 1
Exhibit 2.3
THIS SECOND AMENDMENT (the "Second Amendment") is made and entered into
as of June 2, 1997 by and among Vendell Healthcare, Inc., a Delaware corporation
("Vendell"), certain subsidiaries of Vendell (the "Vendell Subsidiaries") and
Children's Comprehensive Services, Inc., a Tennessee corporation ("CCS").
Capitalized terms used in this Agreement without definition shall have the
respective meanings given to them in the Asset Purchase Agreement dated as of
February 27, 1997, as amended by an Amendment, dated as of March 24, 1997 (as so
amended, the "Asset Purchase Agreement") among CCS, Vendell and the Vendell
Subsidiaries.
RECITALS
WHEREAS, the parties hereto are parties to that certain Asset Purchase
Agreement; and
WHEREAS, the parties wish to make certain amendments to the Asset
Purchase Agreement, in order to set forth their understandings and agreements
with respect to (i) the sale of Red River Hospital, (ii) the post-closing
contingency for a shutdown of the facility operated by Rivendell of Utah, Inc.
(iii) the allocation of costs with respect to a construction contract dated
March 7, 1997 among Vendell, Clark Construction Company and Bernath-Coakley
Associates, Inc., (iv) the assumption of certain additional Contracts by Buyer
and the exclusion of certain other Contracts, (v) the purchase of accounts
receivable and assumption of accounts payable relating to Rivendell Wichita
Falls, Inc., (vi) the removal of an unlicensed underground storage tank at the
facility operated by Rivendell Houston Psychiatric Center, Inc., (vii) the
reduction of the Purchase Price by $75,000 with respect to the $100,000 payment
to be made by CCS to the Michigan Department of Community Health, and (viii) the
reduction of the Purchase Price by $75,000 with respect to the $100,000 payment
to be made by CCS to the Montana Department of Public Health and Human Services
and to make amendments ancillary thereto, and other miscellaneous amendments.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE 1. PROVISIONS AND AMENDMENTS RELATING TO PURCHASE PRICE AND PURCHASE
PRICE ADJUSTMENTS.
1.1 The Purchase Price shall be adjusted as follows: (a) the Cash
Purchase Price and the portion of the Purchase Price payable in stock shall be
adjusted, on a pro rata basis, on account of the occurrence of the sale of the
Marketed Hospital resulting in a reduction in the Purchase Price in the amount
of $1,000,000, (b) the Purchase Price shall be reduced in the amount of $75,000
(which shall be a reduction in the Cash Purchase Price) to reflect the
understanding of the parties relating to the settlement of a claim by the
Michigan Department of Community Health, and (c) the Purchase Price shall be
reduced in the amount of $75,000 (which shall be a reduction in the Cash
Purchase Price) to reflect the understanding of the parties relating to the
settlement of a claim by the Montana Department of Public Health and Human
Services. In addition, a portion of the Cash Purchase Price shall be deposited
in escrow (i) to provide for the contingency of a
<PAGE> 2
shutdown of the facility operated by Rivendell of Utah, Inc. and (ii) as
required by Section 7.20 of the Asset Purchase Agreement, in addition to the
Escrow Amount currently required to be deposited by the Asset Purchase Agreement
prior to this amendment. Accordingly,
1.1.1 The Asset Purchase Agreement is amended by deleting Section 3.1
in its entirety, and inserting in its place the following:
"3.1 Purchase Price. Subject to adjustment as set forth in this
Article 3, the aggregate consideration for the Assets payable to
Vendell and the Vendell Subsidiaries shall consist of the following:
(a) $11,250,000 (the "Cash Purchase Price"), (i) $7,341,910
of which will be subject to adjustment as set forth in Sections
3.2, and 3.3 and payable to Vendell and the Vendell Subsidiaries
(or as directed by Vendell and the Vendell Subsidiaries) at the
Closing by means of federal funds wire or interbank transfer in
immediately available funds, (ii) $650,000 (the "Escrow Amount")
of which will be deposited in an escrow account maintained by
SunTrust Bank, N.A., Nashville, or such other Nashville,
Tennessee financial institution as the parties may mutually agree
upon, as escrow agent (the "Escrow Agent"), which Escrow Amount
shall be held for six months following the Closing Date pursuant
to the terms of an Escrow Agreement (the "Escrow Agreement")
substantially in the form of Exhibit 3.1(a)(ii) attached hereto,
(iii) $400,000 of which will be deposited in an escrow account
(the "Utah Escrow") maintained by SunTrust Bank, N.A., Nashville,
or such other Nashville, Tennessee financial institution as the
parties may mutually agree upon, as escrow agent (the "Utah
Escrow Agent"), pursuant to the Escrow Agreement dated as of June
2, 1997 among CCS, Rivendell of Utah, Inc. and the Utah Escrow
Agent substantially in the form of Exhibit 3.1(a)(iii) attached
hereto (the "Utah Escrow Agreement"), and (iv) $2,858,090 of
which will be deposited in the escrow account established
pursuant to Section 7.20, maintained by SunTrust Bank, N.A.,
Nashville, or such other Nashville, Tennessee financial
institution as the parties may mutually agree upon, as escrow
agent (the "Due To Escrow") substantially in the form of Exhibit
3.1(a)(iv) attached hereto;
(b) $7,600,000 in shares of CCS Common Stock, determined
pursuant to Section 3.4, and which shares will, at Closing, be
distributed to Vendell, and then distributed by Vendell to the
Holders of Allowed Class 3 Claims (which include the
Noteholders), as such phrase is defined in the Plan of
Reorganization (which include the Noteholders) in accordance with
the Plan of Reorganization; and
2
<PAGE> 3
(c) the assumption by Buyer of the Assumed Liabilities."
1.1.2 Section 3.4 of the Asset Purchase Agreement is amended by
deleting the words contained in clause (a) thereof and inserting in their place
"$7,600,000, divided by."
1.2 The Asset Purchase Agreement is amended by deleting Section 3.2 in
its entirety and inserting in its place the following:
"3.2 Cash Purchase Price Adjustments. The Cash Purchase Price
will be increased or decreased, as applicable, in accordance with, at
the times, and in the manner set forth in Section 3.3, as follows:
(a) If the aggregate amount of the Current Liabilities
exceeds the aggregate amount of the Current Assets as of 12:01
a.m. on the day after Closing Date (the "Adjustment Time"), the
Cash Purchase Price shall be decreased by an amount equal to that
excess.
(b) If the aggregate amount of the Current Assets exceeds
the aggregate amount of the Current Liabilities as of the
Adjustment Time, the Cash Purchase Price shall be increased by an
amount equal to that excess.
(c) The Cash Purchase Price shall be increased by the amount
paid by Seller in excess of $200,000 (the "Rivendell-Michigan
Excess Amount") under the construction contract dated March 7,
1997 among Vendell, Clark Construction Company and
Bernath-Coakley Associates, Inc. (the "Michigan Construction
Contract") as of the Adjustment Time.
As used in this Agreement, "Current Assets" means the Sellers'
Receivables and Rights to Government Proceeds (net of allowances for
uncollectibility), Prepaid Expenses, and other current assets included
within the Assets of each Seller determined in accordance with GAAP
consistently applied; provided, however, that, for purposes of this
Article 3, Current Assets shall not include cash or cash equivalents
or any other assets that constitute Excluded Assets. "Current
Liabilities" means current liabilities of each Seller determined in
accordance with GAAP consistently applied (including, without
limitation, appropriate accruals for vacation pay, sick pay, paid time
off and unpaid health insurance claims); provided, however, that no
(i) amounts payable with respect to the Senior Notes; (ii) amounts due
or payable to third party payors (whether private insurers, private
pay patients, governmental payors including Medicare and Medicaid or
other third party payors) including cost report reimbursements or
settlements, repayments, fines or otherwise; (iii) professional fees
or expenses relating to or arising out of Vendell's bankruptcy filing
or administration; (iv) accrued expenses associated with the sale of
the Marketed Hospital and related facilities; (v) reserves for
malpractice
3
<PAGE> 4
or other tort liabilities; (vi) deferred revenue amounts; (vii) income
taxes payable; (viii) bonus and severance accruals; and (ix) fines and
settlements with governmental agencies shall be considered to be
Current Liabilities or Assumed Liabilities for any purposes under this
Agreement; and provided further, that Assumed Liabilities under the
Michigan Construction Contract shall not be considered to be Current
Liabilities under this Agreement.
It is expressly agreed and understood that the $100,000 threshold
amount and the $650,000 maximum amount set forth in Section 7.17(e)
shall in no way limit the adjustments to the Cash Purchase Price or
the liability therefor calculated as provided in this Article 3. Buyer
agrees that it will not make an indemnification claim pursuant to
Section 7.17 for adjustments pursuant to the Cash Purchase Price
pursuant to this Section 3.2."
1.3 Section 3.3 of the Asset Purchase Agreement is amended by deleting
clause (a) thereof in its entirety and inserting in its place the following:
"(a) At least three Business Days prior to the Closing Date,
Vendell will deliver to Buyer a report (the "Preliminary
Adjustments Report"), prepared by Vendell in good faith and on a
reasonable basis, setting forth in reasonable detail a pro forma
determination as of the Adjustment Time of the Current Assets,
the Current Liabilities and the Michigan-Rivendell Excess Amount
and the corresponding adjustments to the Cash Purchase Price
pursuant to Section 3.2. The compliance of the Preliminary
Adjustments Report with the provisions of the first sentence of
this Section 3.3(a) shall be certified by an authorized officer
of Vendell as of the date it is delivered. Based on the
Preliminary Adjustments Report, the Cash Purchase Price will be
adjusted on the Closing Date in accordance with the provisions of
Section 3.2."
1.4 The Asset Purchase Agreement is amended by deleting Section
3.6(a)(iii) in its entirety and inserting in its place the following:
"(iii) Current Liabilities, to the extent included in or
reserved against in the Final Adjustment Report pursuant to
Section 3.3 hereof; and
(iv) all obligations under the Michigan Construction
Contract."
ARTICLE 2. PROVISIONS AND AMENDMENTS RELATING TO RIVENDELL OF UTAH, INC.
2.1 The parties hereto acknowledge that the Marketed Hospital operated
by Rivendell of Utah, Inc. will not be shut down prior to the Closing Date.
Vendell has agreed to provide the Utah Escrow at the Closing in an amount equal
to $400,000. On or before December 2, 1997,
4
<PAGE> 5
CCS shall be entitled to give a notice to Rivendell of Utah, Inc. that it
intends to cease operation at and shut down its facilities at and related to the
Hospital located in West Jordan, Utah, and receive said $400,000, all as
provided in the Utah Escrow Agreement. In such event, the Hospital shall cease
operation and be shut down within 180 days after such notice is given.
Accordingly,
2.1.1 The Asset Purchase Agreement is amended by deleting Section 1.51
in its entirety and inserting in its place the following:
"1.51. 'Marketed Hospital' shall mean the Hospital located in
Wichita Falls, Texas."
2.1.2 Section 3.6(b) of the Asset Purchase Agreement is amended by
deleting therefrom clause (viii), and inserting in its place, "(viii) any
Liabilities of or associated with the Marketed Hospital."
2.1.3 Section 7.18 of the Asset Purchase Agreement is amended by
deleting the first sentence thereof and inserting in its place the following:
"At the Closing, CCS covenants that it will hire all employees of
Vendell and the Vendell Subsidiaries who are engaged in the Business
other than employees of the Marketed Hospital; provided, however, that
such covenant shall not include any obligation to retain such
employees for any period of time or to compensate such employees at
any level."
2.1.4 Section 9.2(e) of the Asset Purchase Agreement is amended by
deleting therefrom the following parenthetical: "(except the facility in Utah)."
2.1.5 The Asset Purchase Agreement is amended by deleting Section
9.2(g) in its entirety.
2.1.6 The Asset Purchase Agreement is amended (i) by deleting all
references therein to the phrase "Marketed Hospitals" and inserting in its place
the phrase "Marketed Hospital," and (ii) by deleting all references therein to
the phrase "one or more Marketed Hospitals" and inserting in its place the
phrase "the Marketed Hospital."
ARTICLE 3. PROVISIONS AND AMENDMENTS RELATING TO RIVENDELL OF MICHIGAN, INC.,
RIVENDELL OF ARKANSAS, INC. AND RIVENDELL OF MONTANA, INC.
3.1 The parties hereto acknowledge and agree that Buyer will assume
certain previously Excluded Assets relating to Rivendell-Michigan, Rivendell of
Arkansas, Inc. and Rivendell-Montana. Accordingly,
3.1.1 Section 2.2 of the Asset Purchase Agreement is amended by
deleting therefrom clause (j), and inserting in its place, "(j) all Medicare,
Medicaid, CHAMPUS, FEHBA and
5
<PAGE> 6
RRRB provider agreements and provider numbers, except for Medicare provider
agreements and provider numbers relating to Rivendell-Michigan (Medicare
Provider Agreement No.23-4031); Rivendell of Arkansas, Inc. (Medicare Provider
Agreement No. 04-4007) and Rivendell of Montana, Inc. (Medicare Provider
Agreement No. 27-4005.
3.1.2 Section 2.3(a) of the Asset Purchase Agreement is amended by
adding thereto clauses (iii) and (iv) as follows:
"(iii) Buyer shall pay the Michigan Department of Community
Health the amount of $100,000, in full and final satisfaction of
any and all claims said Department or any other department or
agency of the State of Michigan could or may assert against Buyer
as a result of the transactions contemplated by this Agreement or
otherwise; and
(iv) Buyer shall pay the Montana Department of Public Health
and Human Services the amount of $100,000, in full and final
satisfaction of any and all claims said Department or any other
department or agency of the State of Montana could or may assert
against Buyer as a result of the transactions contemplated by
this Agreement or otherwise."
3.1.3 The Asset Purchase Agreement is amended by the addition thereto
of a new Section 9.2(k) as follows:
"(k) Buyer shall have received a certificate of Seller
executed by the Controller and the Chief Executive Officer of
Vendell to the effect that (i) Rivendell-Michigan net revenues
attributable to Medicare for the fiscal years ending 1992-1996
did not, in the aggregate, exceed $70,000, (ii) Rivendell of
Arkansas, Inc. net revenues attributable to Medicare for the
fiscal years ending 1992-1996 did not, in the aggregate, exceed
$50,000, and (iii) Rivendell-Montana net revenues attributable to
Medicare for the fiscal years ending 1992-1996 did not, in the
aggregate, exceed $135,000."
3.1.4 Section 3.6(b) of the Asset Purchase Agreement is amended by
deleting therefrom the penultimate sentence and inserting in its place, "Buyer
will accept no assignment of any Medicare, Medicaid, CHAMPUS, FEHBA or RRRB
provider agreements or provider numbers except for Medicare provider agreements
and provider numbers relating to Rivendell-Michigan (Medicare Provider Agreement
No.23-4031), Rivendell of Arkansas, Inc. (Medicare Provider Agreement No.
04-4007) and Rivendell-Montana (Medicare Provider Agreement No. 27-4005."
6
<PAGE> 7
ARTICLE 4. PROVISIONS AND AMENDMENTS RELATING TO RIVENDELL WICHITA FALLS, INC.
AND RIVENDELL OF UTAH, INC.
4.1 In accordance with Section 3.7 of the Asset Purchase Agreement
(prior to amendment by this Second Amendment), the Marketed Hospital located in
Wichita Falls, Texas, has been sold. Additionally, the parties have agreed the
Marketed Hospital operated by Rivendell of Utah, Inc. will not be shut down
prior to the Closing Date. The parties agree that notwithstanding anything to
the contrary contained in the Asset Purchase Agreement, Buyer is not purchasing
any of the Assets (other than the Current Assets) nor assuming any Liabilities
of Rivendell Wichita Falls Psychiatric Center, Inc. or the Red River Hospital.
Without limiting the generality of the foregoing,
4.1.1 Section 2.2 is amended by adding to the end thereof the
following:
"(e) All rights, assets and properties of any nature
whatsoever owned by or otherwise primarily associated with
Rivendell Wichita Falls Psychiatric Center, Inc. or the Marketed
Hospital, except their Current Assets."
4.1.2 The Asset Purchase Agreement is amended by deleting Section 3.7
in its entirety.
4.1.3 The Asset Purchase Agreement is amended by deleting Section 4.11
thereof in its entirety and inserting in lieu thereof the following:
"4.11 Receivables
(a) The Receivables (including the Right to Government
Proceeds) as reflected in the June 30, 1996 Balance Sheet (net of
reserves reflected in such balance sheet) and the Receivables
(including the Right to Government Proceeds) arising in the
ordinary course of business since the date thereof, to the extent
uncollected on the date hereof, and the Receivables from
Affiliates reflected on the books of Vendell and the Vendell
Subsidiaries on the date hereof, are validly existing and
represent monies due for goods sold and delivered or services
performed. To Seller's knowledge, except as set forth on Schedule
4.11, there are no refunds, discounts, or other adjustments
payable with respect to such Receivables (including the Right to
Government Proceeds), and there are no defenses, written notices
of set-off, assignments, restrictions, encumbrances or conditions
enforceable by third parties on or affecting any of the
foregoing.
7
<PAGE> 8
(b) Notwithstanding anything in Section 4.11(a) to the
contrary, Receivables included in the Assets associated with the
Red River Hospital shall be collectible within six (6) months of
the Closing to the full extent of $883,769. Buyer agrees to use
commercially reasonable efforts to collect the Receivables
referred to in Section 4.11(b) following the Closing and shall
provide Seller with monthly reports with respect to its
collection efforts."
4.1.4 The Asset Purchase Agreement is amended by deleting Section
7.17(e) in its entirety, and inserting in its place the following:
"(e) Until all Buyer Indemnified Parties have incurred
losses aggregating $100,000, no amounts shall be paid to the
Buyer Indemnified Party seeking indemnification from the Escrow
Fund or otherwise. In the event such losses exceed $100,000 in
the aggregate, the Buyer Indemnified Parties shall be entitled to
payment from the Escrow Fund for all losses suffered which exceed
$100,000, but shall not be authorized to otherwise seek monetary
recourse from Vendell or the Vendell Subsidiaries. The aggregate
monetary Damages of Vendell and the Vendell Subsidiaries to Buyer
Indemnified Parties hereunder shall not exceed $650,000. With
respect to the breach of the representation and warranty
contained in Section 4.11(b), the $100,000 threshold set forth
above in this Section 7.17(e) shall not apply and the maximum
amount which may be recovered for the breach of such
representation and warranty shall be $150,000. In the event a
claim is made by a Buyer Indemnified Party with respect to the
representation and warranty contained in Section 4.11(b), Buyer
shall transfer to Seller all then uncollected Receivables
referred to in Section 4.11(b). With respect to all monetary
Damages of Buyer Indemnified Parties other than for breach of the
representation and warranty contained in Section 4.11(b), the
maximum amount which may be recovered is $500,000. Monetary
Damages of Buyer Indemnified Parties for breach of the
representation and warranty contained in Section 4.11(e) shall
not be included in calculating such $500,000 maximum amount.
4.1.5 Substantially all the tangible assets of the Marketed Hospital
were sold to Wichita Falls Behavioral Health, L.P. ("Wichita Falls Buyer") on
May 9, 1997. As an accommodation to Rivendell Wichita Falls Psychiatric Center,
Inc., and pursuant to the terms of Section 7.22, the Asset Purchase Agreement is
amended by the addition thereto of a new Section 7.22 as follows:
8
<PAGE> 9
"7.22. Collections of Post-Closing Accounts Receivable at
Marketed Hospital.
(a) CCS agrees with Rivendell Wichita Falls
Psychiatric Center, Inc. that following the Closing Date, it
will act as agent of Rivendell Wichita Falls Psychiatric
Center, Inc. in the collection of receivables of the Marketed
Hospital for services performed after the Closing Date, all of
which remain as assets of Rivendell Wichita Falls Psychiatric
Center, Inc. (the "Marketed Hospital Receivables"), and the
payment of the accounts payable of the Marketed Hospital
incurred after the Closing Date ("Marketed Hospital Accounts
Payable"). The obligations of CCS pursuant to this Section
7.22 shall be limited to the administrative aspects of billing
for, submitting claims with respect to, receiving and
accounting for payments with respect to the Marketed Hospital
Receivables and payment of and accounting for Marketed
Hospital Accounts Payable, in the manner specified in this
Section 7.22, and Rivendell Wichita Falls Psychiatric Center,
Inc. grants to CCS all authorizations necessary for CCS to
render such services. CCS' obligations under this Section 7.22
shall end on December 31, 1997. At the end of the aforesaid
period, CCS shall turn over to Rivendell Wichita Falls
Psychiatric Center, Inc. any uncollected Marketed Hospital
Receivables and unpaid Marketed Hospital Accounts Payable, and
thereafter CCS shall be released from any further obligation
under this Section 7.22.
(b) Except as otherwise provided in Section 7.22(d),
CCS shall, on behalf of Rivendell Wichita Falls Psychiatric
Center, Inc. and as its agent, (i) bill and attempt to collect
payments for all Marketed Hospital Receivables, and (ii) make
payment of all Marketed Hospital Accounts Payable, to the
extent and only to the extent of moneys available to make such
payment as provided in this Section 7.22, with all such
billing, collecting, and payment to be done in the name of
Rivendell Wichita Falls Psychiatric Center, Inc. Solely for
the purpose of carrying out the billing, collecting and
payment services hereunder and except as otherwise limited in
Section 7.22(d), CCS shall have full authority to receive,
take possession of and endorse in the name of Rivendell
Wichita Falls Psychiatric Center, Inc. any checks, drafts,
notes, money orders, cash, insurance payments, and other
instruments received in payment on behalf of Rivendell Wichita
Falls Psychiatric Center, Inc. CCS shall maintain complete and
accurate records of all fees, charges, billings and payments
contemplated hereby. To the extent that Rivendell Wichita
Falls Psychiatric Center, Inc. or any of its employees or
agents receives funds for professional services relating to
the Marketed Hospital after the Closing Date, such funds shall
be paid to CCS for deposit in the Marketed Hospital
Receivables Account. CCS
9
<PAGE> 10
may assume the genuineness of all Marketed Hospital Accounts
Payable, unless notified in writing to the contrary by
Rivendell Wichita Falls Psychiatric Center, Inc. in a timely
manner.
(c) CCS shall open a bank account over which it shall
have exclusive domain and control (the "Marketed Hospital
Receivables Account") with a bank (the "Bank") mutually agreed
upon by CCS and Rivendell Wichita Falls Psychiatric Center,
Inc. and, except as provided otherwise in Section 7.22(d) ,
shall deposit therein all collections collected by CCS
pursuant to this Section 7.22. On or before the fifteenth
(15th) day following the end of each calendar month, CCS is
hereby expressly authorized to, and CCS shall disburse from
the Marketed Hospital Receivables Account, all amounts owed by
Rivendell Wichita Falls Psychiatric Center, Inc. for the
preceding month to CCS in accordance with Section 7.22(e). CCS
is authorized to apply all collections deposited in the
Marketed Hospital Receivables Account, until exhausted, in the
following order of priority: (i) first toward payment of any
refunds relating to Marketed Hospital Receivables owed by
Rivendell Wichita Falls Psychiatric Center, Inc.; (ii) second
to the payment of Marketed Hospital Accounts Payable; (iii)
third toward satisfaction of amounts owed to CCS pursuant to
this Agreement; and (iv) fourth to the extent any collections
remain in such account, to Rivendell Wichita Falls Psychiatric
Center, Inc. The Marketed Hospital Receivables Account shall
be used solely for depositing collections collected by CCS and
disbursing such collections in accordance with this Agreement.
(d) CCS shall submit Marketed Hospital Receivables
which are claims for payment to Medicare and Medicaid in the
name of Rivendell Wichita Falls Psychiatric Center, Inc. and
on its behalf. All of the payments with respect to such claims
shall be made by check (or electronic funds transfer) payable
to Rivendell Wichita Falls Psychiatric Center, Inc. and shall
be deposited into a bank account with a bank designated by
Rivendell Wichita Falls Psychiatric Center, Inc. (the "Special
Account Bank") under the exclusive domain and control of
Rivendell Wichita Falls Psychiatric Center, Inc. (the
"Marketed Hospital Medicare and Medicaid Receivables
Account"). Rivendell Wichita Falls Psychiatric Center, Inc.
shall, effective as of the Closing Date, direct the Special
Account Bank in writing to transfer all amounts in the
Marketed Hospital Medicare and Medicaid Receivables Account at
the end of each business day of the Bank to the Marketed
Hospital Receivables Account. Amounts deposited into the
Marketed Hospital Receivables Account pursuant to this Section
7.22(d) shall be disbursed as provided in Section 7.22(c).
Rivendell Wichita Falls Psychiatric Center, Inc. agrees that
it will not take any actions that interfere
10
<PAGE> 11
with the transfer of funds from Marketed Hospital Medicare and
Medicaid Receivables Account to the Marketed Hospital
Receivables Account as provided in this Section 7.22(d) nor
will Rivendell Wichita Falls Psychiatric Center, Inc. or its
agents remove, withdraw or authorize the removal or withdrawal
of any funds from Marketed Hospital Medicare and Medicaid
Receivables Account for any purpose except to accomplish the
transfer of funds provided in this Section 7.22(d).
(e) CCS shall be entitled to a fee for performance
of its services pursuant to this Section 7.22 equal in
amount to the fee which was paid by Rivendell Wichita Falls
Psychiatric Center, Inc. to the Gulf Pines Hospital in
accordance with current practices.
(f) Under no circumstances shall CCS be responsible
for the payment of any liabilities of the Marketed Hospital or
Rivendell Wichita Falls Psychiatric Center, Inc. or otherwise
except out of funds available in the accounts established
pursuant to and in the manner contemplated by this Section
7.22. Seller hereby agrees to indemnify, defend and hold
harmless CCS and each of CCS officers, directors,
shareholders, agents and employees from and against any and
all claims, demands, losses, liabilities, actions, lawsuits
and other proceedings, judgments and awards, and costs and
expenses (including reasonable attorneys' fees) arising
directly or indirectly, in whole or in part, out of the
obligations assumed by CCS pursuant to this Section 7.22,
except any such claim, demand, loss, liability, action,
lawsuit, proceeding, judgment, award, cost or expense directly
attributable to the gross negligence or wilful misconduct of
CCS."
ARTICLE 5. PROVISIONS AND AMENDMENTS RELATING TO RIVENDELL OF HOUSTON
5.1 The parties hereto waive any requirement with respect to the
transfer of Houston Health Alliance, Inc. except that Vendell and each Vendell
Subsidiary agree that, as soon as is reasonably practicable after the Closing
Date, and in any event within 90 days after the Closing Date, they shall take
all commercially reasonable actions necessary to transfer the membership
interests of Houston Health Alliance, Inc. to CCS or its designated subsidiary
or affiliate; provided, however, that no such transfer shall be required if such
transfer would violate any applicable law. If the proposed transfer would
violate applicable laws, the parties shall in good faith seek and negotiate to
structure an alternative transaction that would provide the same economic effect
and benefits to CCS.
5.2 The parties hereto acknowledge that Vendell has agreed to remove an
unlicensed underground storage tank at the facility operated by Rivendell
Houston Psychiatric Center, Inc. The parties confirm that Vendell's agreement to
such removal shall constitute a waiver of the
11
<PAGE> 12
failure of the requirement or representations that such underground storage tank
is licensed as required by Law (but no other representation or warranty). With
respect thereto,
5.2.1 Article 7 of the Asset Purchase Agreement is amended by the
adding thereto a new Section 7.23 as follows:
"7.23. Removal of Underground Storage Tanks. Seller agrees
that it will, at its expense, in an expeditious fashion, and in a
manner which does not interfere in any material respect with the
operations of the Gulf Pines Hospital, (i) cause the underground
storage tank located at the Gulf Pines Hospital to be removed, (ii)
cause construction and installation of a 500 gallon above-ground
storage tank, which shall be filled and tested in a reasonable manner
and (iii) if there is or has been any release from or in connection
with such underground storage tank or in connection with the activity
undertaken pursuant to this Section 7.23, Seller shall promptly take
all reasonably necessary and appropriate actions with respect thereto,
including all required investigation and remediation. All activity
pursuant to this Section 7.23 shall be undertaken in compliance with
and to the extent required by applicable Laws, including the obtaining
of all necessary approvals and permits. Seller also agrees that all
notices and correspondence with respect to the foregoing will be
furnished to CCS. The maximum expenditure that shall be required of
Seller pursuant to Section 7.23(i) and (ii) shall be $12,548, which
expenditure shall not be subject to, count against or impact in any way
the $100,000 threshold amount or the $650,000 maximum amount set forth
in Section 7.17(e). CCS agrees that it will cooperate with and take all
reasonable actions to administer the contract entered into by Vendell
for the removal and construction work contemplated by this Section 7.23
at no administrative cost to Vendell."
ARTICLE 6. MISCELLANEOUS AMENDMENTS
6.1 Section 1.84 of the Asset Purchase Agreement is amended by deleting
such Section in its entirety and inserting in its place the following:
"1.84. 'Vendell Subsidiaries' shall have the meaning given such
term in the recitals hereto."
6.2 Section 7.17(a) is amended by deleting the words "effective date"
and inserting in their place the words "Closing Date."
6.3 Section 9.2 of the Asset Purchase Agreement is amended by deleting
Section 9.2(f) in its entirety.
12
<PAGE> 13
6.4 The Asset Purchase Agreement is amended by deleting Schedules 1.58,
2.1(a), 2.1(b), 2.1(c), 2.1(d), 2.1(k), 2.2(d), 4.2, 4.4, 4.5, 4.8.4, 4.14(a),
4.16, 4.19(h) and 4.20 and inserting in their place, respectively, the Schedules
1.58, 2.1(a), 2.1(b), 2.1(c), 2.1(d), 2.1(k), 2.2(d), 4.2, 4.4, 4.5, 4.8.4,
4.14(a), 4.16, 4.19(h) and 4.20 attached hereto.
6.5 Section 7.1 of the Asset Purchase Agreement shall be amended by
adding the following to the end thereof:
"The parties agree that the events referred to or actions taken
or to be taken pursuant to the terms of this Second Amendment shall
not be deemed to be breaches of any representations or warranties or
violations of any covenants or conditions contained in the Asset
Purchase Agreement, as amended herewith."
6.6 All references to "Sellers" are deleted and the word "Seller" is
inserted in its place.
ARTICLE 7. MISCELLANEOUS
7.1 Except as herein specifically provided, the Asset Purchase
Agreement shall not be amended or modified in any respect whatsoever and shall
stay in full force and effect in the form originally executed.
7.2 This Amendment may be executed in counterparts, each of which, when
executed, shall be deemed to be an original, and all of which together shall
constitute one and the same instrument.
7.3 In the event of a conflict or inconsistency between the terms of
this Amendment and the Asset Purchase Agreement in the form existing immediately
prior to this Amendment, this Amendment shall control.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their duly authorized officers as of June 2, 1997.
CHILDREN'S COMPREHENSIVE SERVICES, INC.
By: /s/ William J Ballard
------------------------------------------
William J Ballard, Chief Executive Officer
VENDELL HEALTHCARE, INC.
RIVENDELL OF ARKANSAS, INC.
RIVENDELL OF KENTUCKY, INC.
RIVENDELL OF MICHIGAN, INC.
RIVENDELL OF MONTANA, INC.
RIVENDELL OF BAY COUNTY, INC.
RIVENDELL OF UTAH, INC.
RIVENDELL HOUSTON PSYCHIATRIC CENTER, INC.
RIVENDELL WICHITA FALLS PSYCHIATRIC CENTER, INC.
VENDELL MANAGEMENT COMPANY
ALTACARE OF ALABAMA, INC.
ALTACARE OF ARKANSAS, INC.
ALTACARE OF DELAWARE, INC.
ALTACARE OF FLORIDA, INC.
ALTACARE OF KENTUCKY, INC.
ALTACARE OF MICHIGAN, INC.
BEHAVIORAL CARE MANAGEMENT, INC.
EMERALD COAST ADVANTAGE, INC.
BEHAVIORAL HEALTH SERVICES OF MICHIGAN
VENDELL OF FLORIDA, INC.
By: H. Neil Campbell
-----------------------------------------
H. Neil Campbell, Chief Executive Officer
14
<PAGE> 1
Exhibit 2.4
THIS THIRD AMENDMENT (the "Third Amendment") is made and entered into
as of June 2, 1997 by and among Vendell Healthcare, Inc., a Delaware corporation
("Vendell"), certain subsidiaries of Vendell (the "Vendell Subsidiaries") and
Children's Comprehensive Services, Inc., a Tennessee corporation ("CCS"). Except
as amended hereby, capitalized terms used in this Agreement without definition
shall have the respective meanings given to them in the Asset Purchase Agreement
dated as of February 27, 1997, as amended by an Amendment, dated as of March 24,
1997, and as further amended by that certain Second Amendment, dated as of June
2, 1997 (as so amended, the "Asset Purchase Agreement") among CCS, Vendell and
the Vendell Subsidiaries.
RECITALS
WHEREAS, the parties hereto desire to further amend that certain Asset
Purchase Agreement to eliminate Behavioral Health Services of Michigan from the
transaction.
NOW, THEREFORE, the parties hereto agree that the entity Behavioral
Health Services of Michigan shall be removed as a "Seller" and as a "Vendell
Subsidiary," as those terms are defined in the Asset Purchase Agreement. For all
purposes, the entity Behavioral Health Services of Michigan shall be treated as
if it were not a signatory to the Asset Purchase Agreement.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be
executed by their duly authorized officers as of June 2, 1997.
CHILDREN'S COMPREHENSIVE SERVICES, INC.
By: William J Ballard
------------------------------------------
William J Ballard, Chief Executive Officer
VENDELL HEALTHCARE, INC.
RIVENDELL OF ARKANSAS, INC.
RIVENDELL OF KENTUCKY, INC.
RIVENDELL OF MICHIGAN, INC.
RIVENDELL OF MONTANA, INC.
RIVENDELL OF BAY COUNTY, INC.
RIVENDELL OF UTAH, INC.
RIVENDELL HOUSTON PSYCHIATRIC CENTER, INC.
RIVENDELL WICHITA FALLS PSYCHIATRIC CENTER, INC.
VENDELL MANAGEMENT COMPANY
ALTACARE OF ALABAMA, INC.
ALTACARE OF ARKANSAS, INC.
ALTACARE OF DELAWARE, INC.
<PAGE> 2
ALTACARE OF FLORIDA, INC.
ALTACARE OF KENTUCKY, INC.
ALTACARE OF MICHIGAN, INC.
BEHAVIORAL CARE MANAGEMENT, INC.
EMERALD COAST ADVANTAGE, INC.
BEHAVIORAL HEALTH SERVICES OF MICHIGAN
VENDELL OF FLORIDA, INC.
By: H. Neil Campbell
-----------------------------------------
H. Neil Campbell, Chief Executive Officer
2
