<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): September 24, 1998
(September 9, 1998)
CHILDREN'S COMPREHENSIVE SERVICES, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Tennessee 0-16162 62-1240866
- ------------------------------ ---------------------- ---------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
3401 West End Avenue, Suite 500, Nashville, Tennessee 37203
- ------------------------------------------------------ --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 383-0376
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On September 9, 1998, Children's Comprehensive Services, Inc. (the
"Registrant") completed a merger transaction in which CCS Merger Sub, Inc., the
Registrant's wholly-owned subsidiary, merged with and into Ameris Health
Systems, Inc. ("Ameris") and Ameris became a wholly-owned subsidiary of the
Registrant. Based in Nashville, Tennessee, Ameris, through its wholly-owned
subsidiary, American Clinical Schools, Inc., operates residential juvenile sex
offender programs in Tennessee and Alabama with an aggregate capacity of 168
licensed beds. In addition, Ameris has 60 beds under development in
Pennsylvania. Ameris, through subsidiaries, owns two residential facilities in
Tennessee and Alabama which are approximately 40,000 square feet and 38,000
square feet, respectively, and has leases for residential facilities in
Coatesville, Pennsylvania and in Clarksville, Tennessee. The Registrant intends
to continue the operations of Ameris and the use of its facilities to strengthen
the Registrant's continuum of services to at risk and troubled children.
The aggregate consideration paid to Ameris shareholders consisted of
approximately $12,500,000 in cash and assumption of liabilities. Of the
$12,500,000, approximately $3,225,000 was deposited in escrow 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 the Ameris
shareholders was from the Registrant's cash balances.
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
impractical 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 Agreement and Plan of Merger, dated as of September 9, 1998, among
Children's Comprehensive Services, Inc., CCS Merger Sub, Inc. and Ameris Health
Systems, Inc. (as directed by Item 601 (b)(2) of Regulation S-X, certain
schedules and exhibits to this document are omitted from this filing, and the
Registrant agrees to furnish supplementally a copy of any omitted schedule or
exhibit to the Commission upon request)
99 September 10, 1998 Press Release
2
<PAGE> 3
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: September 24, 1998 By: /s/ Donald B. Whitfield
------------------------------------
Donald B. Whitfield
Vice President of Finance and
Chief Financial Officer
3
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
- -----------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of September 9, 1998, among
Children's Comprehensive Services, Inc., CCS Merger Sub, Inc. and
Ameris Health Systems, Inc. (as directed by Item 601 (b)(2) of
Regulation S-X, certain schedules and exhibits to this document are
omitted from this filing, and the Registrant agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the
Commission upon request)
99 September 10, 1998 Press Release
</TABLE>
4
<PAGE> 1
EXHIBIT 2.1
================================================================================
AGREEMENT AND PLAN OF MERGER
AMONG
CHILDREN'S COMPREHENSIVE SERVICES, INC.,
CCS MERGER SUB, INC.
AND
AMERIS HEALTH SYSTEMS, INC.
DATED AS OF SEPTEMBER 8, 1998
================================================================================
<PAGE> 2
INDEX
<TABLE>
<S> <C> <C>
ARTICLE I
THE MERGER................................................................ 1
1.1 The Merger......................................................... 1
1.2 The Closing........................................................ 2
1.3 Effective Time..................................................... 2
1.4 Charter............................................................ 2
1.5 Bylaws............................................................. 2
1.6 Directors.......................................................... 2
1.7 Officers........................................................... 2
ARTICLE II
CONVERSION OF AMERIS SHARES............................................... 2
2.1 Conversion of Ameris Shares........................................ 2
2.2 (Reserved)......................................................... 3
2.3 Exchange of Certificates........................................... 3
2.4 Escrow............................................................. 3
2.5 Post-Closing Adjustments........................................... 6
2.6 Preliminary and Final Settlements.................................. 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AMERIS ................................. 9
3.1 Existence; Good Standing; Corporate Power and Authority,
Pre-Closing Sale. ................................................. 9
3.2 Authorization, Validity and Effect of Agreements.................. 10
3.3 Capitalization.................................................... 10
3.4 Other Interests................................................... 11
3.5 Prior Sales of Securities......................................... 11
3.6 No Violation...................................................... 11
3.7 Financial Statements.............................................. 12
3.8 No Material Adverse Changes....................................... 12
3.9 Tax Matters....................................................... 12
3.10 Employees and Fringe Benefit Plans................................ 14
3.11 Assets. .......................................................... 17
3.12 Accounts Receivable............................................... 17
3.13 Lawful Operations................................................. 17
3.14 Litigation........................................................ 18
3.15 Licenses; Permits; Authorizations................................. 18
3.16 Regulatory Consents............................................... 18
3.17 Reimbursement and Program Compliance.............................. 18
3.18 Corporate Records; Other Information.............................. 20
3.19 Intellectual Property Rights...................................... 20
3.20 Hazardous Substances.............................................. 20
3.21 Certain Business Practices and Regulations........................ 23
3.22 Labor Matters..................................................... 23
3.23 Insurance......................................................... 23
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
3.24 No Brokers........................................................ 23
3.25 Contracts and Commitments......................................... 24
3.26 Shareholder and Employee Receivables.............................. 25
3.27 Whitwell Indemnification.......................................... 25
3.28 Real Property..................................................... 25
3.29 (Reserved)........................................................ 26
3.30 (Reserved)........................................................ 26
3.31 Certificates of Need.............................................. 26
3.32 Medicare Participation/Accreditation.............................. 27
3.33 (Reserved)........................................................ 27
3.34 (Reserved)........................................................ 27
3.35 Experimental Procedures........................................... 27
3.36 Full Disclosure................................................... 27
3.37 Definition of Knowledge........................................... 28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CCS.................................... 28
4.1 Existence; Good Standing; Corporate Power and Authority. ......... 28
4.2 Authorization, Validity, and Effect of Agreements................. 28
4.3 No Violation...................................................... 28
4.4 No Brokers........................................................ 28
ARTICLE V
COVENANTS AND AGREEMENTS................................................. 29
5.1 Access to Information............................................. 29
5.2 Confidentiality....................................................29
5.3 Cooperation....................................................... 30
5.4 Preservation of Business.......................................... 30
5.5 Material Transactions............................................. 30
5.6 Shareholder Approval.............................................. 32
5.7 Certain Tax Matters............................................... 32
5.8 Legal Conditions to Merger........................................ 32
5.9 Notice of Subsequent Events....................................... 32
5.10 Other Actions..................................................... 33
5.11 Tail Insurance.................................................... 33
5.12 Employees......................................................... 33
5.13 Dissenting Shares................................................. 33
5.14 Non-Solicitation.................................................. 33
5.15 Title Insurance................................................... 34
5.16 (Reserved.)....................................................... 34
5.17 Estoppel Certificates............................................. 34
5.18 (Reserved)........................................................ 35
5.19 UCC Searches...................................................... 35
5.20 Employee Benefit Plans............................................ 35
5.21 Pre-Closing Sale.................................................. 35
5.22 Change of Ameris Name............................................. 36
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE VI
CONDITIONS............................................................... 36
6.1 Conditions to Each Party's Obligation to Effect the Merger........ 36
6.2 Conditions to Obligation of Ameris to Effect the Merger........... 37
6.3 Conditions to Obligation of CCS to Effect the Merger.............. 38
ARTICLE VII
TERMINATION.............................................................. 41
7.1 Termination by Mutual Consent..................................... 41
7.2 Termination by Either CCS or Ameris............................... 41
7.3 Termination by Ameris............................................. 41
7.4 Termination by CCS................................................ 41
7.5 Effect of Termination and Abandonment............................. 41
7.6 Extension; Waiver................................................. 42
ARTICLE VIII
INDEMNIFICATION.......................................................... 42
8.1 Indemnification by Ameris......................................... 42
8.2 Indemnification by CCS............................................ 44
8.3 Procedure......................................................... 44
8.4 Survival of Representations....................................... 45
ARTICLE IX
GENERAL PROVISIONS....................................................... 46
9.1 Notices........................................................... 46
9.2 Assignment, Binding Effect; Benefit............................... 46
9.3 Entire Agreement.................................................. 46
9.4 Amendment......................................................... 46
9.5 Governing Law..................................................... 47
9.6 Counterparts...................................................... 47
9.7 Headings.......................................................... 47
9.8 Interpretation.................................................... 47
9.9 Waivers........................................................... 47
9.10 Incorporation of Exhibits......................................... 47
9.11 Severability...................................................... 47
9.12 Expenses.......................................................... 48
9.13 Enforcement of Agreement.......................................... 48
</TABLE>
iii
<PAGE> 5
ATTACHMENTS AND EXHIBITS
<TABLE>
<S> <C>
Ameris Disclosure Letter
Exhibit A ............................................. Articles of Merger
Exhibit B ............................................. Escrow Agreement
Exhibit C ............................................. Form of Estoppel Certificate
Exhibit D ............................................. Form of Smith of Georgia Note
Schedule 5.21(a) ...................................... Liabilities Assumed by Smith of Georgia
Schedule 5.21(b) ...................................... Assets and Liabilities Transferred to Ameris LLC
</TABLE>
iv
<PAGE> 6
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is executed as of
the 8th day of September, 1998, by and among Children's Comprehensive Services,
Inc., a Tennessee corporation ("CCS"), CCS Merger Sub, Inc., a newly formed
Tennessee corporation and wholly-owned subsidiary of CCS ("Merger Sub") and
Ameris Health Systems, Inc., a Tennessee corporation ("Ameris").
RECITALS
WHEREAS, the Boards of Directors of CCS and Ameris each have determined
that a business combination between CCS and Ameris is in the best interests of
their respective companies and shareholders and presents an opportunity for
their respective companies to achieve long-term strategic and financial
benefits, and accordingly have agreed to effect the merger provided for herein
upon the terms and subject to the conditions set forth herein; and
WHEREAS, Ameris owns all the outstanding capital stock of Ameris of
Georgia, Inc., a Georgia corporation ("Ameris of Georgia"), which operates Smith
Hospital, a 72-bed acute care hospital located in Hahira, Georgia ("Smith
Hospital"), and American Clinical Schools, Inc., a Delaware corporation
("American Clinical Schools"), a holding company that has no operational
activities, but which owns all the outstanding capital stock of Tennessee
Clinical Schools, Inc., a Tennessee corporation ("Tennessee Clinical Schools"),
which operates Hermitage Hall, a residential treatment program for adolescents
located in Nashville, Tennessee ("Hermitage Hall") and a group home for
adolescents located in Clarksville, Tennessee ("Clarksville Home"); Alabama
Clinical Schools, Inc., an Alabama corporation ("Alabama Clinical Schools"),
which operates a residential treatment program for adolescents located in
Birmingham, Alabama (the "Alabama Program"); and Pennsylvania Clinical Schools,
Inc., a Pennsylvania corporation ("Pennsylvania Clinical Schools"), which
operates or will operate a residential treatment program for adolescents located
in Philadelphia, Pennsylvania (the "Philadelphia Program").
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged
with and into Ameris in accordance with this Agreement and the separate
corporate existence of Merger Sub shall thereupon cease (the "Merger"). Ameris
shall be the surviving corporation in the Merger (sometimes hereinafter referred
to as the "Surviving Corporation"). The Merger shall have the effects specified
in Section 48-21-108 of the Tennessee Business Corporation Act (the "TBCA").
<PAGE> 7
1.2 The Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place at the offices of
Bass, Berry & Sims PLC, First American Center, Nashville, Tennessee, at 10:00
a.m. on September 9, 1998 or at such other time, date, or place as CCS and
Ameris may agree. The date on which the Closing occurs is hereinafter referred
to as the "Closing Date."
1.3 Effective Time. If all of the conditions to the Merger set forth in
Article VI shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article VII, the parties
hereto shall cause Articles of Merger, in the form attached hereto as Exhibit A,
to be properly executed and filed in accordance with the applicable provisions
of the TBCA on the Closing Date. The Merger shall become effective at the time
of filing of the Articles of Merger with the Secretary of State of the State of
Tennessee or at such later time that the parties hereto shall have agreed upon
and designated in such filing as the effective time of the Merger (the
"Effective Time").
1.4 Charter. The Charter of Merger Sub in effect immediately prior to
the Effective Time shall be the Charter of the Surviving Corporation, until duly
amended in accordance with applicable law.
1.5 Bylaws. The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until duly
amended in accordance with applicable law.
1.6 Directors. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time.
1.7 Officers. The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time.
ARTICLE II
CONVERSION OF AMERIS SHARES
2.1 Conversion of Ameris Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of the shareholders of Ameris (the
"Ameris Shareholders"), all of the Outstanding Ameris Shares shall be converted
into and become fully exchangeable for the right to receive the Merger
Consideration, subject to the terms of this Article II, and all such Outstanding
Ameris Shares, when so converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate or certificates representing any such shares will cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration to be issued and paid in consideration therefor upon the surrender
2
<PAGE> 8
of such certificate or certificates in accordance with Section 2.3. For purposes
of this Agreement, the capitalized terms shall have the following definitions:
(a) "Outstanding Ameris Shares" shall mean all of the issued
and outstanding shares of Ameris Common Stock immediately prior to the
Effective Time, less Dissenting Shares.
(b) "Ameris Common Stock" shall mean the common stock, par
value $.01 per share, of Ameris.
(c) "Dissenting Shares" shall mean outstanding shares of
Ameris Common Stock, the holders of which have perfected their rights
to dissent to the Merger under the TBCA.
(d) "Merger Consideration" shall mean, subject to the
adjustments described in this Article II, the aggregate of $9,600,000
in cash, a portion of which shall be transferred into the Escrow Fund
as set forth in Section 2.4, and the balance of which shall be paid at
the Closing or thereafter, in accordance with the terms of Section 2.3.
2.2 (Reserved)
2.3 Exchange of Certificates. After the Effective Time, each holder of
an outstanding certificate or certificates theretofore representing Outstanding
Ameris Shares upon surrender thereof to CCS shall be entitled to receive in
exchange therefor such holder's pro rata share of the Merger Consideration,
subject to the terms of this Article II. Until so surrendered, each outstanding
certificate representing Outstanding Ameris Shares shall be deemed for all
purposes to represent the portion of Merger Consideration into which the
Outstanding Ameris Shares theretofore represented shall have been converted.
2.4 Escrow.
(a) At the Closing, pursuant to an Indemnity and Escrow
Agreement substantially in the form attached hereto as Exhibit B (the
"Escrow Agreement"), the parties shall establish an escrow comprised of
(i) $3,000,000, plus (ii) an amount of cash (which shall in no event
exceed $225,000) equal to 25% of the value of the accounts receivable
listed on Schedule 2.4, which schedule shall be prepared immediately
prior to the Closing and shall list those receivables which are, as of
such date, aged longer than 30 days (such receivables may hereafter be
referred to as the "Escrow Receivables," and the value of 25% of the
Escrow Receivables, which shall in no event exceed $225,000, the
"Receivable Escrow Amount"). The aggregate of $3,000,000 and the
Receivable Escrow Amount may hereafter be referred to as the "Escrow
Fund"). The Escrow Fund shall be maintained in escrow for the purposes
of (x) satisfying claims by CCS for indemnification under Article VIII,
(y) satisfying the
3
<PAGE> 9
post-closing adjustments described in Sections 2.5 and 2.6 (the
"Post-Closing Adjustments"), and (z) securing the payment of the Smith
of Georgia Note (as defined in Section 5.21). The "Escrow Period" shall
commence at the Effective Time, and shall continue until the earlier of
(1) the cessation of the indemnification obligations of the Ameris
Shareholders under Article VIII, and (2) the complete disbursement of
the Escrow Fund.
(i) Upon repayment in full of the Smith of Georgia Note, the
Escrow Agent (as hereafter defined) shall disburse from the
Escrow Fund to the Ameris Shareholders an aggregate amount
equal to the entire principal amount of the Smith of
Georgia Note. Upon partial repayment of the Smith of
Georgia Note, (A) the Escrow Agent shall disburse cash from
the Escrow Fund (1) to CCS in the amount of all principal
and interest which remains due and owing as of such date
under the Note, and (2) to the Ameris Shareholders, the
difference between the principal amount of the Smith of
Georgia Note and the disbursement to CCS in clause (1)
above; and (B) CCS shall assign the unpaid portion of the
Smith of Georgia Note to the Escrow Fund and have no
further rights to the Escrow Fund as it relates to
repayment of the Smith of Georgia Note.
(ii) Beginning upon the first anniversary of the Effective Time
and if the Smith of Georgia Note has not been paid, CCS
shall have the option to endorse to the order of the Escrow
Agent the Smith of Georgia Note in exchange for
disbursement from the Escrow Fund of all principal and
interest due and owing under the Smith of Georgia Note as
of such date. Thereafter, CCS shall have no further rights
to the Escrow Fund as it relates to repayment of the Smith
of Georgia Note.
(iii) Upon the 90th day following the Effective Time, the Escrow
Agent shall disburse from the Escrow Fund to the Ameris
Shareholders an aggregate amount equal to the excess (if
any), as of such date, of the Receivable Escrow Amount over
the value of the Escrow Receivables which have not been
collected by the Surviving Corporation as of such date.
(iv) Upon the 180th day following the Effective Time, the Escrow
Agent shall disburse from the Escrow Fund (A) to the Ameris
Shareholders an aggregate amount (if any) equal to the
remaining portion of the Receivable Escrow Amount less the
value of the Escrow Receivables which have not been
collected by the Surviving Corporation as of such date; and
(B) thereafter, to CCS an aggregate amount (if any) equal
to the balance of the Receivable Escrow Amount.
4
<PAGE> 10
(v) Upon the first anniversary of the Effective Time, the
escrow agent shall disburse from the Escrow Fund to the
Ameris Shareholders that amount of the Escrow Fund (if any)
in excess of the sum of (A) $250,000, plus (B) the amounts
of any claims for indemnification under Article VIII, to
the extent that said claims have been identified by CCS
with reasonable particularity and an estimated amount for
each such claim has been established which is commercially
reasonable, taking into consideration the type, magnitude
and probable outcome of such claim (it being understood
that the dispute resolution procedure described in Section
2.6(d) shall be utilized to resolve any disagreement
concerning the appropriate amount of Escrow Funds to be
held and not disbursed as the result of any such claim).
(vi) Upon the second anniversary of the Effective Time, the
escrow agent shall disburse from the Escrow Fund to the
Ameris Shareholders that amount of the Escrow Fund (if any)
in excess of the sum of (A) $100,000, plus (B) the amounts
of any claims for indemnification under Article VIII, to
the extent that said claims have been identified by CCS
with reasonable particularity and an estimated amount for
each such claim has been established which is commercially
reasonable, taking into consideration the type, magnitude
and probable outcome of such claim (it being understood
that the dispute resolution procedure described in Section
2.6(d) shall be utilized to resolve any disagreement
concerning the appropriate amount of Escrow Funds to be
held and not disbursed as the result of any such claim).
(vii) Upon receipt of any payments from Ameris LLC (as hereafter
defined) under the Smith of Georgia Note (as hereafter
defined) in excess of $2.5 million plus accrued interest
thereon, Ameris shall contribute such excess (less
applicable taxes) to the Escrow Agent, and the Escrow Agent
shall, within five business days, disburse said payments to
each Ameris Shareholder in proportion to his or her Pro
Rata Portion thereof (as hereafter defined).
(b) All disbursements set forth above shall be made by the
escrow agent under the Escrow Agreement (the "Escrow Agent") to each of
the Ameris Shareholders based upon such Ameris Shareholder's pro rata
share, as determined by such Ameris Shareholder's proportion of
Outstanding Ameris Shares owned immediately prior to the Effective Time
(the "Pro Rata Portion"). Upon expiration of the Escrow Period, and
subject to the terms of Section 2.4(c), the escrow agent under the
Escrow Agreement (the "Escrow Agent") shall deliver or cause to be
delivered to each Ameris Shareholder from the Escrow Fund such Ameris
Shareholder's Pro Rata Portion of the balance of the Escrow Fund
remaining at the expiration of the Escrow Period.
5
<PAGE> 11
(c) If, upon expiration of the Escrow Period, CCS shall have
asserted a claim for indemnity in accordance with the Escrow Agreement
and such claim is pending or unresolved at the time of such expiration,
or if, upon expiration of the Escrow Period, the Post-Closing
Adjustments remain unsettled, or if, upon expiration of the Escrow
Period, the Smith of Georgia Note has not been paid in full, the Escrow
Agent shall retain in escrow, and shall withhold from delivery to each
Ameris Shareholder, each Ameris Shareholder's Pro Rata Portion of the
value of the asserted amount of the claim, unsettled adjustment or
unpaid portion of the Smith of Georgia Note, until such matter is
resolved. If it is finally determined that CCS is entitled to recover
on account of such claim, unsettled adjustment, or unpaid portion of
the Smith of Georgia Note, the Escrow Agent shall deliver or cause to
be delivered to CCS that amount of cash from the Escrow Fund in the
aggregate equal to the amount due and payable with respect to such
claim, unsettled adjustment or unpaid portion of the Smith of Georgia
Note. The remainder of each Ameris Shareholder's Pro Rata Portion, if
any, following the delivery from the Escrow Fund of cash to CCS in
accordance with this Section 2.4(c) and the Escrow Agreement shall be
delivered to each Ameris Shareholder pursuant to this Agreement,
without interest. For purposes of this Section 2.4(c), a final
determination with respect to a claim will occur only as provided in
the Escrow Agreement.
(d) The right to receive cash from the Escrow Fund upon
expiration of the Escrow Period is an integral part of the Merger
Consideration, and shall not be transferable or assignable by, but
shall inure to the benefit of the heirs, representatives or estate of
any Ameris Shareholder.
(e) Michael G. Lindley shall be the agent and attorney-in-fact
for the Ameris Shareholders in connection with the Escrow Agreement,
and shall have the authority to act in each Ameris Shareholder's name
with respect to the Shareholders' rights and obligations under the
Escrow Agreement.
2.5 Post-Closing Adjustments. The Merger Consideration will be
increased or decreased, as applicable, in accordance with, at the times, and in
the manner set forth in this Section 2.5 and Section 2.6, as follows:
(a) Working Capital Adjustment.
(i) The term "Target Working Capital" shall mean an excess of
Current Assets over Current Liabilities in the amount of
$3,500,000. The term "Closing Date Working Capital" shall mean
the excess of Current Assets over Current Liabilities as of 12:01
a.m. on the day after the Closing Date (the "Adjustment Time").
6
<PAGE> 12
(ii) If Target Working Capital exceeds Closing Date Working
Capital, the Merger Consideration shall be reduced in accordance
with the terms of Section 2.6.
(iii) As used in this Agreement, "Current Assets" means the
Retained Receivables, as hereinafter defined, and rights to
government proceeds (net of allowances for uncollectibility),
prepaid expenses, and other current assets included within the
assets of Ameris determined in accordance with GAAP consistently
applied. "Current Liabilities" means current liabilities of Ameris
determined in accordance with GAAP consistently applied, including,
without limitation, (A) appropriate accruals for bonus and
severance pay (including, without limitation, an accrual for 75%
of the expense incurred by Ameris in connection with the Severance
and Release Agreement between Ameris and David C. Perrine, dated
on or about even date herewith, but excluding the balance of said
expense), vacation pay, sick pay, paid time off, unpaid health
insurance claims and other unpaid employee benefits; and (B)
unless paid by Ameris prior to the Closing Date, appropriate
accruals for the procurement of tail insurance, title insurance
and UCC searches as required herein, legal, accounting, and other
costs and expenses incurred by Ameris in connection with the
negotiation and execution of this Agreement; and (C) the
outstanding balance, as of the Adjustment Time, under that certain
revolving loan agreement, dated July 2, 1997, between Ameris and
Health Care Financing Partners, Inc. ("HCFP").
(b) Excess Hospital Transfer Tax Adjustment.
(i) The term "Excess Hospital Transfer Tax" shall mean the
amount of liability for any Tax, as defined in Section 3.9(a),
incurred by Ameris in connection with the Hospital Transfer, as
defined in Section 5.21(a), in excess of $800,000.
(ii) The Merger Consideration shall be reduced by the amount of
Excess Hospital Transfer Tax in accordance with the provisions of
Section 2.6.
2.6 Preliminary and Final Settlements. Preliminary and final
adjustments to the Merger Consideration will be determined as follows:
7
<PAGE> 13
(a) At least three business days prior to the Closing Date,
Ameris will deliver to CCS a report (the "Preliminary Adjustments
Report"), prepared by Ameris in good faith and on a reasonable basis,
setting forth in reasonable detail (i) a pro forma determination as of
the Adjustment Time of the Current Assets and Current Liabilities, (ii)
an estimate of the Excess Hospital Transfer Tax, and (ii) the
corresponding adjustments to the Merger Consideration pursuant to
Section 2.5. The compliance of the Preliminary Adjustments Report with
the provisions of the first sentence of this Section 2.6(a) shall be
certified by an appropriate officer of Ameris as of the date it is
delivered. Based on the Preliminary Adjustments Report, the Merger
Consideration will be adjusted on the Closing Date in accordance with
the provisions of Section 2.5.
(b) Within 60 days after the Closing Date, CCS will deliver to
Ameris a report (the "Final Adjustments Report"), prepared by CCS in
good faith and on a reasonable basis, setting forth in reasonable
detail the final determination of the adjustments set forth in Section
2.5. The Final Adjustments Report shall make such changes to the
Preliminary Adjustments Report as are necessary to cover those
adjustments which (i) were estimated or were not calculable as of the
Adjustment Time in the Preliminary Adjustments Report, or (ii) were
adjusted in the Preliminary Adjustments Report and that require
subsequent adjustment. The compliance of the Final Adjustments Report
with the provisions of this Section 2.6(b) shall be certified by the
chief financial officer of CCS as of the date it is delivered.
(c) Within 30 days after receipt of the Final Adjustments
Report, Ameris shall review the Final Adjustments Report and notify CCS
in writing whether or not Ameris accepts all or any of the adjustments
set forth on the Final Adjustments Report. If Ameris accepts the Final
Adjustments Report with respect to all adjustments contained therein,
within five business days of such acceptance, the following adjustments
shall be made: (i) if the Merger Consideration calculated based on the
Final Adjustments Report is greater than the Merger Consideration
calculated based on the Preliminary Adjustments Report, CCS shall be
required promptly to pay into the Escrow Fund, an amount of cash equal
to the amount of such excess; or (ii) if the Merger Consideration
calculated based on the Final Adjustments Report is less than the
Merger Consideration calculated based on the Preliminary Adjustments
Report, CCS shall be entitled promptly to be paid the amount of such
deficiency from the Escrow Fund.
(d) If Ameris in good faith objects to any adjustments set
forth on the Final Adjustments Report, Ameris shall give notice thereof
to CCS in writing within 30 days after receipt of the Final Adjustments
Report, specifying in reasonable detail the nature and extent of such
disagreement and CCS and Ameris shall have a period of 30 days from
CCS's receipt of such notice in which to resolve such disagreement. If
such notice of objection is not received by CCS within 30 days after
receipt of the Final Adjustments Report, it shall be
8
<PAGE> 14
deemed that Ameris has accepted the Final Adjustments Report with
respect to all items set forth therein and within three business days
after the expiration of such 30 day period CCS shall make the payment
to the Escrow Fund described in Section 2.6(c) or be entitled to be
paid out of the Escrow Fund as described in Section 2.6(c), as
applicable. Any disputed amounts which cannot be agreed to by the
parties within 30 days from CCS's receipt of Ameris's notice of
objection to any of the adjustments set forth in the Final Adjustments
Report shall be determined by the Nashville office of the accounting
firm of Ernst & Young, LLP ("E&Y"). The engagement of and the
determination by E&Y (or any other accounting firm designated by E&Y as
set forth below) shall be completed within 60 days after such
assignment is given to E&Y and shall be binding on and shall be
nonappealable by Ameris and CCS. If for any reason E&Y is unable to act
in such capacity, such determination will be made by any other
nationally recognized accounting firm, independent of both Ameris and
CCS, selected by the Nashville office of E&Y. The fees and expenses
payable to E&Y (or any other accounting firm designated by E&Y) in
connection with such determination will be borne 50% by the Ameris
Shareholders and 50% by CCS (the Ameris Shareholders' fees to be paid
out of the Escrow Fund, and applied against each Ameris Shareholder's
Pro Rata Portion).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AMERIS
Ameris represents, warrants, and agrees as follows:
3.1 Existence; Good Standing; Corporate Power and Authority,
Pre-Closing Sale.
(a) Ameris is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Tennessee. The
disclosure letter delivered prior to the execution hereof to CCS (the
"Ameris Disclosure Letter") sets forth the name and jurisdiction of
each corporation, partnership or other entity of which at least a
majority of the voting power of any class or interest is owned directly
or indirectly, as of the date of this Agreement, by Ameris (each, an
"Ameris Subsidiary" and collectively, the "Ameris Subsidiaries"). Each
Ameris Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its state of incorporation.
Ameris and each Ameris Subsidiary are duly licensed or qualified to do
business as foreign corporations and are in good standing under the
laws of any state of the United States in which the character of the
properties owned or leased by them therein or in which the transaction
of business makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on
the business, results of operations, prospects or conditions
(financial or otherwise) of Ameris or any Ameris Subsidiary (an "Ameris
Material Adverse Effect"). Ameris and each Ameris Subsidiary have all
requisite corporate power and
9
<PAGE> 15
authority to own, operate, and lease their respective properties and to
carry on their respective businesses as now conducted. Ameris has
provided to CCS complete and correct copies of its charter and bylaws
and the corresponding constituent documents of each Ameris Subsidiary,
each of which is in full force and effect. At the time of the Closing,
Ameris will be a holding company with no operational activities.
(b) As contemplated by Section 5.21, prior to the Closing, Ameris
shall have consummated the Pre-Closing Sale, as hereinafter defined.
As used in this Agreement, the term Ameris Subsidiaries shall be
deemed in all instances (unless specifically excepted) to include
Ameris of Georgia, notwithstanding the Pre-Closing Sale. In addition,
as used herein, the following terms shall have the following meanings:
(i) "Transferred Business" shall mean (A) the operation of the
Smith Hospital, and (B) the business comprised by the Management
Contracts, as hereinafter defined, and the assets listed on
Schedule 5.21(b).
(ii) "Retained Business" shall mean all businesses of Ameris
other than the Transferred Business, specifically including
Hermitage Hall, the Clarksville Home, the Alabama Program and the
Philadelphia Program.
(iii) "Transferred Assets" shall mean (A) all of the assets of
Ameris of Georgia, the Management Contracts and the assets set
forth on Schedule 5.21(b).
(iv) "Retained Assets" shall mean all Assets, as hereinafter
defined, other than the Transferred Assets.
(c) None of the Transferred Assets are employed in connection
with the operation of the Retained Business.
3.2 Authorization, Validity and Effect of Agreements. Ameris has the
full corporate power and authority to execute and deliver this Agreement and all
agreements and documents contemplated hereby, and to consummate the transactions
contemplated hereby, including, without limitation, the Pre-Closing Sale. This
Agreement, Merger and the Pre-Closing Sale have been approved by Ameris' Board
of Directors and, subject to approval by the Ameris Shareholders, the
consummation by Ameris of the transactions contemplated hereby has been duly
authorized by all requisite corporate action. This Agreement constitutes, and
all agreements and documents contemplated hereby (when executed and delivered
pursuant hereto) will constitute, the valid and legally binding obligations of
Ameris, enforceable in accordance with their respective terms.
3.3 Capitalization. As of August 17, 1998, the authorized capital stock
of Ameris consists of 5,000,000 shares of Ameris Common Stock, 1,177,846 shares
of which are issued and
10
<PAGE> 16
outstanding and owned beneficially and of record by the Ameris Shareholders as
set forth in the Ameris Disclosure Letter. Ameris has no outstanding capital
stock, bonds, debentures, notes or other obligations, the holders of which have
the right to vote (or which are convertible into or exercisable for securities
having the right to vote) with the shareholders of Ameris on any matter. All
issued and outstanding shares of Ameris Common Stock are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. Except
as set forth in the Ameris Disclosure Letter, there are no options, warrants,
calls, subscriptions, convertible securities or other rights, agreements or
commitments that obligate Ameris to issue, transfer or sell any shares of its
capital stock. None of the outstanding shares of Ameris Common Stock are subject
to any voting trust agreement, lien, encumbrance, security interest, restriction
or claim. Each of the outstanding shares of capital stock of each corporate
Ameris Subsidiary is duly authorized, validly issued, fully paid, nonassessable
and free of any preemptive rights. Each of the outstanding shares of capital
stock of Ameris of Georgia and American Clinical Schools is owned beneficially
and of record by Ameris, free and clear of all liens, pledges, security
interests or encumbrances. Each of the outstanding shares of capital stock of
Tennessee Clinical Schools, Alabama Clinical Schools and Pennsylvania Clinical
Schools is owned beneficially and of record by American Clinical Schools free
and clear of all liens, pledges, security interests or encumbrances. There are
no options, warrants, calls, subscriptions, convertible securities or other
rights, agreements or commitments that obligate any Ameris Subsidiary to issue,
transfer or sell any of its equity interests.
3.4 Other Interests. Neither Ameris nor any Ameris Subsidiary owns,
directly or indirectly, or has any obligation to acquire any interest or
investment in any corporation, partnership, joint venture, business, trust or
other entity, except for Ameris' ownership interest in Ameris of Georgia and
American Clinical Schools, and American Clinical Schools' ownership interest in
Tennessee Clinical Schools, Alabama Clinical Schools and Pennsylvania Clinical
Schools.
3.5 Prior Sales of Securities. All offers and sales of Ameris Common
Stock prior to the date hereof were at all relevant times exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and were duly registered or the subject of an available
exemption from the registration requirements of the applicable state securities
or Blue Sky laws, or the relevant statutes of limitations have expired, or civil
liability therefor has been eliminated by an offer to rescind.
3.6 No Violation. Except as set forth in the Ameris Disclosure Letter,
neither the execution and delivery by Ameris of this Agreement nor the
consummation by Ameris of the transactions contemplated hereby, including
without limitation, the Pre-Closing Sale, in accordance with the terms hereof,
will: (a) conflict with or result in a breach of any provision of the charter or
bylaws of Ameris or an Ameris Subsidiary; (b) conflict with, result in a breach
of any provision of, or the modification or termination of, constitute a default
under, or result in the creation or imposition of any lien, security interest,
charge or encumbrance upon any of the assets of Ameris or any Ameris Subsidiary
pursuant to any material commitment, lease, contract or other material
11
<PAGE> 17
agreement or instrument to which Ameris or any Ameris Subsidiary is a party
(including without limitation "Material Contracts" as defined below); or (iii)
violate or result in a change in any rights or obligations under any
governmental permit or license or any order, arbitration award, judgment, writ,
injunction, decree, statute, rule or regulation applicable to Ameris or any
Ameris Subsidiary.
3.7 Financial Statements. Prior to the date hereof, Ameris has
delivered to CCS its audited consolidated financial statements for the year
ended February 28, 1998 ("Audited Statements") and its unaudited consolidated
financial statements for the four months ended June 30, 1998 (the "June 30
Statements" and, together with the Audited Statements, the "Financial
Statements"). Each of the balance sheets provided to CCS by Ameris (including
the balance sheet dated February 28, 1998 (the "Balance Sheet") and including
the related notes and schedules) fairly presents the financial position of
Ameris as of their respective dates and each of the statements of income,
stockholders' equity and cash flows provided to CCS by Ameris (including any
related notes and schedules) fairly presents the results of operations,
stockholders' equity and cash flows of Ameris for the periods set forth therein
(subject, in the case of the June 30 Statements, to the absence of notes and to
normal year-end audit adjustments, none of which will be material in amount or
effect), in each case in accordance with generally accepted accounting
principles consistently applied, except as may be noted therein. The Financial
Statements have been prepared from the books and records of Ameris, which
accurately and fairly reflect the transactions and the acquisitions and
dispositions of the assets of Ameris. Except as set forth in the Ameris
Disclosure Letter, as of the date hereof, Ameris does not have any liabilities
contingent or otherwise, whether due or to become due, known or unknown, other
than as indicated on the June 30 balance sheet.
3.8 No Material Adverse Changes. Since June 30, 1998, there has not
been (a) any material adverse change in the financial condition, results of
operations, business, prospects, assets or liabilities (contingent or otherwise,
whether due or to become due, known or unknown), of Ameris or the Ameris
Subsidiaries; (b) any dividend declared or paid or distribution made on the
capital stock of Ameris, or any capital stock thereof redeemed or repurchased;
(c) any incurrence by Ameris or any Ameris Subsidiary of any funded
indebtedness; (d) any salary, bonus or compensation increases to any officers,
employees or agents of Ameris or any Ameris Subsidiary; (e) any pending or
threatened labor disputes or other labor problems against or potentially
affecting Ameris or any Ameris Subsidiary; or (f) any other transaction entered
into by Ameris or any Ameris Subsidiary, except in the ordinary course of
business and consistent with past practice; provided, however, that on or prior
to the Closing Date, Ameris shall have effected the Pre-Closing Sale.
3.9 Tax Matters.
(a) For purposes of this Agreement, (i) "Affiliated Group" means
any affiliated group within the meaning of Code Section 1504(a) or any
similar group defined under a similar provision of state, local or
foreign law; (ii) "Tax" means any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp,
12
<PAGE> 18
occupation, premium, windfall profits, environmental (including taxes
under Section 59A of the Code), customs duties, capital stock,
franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not; and (iii) "Tax
Return" means any return report, information return, or other document
(including any related or supporting information) filed or required to
be filed with any taxing authority in connection with its
determination, assessment, collection, administration or imposition of
any Tax.
(b) Except as disclosed on the Financial Statements, Ameris
and each Ameris Subsidiary have duly and timely filed all Tax Returns
and have duly and timely paid all Taxes and other charges (whether or
not shown on any Tax Return) due or claimed to be due from any of them
by federal, foreign, state or local taxing authorities. True and
correct copies of all Tax Returns relating to federal taxes and state
income and sales taxes and other charges for the period from
organization through December 31, 1997, have been heretofore made
available to CCS. The accruals and reserves for Taxes contained in the
Financial Statements and carried on the books of Ameris and each Ameris
Subsidiary (other than any reserve for deferred taxes established to
reflect timing differences between book and tax income) are adequate to
cover all Tax liabilities. Since December 31, 1997, neither Ameris nor
any Ameris Subsidiary has incurred any Tax liabilities other than in
the ordinary course of business. There are no Tax liens (other than
liens for current Taxes not yet due) upon any properties or assets of
Ameris or any Ameris Subsidiary (whether real, personal or mixed,
tangible or intangible), and, except as reflected in the Ameris
Disclosure Letter there are no pending or, to the knowledge of Ameris
threatened, audits or examinations relating to, or claims asserted for,
Taxes or assessments against Ameris or any Ameris Subsidiary, and there
is no basis for any such claim. Neither Ameris nor any Ameris
Subsidiary has granted or been requested to grant any extension of the
limitation period applicable to any claim for Taxes or assessments with
respect to Taxes. Neither Ameris nor any Ameris Subsidiary is a party
to any Tax allocation or sharing agreement. Neither Ameris nor any
Ameris Subsidiary (A) has been a member of an Affiliated Group filing a
consolidated federal income tax return (other than a group the common
parent of which was Ameris), or (B) has any liability for the Taxes of
any person other than any of Ameris and the Ameris Subsidiaries under
Treasury Regulation ss. 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract or
otherwise. Ameris and each Ameris Subsidiary have withheld and paid all
Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor
or shareholder.
(c) The Ameris Disclosure Letter lists each jurisdiction in
which Ameris or any Ameris Subsidiary files Tax Returns for each period
or portion thereof ending on or before
13
<PAGE> 19
the Closing Date. Except as set forth in the Ameris Disclosure Letter,
there is no claim outstanding against Ameris or any Ameris Subsidiary
by any taxing authority in a jurisdiction where Ameris or any Ameris
Subsidiary does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction.
(d) All material elections with respect to Taxes affecting Ameris
or any Ameris Subsidiary as of the date hereof are set forth in the
Ameris Disclosure Letter.
(e) All joint ventures, partnerships or other arrangements or
contracts to which Ameris or any Ameris Subsidiary is a party and that
could be treated as a partnership for federal income tax purposes are
set forth in the Ameris Disclosure Letter.
(f) Neither Ameris nor any Ameris Subsidiary (i) has filed a
consent pursuant to Section 341(f) of the Code nor agreed to have
Section 341(f)(2) apply to any disposition of a subsection (f) asset
(as such term is defined in Section 341(f) of the Code) owned by Ameris
or any Ameris Subsidiary; (ii) has agreed, or is required to agree, to
make any adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise that will affect the liability
of Ameris or any Ameris Subsidiary for Taxes; (iii) has made an
election, or is required to make an election, to treat any asset of
Ameris or any Ameris Subsidiary as owned by another person pursuant to
the provisions of former Section 168(f)(8) of the Code or as tax-exempt
bond financed property or tax-exempt use property within the meaning of
Section 168 of the Code; (iv) has made any of the foregoing elections
or is required to apply any of the foregoing rules under any comparable
state or local tax provision; or (v) has been a United States real
property holding corporation within the meaning of Code ss. 897(c)(2)
during the applicable period specified in Code ss. 897(c)(1)(A)(ii).
(g) The Ameris Disclosure Letter sets forth the following
information with respect to each of Ameris and each Ameris Subsidiary
as of the most recent practicable date (as well as on an estimated pro
forma basis as of the Closing giving effect to the consummation of the
transactions contemplated hereby): (A) the basis of the Ameris or
Ameris Subsidiary in its assets; (B) the basis of the stockholder(s) of
each Ameris Subsidiary in its stock (or the amount of any Excess Loss
Account); (C) the amount of any net operating loss, net capital loss,
unused investment, foreign tax or other credit or excess charitable
contribution allocable to Ameris or any Ameris Subsidiary; and (D) the
amount of any deferred gain or loss allocable to Ameris or any Ameris
Subsidiary arising out of any deferred intercompany transaction (as
that term is used in Treasury Regulations ss. 1.1502-13).
3.10 Employees and Fringe Benefit Plans.
14
<PAGE> 20
(a) The Ameris Disclosure Letter sets forth the names, ages
and titles of (i) all members of the Board of Directors and officers of
Ameris and each Ameris Subsidiary and (ii) all employees of Ameris and
each Ameris Subsidiary earning in excess of $30,000 per year, and the
annual rate of compensation (including bonuses) being paid to each such
officer and employee as of the most recent practicable date.
(b) The Ameris Disclosure Letter lists each employment, bonus,
deferred compensation, pension, stock option, stock appreciation right,
profit-sharing or retirement plan, arrangement or practice, each
medical, vacation, retiree medical, severance pay plan and each other
agreement or fringe benefit plan, arrangement or practice, of Ameris
and the Ameris Subsidiaries, whether legally binding or not, that
affects one or more employees of Ameris or an Ameris Subsidiary,
including all "employee benefit plans" as defined by Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended
("ERISA") (collectively, the "Plans"). Neither Ameris nor any Ameris
Subsidiary has, sponsors, nor participates in any Plan that is subject
to Title IV of ERISA or the minimum funding standards of Section 412 of
the Code.
(c) For each Plan that is an "employee benefit plan" under
Section 3(3) of ERISA, Ameris has delivered to CCS correct and complete
copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the Internal Revenue Service,
the most recent Form 5500 Annual Report and all related trust
agreements, insurance contracts and funding agreements that implement
each such Plan.
(d) Neither Ameris nor any Ameris Subsidiary has any
commitment, whether formal or informal and whether legally binding or
not, (i) to create any additional Plan; (ii) to modify or change any
Plan; or (iii) to maintain for any period of time any Plan. The Ameris
Disclosure Letter contains an accurate and complete description of the
funding policies (and commitments, if any) with respect to each
existing Plan.
(e) Neither Ameris nor any Ameris Subsidiary has any unfunded
past service liability in respect of any Plans; neither Ameris, nor any
Ameris Subsidiary, nor any Plan nor any trustee, administrator,
fiduciary or sponsor of any Plan has engaged in any prohibited
transaction as defined in Section 406 of ERISA or Section 4975 of the
Code for which there is no statutory exemption in Section 408 of ERISA
or Section 4975 of the Code; all filings, reports and descriptions as
to such Plans (including Form 5500 Annual Reports, summary plan
descriptions, and summary annual reports) required to have been made or
distributed to participants, the Internal Revenue Service, the United
States Department of Labor or other governmental agencies have been
made in a timely manner or will be made on or prior to the Closing
Date; there is no material litigation, disputed claim, governmental
proceeding or investigation pending or threatened with respect to any
of the Plans, the related trusts or any fiduciary, trustee,
administrator or sponsor of the Plans; the Plans have been established,
15
<PAGE> 21
maintained and administered in all material respects in accordance with
their governing documents and applicable provisions of ERISA and the
Code and Treasury Regulations promulgated thereunder; and each Plan
that is intended to be a qualified plan under Section 401(a) of the
Code has received a favorable determination letter from the Internal
Revenue Service with respect to the current terms of the Plan.
(f) Ameris and each of the Ameris Subsidiaries have complied
in all respects with all applicable federal, state, and local laws,
rules, and regulations relating to employees' employment and employment
relationships, including, without limitation, wage related laws,
anti-discrimination laws, employee safety laws, and COBRA (defined
herein to mean the requirements of Code Section 4980B, Proposed
Treasury Regulation Section 1.162-26, and Part 6 of Subtitle B of
Title I of ERISA).
(g) Except as set forth in the Ameris Disclosure Letter, the
consummation of the transactions contemplated by this Agreement,
including, without limitation, the Pre-Closing Sale, will not (i)
result in the payment or series of payments by Ameris or any Ameris
Subsidiary to any employee or other person of an "excess parachute
payment" within the meaning of Section 280G of the Code; (ii) entitle
any employee or former employee of Ameris or any Ameris Subsidiary to
severance pay, unemployment compensation, or any other payment; or
(iii) accelerate the time of payment or vesting of any stock option,
stock appreciation right, deferred compensation, or other employee
benefits under any Plan (including vacation and sick pay).
(h) None of the Plans that are "welfare benefit plans" within
the meaning of Section 3(1) of ERISA provide for continuing benefits or
coverage after termination or retirement from employment, except for
COBRA rights under a "group health plan" as defined in Code Section
4980B(g) and ERISA Section 607.
(i) Neither Ameris nor any Ameris Subsidiary, nor any member
in a "controlled group" (as defined in ERISA) with Ameris or an Ameris
Subsidiary has ever contributed to, participated in, or withdrawn from
a multi-employer plan as defined in Section 4001(a)(3) of Title IV of
ERISA, and neither Ameris nor any Ameris Subsidiary has incurred or
owes any liability as a result of any partial or complete withdrawal by
any employer from such a multi-employer plan as described under
Sections 4201, 4203, or 4205 of ERISA.
(j) No pension plan of Ameris or any Ameris Subsidiary has
been completely or partially terminated, nor has any proceeding been
instituted by the Pension Benefit Guaranty Corporation ("PBGC") to
terminate any such pension plan; neither Ameris nor any Ameris
Subsidiary has incurred, nor does Ameris or any Ameris Subsidiary
presently owe, any liability to the PBGC or the Internal Revenue
Service with respect to any pension plan
16
<PAGE> 22
including, but not by way of limitation, any liability for PBGC
premiums or excise taxes under Code Section 4971.
3.11 Assets. At the date of this Agreement, Ameris owns, either
directly or indirectly through an Ameris Subsidiary, the assets (the "Assets")
reflected in the Balance Sheet, and at Closing, will own, either directly or
indirectly, through an Ameris Subsidiary, the Retained Assets reflected in the
Balance Sheet (in each case, including any patents, copyrights, trade names,
service marks, and other names and marks used in connection with its business,
and the leasehold estates described therein), with good and marketable title,
free and clear of any and all claims, liens, mortgages, options, charges,
conditional sale or title retention agreements, security interests,
restrictions, easements, or encumbrances whatsoever, and free and clear of any
rights or privileges capable of becoming claims, liens, mortgages, options,
charges, conditional sale or title retention agreements, securities interests,
restrictions, easements, or encumbrances, except those listed in the Ameris
Disclosure Letter. The buildings, plants, structures, and equipment owned or
leased by Ameris and the Ameris Subsidiaries are in good operating condition and
repair, and are adequate for the uses for which they are being put, and none of
such buildings, plants, structures, or equipment is in need of maintenance or
repairs except for ordinary and routine maintenance and repairs that are not
material in nature or cost. The Retained Assets are sufficient for the continued
conduct of the Retained Business after the Closing Date in substantially the
same manner as conducted prior to the Closing Date.
3.12 Accounts Receivable. All accounts receivable of Ameris that are
reflected on the Balance Sheet, other than those receivables which are
Transferred Assets (the "Transferred Receivables"), and on the accounting
records of Ameris as of the Closing Date (collectively, the "Retained
Receivables") represent or will represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of business.
Unless paid prior to the Closing Date, the Retained Receivables are or will be
as of the Closing Date current and collectible, net of the respective reserves
applicable to such Retained Receivables shown on the Balance Sheet or on the
accounting records of Ameris as of the Closing Date (which applicable reserves
are adequate and calculated consistent with past practice and, in the case of
the reserve as of the Closing Date, will not represent a greater percentage of
the Retained Receivables as of the Closing Date than the applicable reserve
reflected in the Balance Sheet and will not represent a material adverse change
in the composition of such Retained Receivables in terms of aging). Subject to
such applicable reserves, each of the Retained Receivables either has been or
will be collected in full, without any set-off, within one hundred eighty (180)
days after the day on which it first becomes due and payable. There is no
contest, claim, or right of set-off with any maker of an Retained Receivables
relating to the amount or validity of such Retained Receivables.
3.13 Lawful Operations. Ameris and each Ameris Subsidiary have been and
currently are duly conducting their respective businesses, and each of the
premises leased or owned by Ameris or any Ameris Subsidiary has been and now is
being used and operated, in material compliance with
17
<PAGE> 23
all applicable laws, whether statutory or otherwise, rules, regulations, orders,
ordinances, judgments, and decrees of all governmental authorities (federal,
state, local, or otherwise) (collectively, "Laws"). Neither Ameris nor the
Ameris Subsidiaries has received any notice of, or notice of any investigation
of, a possible violation of any applicable Laws, or any other Law or requirement
relating to or affecting the operations or the properties of Ameris and the
Ameris Subsidiaries.
3.14 Litigation. Except as disclosed in the Ameris Disclosure Letter,
there is no claim, suit, action, proceeding, or investigation pending or, to the
knowledge of Ameris, threatened against or affecting Ameris, any Ameris
Subsidiary, or any of their respective assets, at law or in equity, or before
any federal or state commission, board, bureau, agency, or instrumentality.
Ameris does not know of any basis for any such claim, suit, action, proceeding,
or investigation. Neither Ameris nor any Ameris Subsidiary is subject to any
currently existing order, writ, injunction, or decree relating to its respective
operations.
3.15 Licenses; Permits; Authorizations. The Ameris Disclosure Letter
sets forth (i) a complete list of all material approvals, authorizations,
consents, licenses, certificates of need, orders, and permits (hereinafter
sometimes collectively referred to as the "Permits") of all governmental
agencies, instrumentalities, or bodies, whether federal, state, or local,
required by the nature of the Retained Business to permit the continued
operations thereof in the manner in which it is being conducted as of the date
hereof, and (ii) a description, with respect to each Permit, of any consent,
notice, or other action required to consummate the transactions contemplated by
this Agreement. Each of the Permits is in full force and effect; and no
proceedings or actions with respect to the suspension or cancellation of any
Permit is pending or, to the knowledge of Ameris, threatened, and no basis
exists therefor. Except as set forth in the Ameris Disclosure Letter, to the
knowledge of Ameris, employee or independent contractor of Ameris or the Ameris
Subsidiaries required to be licensed by any applicable governmental agency has
ever had such license denied, revoked, restricted, suspended, conditioned,
placed on probation nor, is such action contemplated or threatened.
3.16 Regulatory Consents. Except as set forth in the Ameris Disclosure
Letter, no consent, approval, order or authorization of, or registration,
declaration or filing with, any governmental entity is required by or with
respect to Ameris or any Ameris Subsidiary in connection with the execution and
delivery of this Agreement by Ameris or the consummation by Ameris of the
transactions contemplated hereby, including, without limitation, the Pre-Closing
Sale.
3.17 Reimbursement and Program Compliance.
(a) Neither Ameris nor the Ameris Subsidiaries have engaged in
any activity or contractual relationship in violation of 42 C.F.R.
Section 424.22 (d), the False Claims Act (31 U.S.C. Section 3729), the
Health Insurance Portability and Accountability Act of 1996, Pub.L.No.
104-191, 110 Stat. 1936 (1996), the Fraud and Abuse provisions of
Section 1128B
18
<PAGE> 24
of the Social Security Act, the Medicare and Medicaid Patient and
Program Protection Act of 1987 (42 U.S.C. Section 1320a-7b), Section
1877 of the Medicare Act (42 U.S.C. Section 1395nn)(the Stark
anti-referral amendments), as amended, or any directives, rules, or
regulations thereunder promulgated by the U.S. Department of Health and
Human Services, or any comparable rules and regulations promulgated by
and other federal or state agency; or, which results in the
over-utilization of health care services by patients or improper denial
of health care services to patients.
(b) Neither Ameris nor the Ameris Subsidiaries, nor any
manager or employee thereof, nor to the knowledge of Ameris or the
Ameris Subsidiaries, any agent acting on behalf of or for the benefit
of any thereof, has directly or indirectly (i) offered or paid any
remuneration, in cash or in kind to, or made any financial arrangements
with, any past or present customers, past or present suppliers,
contractors or third party payors of Ameris or the Ameris Subsidiaries
to obtain business or payments from such person, other than
entertainment activities in the ordinary and lawful course of business;
(ii) given or agreed to give, or is aware that there has been made or
that there is any agreement to make, any gift or gratuitous payment of
any kind, nature or description (whether in money, property or
services) to any customer or potential customer, supplier or potential
supplier, contractors, third party payor or any other person, other
than in connection with promotional or entertainment activities in the
ordinary and lawful course of business; (iii) made or agreed to make,
or is aware that there has been made or that there is any agreement to
make, any contribution, payment or gift of funds or property to, or for
the private use of, any governmental official, employee or agent, where
the contribution, payment or gift is or was illegal under applicable
laws; (iv) established or maintained any unrecorded fund or asset for
any purpose, or made any false or artificial entries on any of its
books or records for any reason; or (v) made, or agreed to make, or is
aware that there has been made or that there is any agreement to make,
any payment to any person with the intention or understanding that any
part of such payment would be used for any purpose other than that
described in the documents supporting such payment.
(c) Except as set forth in the Ameris Disclosure Letter,
neither Ameris nor the Ameris Subsidiaries, nor any manager or employee
thereof, is or has been a party to any contract, lease agreement, or
arrangement, including, but not limited to, any joint venture or
consulting agreement with any physician, hospital, nursing facility,
home health agency, or other person who is in a position to make or
influence referrals to or otherwise generate business for Ameris or the
Ameris Subsidiaries to provide services, lease space, lease equipment,
or engage in any other venture activity.
(d) The billing practices by Ameris and the Ameris
Subsidiaries to all third party payors, including, but not limited to,
the federal Medicare program, state Medicaid programs, and private
insurance companies, have been true, fair, and correct and in
compliance in all
19
<PAGE> 25
material respects with all applicable laws, regulations, and policies
of all such third party payors, and neither Ameris nor the Ameris
Subsidiaries billed for or received any payment or reimbursement in
excess of amounts allowed by law. Ameris and the Ameris Subsidiaries
have timely filed all requisite claims and other reports required to be
filed in connection with all Medicare and Medicaid programs due on or
before the date hereof, which claims and reports are complete and
correct. There are no claims, actions, payment reviews, or appeals
pending or threatened before any commission, board, or agency,
including, without limitation, any intermediary or carrier, the
Administrator of the Health Care Financing Administration, or any
applicable state program, with respect to any Medicare or Medicaid
claims filed by Ameris or the Ameris Subsidiaries on or before the date
hereof or program compliance matters that would adversely affect
Ameris, the Ameris Subsidiaries, their respective assets and
businesses, or the consummation of the transactions contemplated
hereby. No validation review or program integrity review related to
Ameris or the Ameris Subsidiaries has been conducted by any commission,
board, or agency in connection with the Medicare or Medicaid program,
and no such reviews are scheduled, pending, or threatened against or
affecting Ameris, the Ameris Subsidiaries, or the consummation of the
transactions contemplated hereby.
3.18 Corporate Records; Other Information. The minute books of Ameris
and each Ameris Subsidiary, copies of which have been provided to CCS, reflect
all meetings of the boards of directors, committees of the boards of directors,
and the shareholders thereof.
3.19 Intellectual Property Rights. Ameris, directly or indirectly, owns
or possesses the right to use all trademarks, service marks, trade names,
slogans, copyrights in published and unpublished works, patents, patent
applications, inventions and discoveries that may be patentable, rights in mask
works, and all trade secrets it currently uses without any conflict or alleged
conflict with the rights of others, except where any such conflict would not
have an Ameris Material Adverse Effect. All copyrights have been registered and
are currently in compliance with formal legal requirements, are valid and
enforceable, and are not subject to any maintenance fees, taxes, or actions
falling due within ninety days after the Closing Date. No copyright is infringed
or has been challenged or, to the knowledge of Ameris, threatened in any way.
None of the subject matter of any copyright infringes or is alleged to infringe
any copyright of any third party or is a derivative work based on the work of a
third party. To the knowledge of Ameris, works encompassed by a copyright have
been marked with the proper copyright notice. Prior to the Closing Date, all
rights to the name "Ameris" will be transferred to Ameris LLC in connection with
the Pre-Closing Sale.
3.20 Hazardous Substances.
For the purposes of this Section 3.20 the following terms shall have
the following meanings:
20
<PAGE> 26
"Environmental Laws" shall mean any federal, state or local statute,
rule, regulation, ordinance, code, or rule of common law now in effect and as
amended, and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent, decree or judgment, relating to
the environment, public or employee health or safety, or hazardous, toxic or
dangerous materials, substances or wastes, including without limitation the
federal Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. ss.ss. 9601 et seq.; the Toxic Substances Control Act, as amended, 15
U.S.C. ss.ss. 2601, et seq.; the Clean Air Act, as amended, 42 U.S.C. ss.ss.
7401, et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C.
ss.ss. 1251, et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act,
as amended, 7 U.S.C. ss.ss. 136, et seq.; the Hazardous Materials Transportation
Act, as amended, 49 U.S.C. ss.ss. 1801, et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. ss.ss. 6901, et seq.; the Safe Drinking
Water Act, as amended, 42 U.S.C. ss.ss. 300(f) et seq.; the federal Occupational
Safety & Health Act, as amended, 29 U.S.C. ss.ss. 651, et seq.; the federal
Emergency Planning and Community Right-to-Know Act, as amended, 42 U.S.C. ss.ss.
11001, et seq.; and any similar state or local law.
"Hazardous Materials" shall mean those materials listed in Section
101(14) of CERCLA, as defined above, and any other substance, material or waste
defined and/or regulated as toxic or hazardous under any Environmental Law,
including, but not limited to:
(a) any petroleum, petroleum hydrocarbons, petroleum by-products, waste
oil, used oil (and any constituent thereof to the extent regulated under any
Environmental Law), medical waste, special waste, industrial waste, flammable
explosive, radioactive materials, asbestos, asbestos products, urea formaldehyde
foam insulation, polychlorinated biphenyls, and radon gas; and
(b) any other chemical, material or substance, exposure to which is
prohibited, limited or regulated by any governmental authority pursuant to an
Environmental Law.
Except as set forth in the Ameris Disclosure Letter:
(c) Ameris, any Ameris Subsidiary, and any real property at any time
owned, leased, operated or used by Ameris or any Ameris Subsidiary (for purposes
of this Section 3.20 the "Property") are and have been in material compliance
with all Environmental Laws.
(d) Ameris and each Ameris Subsidiary have, and are in material
compliance with, all licenses, permits, registrations, approvals, identification
numbers, consents, and government authorizations necessary to operate their
respective businesses or otherwise required by any Environmental Law
("Environmental Permits"), all such Environmental Permits are current and in
full force and effect, and a complete list of all such Environmental Permits is
set forth the Ameris Disclosure Letter.
21
<PAGE> 27
(e) To the knowledge of Ameris, Ameris and each Ameris Subsidiary has
maintained all records and have made all filings, reports, and other
notifications ("Reports") required by Environmental Laws with respect to the
Property and/or Ameris' and/or Ameris Subsidiary's operations at any portion of
the Property, and all such Reports were accurate.
(f) No disposal, discharge or release of any Hazardous Materials has
occurred on any portion of the Property and no Hazardous Materials have been
generated, used, handled, treated or stored on any portion of the Property
except in full compliance with Environmental Laws.
(g) Neither Ameris nor any Ameris Subsidiary has received any written
or oral notice from any federal, state or local governmental entity or any other
person, and there is no pending or, to the knowledge of Ameris, threatened
claim, litigation or any administrative agency proceeding that: (i) alleges a
violation of any Environmental Law by Ameris or any Ameris Subsidiary, (ii)
alleges Ameris or any Ameris Subsidiary is or may be a liable party or a
potentially responsible party under any Environmental Law, (iii) has resulted in
or could result in the attachment of any environmental lien on any portion of
the Property, or (iv) alleges the presence of contamination on or from any
portion of the Property, damage to natural resources, property damage, or
personal injury based on Ameris' or any Ameris Subsidiary's activities or the
activities of Ameris' predecessors or third parties (whether at the Property or
elsewhere) involving Hazardous Materials, whether arising under Environmental
Laws, common law, or other legal standards.
(h) To the knowledge of Ameris, no federal, state or local governmental
or regulatory authority has issued any agreements, decrees, consent orders,
judgments, licenses, permit conditions, or other directives respecting the
environment that require any present or future change in the operations of the
hospitals or the use of the Property.
(i) Neither Ameris nor any Ameris Subsidiary has had insurance coverage
denied or canceled relating to the presence or use of Hazardous Materials on the
Property, and none of Ameris' or any Ameris Subsidiary's insurance carriers have
given any notification, recommendation, advice or directives to Ameris or any
Ameris Subsidiary relating to the presence, handling, use, generation, storage,
treatment, release, discharge or disposal of Hazardous Materials at the
Property.
(j) No underground storage tanks or aboveground storage tanks are or
have been present on any of the Property and no portion of any improvements on
the Property contain asbestos.
(k) Copies of all environmental reports, audits or investigations,
including but not limited to Phase I, II or III Environmental Site Assessments,
prepared by or for Ameris or any Ameris Subsidiary relating to any Property, or
otherwise in Ameris' or any Ameris Subsidiary's possession or control and
relating to any of the Property, have been provided to CCS.
22
<PAGE> 28
3.21 Certain Business Practices and Regulations. Neither Ameris, nor
any Ameris Subsidiary, nor, to the knowledge of Ameris, any officer, director,
employee, agent, or other representative of Ameris or any Ameris Subsidiary
acting or purporting to act on behalf of any such entity or any business
enterprise with which such entities have been associated or affiliated, has (a)
made or agreed to make any contribution, payment, or gift to any customer,
supplier, landlord, political candidate, governmental official, employee, or
agent when either the contribution, payment, or gift or the purpose thereof was
illegal under any law or regulation; (b) established or maintained any
unrecorded fund or asset for any purpose or made any false entries on its
respective books and records for any reason; (c) made or agreed to make any
contribution, or reimbursed any political gift or contribution made by any other
person, to any candidate for federal, state, or local public office in violation
of any law or regulation; (d) submitted or caused to be submitted any claim for
services rendered or reimbursement for expenses to any person when the services
were not actually rendered or the expenses were not actually incurred; or (e)
submitted or caused to be submitted a false or fraudulent claim for payment to
any state or the federal government.
3.22 Labor Matters. Neither Ameris nor any Ameris Subsidiary is a party
to any collective bargaining agreements and has not been the subject of any
union activity or labor dispute, and there have not been any strikes, work
stoppages or threatened labor dispute of any kind called, threatened to be
called or existing against Ameris or any Ameris Subsidiary. Neither Ameris nor
any Ameris Subsidiary has liability to any of their employees, agents, or
consultants in connection with grievances by, or the termination of, such
employees, agents, or consultants.
3.23 Insurance. All policies and binders of insurance for professional
liability, directors and officers, fire, liability, workers' compensation,
builder's risk, and other customary matters held by or on behalf of Ameris or
any Ameris Subsidiary ("Insurance Policies") are described in the Ameris
Disclosure Letter and have been made available to CCS. The Insurance Policies
(which term shall include any insurance policy entered into after the date of
this Agreement in replacement of an Insurance Policy provided that such
replacement policy shall insure against risks and liabilities, and in amounts
and under terms and conditions, substantially the same as those provided in such
replaced policy or binder) are in full force and effect. Neither Ameris nor any
Ameris Subsidiary is in default with respect to any material provision contained
in any Insurance Policy. Neither Ameris nor any Ameris Subsidiary has failed to
give any notice of any claim under any Insurance Policy in due and timely
fashion, nor has any coverage for current claims been denied.
3.24 No Brokers. Except as set forth in the Ameris Disclosure Letter,
neither Ameris, nor any Ameris Subsidiary, nor any Ameris Shareholder has
entered into any contract, arrangement, or understanding with any person or firm
that may result in the obligation of Ameris or CCS to pay any finder's fees,
brokerage or agent's commissions, or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby, including, without limitation, the Pre-Closing Sale. Ameris
is not aware of any claim for payment of any finder's fees, brokerage or agent's
commissions, or other like payments in connection
23
<PAGE> 29
with the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby, including, without limitation, the Pre-Closing
Sale.
3.25 Contracts and Commitments. Except as set forth in the Ameris
Disclosure Letter:
(a) Neither Ameris nor any Ameris Subsidiary has any contracts,
commitments, arrangements, or understandings that (i) may involve the
expenditure by the Surviving Company after the Closing Date of more
than $25,000 for any individual contract, commitment, arrangement, or
understanding or series of related contracts, commitments, arrangements
or understandings, or (ii) that was not entered into in the ordinary
course of business. The legal enforceability after the Closing of the
rights of Ameris or any Ameris Subsidiary under any of their respective
contracts will not be affected in any manner by the execution and
delivery of this Agreement or the consummation of the transactions
contemplated hereby, including, without limitation, the Pre-Closing
Sale.
(b) Neither Ameris nor any Ameris Subsidiary has any sales or
purchase commitments that are in excess of the normal, ordinary, and
usual capacity or requirements of its business or that are not
terminable on 30 days' notice.
(c) Neither Ameris nor any Ameris Subsidiary is a party to or
bound by (i) any outstanding contracts with officers, employees,
agents, consultants, advisors, salesmen, sales representatives,
distributors, or dealers that are not cancelable by Ameris or any
Ameris Subsidiary on notice of not longer than 30 days and without
liability, penalty, or premium; (ii) any agreement or arrangement
providing for the payment of any bonus or commission based on sales or
earnings; or (iii) any agreements that contain any severance or
termination pay, liabilities, or obligations.
(d) Except for computer software licenses incorporated in
connection with the purchase of software from third party vendors,
neither Ameris nor any Ameris Subsidiary is a party to any licensing
agreement, either as licensor or licensee.
(e) Neither Ameris nor any Ameris Subsidiary is restricted or
purported to be restricted by agreement or otherwise from carrying on
its business or any business anywhere in the world.
(f) Neither Ameris nor any Ameris Subsidiary is a party to any
contract to management or sub-manage any hospital or health care
facility owned by others except the Management Contracts. As used
herein, the term "Management Contracts" shall mean that management or
sub-management agreements relating to Morton Medical Center, Inc.,
d/b/a Scott Regional Hospital; Newton Regional Hospital; Jefferson
Davis County Hospital;
24
<PAGE> 30
Winston County Medical Center, together with geriatric/psychiatric
units at Newton Regional Hospital; Jefferson Davis County Hospital; and
Winston County Medical Center.
3.26 Shareholder and Employee Receivables. The Ameris Disclosure Letter
lists the current outstanding balance of all notes, receivables, and liabilities
owed from employees and shareholders of Ameris and the Ameris Subsidiaries to
Ameris or any Ameris Subsidiary.
3.27 Whitwell Indemnification. Attached to the Ameris Disclosure Letter
is a copy of all documents that could give rise to liability or obligations of
Ameris in connection with the sale of Whitwell Medical Center ("Whitwell").
Described in the Ameris Disclosure Letter is a list of all claims for
indemnification or other recourse (whether monetary or otherwise) that have been
made in connection with the Whitwell sale, and a description of the handling of
those claims that have been disposed of.
3.28 Real Property. Ameris and the Ameris Subsidiaries own fee simple
title (or an option to acquire fee simple title for no additional consideration
upon full and final payment of the debts as provided in the Balance Sheet) to,
or a valid and enforceable leasehold estate in and to, the real property
employed in the operation of the Retained Business, as described in the Ameris
Disclosure Letter (the "Real Property"), together with all buildings,
improvements, and fixtures thereon and all appurtenances and rights thereto, and
such Real Property is not subject to any mortgages, liens, restrictions,
agreements, claims, or other encumbrances that causes title to the Real Property
to be unmarketable or which will materially interfere with CCS' use of the
Assets in a manner consistent with the current use by Ameris or any Ameris
Subsidiary. There are no easements, restrictions, leases, encumbrances or other
matters affecting or encumbering the Real Property other than those easements,
restrictions and encumbrances and other matters of record as more particularly
described in the Ameris Disclosure Letter (the "Permitted Encumbrances"). The
Real Property comprises all of the real property owned, leased or used by Ameris
and the Ameris Subsidiaries and associated with or employed in the operation of
each of Hermitage Hall, the Clarksville Home, the Alabama Program, and the
Philadelphia Program; and
(a) if any lien, including, without limitation, any mortgages,
deed of trust lien, mechanics and materialmen's lien, and/or judgment
liens, is asserted against the Real Property by, through, or under
Ameris or any Ameris Subsidiary, or any affiliate of any thereof, that
is not a Permitted Encumbrance, Ameris or the Ameris Subsidiary shall
obtain the release of such lien;
(b) neither Ameris nor any Ameris Subsidiary has received notice
of a violation of any restrictive covenants or any applicable
ordinance or other law, order, regulation, or requirement, nor has
Ameris or any Ameris Subsidiary received notice of condemnation, lien,
assessment, or the like, relating to any part of the Real Property or
the operation thereof;
25
<PAGE> 31
(c) the Real Property and its operation are in material
compliance with all applicable zoning ordinances, and the consummation
of the transactions contemplated herein will not result in a violation
of any applicable zoning ordinance or the termination of any applicable
zoning variance now existing and if the improvements on the Real
Property are damaged or destroyed subsequent to Closing, the repair or
replacement of same by CCS to the condition existing immediately prior
to Closing will not violate applicable zoning ordinances (assuming
there has been no change in such zoning ordinances);
(d) the Real Property is subject to no easements, restrictions,
ordinances, or such other limitations on title so as to make the Real
Property unusable for its current use or unmarketable; and
(e) no buildings or other improvements located on the Real
Property have been materially damaged by fire or other casualty;
(f) there is no condemnation or similar proceeding or action
presently pending or under consideration with respect to any of the
Real Property;
(g) except as described in Section 3.29 hereof, there is no
construction project exceeding $5,000 in total cost underway at or on
any of the Real Property.
As to all Real Property in which Ameris or the Ameris Subsidiaries own a
leasehold estate, (i) true and correct copies of all leases creating such
leasehold estates and all amendments, exhibits, riders and attachments thereto
(each, a "Lease") have been delivered to CCS prior to the date hereof, (ii) each
Lease is in full force and effect and is valid and enforceable against the
parties thereto, (iii) no Lease has been modified or amended, except pursuant to
a written instrument that has been delivered to CCS prior to the date hereof,
and (iv) there is no default, event of default or event that with the giving of
notice, the passage of time, or both, would constitute an event of default under
any of the Leases.
3.29 (Reserved)
3.30 (Reserved)
3.31 Certificates of Need. Except as set forth in the Ameris Disclosure
Letter and except with respect to the Smith Hospital, no application for any
Certificate of Need or Exemption Certificate or request for determination of
reviewability has been made by Ameris or any Ameris Subsidiary with a state or
local planning agency ("Planning Agency") which is currently pending or open
before the Planning Agency and no such application or request (collectively,
"Applications") filed by any such entity within the past three (3) years has
been ultimately denied by any commission, board, authority, reviewing court, or
agency or withdrawn by any such entity. Except as disclosed
26
<PAGE> 32
in the Ameris Disclosure Letter and except with respect to the Smith Hospital,
as of the date hereof, no Applications are being prepared by or for or on behalf
of Ameris or any Ameris Subsidiary for submission to or before any commission,
authority, board, or agency. No such entity has prepared, filed, supported, or
presented opposition to any Applications filed by another hospital or health
agency within the past three (3) years. Except as disclosed in the Ameris
Disclosure Letter, no such entity has any Applications pending and has no
approved Applications that related to projects not yet completed. Except with
respect to the Smith Hospital, Ameris and the Ameris Subsidiaries have properly
filed all required applications, which are complete and correct in all material
respects, with respect to any and all material improvements, projects, changes
in services, zoning requirements, construction and equipment purchases, and
other changes for which approval is required by applicable state law or under
the Social Security Act, occurring on or before the date hereof. As used herein
"Certificate of Need" means a written statement issued by a Planning Agency
evidencing community need for a new, converted, expanded, or otherwise
significantly modified health care facility, health service, or hospice and
"Exemption Certificate" means a written statement from the Planning Agency
stating that a health care project is not subject to applicable state
Certificate of Need laws.
3.32 Medicare Participation/Accreditation. Except as disclosed on the
Ameris Disclosure Letter, each of Tennessee Clinical Schools, Alabama Clinical
Schools and Pennsylvania Clinical Schools is qualified for participation in the
Medicaid or applicable state program, has a current and valid provider contract
with the Medicaid program, is in compliance with the conditions of participation
in such program, and has received all approvals or qualifications necessary for
reimbursement therefrom. Neither Tennessee Clinical Schools, Alabama Clinical
Schools nor Pennsylvania Clinical Schools has received notice from the Medicaid
or applicable state program of any pending or threatened investigations or
surveys involving or associated with its business, and neither Tennessee
Clinical Schools, Alabama Clinical Schools nor Pennsylvania Clinical Schools has
any reason to believe that any such investigations or surveys are pending,
threatened, or imminent.
3.33 (Reserved).
3.34 (Reserved).
3.35 Experimental Procedures. Neither Ameris nor any Ameris Subsidiary
is performing or permitting the performance of any experimental or research
procedures or studies involving parties in Smith Hospital, Hermitage Hall, the
Clarksville Home, the Alabama Program or the Philadelphia Program or otherwise.
3.36 Full Disclosure. All of the information provided by Ameris and its
representatives herein or in the Ameris Disclosure Letter is true, correct, and
complete in all material respects, and no representation, warranty, or statement
made by Ameris in or pursuant to this Agreement or the
27
<PAGE> 33
Ameris Disclosure Letter contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary to make
such representation, warranty, or statement not misleading. None of the
executive officers of Ameris or any Ameris Subsidiary has withheld from CCS or
its representatives disclosure of any event, condition, or fact that such
officer knows could result in an Ameris Material Adverse Effect.
3.37 Definition of Knowledge. As used herein, the phrase "to the
knowledge of Ameris," and all similar phrases shall mean to the actual knowledge
of Sam J. Lewis, C.J. Herring, David C. Perrine, Luther Ramsay, Michael G.
Lindley, Nat T. Winston and Greg Cantrell.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CCS
CCS represents, warrants, and agrees as follows:
4.1 Existence; Good Standing; Corporate Power and Authority. CCS is a
corporation duly organized, validly existing, and in good standing under the
laws of the State of Tennessee. CCS has all requisite corporate power and
authority to own, operate, and lease its properties and carry on its business as
now conducted.
4.2 Authorization, Validity, and Effect of Agreements. CCS has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby. The consummation by CCS of
the transactions contemplated hereby has been duly authorized by all requisite
corporate action. This Agreement constitutes, and all agreements and documents
contemplated hereby (when executed and delivered pursuant hereto) will
constitute, the valid and legally binding obligations of CCS, enforceable in
accordance with their respective terms.
4.3 No Violation. Neither the execution and delivery by CCS of this
Agreement, nor the consummation by CCS of the transactions contemplated hereby
in accordance with the terms hereof, will: (a) conflict with or result in a
breach of any provisions of the charter or bylaws of CCS; (b) conflict with,
result in a breach of any provision of or the modification or termination of,
constitute a default under, or result in the creation or imposition of any lien,
security interest, charge, or encumbrance upon any of the assets of CCS pursuant
to, any material commitment, lease, contract, or other material agreement or
instrument to which CCS is a party; or (c) violate or result in a change in any
rights or obligations, under any governmental permit or license or any order,
arbitration award, judgment, writ, injunction, decree, statute, rule, or
regulation applicable to CCS.
4.4 No Brokers. CCS has not entered into any contract, arrangement, or
understanding with any person or firm that may result in the obligation of CCS
to pay any finder's fees, brokerage
28
<PAGE> 34
or agent's commissions, or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby. CCS is not aware of any claim for payment of any finder's
fees, brokerage or agent's commissions, or other like payments in connection
with the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
ARTICLE V
COVENANTS AND AGREEMENTS
During the period from the date hereof and continuing until the
Effective Time (and continuing beyond the Effective Time where expressly
indicated herein) each of CCS and Ameris covenants and agrees as follows:
5.1 Access to Information. Ameris shall allow all designated officers,
attorneys, accountants, and other representatives of CCS access at all
reasonable times during regular business hours to the records and files,
correspondence, audits, and properties, as well as to all information relating
to commitments, contracts, titles, and financial position, or otherwise
pertaining to the business and affairs of Ameris.
5.2 Confidentiality.
(a) As used herein, the term "Information" means all information,
materials, documents, financial reports, business plans, and marketing
data that relate to the business or operations of CCS or Ameris, as
the case may be, that are or were disclosed by one of them (the
"Disclosing Party") to the other (the "Recipient"), but shall not
include (i) information that at the time of the disclosure by the
Disclosing Party is in, or after disclosure by the Disclosing Party
becomes part of, the public domain, other than by reason of the
Recipient's breach of the provisions hereof; (ii) information known to
the Recipient at the time of disclosure by the Disclosing Party; and
(iii) information obtained by the Recipient from sources not bound by
a duty of confidentiality to the Disclosing Party with respect to such
information.
(b) Upon the termination of this Agreement pursuant to the terms of
Article VII, each party shall return to the Disclosing Party all
tangible forms of Information provided by the Disclosing Party,
including any copies made by the Recipient or by others acting on
behalf of, or in concert with, the Recipient, and shall not thereafter
use or disclose the Information for any reason. The provisions of this
Section 5.2 shall supersede the confidentiality provisions of the Term
Sheet executed by the parties hereto on June 5, 1998.
29
<PAGE> 35
(c) Notwithstanding the foregoing, the Recipient shall be permitted
to disclose Information to its directors, officers, employees, agents,
advisors, and representatives of financial institutions and
third-party lenders under conditions of confidentiality and solely for
the purposes of evaluating the transactions contemplated hereby. The
Recipient shall institute security procedures to limit dissemination
of Information to those who have a need to know such Information in
evaluating the subject matter hereof.
(d) The parties shall have the right to equitable relief, including
injunctive relief, if the Recipient violates the provisions of this
Section 5.2, in addition to all other rights or remedies available at
law to the Recipient.
5.3 Cooperation. Each of CCS and Ameris, upon prior reasonable written
request from the other, will cooperate with the other in every reasonable
commercial way to consummate the Merger. Each of CCS and Ameris shall use all
reasonable efforts (i) to take, or cause to be taken, all actions necessary to
comply promptly with all legal requirements that may be imposed on such party
(or any subsidiaries or affiliates of such party) with respect to the Merger and
to consummate the transactions contemplated hereby and (ii) to obtain (and to
cooperate with the other party to obtain) any consent, authorization, order, or
approval of, or any exemption by, any governmental entity and/or any other
public or private third party that is required to be obtained or made by such
party or any of its subsidiaries or affiliates in connection with the Merger and
the transactions contemplated hereby. Each of CCS and Ameris will promptly
cooperate with and furnish information to the others in connection with any such
burdens suffered by, or requirement imposed on, any of them or any of their
subsidiaries or affiliates in connection with the foregoing.
5.4 Preservation of Business. Each of CCS and Ameris will use its
reasonable best efforts to preserve its business and the business of its
subsidiaries in tact, to keep available the services of the present employees of
each such entity, and to preserve the goodwill of the suppliers, customers, and
others having business relations with each such entity.
5.5 Material Transactions. Except as contemplated by this Agreement
(including without limitation, the Pre-Closing Sale), prior to the Effective
Time, neither Ameris nor any Ameris Subsidiary will, without first obtaining the
written consent of CCS:
(a) encumber any asset or enter into any transaction or make any
contract commitment relating to the properties, assets, and business
of such entity, other than in the ordinary course of business or as
otherwise disclosed herein;
(b) enter into any employment contract that is not terminable upon
notice of 30 days or less, or at will and without penalty;
30
<PAGE> 36
(c) enter into any contract or agreement (i) that cannot be
performed within three months or less or (ii) that involves the
expenditure of over $10,000;
(d) issue or sell, or agree to issue or sell, any shares of
capital stock or other securities of such entity except for (i) the
issuance of Ameris Common Stock to HCFP in connection with the exercise
by HCFP of that certain stock warrant dated July 2, 1997 (the "HCFP
Warrant"), (ii) the issuance of Ameris Common Stock upon the conversion
of that certain convertible promissory note made payable to Jack R.
Anderson by Ameris (the "Anderson Note"), and (iii) the issuance of
Ameris Common Stock upon the exercise of those employee stock options
listed in Section 3.3 of the Ameris Disclosure Letter;
(e) make any payment or distribution under any bonus, pension,
profit-sharing, or retirement plan or incur any obligation to make any
such payment or contribution that is not in accordance with such
entity's usual past practice, or make any payment or contributions or
incur any obligation pursuant to or in respect of any other plan or
contract or arrangement of providing for bonuses, executive incentive
compensation, pensions, deferred compensation, retirement payments,
profit-sharing, or the like, establish or enter into any such plan,
contract, or arrangement, or terminate any plan;
(f) extend credit to anyone except in the ordinary course of
business consistent with prior practices and in an amount less than
$10,000;
(g) guarantee the obligation of any person, firm, or corporation,
except in the ordinary course of business consistent with prior
practices and in an amount less than $10,000;
(h) amend its charter or bylaws or applicable organizational
documents;
(i) set aside or pay any cash dividend or any other distribution
on or in respect of its capital stock or any redemption, retirement,
or purchase with respect to its capital stock or issue any additional
shares of its capital stock;
(j) other than normal payments consistent with prior practices,
discharge or satisfy any lien, charge, encumbrance, or indebtedness
outside the ordinary course of business except those required to be
discharged or satisfied;
(k) institute, settle, or agree to settle any litigation, action,
or proceeding before any court or governmental body;
(l) mortgage, pledge, or subject to any other encumbrance any of
its property or assets, tangible or intangible;
31
<PAGE> 37
(m) authorize any compensation increases of any kind whatsoever
for any employee;
(n) engage in any extraordinary transaction; or
(o) enter into any material contract, including leases and real
estate agreements.
5.6 Shareholder Approval. Promptly after execution of this Agreement
and completion of a proxy statement in form and substance reasonably
satisfactory to CCS (the "Proxy Statement"), Ameris shall cause a special
meeting of its shareholders to be held for the purpose of approving the
Pre-Closing Sale, this Agreement, and the transactions contemplated hereby as
provided by Tennessee law and the Charter and Bylaws of CCS and such other
documents as may be necessary in order to satisfy the requirements of obtaining
such approval. Ameris agrees to use reasonable efforts to obtain the approval of
its shareholders sufficient to approve the Pre-Closing Sale, the Merger, this
Agreement, and the transactions contemplated hereby so as to enable the Closing
to occur as promptly as practical following the date hereof.
5.7 Certain Tax Matters.
(a) Each of CCS and Ameris shall provide to the other, at the
expense of the requesting party, with such assistance as may reasonably
be requested by either of them in connection with the preparation of
any tax return, any audit or other examination by any regulatory
authority, or any judicial or administrative proceedings relating to
liability for Taxes, and each will retain and provide the requesting
party with any records or information that may be relevant to any of
the foregoing.
(b) CCS shall close the books of Ameris on the Closing Date and
shall report for Ameris all items of income, loss, deduction and
credit arising during the short period beginning March 1, 1998 and
ending on the Closing Date (the "Short Period") under the method of
accounting used by Ameris. As soon as practicable following the
Effective Time, CCS shall, on behalf of Ameris, timely file all Tax
Returns for, and pay all Taxes due with respect to the Short Period.
5.8 Legal Conditions to Merger. Each of CCS and Ameris will take all
reasonable actions necessary to comply promptly with all legal requirements that
may be imposed on it with respect to the Merger, in connection with approvals of
or filings with any governmental entity, and will promptly cooperate with and
furnish information to each other in connection with any such requirements
imposed upon either of them in connection with the Merger.
32
<PAGE> 38
5.9 Notice of Subsequent Events. Each party hereto shall notify the
other of any changes, additions, or events not specifically contemplated by this
Agreement of which they have knowledge that would cause any material change in
or material addition to its Disclosure Letter promptly after occurrence of the
same. If the effect of such change or addition would, individually or in the
aggregate with the effect of changes or additions previously disclosed pursuant
to this Section 5.9, constitute an Ameris Material Adverse Effect or a CCS
Material Adverse Effect on the notifying party, as applicable, the non-notifying
party may, within 10 days after receipt of such notice, elect to terminate this
Agreement. If the non-notifying party does not give written notice of such
termination with such 10-day period, the non-notifying party shall be deemed to
have consented to such change or addition and shall not be entitled to terminate
this Agreement by reason thereof.
5.10 Other Actions. Neither CCS nor Ameris shall knowingly or
intentionally take any action, or omit to take any action, if such action or
omission would, or reasonably might be expected to, result in any of its
representations and warranties set forth herein being or becoming untrue in any
material respect (except actions specifically contemplated by this Agreement),
or in any of the conditions to the Merger set forth in this Agreement not being
satisfied, or, unless such action is required by applicable law, which would
materially adversely affect the ability of CCS or Ameris to obtain any consents
or approvals required for the consummation of the Merger without imposition of a
condition or restriction which would have a material adverse effect such party
or which would otherwise materially impair the ability of CCS or Ameris to
consummate the Merger in accordance with the terms of this Agreement or
materially delay such consummation.
5.11 Tail Insurance. In good faith cooperation with CCS, Ameris will
obtain "tail" insurance, in form and substance reasonably satisfactory to CCS,
for professional liability, general liability and other customary matters, to
insure against risks and liabilities of Ameris related to all periods prior to
the Closing, the cost thereof to be split equally between CCS and Ameris.
5.12 Employees. Subject to Section 6.3(p), at the Closing, CCS
covenants that it will hire substantially all employees of Ameris and any Ameris
Subsidiary employed in connection with the Retained Business; provided, however,
that such covenant shall not include any obligation to retain such hired
employees for any period of time or to compensate such hired employees at any
level. Buyer agrees to give credit to employees of Ameris for past service
rendered to Ameris for purposes of determining eligibility to participate in
Buyer's employee benefit plans.
5.13 Dissenting Shares. Ameris will promptly notify CCS of any written
notice relating to the exercise of dissenters' rights granted under the TBCA,
including the name of the dissenting shareholder and the number of Dissenting
Shares to which such notice relates. Subject to Section 6.1(f), CCS shall
satisfy (if by payment, in cash) obligations of Ameris to those shareholders
properly exercising and perfecting their dissenters' rights under the TBCA.
33
<PAGE> 39
5.14 Non-Solicitation. Except with respect to the Pre-Closing Sale,
Ameris shall, and shall direct and use its best efforts to cause its
subsidiaries, directors, officers, employees, advisors, accountants, and
attorneys (the "Representatives"), not to initiate, solicit, or encourage,
directly or indirectly, any inquiries or the making or implementation of any
proposal or offer with respect to a merger, acquisition, consolidation, or
similar transaction involving, or any purchase of all or any significant portion
of the assets or any equity securities of Ameris or any Ameris Subsidiary (any
such proposal or offer being hereinafter referred to as an "Acquisition
Proposal") or engage in any negotiations concerning, or provide any confidential
information or data to, or have any discussions with, any person relating to an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal; (ii) they will immediately cease and cause to
be terminated any existing activities, discussions, or negotiations with any
parties conducted heretofore with respect to any of the foregoing and will take
the necessary steps to inform the individuals or entities referred to above of
the obligations undertaken in this Section 5.14; and (iii) they will notify CCS
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it.
5.15 Title Insurance. At least ten (10) days prior to Closing, Ameris
shall deliver to CCS a current ALTA title insurance commitment issued by a
nationally recognized title insurance company acceptable to CCS of the condition
of title to the Retained Real Estate located at Hermitage Hall (a "Commitment"),
which commitment shall commit for the issuance of a title insurance policy, ALTA
Owner's (or Leasehold, as appropriate) Policy Form 1992 (each a "Title Policy")
as to such tract of Retained Real Estate. The costs of the Commitment and the
Title Policy shall be borne equally by CCS and Ameris. The Commitment and Title
Policy shall show that the Hermitage Hall Retained Real Estate is owned in fee
simple (or that a valid and enforceable leasehold estate is owned, as the case
may be) by Ameris or an Ameris Subsidiary, free from all liens, restrictions,
encumbrances, easements, leases and claims on title whatsoever, except the
Permitted Exceptions and except for those liens related to debt that are
reflected on the Balance Sheet. The Commitment and the Title Policy will also
contain: (a) a so-called "tax parcel endorsement" listing all of the tax parcel
identification numbers affecting the Hermitage Hall Retained Real Estate and
stating that no other property is included in such Retained Real Estate and that
no other tax parcel identification numbers affect such Retained Real Estate; (b)
a 3.1 zoning endorsement or its equivalent as then in use by the title company
in form and substance acceptable to CCS; (c) extended coverage deleting all
standard and general exceptions; (d) affirmative coverage against any
Hill-Burton Liens; (e) an owner's comprehensive endorsement; and (f) any
additional endorsements or insurance as CCS may reasonably require. The title
company shall provide, when delivering the Commitment, one (1) copy of all
recorded documents affecting title to such Retained Real Estate to CCS. Ameris
and the Ameris Subsidiaries shall execute such certificates and affidavits as
may be reasonably required in connection with the issuance of the Title Policy
and endorsements.
5.16 (Reserved.)
34
<PAGE> 40
5.17 Estoppel Certificates. Prior to Closing, Ameris shall furnish to
CCS and its designees, an estoppel certificate in substantially the form
attached hereto as Exhibit C (an "Estoppel Certificate"), from the Lessor under
the lease for the Clarksville Home facility. Ameris shall use its best efforts
to obtain an Estoppel Certificate from the State of Pennsylvania with respect to
the facility used in connection with the Philadelphia Program.
5.18 (Reserved).
5.19 UCC Searches. UCC Financing Statement searches, local and central,
including fixtures (and including copies of all such financing statements and
exhibits and attachments thereto), and federal and state tax lien and judgment
searches, with respect to Ameris, the Ameris Subsidiaries and their respective
predecessors, including all "DBAs", trade names and fictitious names of Ameris
and Ameris Subsidiaries, from each of the jurisdictions in which such entity
does business or has done business within the preceding five (5) years (the "UCC
Searches"), shall be obtained by Ameris, at the expense of Ameris, and delivered
to CCS prior to Closing.
5.20 Employee Benefit Plans. For that period prior to the Closing,
Ameris shall maintain in good standing, and shall fund all liabilities under,
all Ameris Plans other than the Ameris 401(k) Plan, which shall be terminated by
the Ameris Board of Directors prior to the Closing Date. CCS and Ameris shall
cooperate in good faith to determine the disposition of funds currently held in
the Ameris 401(k) Plan for the benefit of Ameris employees, and shall take all
action necessary and appropriate to effect such disposition.
5.21 Pre-Closing Sale.
(a) Prior to the Closing, Ameris shall sell and deliver to Smith
of Georgia, LLC, a Tennessee limited liability company ("Smith of
Georgia"), all of the issued and outstanding shares of the capital
stock of Ameris of Georgia, in exchange for Smith of Georgia's
assumption of those certain liabilities and obligations of Ameris
described on Schedule 5.21(a) and the issuance by Smith of Georgia to
Ameris of a promissory note in a principal amount of $2,500,000 and in
the form attached hereto as Exhibit D (the "Smith of Georgia Note")
(collectively, the "Hospital Transfer").
(b) Prior to the Closing, Ameris shall sell and assign to Ameris
Health Systems, LLC, a Tennessee limited liability company ("Ameris
LLC"), (i) all of its rights and obligations under the Management
Contracts and (ii) those assets listed on Schedule 5.21(b), in
exchange for the issuance by Ameris LLC to Ameris of a promissory note
in a principal amount of $1,000,000 (the "Ameris LLC Note"), and
Ameris LLC's assumption of those certain liabilities and obligations
Ameris described on Schedule 5.21(b) (collectively, the "Asset Sale,"
and together with the Hospital Transfer, the "Pre-Closing Sale").
35
<PAGE> 41
5.22 Change of Ameris Name. As soon as reasonably practical following
the Effective Time, CCS shall cause the name of Ameris to be changed to the name
which does not incorporate the word "Ameris".
ARTICLE VI
CONDITIONS
6.1 Conditions to Each Party's Obligation to Effect the Merger. The
obligation of each of CCS and Ameris to effect the Merger shall be subject to
the fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved by the Ameris Shareholders in the manner required
by the TBCA, the Charter and Bylaws of Ameris, and such other
documents as may be necessary in order to satisfy the requirements of
obtaining such approval.
(b) No action or proceeding before a court or other governmental
body by any governmental agency or public authority shall have been
instituted or threatened to restrain or prohibit the transactions
contemplated by this Agreement or to obtain an amount of damages or
other material relief in connection with the execution of the
Agreement or the related agreements or the consummation of the Merger;
and no governmental agency shall have given notice to any party hereto
to the effect that consummation of the transactions contemplated by
this Agreement would constitute a violation of any law or that it
intends to commence proceedings to restrain consummation of the
Merger.
(c) All consents, authorizations, orders, and approvals of (or
filings or registrations with) any governmental commission, board, or
other regulatory body or any other third party (including lenders and
lessors) required in connection with the execution, delivery, and
performance of this Agreement and the transactions contemplated hereby
(including, without limitation, the Pre-Closing Sale) shall have been
obtained or made, except for filings in connection with the Merger and
any other documents required to be filed after the Effective Time and
except where the failure to have obtained or made any such consent,
authorization, order, approval, filing, or registration would not have
a CCS Material Adverse Effect or an Ameris Material Adverse Effect
following the Effective Time.
(d) Each of CCS and Ameris shall have received from the other
copies of all resolutions adopted by the Board of Directors and
shareholders (if applicable) of the other in connection with this
Agreement and the transactions contemplated hereby.
(e) (Reserved).
36
<PAGE> 42
(f) The holders of no more than five percent (5%) of the
outstanding equity securities of Ameris shall have filed written
objection to the Merger, as provided in TBCA Section 18-23-202.
(g) No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to
restrain or prohibit the transactions herein contemplated, and no
governmental agency or body shall have taken any other action or made
any request of any party hereto as a result of which either CCS or
Ameris reasonably and in good faith deems it inadvisable to proceed
with the transactions hereunder.
6.2 Conditions to Obligation of Ameris to Effect the Merger. The
obligation of Ameris to effect the Merger shall be subject to the fulfillment at
or prior to the Closing Date of the following conditions:
(a) CCS shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and
the representations and warranties of CCS contained in this Agreement
and in any document delivered in connection herewith shall be true and
correct as of the Closing Date.
(b) From the date of this Agreement until the Effective Time,
there shall not have occurred any material change in the financial
condition, business, operations, or prospects of CCS, that would have
or would be reasonably likely to have a CCS Material Adverse Effect.
(c) Ameris shall have received a written opinion, dated as of
the Closing Date, from Bass, Berry & Sims PLC, in form and substance
satisfactory to it, as to certain matters agreed upon by legal counsel
of CCS and Ameris.
(d) Ameris shall have received such customary certificates of
officers of CCS and such other customary closing documentation as it
may reasonably request, including without limitation:
(i) a certificate of existence regarding CCS, certified by the
Secretary of State of the State of Tennessee, dated within 10
business days of Closing;
(ii) a certificate dated as of the Closing Date signed by a
duly authorized Officer of CCS, certifying the satisfaction of
the condition in Section 6.2(a) and that CCS has fulfilled all of
the conditions applicable to it of this Article VI; and
(iii) an incumbency certificate certifying the identity of the
officers of CCS.
37
<PAGE> 43
(e) All documents, instruments, proceedings, and related matters in
connection with the transactions contemplated by this Agreement shall
be reasonably satisfactory in all material respects to counsel to
Ameris.
6.3 Conditions to Obligation of CCS to Effect the Merger. The
obligation of CCS to effect the Merger shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions:
(a) Ameris shall have performed its agreements contained in this
Agreement required to be performed on or prior to the Closing Date and
the representations and warranties of Ameris contained in this
Agreement and in any document delivered in connection herewith shall
be true and correct as of the Closing Date (except those
representations and warranties which have been rendered untrue and
incorrect as a result of the consummation of the Pre-Closing Sale,
which need only be true as of the date immediately prior to the
consummation of the Pre-Closing Sale).
(b) From the date of this Agreement until the Effective Time,
there shall not have occurred any material change in the financial
condition, business, operations, or prospects of Ameris (other than the
Pre-Closing Sale), that would have or would be reasonably likely to
have a Ameris Material Adverse Effect.
(c) CCS shall have received a written opinion, dated as of the
Closing Date, from Boult Cummings Conners & Berry PLC, in form and
substance satisfactory to it, as to certain matters agreed upon by
legal counsel of CCS and Ameris.
(d) CCS shall have received such customary certificates of officers
of Ameris and such other customary closing documentation as it may
reasonably request, including without limitation:
(i) a certificate of existence regarding Ameris, certified by
the Secretary of State of the State of Tennessee, dated within 10
business days of Closing;
(ii) a certificate dated as of the Closing Date signed by a
duly authorized officer of Ameris, certifying the satisfaction of
the condition in Section 6.3(a) and that Ameris has fulfilled all
of the conditions applicable to it of this Article VI; and
(iii) an incumbency certificate certifying the identity of the
officers of Ameris.
(e) (Reserved)
38
<PAGE> 44
(f) CCS shall have received reasonable assurances from all
applicable licensure agencies that upon or as of the Closing all
licenses, permits and certificates of need required by law to operate
each of Hermitage Hall, the Clarksville Home, the Alabama Program, and
the Philadelphia Program as currently operated will be transferred to,
or reissued in the name of, CCS or a subsidiary thereof.
(g) CCS shall have obtained reasonable assurances that
Medicare and Medicaid certification of each of Hermitage Hall, the
Clarksville Home, the Alabama Program, and the Philadelphia Program for
their operation by CCS or a subsidiary thereof will be effective as of
Closing and that CCS or a subsidiary thereof may participate in and
receive reimbursement from such programs without interruption effective
from and after the Closing.
(h) CCS shall have received transfer of all accreditations
(including JCAHO accreditations where applicable) and provider
contracts necessary in the reasonable opinion of CCS to own and operate
Hermitage Hall, the Clarksville Home, the Alabama Program, and the
Philadelphia Program, if any.
(i) The HCFP Warrant shall have been exercised.
(j) All consents, waivers, and estoppels of third parties as
may be legally or contractually required for the consummation of the
Merger shall have been obtained in form and substance reasonably
satisfactory to CCS.
(k) CCS shall have received a Report of a Phase I
Environmental Site Assessment of the Retained Real Estate, at the
expense of CCS, and the scope, findings, and conclusions of such report
shall be reasonably satisfactory to CCS.
(l) CCS shall have obtained mechanical, electrical and
structural engineering reports, if CCS elects to obtain them, at the
expense of CCS, indicating a condition of the Assets consistent with
the representations and warranties of Ameris herein.
(m) CCS shall have received the Title Policy as specified in
Section 5.15, and all matters listed or described therein or depicted
thereon shall be reasonably satisfactory to CCS.
(n) CCS shall have received the Leases and the Clarksville
Home Estoppel Certificate, and all matters listed and described therein
and all provisions thereof shall be reasonably satisfactory to CCS.
39
<PAGE> 45
(o) All documents, instruments, proceedings, and related
matters in connection with the transactions contemplated by this
Agreement (including, without limitation, the Pre-Closing Sale) shall
be reasonably satisfactory in all material respects to counsel to CCS.
(p) Ameris shall have caused those employment agreements
between it and each of Sam J. Lewis, C.J. Herring and David S. Perrine
to be terminated, and each of Messrs. Lewis, Herring and Perrine shall
have executed a release of Ameris, in form and substance reasonably
satisfactory to CCS.
(q) The Anderson Note shall have been fully converted into
Ameris Common Stock.
(r) Each outstanding option to purchase shares of Ameris
Common Stock listed in Section 3.3 of the Ameris Disclosure Letter
shall have been exercised in full.
(s) Ameris shall have received from shareholders owning at
least 95% of the Ameris Common Stock entitled to vote at the Ameris
special meeting of shareholders a signed proxy voting in favor of the
Pre-Closing Sale and the Merger; and no more than three Ameris
Shareholders shall have failed to submit a signed proxy voting in favor
of the Pre-Closing Sale and the Merger.
(t) Ameris shall have received a written consent, in form and
substance reasonably satisfactory to CCS, to the Pre-Closing Sale and
the Merger, from each shareholder of Ameris, as of the Closing Date,
who was not entitled to vote at the special meeting of shareholders of
Ameris.
(u) Ameris shall have provided evidence to CCS of the
agreement by Ameris LLC to provide indemnification in form and
substance reasonably satisfactory to CCS, to Ameris from and against
any liability (including, without limitation, legal fees and other
defense costs) incurred in connection with that item of litigation
styled Ameris Health Systems, Inc. v. Consolidated Health Corporation
of Mississippi, Inc., and any claims arising in connection therewith.
40
<PAGE> 46
ARTICLE VII
TERMINATION
7.1 Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the shareholders of Ameris, by the
mutual consent of the Boards of Directors of CCS and Ameris.
7.2 Termination by Either CCS or Ameris. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of CCS or Ameris if (a) the Merger shall not have been consummated by September
30, 1998; (b) the approval of Ameris' shareholders required by Section 6.1(a)
shall not have been obtained at a meeting duly convened therefor or at any
adjournment thereof; or (c) a United States federal or state court of competent
jurisdiction or United States federal or state governmental, regulatory, or
administrative agency or commission shall have issued an order, decree, or
ruling, or taken any other action permanently restraining, enjoining, or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling, or other action shall have become final and
non-appealable; provided, however, that the party seeking to terminate this
Agreement pursuant to this clause (c) shall have used all reasonable efforts to
remove such injunction, order or decree.
7.3 Termination by Ameris. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the adoption and approval by the shareholders of Ameris, by action by the Board
of Directors of Ameris, if (a) there has been a breach by CCS of any
representation or warranty contained in this Agreement that would have or would
be reasonably likely to have a CCS Material Adverse Effect or (b) there has been
a material breach of any of the covenants or agreements set forth in this
Agreement on the part of CCS, which breach is not curable or, if curable, is not
cured within 10 days after written notice of such breach is given by Ameris to
CCS.
7.4 Termination by CCS. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, before or after
adoption and approval of the shareholders of Ameris, by action of the Board of
Directors of CCS, if (a) there has been a breach by Ameris or Merger Sub of any
representation or warranty contained in this Agreement that would have or would
be reasonably likely to have an Ameris Material Adverse Effect or (b) there has
been a material breach of any of the covenants or agreements set forth in this
Agreement on the part of Ameris or Merger Sub, which breach is not curable or,
if curable, is not cured within 10 days after written notice of such breach is
given by CCS to Ameris.
7.5 Effect of Termination and Abandonment. Upon termination of this
Agreement pursuant to this Article VII, this Agreement shall be void and of no
other effect, and there shall be no liability by reason of this Agreement or the
termination thereof on the part of any party hereto
41
<PAGE> 47
(other than for breach of a covenant contained herein), or on the part of the
respective directors, officers, employees, agents, or shareholders of any of
them.
7.6 Extension; Waiver. At any time prior to the Effective Time, any
party hereto, by action taken by its Board of Directors, may, to the extent
legally allowed, (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto; (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto; and (c) waive compliance
with any of the agreements or conditions for the benefit of such party
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Ameris. Subject to the provisions of this
Article VIII, the Ameris Shareholders hereby agree to defend, indemnify, and
hold harmless the Surviving Corporation, CCS, each CCS fiduciary's employee
benefit plans, and shareholders, affiliates, officers, directors, employees,
agents, successors, and assigns of CCS ("CCS Indemnified Persons") and shall
reimburse CCS Indemnified Persons for, from, and against each claim, loss,
liability, costs, and expense (including without limitation interest, penalties,
costs of preparation and investigation, and the reasonable fees, disbursements,
and expenses of attorneys, accountants, and other professional advisors)
(collectively, "Losses"), directly or indirectly relating to, resulting from, or
arising out of:
(a) Any untrue representation, misrepresentation, breach of
warranty, or nonfulfillment of any covenant, agreement, or other
obligation by or of Ameris contained herein, in the Ameris Disclosure
Letter, or in any certificate, document, or instrument delivered to CCS
pursuant hereto.
(b) Any Tax for any period prior to and including the Closing that
is not previously paid, or for which adequate reserves have not been
established in the Balance Sheet, which may at any time be asserted or
assessed against CCS, Ameris or an Ameris Subsidiary for any event or
period prior to and through the Closing Date (regardless of whether
the possibility of the assertion or assessment of any such liability
or obligation shall have been disclosed to CCS at or prior to the
Closing).
(c) The release, discharge or disposal of any Hazardous Material
at, on, under or onto any portion of the soils, air, groundwater or
surface water of the Property (as defined in Section 3.20), or
migrating from the Property, on or prior to the Closing Date (and
42
<PAGE> 48
including any migration of such pre-Closing releases, discharges or
disposals after the Closing Date); and/or
(d) Any claim, complaint, action, or other lawsuit brought before
any court or governmental authority by any person alleging personal
injury, property damage, and/or a citizen suit relating to the
release, discharge or disposal of any Hazardous Material at, on, under
or onto any portion of the soils, air, groundwater or surface water of
the Property, or migrating from the Property, on or prior to the
Closing Date (and including any migration of such pre-Closing
releases, discharges or disposals after the Closing Date), and which
is due to the use of the Property by Ameris or any Ameris Subsidiary,
and/or prior owners' or third parties' use of the Property prior to
the Closing Date.
(e) Any claim for indemnification or other recourse relating to the
ownership or sale of Whitwell that exceeds $114,000.
(f) Any act or omission of Ameris or an Ameris Subsidiary or any of
their affiliates, officers, employees, agents, or independent
contractors that occurred prior to the Closing Date for which adequate
reserves have not been established in the Balance Sheet.
(g) Any professional liability claim against CCS, Ameris or an
Ameris Subsidiary that arises out of an act or omission occurring prior
to the Closing Date.
(h) Any matter relating to any violation of any federal, state or
local statute, regulation, law or order in respect of Ameris, any
Ameris Subsidiary or any of their operations occurring prior to the
Closing Date, including, without limitation, laws relating to the
provision of health care services.
(i) Any amounts payable or repayments as a result of audit reviews
by third party payors or settlement processes (including cost reports
filed or to be filed) used by any third party payor, including Medicare
and Medicaid, for all periods through Closing, including any amount
payable as a result of the transactions contemplated by this
Agreement.
(j) (Reserved)
(k) Any loans, grants or loan guarantees pursuant to the
Hill-Burton Act program, the Health Professions Educational Assistance
Act, the Nurse Training Act, the National Health Planning and Resources
Development Act and the Community Mental Health Centers Act, as
amended, or similar laws or acts relating to health care facilities.
43
<PAGE> 49
(l) Any investigation, claim, inquiry or action by any
governmental agency (including but not limited to the Department of
Health and human Services or any division thereof, Federal Bureau of
Investigation, the Department of Justice, Internal Revenue Service,
and/or any state agency) or private individual acting in the capacity
of qui tam relator or qui tam plaintiff, which such investigation,
claim, inquiry or action arises from any actions, inaction, conduct or
omissions occurring or in existence prior to Closing relating to any
business owned or operated by Ameris or an Ameris Subsidiary,
including, without limitation, damages, penalties, fines, assessments
and attorneys fees, as well as any costs associated with or arising
from researching, reviewing, providing or copying records and
responding to search warrants, civil investigative demands, summons or
subpoenas.
(m) Any liability or obligation of Ameris of Georgia.
(n) Any liability or obligation related to the Transferred Business
or the Transferred Assets.
(o) Any liability or obligation arising out of those disputes and
matters listed in Section 3.14 of the Ameris Disclosure Letter, and
all related claims and causes of actions stated therein, as the same
may be amended from time to time after the date hereof, and including
without limitation legal fees and other defense costs associated
therewith.
(p) Any other Loss incidental to any of the foregoing.
8.2 Indemnification by CCS. Subject to the provisions of this Article
VIII, CCS hereby agrees to defend, indemnify and hold harmless Ameris, each
Ameris fiduciary's employee benefit plans, each of the Ameris Shareholders and
all affiliates, officers, directors, employees, agents, successors and assigns
of Ameris ("Ameris Identified Persons") and shall reimburse Ameris Indemnified
Persons for, from and against each Loss, directly or indirectly relating to,
resulting from or arising out of, any untrue representation, misrepresentation,
breach of warranty, or nonfulfillment of any covenant, agreement, or other
obligation by or of CCS contained herein, in the Ameris Disclosure Letter, or in
any certificate, document, or instrument delivered to Ameris pursuant hereto.
8.3 Procedure.
(a) The indemnified party shall promptly notify the indemnifying
party (or in the case of the Ameris Shareholders, Mr. Lindley) of any
claim, demand, action, or proceeding for which indemnification will be
sought under Sections 8.1 or 8.2 of this Agreement, and, if such
claim, demand, action, or proceeding is a third party claim, demand,
action, or proceeding, the indemnifying party will have the right at
its expense to assume the defense thereof using counsel reasonably
acceptable to the indemnified party. The indemnified party shall have
the right to participate, at its own expense, with respect to any such
third party
44
<PAGE> 50
claim, demand, action, or proceeding. In connection with any such third
party claim, demand, action, or proceeding, CCS and the Ameris
Shareholders shall cooperate with each other and provide each other
with access to relevant books and records in their possession. No such
third party claim, demand, action, or proceeding shall be settled
without the prior written consent of the indemnified party. If a firm
written offer is made to settle any such third party claim, demand,
action, or proceeding and the indemnifying party proposes to accept
such settlement and the indemnified party refuses to consent to such
settlement; then: (i) the indemnifying party shall be excused from, and
the indemnified party shall be solely responsible for, all further
defense of such third party claim, demand, action, or proceeding; and
(ii) the maximum liability of the indemnifying party relating to such
third party claim, demand, action, or proceeding shall be the amount of
the proposed settlement if the amount thereafter recovered from the
indemnified party on such third party claim, demand, action, or
proceeding is greater than the amount of the proposed settlement.
(b) Notwithstanding any provision contained herein to the contrary,
neither CCS nor Ameris shall have any obligation to indemnify or to
reimburse the other pursuant to Section 8.1 or 8.2 unless the amount
of the Loss of the claim for which indemnification is sought, when
aggregated with all other losses and claims for which indemnification
is sought, exceeds $50,000, at which time rights to indemnification
for losses and claims may be asserted for all amounts above such
initial $50,000.
(c) Notwithstanding anything herein to the contrary, no claim for
indemnification may be brought in respect of Section 8.1(a), as it
relates to Article III of this Agreement (other than Sections 3.9,
3.10, 3.13, 3.17, 3.20, 3.31, 3.32 and 3.35), following the second
anniversary of the Closing Date, and no claim for indemnification may
otherwise be brought in respect of Sections 8.1 or 8.2 following the
fifth anniversary of the Closing Date; provided that a claim for
indemnification made prior to the end of such two or five year period,
as applicable, shall not be precluded following such two or five year
period, as applicable, but shall remain subject to the terms of this
Agreement until the resolution of such claim.
(d) Notwithstanding anything herein to the contrary, no claim for
indemnification may be brought in respect of Section 8.1(a), as it
relates to Section 3.12, in excess of the Receivable Escrow Amount.
8.4 Survival of Representations. All representations, warranties,
covenants, and agreements by the parties contained in this Agreement shall
survive the Closing and any investigation at any time made by or on behalf of
any party hereto. The remedies provided in this Article VIII shall not be
cumulative, but shall be the sole remedies of the parties with respect to the
subject matter thereof. The sole remedy against the Ameris Shareholders for any
claims for indemnification arising hereunder shall be disbursement of Escrow
Funds as authorized by this
45
<PAGE> 51
Agreement, there being no personal liability of any kind upon any of the Ameris
Shareholders, beyond such Shareholders' proportionate share of the Escrow Fund.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. Any notice required to be given hereunder shall be
sufficient if in writing, by courier service (with proof of service), hand
delivery or certified or registered mail (return receipt requested and
first-class postage prepaid), addressed as follows:
If to CCS or Merger Sub: If to Ameris:
Children's Comprehensive Services, Inc. Ameris Health Systems, Inc.
3401 West End Avenue, Suite 500 1114 Seventeenth Avenue South
Nashville, TN 37203 Nashville, TN 37212-2215
Attn: H. Neil Campbell Attn: Sam J. Lewis
with a copy to: with a copy to:
Leigh Walton John Gillmor
Bass, Berry & Sims PLC Boult Cummings Conners & Berry PLC
2700 First American Center 414 Union Street
Nashville, Tennessee 37238 Nashville, Tennessee 37219
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered, or mailed.
9.2 Assignment, Binding Effect; Benefit. Neither this Agreement nor any
of the rights, interests, or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns and all references to any
party to this Agreement shall include references to its respective successors
and assigns.
9.3 Entire Agreement. This Agreement, the Exhibits and Schedules, the
Disclosure Letters, and any documents delivered by the parties in connection
herewith constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings
among the parties with respect thereto.
46
<PAGE> 52
9.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
9.5 Governing Law. The validity of this Agreement, the construction of
its terms, and the determination of the rights and duties of the parties hereto
shall be governed by and construed in accordance with the laws of the United
States and those of the State of Tennessee applicable to contracts made and to
be performed wholly within such state without regard to its conflict of laws
provisions.
9.6 Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
9.7 Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever. Unless otherwise indicated, all references to
"Articles" or "Sections" refer to the corresponding articles or sections,
respectively, of this Agreement.
9.8 Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
9.9 Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
9.10 Incorporation of Exhibits. The Disclosure Letters and the Exhibits
and Schedules attached hereto and referred to herein are hereby incorporated
herein and made a part hereof for all purposes as if fully set forth herein.
9.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this
47
<PAGE> 53
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
9.12 Expenses. Each party to this Agreement shall bear its own expenses
in connection with the Merger and the transactions contemplated hereby.
9.13 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of competent
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
(signature page follows)
48
<PAGE> 54
IN WITNESS WHEREOF, the parties have executed this Agreement and caused
the same to be duly delivered on their behalf as of the day and year first
written above.
CHILDREN'S COMPREHENSIVE SERVICES, INC.
By:
---------------------------------------
H. Neil Campbell
Executive Vice-President
CCS MERGER SUB, INC.
By:
---------------------------------------
H. Neil Campbell
President
AMERIS HEALTH SYSTEMS, INC.
By:
---------------------------------------
Sam J. Lewis
Chairman and Chief Executive Officer
49
<PAGE> 1
EXHIBIT 99
COMPANY PRESS RELEASE
CHILDREN'S COMPREHENSIVE SERVICES ACQUIRES AMERIS HEALTH SYSTEMS
OPERATOR OF JUVENILE SEX OFFENDER PROGRAMS BRINGS 168 BEDS TO CCS AND 60 BEDS
UNDER DEVELOPMENT
NASHVILLE, Tenn. -- (BUSINESS WIRE) -- Sept. 10, 1998 -- William J. Ballard,
Chairman and Chief Executive Officer of Children's Comprehensive Services, Inc.
("CCS") (Nasdaq/NM:KIDS - news), today announced the acquisition of Ameris
Health Systems, Inc. ("Ameris") for net consideration of approximately $12.5
million in cash. Ameris, through its wholly-owned subsidiary, American Clinical
Schools, Inc., operates residential juvenile sex offender programs in Tennessee
and Alabama with an aggregate capacity of 168 licensed beds. In addition, Ameris
has 60 beds under development in Pennsylvania, a state in which CCS has not
previously operated.
Mr. Ballard said, "The acquisition of Ameris represents an excellent opportunity
for CCS for several reasons. First, it represents a substantial expansion of
CCS's presence in the juvenile sex offender treatment business, not only through
the additional bed capacity we are gaining, but also through the outstanding
staff that will be joining CCS. At full capacity, including the Pennsylvania
facility, we expect the Ameris assets to generate annual revenues of
approximately $13 million to $14 million. We also expect its operations to be
accretive to the Company's fiscal 1999 financial results.
"In addition, with the opening of the Pennsylvania facility, we will be
established in a large new state for CCS, which, including the new residential
treatment program expected to open in Hawaii in the second quarter of fiscal
1999, will be the second new state we have entered thus far in fiscal 1999.
Furthermore, three of Ameris's four facilities are located in major cities -
Birmingham, Nashville and Philadelphia - in which it has become increasingly
difficult to site residential treatment facilities. The fourth facility, a
sixteen-bed group home, expands our base of operations in Clarksville,
Tennessee, where we already operate the Chad Youth Enhancement Center, acquired
in February 1998, as well as other facilities.
"We view this acquisition as representative of the ongoing opportunities we are
encountering to strengthen our broad spectrum of services, add new customers and
enter new geographic territories through acquisition. Because of the company's
excellent financial flexibility, with substantial free cash flow and a modest
ratio of debt to total capitalization, we remain well positioned to act on
appropriate additional acquisition opportunities."
To take advantage of the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, you are hereby cautioned that this release
contains forward-looking statements that are based upon current expectations and
involve a number of risks and uncertainties. Actual operations and results may
differ materially from those expressed in the forward-looking statements made by
the
<PAGE> 2
Company. Please refer to CCS's filings with the Securities and Exchange
Commission for additional information. The Company disclaims any intent or
obligation to update these forward-looking statements.
Children's Comprehensive Services provides primarily education and treatment
services for at-risk youth either directly or through management contracts. It
currently offers these services through the operation and management of
nonresidential specialized education programs and day treatment programs and
both open and secured residential treatment centers in Alabama, Arkansas,
California, Florida, Kentucky, Louisiana, Michigan, Montana, Tennessee, Texas
and Utah.
